Another day of growth for the USD index

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

US Dollar             1.2900-1.3000

Euro                     1.3500-1.3600

Sterling                1.5600-1.5700

WTI Oil (opening level) $121.60 (up $3.00 from yesterday's opening.)

The US Dollar Index is marginally stronger this morning but that was only after a much stronger day yesterday that saw stocks around the world drop considerably and US bond yields rise in response to the stronger than expected US inflation report on Friday. The US Stock market is now fully into a bear market as the S&P average has fallen 20% since January and 10-year US treasury yields have climbed to their highest levels since 2011, two-year rates which are less volatile have jumped to levels last seen before the 2008 financial crisis. Markets are now expecting that the US Federal Reserve will announce a 0.75% interest rate hike tomorrow which should push the Dollar higher and stocks down further.

Sterling is much weaker this morning as Boris Johnson is set to introduce legislation that would effectively rip up the Northern Ireland protocol component of the Brexit deal and push the UK and EU into a trade war. The market is awaiting the Bank of England interest rate decision on Thursday so this development will put them in a very tough position.

The Canadian Dollar is feeling the full effect of the stronger US Dollar with USD.CAD opening the day at the 1.2940 (0.7727) level, once again USD.CAD is approaching its highest levels of the recent range so we will see if it breaks through. The Loonie continues to hold onto its strength against the other countries so this is clearly a case of US Dollar strength against the world.

The price of oil continues to jump and for the most part Loonie trading is not correlated at all to the price of oil, as economic activity slows, we should see the oil price start to fall as demand for the commodity will also fall.

Up today we get some US Secondary inflation data hitting the market and stocks are pointing slightly higher, at some point I would expect the stock market to continue to decline but it may have an up day at some point. I would expect that USD.CAD will test the 1.3000 level at some point this week and we will see if it finally breaks through.