Daily Financial Breakfast 28 October 2026: RBNZ Holds at 2.75% While Australian Underlying Inflation Tops RBA Projection

Market News Today: Key Takeaways

• The Reserve Bank of New Zealand unexpectedly held its cash rate at 2.75% in a 4–3 vote, and the New Zealand dollar fell as much as 1.6% against the U.S. dollar.
• Australian third-quarter trimmed mean inflation rose 1% quarter on quarter, seasonally adjusted, exceeding the Reserve Bank of Australia's 0.8% projection.
• WTI crude futures rose 1.42% to near $101.00 after Yemen's Houthis said they launched a missile toward Saudi Arabia's Ras Tanura refinery.
• Commerzbank said below-average European gas storage and constrained LNG supply had increased the region's dependence on flexible LNG imports.
• Canada's September headline inflation reached 3.1%, above the Bank of Canada's 2.5% third-quarter projection, while markets priced an 80% probability of a 25-basis-point rate increase.
• Eurozone banks tightened third-quarter credit standards more than expected, while September credit-growth momentum reached its highest level since 2022, Danske Bank said.

Market Developments

U.S. Equity Futures

During Wednesday's European trading hours, Dow Jones futures fell 0.22% to around 52,460, while S&P 500 futures gained 0.08% to around 7,760 and Nasdaq 100 futures rose 0.45% to near 29,950.

Foreign Exchange

The U.S. Dollar Index traded near 102.40 in early European trading. EUR/USD traded close to its yearly low of 1.1113, after trading around 1.1145 on Tuesday and near 1.1125 in Wednesday's early Asian session. Sterling slipped below 1.3300 after trading at 1.3321, down 0.14%, on Tuesday. USD/CHF rose for a fourth consecutive day to around 0.8300 during Asian hours, while USD/CAD advanced for a second day and later held above 1.4000. USD/JPY traded around 157.85 on Tuesday.

Gold

Gold rebounded more than 1% on Tuesday from a daily low of $3,989 to trade at $4,061. It subsequently traded around $4,065 in early Asian trading on Wednesday, reached a weekly high near $4,070, and then pulled back from that high.

Asia-Pacific Central Banks

RBNZ Unexpectedly Holds Cash Rate at 2.75% in Split Vote

The Reserve Bank of New Zealand left its Official Cash Rate unchanged at 2.75% in a narrow 4–3 vote, defying widespread expectations for a 25-basis-point increase. Before the announcement, money markets had priced a 100% probability of an increase to 3%.

The central bank signalled that further tightening might still be necessary to address rising fourth-quarter inflation. The New Zealand dollar fell below 0.5600 against the U.S. dollar during Asian trading. An earlier Wednesday reading showed a 1.28% decline to near 0.5600; subsequent reporting put the decline at as much as 1.6%.

The Australian dollar also rallied against the New Zealand dollar to its highest level since March 2013, following the combination of New Zealand's unexpected rate hold and stronger Australian inflation figures.

Australian Underlying Inflation Exceeds RBA Projection

Australia's third-quarter trimmed mean inflation rose 1% quarter on quarter on a seasonally adjusted basis, exceeding the Reserve Bank of Australia's 0.8% projection, Standard Chartered's Nicholas Chia said. Short-term inflation expectations also edged higher.

Chia said RBA communications and the September meeting minutes indicated that policymakers were not overly concerned by the steady increase in unemployment, given improvements in other labour-market indicators, including vacancies. He also identified existing capacity pressures and high oil prices as factors affecting the inflation outlook.

The Australian dollar gained 0.15% against the U.S. dollar to near 0.7035 on Wednesday. AUD/JPY rose for a fourth consecutive day to around 111.30 during Asian trading following the inflation release.

Energy & Geopolitics

WTI Climbs Near $101 After Houthis Claim Missile Launch Toward Saudi Refinery

Yemen's Iran-aligned Houthis said on Tuesday that they had launched a ballistic missile toward the Ras Tanura oil refinery in eastern Saudi Arabia, Reuters reported. Ras Tanura is the kingdom's largest refinery; the statement was a Houthi claim rather than confirmation of damage or disrupted output.

WTI crude rose after two days of losses as concerns about Saudi supply returned. The benchmark traded around $100.30 per barrel during Asian hours on Wednesday and around $100.75 in early European trading. Later in the European session, NYMEX WTI futures were up 1.42% to near $101.00.

Commerzbank Flags Low European Gas Storage and LNG Constraints

Europe's comparatively low gas inventories and reduced LNG supply have increased its dependence on flexibly available LNG cargoes, Commerzbank economist Norman Liebke said. European gas consumption remained below previous years' levels, but competition for LNG was stronger.

Liebke identified a medium-term loss of 17% of Qatar's capacity as a constraint on supply. His assessment highlighted the combination of lower storage and constrained LNG availability, rather than a reported new interruption to European deliveries.

Canadian & Eurozone Monetary Conditions

Canadian Inflation and Growth Exceed Bank of Canada Projections

Canada's September headline consumer inflation was 3.1% year on year, compared with the Bank of Canada's 2.5% third-quarter projection, Brown Brothers Harriman's Elias Haddad said. Second-quarter real GDP grew at an annualised 3.3%, also above the bank's 2.5% projection.

Underlying inflation was more contained: the average of CPI trim and CPI median stood at 1.85% in September, just below the central bank's 2.0% third-quarter projection. Firms' one- and two-year inflation expectations had nevertheless increased. Governor Tiff Macklem recently warned that “the risk that inflation broadens and becomes more persistent has gone up”.

Markets priced an 80% probability of a 25-basis-point increase to 2.50%, after rates had been held steady since December 2025. National Bank of Canada economists Taylor Schleich and Ethan Currie said economic slack and contained core inflation had previously allowed policymakers to remain patient, while sustained high oil prices and a firmer growth backdrop had changed that assessment.

Eurozone Banks Tighten Credit Standards as Credit Growth Accelerates

The European Central Bank's third-quarter Bank Lending Survey showed banks tightening credit standards more than expected, Danske Bank's research team said. The net share reporting tighter standards remained low by historical standards, with French banks accounting for much of the tightening.

Separate September figures showed credit-growth momentum continuing to increase to its highest level since 2022. Danske Bank also reported a slight widening in the French OAT–German Bund yield spread on Tuesday, alongside broad-based euro weakness.

Upcoming Key Events

• Bank of Canada Policy Decision and Monetary Policy Report (28 October 2026, 9:45am New York): Canada's central bank is scheduled to announce its policy decision and publish its Monetary Policy Report.
• Federal Reserve Policy Decision and Press Conference (28 October 2026): The Federal Open Market Committee is scheduled to announce its interest-rate decision, followed by a press conference.
• UK Budget (28 October 2026): The UK government is scheduled to release its budget.
• Reserve Bank of Australia Policy Meeting (3 November 2026): The RBA's next policy meeting follows the third-quarter underlying inflation reading.
• European Central Bank Interest-Rate Decision: The ECB has an upcoming monetary-policy decision.
• Bank of Japan Monetary-Policy Decision: The Bank of Japan has an upcoming monetary-policy decision.