The US dollar has rallied significantly against the Japanese yen and the euro as risk appetite returns to the market.

The Bank of Canada is widely expected to cut rates by 50bps on Tuesday to 3.00 percent, the lowest target rate since October 2005, as inflation pressures subside, credit markets tighten, and a probable recession in the US threatens the Canadian economy.

Professional system trader Art Collins shares his daily biases in the index, bonds and currency futures markets for April 18.

Deflation is doing its work on yesterday’s bubbles -- primarily the financial industry and U.S. residential housing. Inflation, on the other hand, focuses on tomorrow’s bubbles -- in resources, soft commodities, precious metals and oil.

The euro hit an all time high of 1.5983 against the US dollar following better than expected trade balance numbers.  The strength faded quickly however when Eurogroup President Junker told the markets that they "did not correctly understand G7 message on FX" and he "does not consider the euro’s rise vs. dollar desirable."

Given the marked slowdown and probable recession in the US, the Canadian economy is now more reliant than ever on domestic demand growth to keep expansion on pace.

Canadian fundamental data will have the stage to itself, with no U.S. releases scheduled for Friday, which should provide trade worthy event risk.

Professional system trader Art Collins shares his daily biases in the index, bonds and currency futures markets for April 17.

Today, the euro-US dollar currency pair hit an all-time high and is inching ever so closer to that target.