US Dollar Resilience: Navigating Inflation and Geopolitical Shifts

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

US Dollar        1.3325-1.3425

Euro                1.4600-1.4700

Sterling           1.7000-1.7100

WTI Oil (opening level) $74.30

The US Dollar Index is a marginally weaker this morning after the market digested the latest inflation news out of the US. The annual rate of inflation in December rose a little more than expected to 3.4% while the core inflation rate only rose 0.1% to 3.9%. I think this number pretty much rules out any interest’s rate cut in March and should help the US Dollar with some short-term strength.

The Dollar should also get a little help now that the Houthis in Yemen have been attacked by the US and the UK. The middle East conflict could very easily expand and get really messy and the markets wont like that in which case the Dollar will jump on flows going into safe markets like US treasury bonds.

The Canadian Dollar is mixed this morning, it lost about 100 points after the inflation announcement yesterday and reached a high near 1.3440 (0.7440) but it picked up strength as the day went on and pulled back most of its losses. As a result of the Western attack in Yemen the oil price has jumped a little and that should provide a little benefit to the Loonie in the short-term but in won't be a game changer unless it really goes higher.

Stocks after a tough day yesterday are again pointing a lot lower on the opening, we do get some secondary inflation data in the form of the Producer Price index but for the most part the US Dollar should remain supported into the weekend.