US Dollar weaker despite Powell's comments: impact on markets and outlook for the Canadian Dollar

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

US Dollar        1.3750-1.3850

Euro                1.4625-1.4725

Sterling           1.7250-1.7350

WTI Oil (opening level) $89.39

The US Dollar index is marginally weaker this morning despite comments yesterday from Fed Chair Powell that US Interest rate cuts may have to wait as the economy is quite strong and inflation remain stubborn. The Middle East situation while remaining fluid seems to have quieted down for the moment so markets have also calmed down and US stocks were able to recover some of their losses from Monday. Either way higher interest rates for a longer period of time in the US should continue to support the Dollar especially if other central banks start to cut rates ahead of the Fed.

The Canadian Dollar opens the day near the 1.3800 (0.7246) level which is a little lower than the highs of yesterday seen after the inflation report. March inflation came in at 2.8% but the Core reading which the Bank of Canada looks at came it at 2.0%, this should give the BOC room to cut interest rates in June, if this scenario plays out, we will see further weakness in the Loonie. On a positive note, for the Loonie, with the Middle East calming down yesterday the oil price jumped about $4 a barrel overnight so that may help blunt some weakness in the short-term.

With only a few Fed speakers on tap today the markets should remain relatively quiet but look for the Loonie to trade with a weak bias over the coming days.