USD index gains some strength as investors react to a disappointing U.S. Inflation report

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

US Dollar             1.2825-1.2925

Euro                     1.3400-1.3500

Sterling                1.5600-1.5700

WTI Oil (opening level) $118.50 (down $4.00 from Friday's opening.)

The US Dollar Index is much stronger this morning as the markets around the globe continue to react to the higher-than-expected US May inflation report. The market was expecting that US inflation would start to show signs of moderation but instead the May number jumped to 8.6% which is the highest reading since December of 1981. In response to this number stocks have crashed around the globe with every Asian and European index in the red overnight, the Dow Jones after a loss of 880 points on Friday is pointing some 550 points lower as I write. The US Federal Reserve which reports on interest rates on Wednesday is now faced with a crisis, the need to fight off inflation with much higher interest rates in the face of a declining growth rate and possible recession. Either way we can expect much higher US interest rates and lower stock markets with now a 0.75% hike in July from the Fed a very real possibility.

As you would expect the Canadian Dollar lost ground to the US Dollar as USD.CAD opens the day at the 1.2860 (0.7776) level which is its highest level in some time against its Southern neighbour. The Loonie has not fared as badly as the other currencies so the Loonie actually made some small gains against the other currencies. Mrs. Smith and I are going to Ireland and Scotland in a few weeks for a holiday so I think I will go and by some Sterling today as the rate as not been this low in many years.

Nothing of note on the calendar today so the currency market will push the US Dollar higher as stocks continue to crash, how far the Greenback goes will depend on what the Fed says about future interest rate hikes to fight inflation. I remember when at the end of last year each Central Bank around the world said inflation was nothing to worry about, well they got that all wrong.