Financial markets react to yesterday's interest rate hike in the U.S.

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

US Dollar             1.3400-1.3500

Euro                     1.3250-1.3350

Sterling                1.5175-1.5275

WTI Oil (opening level) $84.18

The US Dollar index is marginally weaker this morning but that was only after it had a strong day yesterday on the back of the US Federal Reserve announcement of a 0.75% interest rate increase and the promise of another similar rate hike at their next meeting in November. The Japanese Yen took the brunt of the US Dollar strength with USD.JPY hitting a 24-year high at 1.4590, shortly after the pair reached this level the Central Bank of Japan took the unexpected step of intervening in the currency market for the first since 1998 and sold US Dollars to buy Yen. USD.JPY fell in rapid order and went from the high of 145.95 to trade at 141.00 before pulling back a little higher this morning. In my experience with Central Bank interventions in the FX markets they have great short-term effect but generally do not stop the currency from going where markets want to take it so I will not be surprised if the Yen continues to weaken.

Sterling has recovered a little this morning as the Bank of England has announced a 0.50% interest rate hike which is it seventh interest rate hike this year and the second in a row of half a percentage point. GBP.USD touched a low of 1.1220 before pulling back higher this morning and trades at 1.1320 as I write.

USD.CAD rose to trade at a high of 1.3540 (0.7386) on the Fed announcement yesterday before pulling back overnight to trade at the 1.3440 (0.7440) level. The Loonie also lost some ground to the other currencies shortly after the Bank of England announcement so overall a tough 24-hours for the Loonie.

After a tough day yesterday stocks around the globe were mixed overnight and North America is pointing a little higher on the opening. As long as the Fed is considering oversized interest rate hikes then it will be tough for the stock market to show any real strength and a a result the US Dollar should remain supported.