Oil prices surged in American trade for the eighth session in a row, scaling a ten-month high, with Brent trading above $95 a barrel for the first time this year.

Markets are still focused on the prospects of extreme shortages the markets will undergo this year as Saudi Arabia and Russia extend their voluntary production cuts.

Global Oil Prices

US crude rose 0.5% to $92.63 a barrel, the highest since November 2022, while Brent rallied 1.5% to $95.91 a barrel, the highest since November 2022.

US crude rose 1.3% on Monday, while Brent added 0.4%, the seventh profit in a row, and the longest such streak of daily gains since August. 

Shortages

The International Energy Agency said the decision by Saudi Arabia and Russia to cut crude output by 1.3 million bpd until the end of the year will cause shortages in the fourth quarter of the year.

Bank of America analysts believe such cuts will send Brent prices above $100 by the end of the year.

Conversely, OPEC maintained its optimistic outlook for demand growth worldwide this year and next year,while also expecting flexible global economic growth despite higher interest rates.

US Stocks

Later today, the American Petroleum Institute will release initial data on US crude stocks, expected to show a buildup for the second week in a row. 

Canadian dollar rose in American trade on Tuesday against a basket of major rivals, extending gains for the second day against US dollar and hitting a six-week high following strong Canadian inflation data, which renewed inflationary pressures on Bank of Canada.

The increasing inflationary pressures coincide with higher global oil prices, which hit ten-month highs, bolstering the case for another 0.25% interest rate hike by Bank of Canada in October.

USD/CAD

USD/CAD fell 0.8% to 1.3380, the lowest since August 10, with a session-high at 1.3490, after rising 0.3% on Monday, the sixth profit in seven sessions as global oil prices rallied. 

Canadian Inflation

Recent data renewed the inflationary pressures on Bank of Canada's policymakers and could force them to resume the cycle of policy tightening soon.

Canada's consumer prices rose 4% y/y in August, the highest in four months, passing  estimates of 3.8%. 

Core prices rose 3.3% in August, up from 3.2% in July.

Global Oil Prices

Global oil prices rallied on Tuesday for the eighth straight session, scaling a ten-month high and on track for $100 a barrel according to many estimates.

Canadian Rate Prospects 

Renewed inflationary pressures as oil prices surge worldwide are likely to force Bank of Canada to raise interest rates once more at the October meeting. 

Gold prices rose in European trade, extending gains for the fourth straight session and scaling a two-week high as the dollar loses ground against a basket of major rivals.

The decline comes ahead of the Federal Reserve's policy meeting later today, expected to hold interest rates unchanged in order to assess economic developments. 

Gold Prices Today

Gold prices rose 0.1% to $1,935 an ounce, the highest since September 5, with a session-low at $1,929, after rising 0.5% yesterday, the third profit in a row as the dollar slows down.

The Dollar

The dollar index fell 0.1% on Tuesday, extending losses for the third session away from a six-month high against a basket of major rivals.

Dollar is losing ground as investors shun new positions ahead of the Federal Reserve's meeting, which is expected to provide important clues on the future path of interest rates.

The Fed

Later today, the Federal Reserve will hold its policy meeting, expected to maintain interest rates flat at 5.5%, the highest in 22 years.

The decisions will be followed by Fed Chair Jerome Powell's speech, which could provide important clues on the likely path ahead for monetary policies.

US Rates

Pricing for a US 0.25% interest rate hike this week stands at 1%, while pricing for a similar hike in November stands at 31%.

Estimates

Analysts believe that gold prices are carrying strong momentum as global central bank pull back from their policy tightening marathons.

Future US and European data especially on consumer prices and retail sales will offer more clarity on this issue.

Chinese Gold Prices

Gold prices in China hit record highs last week as consumers buy up the safe haven to compensate the declining yuan values.

The SPDR

Gold holdings at the SPDR Gold Trust remained flat yesterday at a total of 880.27 tonnes. 

Sterling fell in European trade on Tuesday, sharpening losses against US dollar for sixth straight session and plumbing a three-month trough on UK interest rate speculation.

Bank of England is preparing for a 0.25% interest rate hike this week, which could be the last rate hike in the current policy tightening cycle as the UK economy experiences a sharp slowdown.

GBP/USD fell 0.1% to $1.2370, the lowest since June 6, after losing 0.1% yesterday, the fifth loss in a row on UK recession concerns.

Bank of England

Bank of England is convening on Thursday to discuss monetary policies and economic conditions, expected to raise interest rates by 25 basis points to 5.5%.

This could very well be the last interest rate hike of this policy tightening cycle. 

BOE Governor Andrew Bailey said this month "The BOE is pretty close to ending its cycle of interest rate hikes according to current evidence".

UK Inflation

Later today, important UK consumer prices data will be released and will influence the decision by Bank of England.