Tuesday, September 26, 2023

Daily Summary: Significant declines the day before the important FOMC decision

  • Canada’s August inflation data surprised the market. CPI inflation rose to 4.0% and core inflation rose to 3.3% on an annual basis. Although the BoC has already completed the rate hike cycle, the market now expects a 40% chance of a rate hike in October (it was 23% before the CPI release).
  • The USD/CAD lost significant ground today, even with the US dollar stable. The pair fell from around 1.35 to levels even below 1.34.
  • The CAD was also supported, among other things, by the further rise in crude oil. Brent tested near $96 today, its highest level in 10 months. Many institutions point out that the $100 mark is a matter of time, but due to weak demand, the price may not sustain at this level
  • OPEC+ officials have indicated that there is a voluntary cuts agreement but that there will be a review every month. If there are problems with demand, some production could be restored.
  • It was this speculation that led to a sharp price drop at the end of the day.
  • Eurozone CPI inflation was slightly below the preliminary figure of 5.2% (5.3% preliminary year-on-year).
  • The US real estate market data was very mixed today. Home construction starts fell by up to 11.3% month-on-month, while building permits increased by 6.9% year-on-year
  • Natural gas rose about 2.85 today due to new maintenance work at Norway’s largest gas field, Troll
  • EUR/USD continued its rally on Monday but fell back below 1.0700 towards the end of the day, leading to rising yields.
  • There is visible selling pressure on Wall Street the day before the Federal Reserve’s decision. The Nasdaq100 or US100 lost almost 0.6%, while the S&P500 fell 0.55%.
  • Cryptocurrencies continue to rise today as more reports come in about the adoption of blockchain technology by financial institutions, rising debt in the US and upcoming regulations. Bitcoin is up 1.3% and trading around the $27,200 mark.

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Nation World News Desk
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