American dollar goes up, taking advantage of the falling Euro

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar             1.2700-1.2800

Euro                     1.3450-1.3550

Sterling                1.5800-1.5900

WTI Oil (opening level) $122.44 (up $0.50 from yesterday's opening.)

The US Dollar Index is much stronger this morning as the Euro fell almost 1% yesterday after the ECB interest rate announcement played out. As I mentioned yesterday it looks like investors are punishing the Euro indicating a 0.25% increase in interest rates will not be enough to start to combat inflation. Throughout the day EURO.USD fell to trade at 1.0640 (from 1.0760) and that decline continued overnight as the currency pair now trades at 1.0560,  a big drop for the Euro. Sterling fell in line with the Euro as GBP.USD fell 100 points yesterday and another 60 points overnight, overall a very strong day for the US Dollar.

The Canadian Dollar was not immune to the strong Greenback, USD.CAD opens the day at the 1.2740 (0.7849) level and it also lost considerable ground to the Pound and Euro, clearly global investors view the Canadian Dollar as being susceptible to changes in the global economic picture. Once again the Loonie cannot hold onto it's recent strength and the question now is will it start to break towards the 1.3000 level.

The report on the health of the Canadian Financial system yesterday did not help the Loonie as BOC Governor Macklin indicated that the biggest risk to the Canadian economy is from the high level of household debt and elevated home prices. As interest rates continue to rise this will drastically effect the ability of Canadians to repay their debt which will continue to put pressure on the Loonie.

A busy day on North American markets this morning where we get the US Inflation report for May and we also get the May Canadian Employment report. In the US inflation is expected to have moderated a little coming in at 5.9% down from 6.2% in April and in Canada the economy is expected to have created 30K new jobs last month.

Ahead of these releases the stock market is again in freefall, after dropping over 600 points yesterday it is pointing lower this morning, it may take a much weaker than expected inflation number to stop the slide.