USD index spikes as investors react to higher than expected US inflation report

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

US Dollar             1.2525-1.2625

Euro                     1.4375-1.4475

Sterling                1.6800-1.6900

The US Dollar index is much stronger this morning as it has reached a 16-month high on the back of much higher-than-expected US October Inflation, the inflation rate jumped 6.2% on an annualized basis which is the highest recorded level since 1990. The currency markets went crazy on this report with EUR.USD falling some 100 points, GBP.USD fell 150 points and the price of a barrel of oil dropped over $3 where it now trades this morning at $80.40. As long as inflation remains this high the Fed will be forced to act and increase interest rates sooner than previously thought which will keep pressure on the increasing value of the US Dollar.

The Canadian Dollar took it on the chin yesterday against its US counterpart as USD.CAD opens the day near the 1.2600 (0.7937) level, up almost 200 points since its low earlier in the week, the Loonie did not fare all that badly against the other currencies so not a complete disaster at the moment. As long as the US Dollar remains strong (and the oil price now starting to drop on the prospects of reduced global demand brought on by high interest rates and a slowing economy) the Loonie will not be able to make any significant headway in the short-term so look for USD.CAD to remain high.

Stock markets are open today but the banks are all closed so volumes should be reduced, it could be very hectic on Wall Street but at the moment stocks are pointing higher so the Greenback may pull back a little.