Investors expect a busy morning for the Loonie

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

US Dollar         1.2050-1.2150

Euro                 1.4700-1.4800

Sterling            1.7025-1.7125

The US Dollar Index opens the day near a five-month low as volatility continues to decline ahead of the US inflation report due out this morning. Just prior to me writing the commentary this morning the European Central Bank announced that they were keeping their interest rate at 0.0% and were not making any changes to their stimulus program. EUR.USD jumped a little on this news but the market remained subdued.

Yesterday saw the Bank of Canada announce that they would as expected keep their key interest rate at 0.25%, they indicated that economic growth in the first quarter came in less than they expected but that they see a strong recovery in the second half of 2022. For the most part I think the Canadian market found the bank statement to be a positive one, the Loonie extended some initial gains but only to give them back as the US Dollar traded stronger during the afternoon session. USD.CAD opens the day at the 1.2100 (0.8264) level, it should be a busy morning for the Loonie as it will move around after the US Inflation report.

For the aforementioned report the market is expecting a US May annualized inflation rate of 3.4% which is up further from the 3.0% rate in April, a higher inflation number should push the US Dollar higher as the expectation will be that the US Federal Reserve will need to increase interest rates sooner than they originally expected.