The Dollar Finds Some Traction, While Bank Of Canada Highlights The North American Session

Shortly before the Bank of Canada announcement, the March CPI figures will be reported.  Owing to the base effect and bottlenecks, the headline CPI is expected to rise 2.3% above year-ago levels, after a 1.1% rise in February.  A month-over-month increase of 0.5% would match the February increase and puts the Q1 annualized rate near 6.5%.  The central bank puts more stock in the underlying core measures, which are more stable and have been higher than the headline.  However, the median and trimmed core will remain near 2%, the common core is expected to tick up to 1.4% from 1.3%.  

The US and Mexico's economic calendars are light today.  In the US, the focus is on corporate earnings, the Republican alternative to President Biden's jobs program (infrastructure initiative), and next week's FOMC meeting.  The heavy demand for the Fed's reverse repo fans ideas that the rate may be tweaked (and the interest paid on all reserves) in order to alleviate pressure on the fed funds rate.  

Falling oil and equity prices saw the greenback squeeze higher yesterday against the Canadian dollar.  It settled above CAD1.26 for the first time in nearly two weeks.  The US dollar is in about a 15-tick range on either side of CAD1.26 today.   Support is seen near CAD1.2540.  On the top side, the greenback has not been above CAD1.2650 since the first half of March.  The US dollar posted a potential key reversal against the Mexican peso yesterday by making a new low for the move (~MXN19.7850) and then recovering to almost MXN19.9950 and closing well above Monday's high.  There has been no follow-through dollar buying yet today.  Still, initial support is seen around MXN19.90, while a move above MXN20.00 could begin to squeeze some of the late dollar shorts.  For the past three weeks, the dollar has fallen against the peso, the longest losing streak of the year (FXC, UUP).  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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