21 October 2026: TMGM Daily Market Breakfast

Morning Market Briefing

• 5% was exceeded by France’s 10-year government bond yield for the first time since 2002. Its premium over German Bunds expanded to 160 basis points.
• $99 came into view for WTI crude on Wednesday. Gulf supply risks persisted, while reports on progress in U.S.-Iran negotiations remained contradictory.
• 3.5% was the UK’s annual inflation rate in September, up from 3.1% in August. The reading surpassed market forecasts and the Bank of England’s projection.
• Australia’s inflation outlook had deteriorated relative to earlier forecasts, RBA Deputy Governor Andrew Hauser said, while emphasising that projections were not yet final.
• With underlying inflation almost at the 2% target, financial conditions were still accommodative, according to BoJ Deputy Governor Ryozo Himino.
• Expectations of a Bank of Canada rate rise supported further Canadian dollar gains, though economists disagreed on whether tightening was necessary.
• A 17% chance of a rate rise at the next Federal Reserve meeting was priced into markets, according to BNY Markets.
• At 5.50%, Hungary’s central bank base rate was unchanged. Separately, Prime Minister Peter Magyar gave explicit support to adopting the euro.
• JPY 536.6 billion was Japan’s merchandise trade shortfall for September, as growth in exports and imports moderated.
• Gains of 0.71% in Nasdaq 100 futures accompanied a 0.25% rise in S&P 500 futures during European trading on Wednesday.

Market Moves And Drivers

U.S. Equity Futures Performance

A 0.71% advance took Nasdaq 100 futures to around 29,880 during European trading on Wednesday. Meanwhile, S&P 500 futures added 0.25% to approximately 7,770. Little changed, Dow Jones futures hovered near 52,730.

Government Bond Markets

5% Breached: France’s 10-Year Yield Rises On Debt Concerns

For the first time since 2002, France’s 10-year government bond yield moved above 5%. Its spread over German Bunds expanded to 160 basis points as concerns centred on whether the government could win parliamentary approval for budget savings.

At EUR 3.596 trillion in the second quarter, government debt amounted to 119% of GDP, its highest level since the postwar period. Borrowing costs rose amid social unrest. The fragile government also lacked the parliamentary backing required to pass a substantial savings programme.

Energy Markets & Geopolitical Risks

$99 In Sight For WTI As Gulf Risks Persist During Iran Talks

Around $98.60 was the level for WTI crude in Wednesday’s Asian session. It later moved towards $99 as Gulf supply concerns continued. Attacks in the Strait of Hormuz intensified, and Saudi Arabian oilfields remained at risk.

Tuesday’s sharp reversal preceded the rebound. Having earlier hit a one-month high above $100, WTI traded around $95.70, a decline of 2.36% on the day. Reports of a diplomatic proposal between Washington and Tehran initially weighed on prices. Challenges to those reports then prompted a reversal.

According to Israel’s Channel 12 News, Pakistan’s army chief had presented senior Iranian officials with a proposal carrying U.S. approval and preliminary Iranian agreement. Reported provisions covered confidential nuclear inspections and the transfer of interest earned on approximately $6 billion in Iranian funds held at Qatari banks, rather than necessarily the release of the principal.

A diplomat involved in the negotiations later challenged claims that an agreement was near, Bloomberg reported, but did not deny that discussions were ongoing. Separately, Reuters reported that Iranian Foreign Minister Abbas Araghchi said indirect talks with the United States continued through intermediary countries, including Pakistan and Qatar. These conflicting reports did not confirm that a deal had been secured.

As oil prices initially declined on Tuesday, U.S. Treasury yields dropped and the euro strengthened against the dollar.

Economic Data & Monetary Policy

3.5% UK Inflation Accompanies Faster Services Price Growth

September brought UK headline consumer-price inflation to 3.5% year on year, an 11-month high, compared with 3.1% in August. Higher motor-fuel inflation drove the increase. Both the 3.4% consensus forecast and the Bank of England’s 3.0% projection were exceeded.

In line with forecasts, core inflation moved from 2.6% to 2.8%. A 0.3 percentage point increase took services inflation to 3.7%, a four-month high. That compared with a 3.6% consensus estimate and the BoE’s 3.3% projection.

Stronger labour-market figures had already emerged on Tuesday: employment grew by 102,000, versus a forecast of 5,100. According to BoE Monetary Policy Committee member Megan Greene, wage disinflation had stopped progressing, and pay growth needed to moderate further for the inflation target to be met. She questioned the BoE’s estimate of wage growth consistent with that target and voiced concern that policy was insufficiently restrictive.

A 25-basis-point rise in Bank Rate to 4.00% remained the expectation of Brown Brothers Harriman’s Elias Haddad, who said the inflation figures reinforced that view. He highlighted 113 basis points of tightening implied by the swaps curve over the next 12 months. This was market pricing, not a commitment from the BoE.

Across the reporting period, sterling showed different responses. On Tuesday, GBP/USD gained about 0.70%, moving from around 1.3300 to just above 1.3400, its strongest level since mid-September, before closing just below that mark. Early Asian trading on Wednesday saw it around 1.3375. Sterling initially fluctuated following the inflation data. GBP/JPY was largely unchanged near 211.45, while EUR/GBP subsequently fell to around 0.8390. UK government debt increased alongside the inflation release.

