US stocks declined ahead of the Fed decision tomorrow, and continued gains in oil prices are supporting the narrative for a higher-for-longer interest rate environment. Yields have strengthened; in particular, the 5yr yield has reached the 2007 high of 4.50%, and the 2yr yield is now at 5.08%. The dollar remained above 105. Aside from the pause being priced in from the Fed, the market paid close attention to the Canadian inflation reading, which jumped higher to 4.0% y/y on the back of higher petrol prices, once again highlighting upwardly sticky inflation in the developed region. We expect that fears of inflation reacceleration will drive the sentiment into the year-end, as high energy prices feed through to pricing pressures. Elsewhere, according to the OECD's latest forecasts, the world economy is set to slow down given the continued increases in interest rates, easing into 2.7% in 2024.
Metals continued to soften today as markets assessed the impact of a higher interest rate environment. Aluminium softness was marginal today, struggling to break below the $2,200/t support level and remaining above it at $2,214/t. Copper continued to weaken for the third straight day, falling to $8,291/t. Nickel was once again seen testing prices below the $19,700/t level. Lead and zinc continued to give up some of the recent gains, closing lower at $2,220/t and $2,497.50/t, respectively.
Oil futures surged today, with WTI and Brent breaching the $92/bl and $95/bl levels, respectively. Gold and silver edged higher in the first half of the day but struggled to hold on to the gains, trading at $1,933/oz and $23.10/oz at the time of writing.
All price data is from 19.09.2023 as of 17:30