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Thursday, September 17, 2026
What’s happening: US stocks closed lower on Wednesday as investors digested the latest interest rate decision by the Federal Reserve.
What happened: The Federal Reserve announced its first rate-hike in over three years to combat higher inflation due to rising crude oil prices.
Although the Dow Jones index shed more than 600 points, some strong economic reports and a rebound in chip stocks lent support to US stocks.
Why it matters: The Federal Reserve raised its key interest rate by 25 basis points (bps) to 3.75%-4.00%. This was widely expected and marked the first hike since 2023.
The Fed said its decision to raise rates was unanimous and indicated that further policy tightening may be needed in the near future in case inflation remained elevated.
Updated projections from the Fed showed that 16 out of 18 members expect at least one more rate hike later this year, with four seeing the possibility of two additional rate hikes.
The Fed projected US GDP growth at 2.3% in 2026, up from its June projection of 2.2%. The central bank also raised its GDP growth projection for 2027 to 2.4%, from its prior forecast of 2.3%. Core inflation is also seen accelerating to 3.4% in 2026, versus the prior projection of 3.3%, while the projection for 2027 was left unchanged at 2.5%.
Fed Chief Kevin Warsh said during his press conference that the US economy has advanced since the previous central bank meeting, although inflation trends show little improvement.
All three major indices were trending higher prior to the Fed’s announcement, with a recovery in chip stocks providing a boost to the tech-laden Nasdaq 100.
Strong retail sales data also signalled strength in consumer spending despite rising prices, which provided support to US stocks earlier during the session. Retail sales surged 1.2% in August, the most in five months, rebounding from a 0.5% decline in July.
Other data released on Wednesday showed that US export prices rose 0.6% in August, topping market estimates of 0.5%, while import prices rose by 0.7%.
The Dow Jones index dipped 631.33 points, or 1.21%, to close at 51,461.78 on Wednesday, while the S&P 500 fell 0.44% to 7,552.14. The Nasdaq 100 bucked the trend and closed higher by around 7 points at 28,945.06.
Energy stocks were among the worst performers during the session, declining 3% as crude oil prices fell on Wednesday.
What to watch: Investors will keep an eye on the ongoing US-Iran conflict and inflation figures.
Data on initial jobless claims (1630 UAE Time), Philadelphia Fed manufacturing index (1630 UAE Time) and pending home sales (1800 UAE Time) will be released today. The number of people claiming jobless benefits, which fell by 1,000 from the previous month to 206,000 in the first week of September, is expected to rise to 208,000 in the recent week. Analysts expect the Philadelphia Fed manufacturing index to ease to 30.5 in September from 47.4 in the previous month, while pending home sales are expected to rise 2% in August following a 2.3% decline in July.
Context: The Canadian dollar slipped versus the US dollar this morning after the Fed raised its benchmark interest rates.
Details: The Federal Reserve raised its key interest rates by 25bps on Wednesday, reinforcing the greenback’s advantage over the loonie. The Bank of Canada had left its key policy rate unchanged at 2.25% at its recent meeting.
Updated projections from the Fed also showed that most officials foresee another rate hike before the end of this year, widening the rate differential between the US and Canada.
Strength in the US dollar weighed on the loonie this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.1% to 100.34.
Weak economic data released on Wednesday also exerted pressure on the Canadian dollar. Canada’s building permits fell 17.3% to C$12.2 billion in July, compared to an 18.5% surge in June. The figure missed market expectations of a 6.4% decline. The latest reading also signalled the steepest decline since August 2023.
Housing starts came in largely flat at an annual rate of 229,000 units in August, hitting the lowest level since March 2025.
Higher prices of crude oil, one of Canada’s major exports, lent some support to the loonie. Spot price for WTI crude oil gained 0.1% to trade at $97.60 per barrel this morning.
The USD/CAD forex pair edged higher to 1.3994 this morning.
What to watch: Investors will continue monitoring the ongoing tensions between the US and Iran.
Data on foreign securities purchases (1630 UAE Time), PPI (1630 UAE Time) and raw materials prices (1630 UAE Time) will be released from Canada today. Producer prices in Canada, which jumped 12.4% year-over-year in July, are expected to rise by 12.3% in August. Analysts expect Canada’s raw materials prices to rise by 0.7% in August following a 2.2% decline in July.
Other Markets: European indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.28%, 0.53%,0.62% and 0.46%, respectively.
The US House of Representatives passed a sanctions bill targeting Russia due to its ongoing war with Ukraine. The news sent the USD/RUB pair higher in forex trading this morning.
Singapore’s non-oil domestic exports jumped 46.2% year-over-year in August, accelerating from a 24.1% gain in the previous month. The latest reading topping market estimates of 35% exerted pressure on the USD/SGD forex pair.
UAE’s central bank increased its overnight deposit facility base rate by 25 bps to 3.9% at its latest meeting, which sent the USD/AED pair slightly lower in forex trading this morning.
The Hong Kong Monetary Authority increased its base rate by 25bps to 4.25% at its latest meeting, which exerted slight pressure on the USD/HKD forex pair.
New Zealand’s economy expanded by 0.2% in the second quarter. The figure topping market estimates of 0.1% sent the NZD/USD pair higher in forex trading this morning.
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