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USD . CAD Canadian dollar broken-hearted after US CPI

– Hot US inflation crushes breaks Loonie’s heart.

– Weak UK data sinks GBPUSD.

– US dollar is steady after Tuesday’s rally.

USDCAD: open 1.3533-37, overnight range 1.3533-1.3573, close 1.3566, WTI $78.03, Gold, $1993.01

The Canadian dollar was crushed on Tuesday, and it is not seeing much love on Valentine’s Day either as traders reassess their outlook for US interest rates.

USDCAD soared from 1.3439 ahead of Tuesday’s US inflation data and hit 1.3586 when CPI was hotter than expected. January CPI dipped to 3.1% from 3.4% in December. Usually, that would be considered a good result, but markets had their hearts set on a much bigger decline, to 2.9% at least, and that caused a kerfuffle. Even worse, Core-CPI remained unchanged at 3.9%. That was the straw that broke the camel’s back.

The US 10-year Treasury yield spiked to 4.326% from 4.17% pre-data. Wall Street tumbled, and the US dollar soared. The US dollar index (DXY) climbed from 103.89 to 104.86, and gold prices plunged from $2028.64 to $1990.14 in early NY today.

Fed Chair Jerome Powell may not be pleased with the results, but he is probably feeling rather smug after warning that Fed officials needed to see more evidence that inflation was in a sustainable downtrend before cutting rates.

EURUSD traded sideways in a 1.0695-1.0719 range overnight after dropping from 1.0793 pre-CPI. Traders were not impressed with better than expected Eurozone data. Industrial Production s.a. easily beat the forecast, rising 2.5% in December (forecast -0.2%), and employment rose by 0.3%. The short-term EURUSD technicals are bearish below 1.0840 but support in the 1.0660-1.0690 area has held.

GBPUSD is trading negatively in a 1.2535-1.2612 range. It got hammered in the wake of the US inflation report yesterday and plummeted from 1.2690 to close at 1.2592. It got hammered further overnight after a series of weaker than expected US economic reports and is trading at the bottom of the range. Producer Prices, Consumer prices, and Retail Price index all missed forecasts which opens the door wider to a May rate cut.

USDJPY consolidated yesterday’s gains in a 150.35-150.81 range due to the surge in the US 10-year Treasury yield. The rally attracted the attention of Finance Ministry officials who repeated the usual blather about watching market moves. Traders are daring them to intervene.

AUDUSD reeled from broad US dollar strength and traded in a 0.6446-0.6482 range but has recouped some losses in early NY trading.

There are no top-tier US economic reports today, but Chicago Fed President Austan Goolsbee is speaking.

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