USD index is weaker as markets await the Fed announcement

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

US Dollar             1.2500-1.2650

Euro                     1.4100-1.4250

Sterling                1.6950-1.7100

The US Dollar index is marginally weaker this morning as markets get set for the US Federal Reserve announcement on interest rates later this afternoon. The market is fully expecting the Fed to indicate that they are ready to increase interest rates in March but the big question now is "will it be a quarter-point or half-point increase"? If they hint at a half point increase then look for stocks to crash off and the US Dollar to soar, my expectation is for a quarter-point but they will increase the number of hikes this year to four.

The Canadian Dollar has recovered overnight and opens the day at the 1.2560 (0.7962) level so the Loonie is heading into the Bank of Canada announcement with a bit of strength, the oil price jumped to trade at $86.50 this morning so that is helping the commodity currencies at the moment.

Like the US we are not expecting any interest rate changes from the BOC but a hint of a rate hike later this year should help give the Loonie some strength, especially if the BOC is going to be more aggressive than the Fed.