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Canadian inflation rose by less than expected yesterday. September headline CPI increased by 0.1% month-on-month and 3.1% annually, below forecasts of 0.2% and 3.2%. The annual rate nevertheless increased from August’s 3.0%, moving just above the Bank of Canada’s 1%–3% target range. Higher gasoline prices were the main driver, rather than a broad acceleration in underlying inflation.
Softer core inflation gives the Bank of Canada more room to wait. CPI-trim eased to 1.8% annually and CPI-median to 1.9%, both below the 2% target midpoint. Excluding gasoline, inflation slowed from 2.4% to 2.2%. This weakens the argument that the Bank must respond immediately to higher energy prices, although a hike at next week’s meeting remains possible: Scotiabank still expects a 0.25% increase, arguing that one soft monthly reading does not resolve the underlying inflation risk.
The Canadian Dollar strengthened despite the inflation miss. USD/CAD fell towards 1.4096 following the release, with the Loonie gaining approximately 0.3%. This is worth noting because the currency’s reaction was stronger than the softer core data alone would suggest. Traders should not interpret the gain as proof that the report made a BoC hike more likely; expectations of an October increase actually eased.
France’s fiscal and political problems remain a headwind for the Euro. EUR/USD fell by approximately 0.25% yesterday and is trading around 1.1200–1.1220 this morning. Unrest and uncertainty over the government’s ability to control its finances continue to undermine confidence. The longer-term bearish trend remains intact, but the pair has not yet broken last week’s low near 1.1150. Trend traders, including myself, remain short of EUR/USD.
In the Forex market, the US Dollar has recovered modestly rather than resumed a decisive surge. The Dollar Index rose by 0.2% yesterday but has been falling from its peak over the past few hours. Next week’s Fed decision remains an important risk, but the latest Dollar recovery also reflects European political concerns rather than simply renewed conviction about an immediate Fed hike.
Asian equities are weaker as traders await major technology earnings. Stock markets have retreated broadly this morning, with elevated oil prices and geopolitical uncertainty weighing on sentiment. The important question is whether earnings can restore confidence in the AI trade after its recent selloff. Yesterday’s early futures bounce should therefore not be treated as confirmation that the correction has ended.
Crude oil has risen substantially from the support defended earlier this month. WTI is testing the $100 area again. The earlier $87.68 spot-WTI support remains unbroken, but prices have now moved far above that area, making it less useful for managing a short-term trade. As always, spot-chart levels should not be applied mechanically to a different futures contract.
Bitcoin remains above a very key support level at $80,000, while Ethereum is still technically weaker. Bitcoin has not produced a convincing recovery away from the $80,000–$82,000 support area, while Ethereum remains below the previously identified $2,544 level. Neither is confirming the fresh bullish breakout that looked possible several weeks ago. However, like many trend traders, I will remain long of Bitcoin until we get a daily close below $80,000.
Gold has fallen back below $4,200. Spot Gold was around $4,120–$4,145 during Asian trading, giving back yesterday’s tentative recovery. Even if the price has crossed above the descending trend line identified earlier, failure to establish itself above $4,200 leaves the bullish reversal unconfirmed. That horizontal resistance level remains the clearer near-term test.