RBA Inflation Outlook Deteriorates, Hauser Warns

A worse inflation outlook than previously forecast was described by Reserve Bank of Australia Deputy Governor Andrew Hauser. Projections were still being completed, he emphasised, and he remained uncertain about what the board would decide.

Relative to the RBA’s August forecast, the outlook was “materially worse”, MUFG’s Lee Hardman quoted Hauser as saying. Hauser cited higher AI and technology prices passing through to consumer inflation, expanding Australian data-centre construction and pressure on domestic capacity.

The prolonged period of high inflation also concerned Hauser. He said some members of the public were growing unsure whether inflation would reach target even over an extended period. According to MUFG, Australian rate markets subsequently priced nearly a 50:50 chance of a further increase next month.

2% Target Almost Reached By Underlying Inflation, Says BoJ’s Himino

Underlying inflation was almost at the Bank of Japan’s 2% target, Deputy Governor Ryozo Himino said on Wednesday. He also described financial conditions as still accommodative.

In a separate Reuters poll, most economists anticipated the next rate rise in December, rather than October. Such a move would be the third increase since June. These were economists’ forecasts, not a decision announced by the BoJ.

Canadian Dollar Gains As BoC Rate-Rise Expectations Build

Around 1.4050 was the level for USD/CAD in Wednesday’s European session, with the pair falling for a fifth consecutive day. On Tuesday, it had been near 1.4052, around a one-month low. Higher oil prices and firmer expectations of Bank of Canada tightening accompanied the Canadian dollar’s appreciation.

Governor Tiff Macklem’s remarks at the IMF and World Bank meetings in Bangkok prompted the repricing. He said sustained high energy prices would produce significantly higher inflation forecasts in the central bank’s next quarterly projections. According to Commerzbank, the market-implied chance of an increase climbed from 36% to more than 75% on Monday morning.

Monday’s data put September annual inflation at 3.1%, a four-month high driven by gasoline prices. Even so, it undershot the market forecast of 3.2%. The BoC had earlier signalled that rates could rise if energy prices remained elevated and inflation pressures extended beyond gasoline into other goods and services.

There was no consensus among economists. An increase was likely in MUFG’s view, with a further rise possible in December. By contrast, Standard Chartered economist Dan Pan anticipated a policy rate of 2.25% through the end of 2026 and 2027. Weak domestic demand, spare economic capacity and contained underlying inflation informed his assessment. He considered the roughly 100 basis points of tightening priced by markets excessive.

A source of political uncertainty in Canada’s major oil-producing province was also removed when Alberta rejected separation from Canada.

17% Probability Priced For A Fed Rate Rise At Next Meeting

A 17% chance of a rate increase at the next Federal Open Market Committee meeting was reflected in market pricing, according to BNY Markets’ John Velis. For December 2027, the implied federal funds rate was 4.64%. That represented slightly less than 75 basis points of further tightening, below the most restrictive pricing seen a few weeks before.

BNY did not expect an October increase, Velis said. It viewed December as the next opportunity for a rise and the last one in the cycle. In his assessment, supply factors and pricing dynamics across areas including airfares, personal services, housing and healthcare explained much of the recent inflation pressure. These were BNY’s assessments, not Federal Reserve guidance.

5.50% Base Rate Maintained In Hungary As Magyar Supports Euro

Tuesday’s decision left Hungary’s central bank base rate at 5.50% and the overnight corridor at 4.50%–6.50%. The bank pointed to elevated energy prices, increasing global yields and uncertainty in financial markets. It reiterated its aim of achieving the new 2.5% inflation target within its policy horizon.

Headline inflation in September stood at 1.6% year on year, with core inflation at 1.9%. However, Commerzbank economist Tatha Ghose warned that the central bank’s preferred seasonally adjusted monthly indicators had gathered pace in recent months and were exceeding the target-consistent rate.

Separately, explicit and unconditional backing for euro adoption came from Prime Minister Peter Magyar. Commerzbank said this position made adoption by 2032 its base case. That date reflected the bank’s assessment rather than a confirmed timetable for entry.

JPY 536.6 Billion Trade Deficit For Japan In September

JPY 536.6 billion was Japan’s September merchandise trade deficit, the Ministry of Finance’s trade balance release showed. Growth in both exports and imports slowed.

Close coordination with the Bank of Japan was reaffirmed by Finance Minister Katayama, with policy directed at increasing supply capacity without creating inflation. After modest declines the day before, USD/JPY advanced to trade around 158.30 in Wednesday’s Asian session.

Key Events Ahead

• Andrew Bailey Fireside Chat: BoE Governor — 2026-10-21 09:00 New York / 14:00 London: United Kingdom: A fireside chat is scheduled to feature Bank of England Governor Andrew Bailey.
• UK Government Budget Presentation — 2026-10-28; time not supplied: United Kingdom: Presentation of the government’s budget is scheduled.
• Bank of Canada Rate Decision And Projections — 2026-10-28; time not supplied: Canada: A policy announcement and the publication of quarterly economic projections are scheduled from the Bank of Canada.
• Bank of England Monetary Policy Announcement — 2026-11-05; time not supplied: United Kingdom: The next monetary policy decision is scheduled for announcement by the Bank of England.