1. The Bank of Canada Hikes and Hints at More
This morning, the Bank of Canada raised interest rates by 25 basis points. That wasn’t the surprising part. The statement it issued was very interesting.
The Bank of Canada expects economic growth of just 1%, is raising interest rates, and expects inflation to remain above 3% through 2027. We have to ask: is the Bank of Canada essentially hinting that more rate hikes are coming?
That’s potentially a dangerous situation, given how highly indebted Canadian consumers are.
This afternoon, we hear from the Federal Reserve. No rate hike is expected, but the statement and press conference will be worth watching to see how the Fed is thinking.
2. Gold Hangs On Above $4,000
Gold is once again under pressure, currently trading at $4,030. Keep in mind, $4,000 is a major level to watch.
Silver remains around $53. A move below $53 could be very dangerous for silver and could send it down to the $45 range very quickly.
Though the news flow precious metal is “good,” but its not really catching on with investors.
Also, between now and late November tend to be seasonally bad time for gold.
3. Fed Day: Don’t Trust the First Move
The S&P 500 recovered above its 50-day moving average yesterday. At 2 p.m., when the Federal Reserve announces its rate decision, we could see some movement.
But keep in mind: the first move isn’t always the real trend. During the press conference, markets are often choppy. The real trend usually becomes clearer on Thursday and Friday, as investors have time to digest the decision, the Fed’s comments, and everything surrounding them.
The AI trade continues to face questions, and valuations are under scrutiny. Anthropic IPO headlines are everywhere.
4. The Dollar Knocks on 102.5
The U.S. dollar index briefly approached 102.5. A close above that level could signal further gains for the dollar. A rising U.S. dollar would add more pressure to precious metals.
Meanwhile, the 10-year Treasury yield is at 5%, and the 30-year is at 5.3%. Yields have cooled, but will they start to bounce after the Fed’s rate announcement? We’ll be tracking this closely.
The euro is also at an interesting level against the U.S. dollar. A break below 1.11 could mean significantly more downside for the euro.
The Japanese yen is trading at 158 against the U.S. dollar. The 160 level is where we’ve seen a lot of intervention. Could the yen get there if the U.S. dollar keeps rising? It’s possible, and the Bank of Japan may then have to react.
5. Bitcoin Hovers Around $80,000
Bitcoin continues to trade around $80,000. Keep in mind, the key support range is around $76,000 to $77,000. A break below that range could open the door to further downside for Bitcoin.
We’re hearing the war drums get louder, with a possible strike on Iran being discussed for after the midterms. Oil is reacting, with WTI at $102 and Brent at $115.
The circular financing happening in the AI world is concerning at the moment. The party goes on until somebody takes away the punch bowl.
European natural gas prices keep rising, up more than 43% over the past month. Scary.