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Perspective: Morning Commentary for September 23

By: Matt Zeller, Market Intelligence Analyst

Perspective: Morning Commentary
 
Matt Zeller
Senior Market Intelligence Analyst
Matt.Zeller@stonex.com

September 23 – the invincible dollar continues to surge this morning at 20+ year highs against a basket of currencies, fueled by global uncertainty and a reasonably strong U.S. economy in the face of rising interest rates. The Fed’s 0.75% rate hike this week and hawkish outlook into the end of the year has the U.S. leading the charge globally to fight rising inflation. Economic data is thin this morning save for S&P Global’s September PMI numbers at 8:45 central, but better-than-expected unemployment numbers are lingering from yesterday and fueling optimism.

 

Conversely, the Dow Jones Industrials look set to finish off a losing week with futures indicating around a 400-point loss at the open, after stocks have slid all the way from Monday’s highs, now on track to take out June lows. Traders are moving out of equities and into treasuries, with two-year and ten-year rates hitting their highest levels in more than a decade.

 

The United Kingdom announced a wide-ranging plan to stimulate that economy, cancelling planned increases on corporate tax rates, reducing personal income taxes, and offering incentives to invest, among other things. The British pound is at a 37-year low against the greenback and the Bank of England is not acting quite as aggressively as the U.S. in raising interest rates.

 

WTI crude oil is off almost three bucks per barrel as of the time of this writing, edging close to the $80/bbl for the first time since early in the calendar year, of course pre-Ukraine war. Global demand concerns are in focus given the imminent threat of an overall economic slowdown. Ironically, European member states are attempting to put a price cap on Russian oil imports, though that may defeat the point of sanctioning Russia by cutting off flows...

 

The grain markets have little chance for an extended rally amid the USD surge, with U.S. corn and soybean exports showing signs of that fatigue now as well, fighting the combination of high prices and the expensive greenback. That is naturally helping ration down usage on what are becoming tight corn and bean S&D’s, as reduced supply numbers from the USDA in this month put the trade on edge with harvest results yet to freely flow in. No such concern remains for some major global crop producers, with Russian wheat estimates rising almost weekly (now over the massive 100 MMT mark) and Brazil very optimistic about pumping out a record soybean crop (in the 150 MMT area) thanks to increased plantings and an ideal moisture situation heading into the 2022/23 season.

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