US Dollar hits five-month high: implications for global currency markets and Central Banks

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

US Dollar        1.3750-1.3850

Euro                1.4625-1.4725

Sterling           1.7125-1.7225

WTI Oil (opening level) $85.05

The US Dollar index is higher once again this morning as it has hit a five-month high. Yesterday saw the US retail sales report for March come in much better than expected which helped confirm that the US economy is still red hot giving the Fed more reason to pause on any interest rate cuts. One of the casualties of the stronger Dollar is the Japanese Yen as USD.JPY now trades above 154.60, markets still expected some form of currency intervention in the market by the Central Bank of Japan to support the Yen but at the moment it does not seem to be forthcoming. The Loonie also hit new highs against the Yen with CAD.JPY hitting a high above 112.00.

The Loonie lost some more ground to the stronger US Dollar with USD.CAD trading above 1.3800 (0.7246) before pulling back a little in overnight trading session. The Loonie will be front and centre this morning as we get the latest inflation report, it is expected that the Core inflation report should remain relatively flat at 2.1% which should give the BOC room to cut interest rates in June.

Stocks traded much weaker yesterday on the back of fears of wider conflicts in the Middle East but they look set to recover some of those losses on the opening, we will see if they can hold onto those gains throughout the session. Look for the US Dollar to remain supported throughout the day.