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USD / CAD - Canadian Dollar facing dual risks

- BoC monetary policy statement, quarterly MPR released today.

- US CPI data will set the tone for the US dollar.

- US dollar opens little changed ahead of US inflation report.

USDCAD: open 1.3567, overnight range 1.3558-1.3577, close 1.3574, WTI $85.49, Gold, $2347.19.

The Canadian dollar stagnated in a quiet session overnight, but there is plenty of market risk on the agenda for today.

The most important market-moving influences stem from the US March inflation report. CPI is expected to have risen 0.3% m/m (0.4% in February) and CPI-ex Food and Energy to rise 0.3% m/m on 0.4% in February. The Fed dismissed hotter than expected January and February CPI data by suggesting the increases were just bumps. Mr. Powell said, "We were saying that it’s going to be a bumpy ride. Now, here are some bumps, and the question is, are they more than bumps? And we just can’t know that." Analysts are not so sure. Mr. Powell misread the signs of the inflation spike which precipitated 535 bps of rate increases in 2023 and fear he will make the same mistake again.

The Bank of Canada takes center stage at 10:00 am, delivering its monetary policy statement and releasing the quarterly Monetary Policy Report (MPR). The BoC is expected to leave its benchmark rate unchanged at 5.00%. The statement is expected to keep the door open to rate cuts while simultaneously pushing back against speculation of a near-term move due to concerns about the sustainability of the inflation downtrend. The BoC is also concerned about over-stimulating the economy in light of the many massive government spending announcements ahead of next week’s budget.

EURUSD traded in a 1.0848-1.0865 range, little changed from yesterday with traders awaiting US CPI and then Thursday's ECB meeting.

GBPUSD's range is little changed from yesterday with prices at the top of the 1.2668-1.2699 band. The currency saw a bit of demand from EURGBP selling ahead of Thursday's ECB meeting. Today's US inflation data will determine if GBPUSD will rally to 1.2830 or drop to 1.2530.

USDJPY traded quietly but with a bid in a 151.68-151.90 range. Japanese Producer prices rose 0.2% m/m in March, the same as in February. Some analysts are speculating that if the US inflation data is hotter than forecast, the BoJ will ignore a spike in USDJPY and not intervene until the 153.00 level.

AUDUSD consolidated yesterday's gains in a narrow 0.6617-0.6632 range. Prices are getting a bit of support from recent data which downgraded the risk that the RBA would cut rates, although it is today's US inflation data that will set the tone for the rest of the week.