Forex Today: Dollar retreats from two-year highs, eyes on BOC rate decision

Here is what you need to know on Wednesday, April 13:

The greenback lost interest after the US inflation data on Tuesday but managed to regain its traction on hawkish Fed commentary. With the market mood improving early Wednesday, the US Dollar Index (DXY), which touched its highest level in nearly two years at 100.44 earlier in the day, is edging lower. The Bank of Canada will announce its rate decision later in the day and the US economic docket will feature March Producer Price Index (PPI) data.

Bank of Canada Preview: Three CAD-shaking things to watch out for beyond the 50 bps hike.

The US Bureau of Labor Statistics announced on Tuesday that annual inflation in the US, as measured by the Consumer Price Index (CPI), jumped to a fresh multi-decade high of 8.5% in March. The Core CPI, however, came in at 6.5%, slightly lower than the market expectation of 6.6%. Later in the day, Richmond Fed President Thomas Barkin argued that they should quickly get interest rates up to a level where borrowing costs will no longer be stimulating the economy. Fed Vice Chair Lael Brainard said that the reduction in the balance sheet could come as soon as June after announcing the decision in May. Brainard further noted that the balance sheet run-off could be worth “two to three additional rate hikes” through its course.

US March Consumer Price Index: Another 40-year record for inflation, but worse was feared.

Meanwhile, in a video address to the Lithuanian parliament on Tuesday, Ukrainian President Volodymyr Zelenskyy called on the European Union to sanction all Russian banks and oil imports in the next package. Reuters also reported that US President Joe Biden was expected to announce a $750 million in military assistance for Ukraine for its fight against Russian forces on Wednesday.

In the early European morning, US stock index futures are up between 0.7% and 1%, the benchmark 10-year US Treasury bond yield is rising 1% at 2.75% and the DXY is posting small losses near 100.20.