TMGM Daily Market Breakfast: 16 October 2026

Morning Snapshot

• U.S. producer inflation accelerated to 6.3% in September, exceeding the 5.3% forecast, as Federal Reserve officials voiced concerns about persistent price pressures.
• International Energy Agency members agreed to release 100 million barrels outstanding from their March intervention, including 20 million barrels of diesel.
• China's September exports rose 36.3% from a year earlier, while its monthly trade surplus widened to $133.5 billion, the largest in 20 months.
• European natural gas prices reached their highest level since December 2022 as Persian Gulf LNG flows remained about 80% below year-earlier levels.
• Bank of Japan board member Junko Koeda emphasised upside inflation risks and judged the neutral interest rate to be considerably above 1%, according to MUFG.
• Australia shed 39,300 jobs and its unemployment rate rose to 4.72%, while the Australian dollar weakened against the U.S. dollar.
• Bank of England Governor Andrew Bailey said it was too early to form strong views on the strength of second-round inflation effects.
• U.S. President Donald Trump said he would not use a nuclear bomb in Iran and did not envisage deploying U.S. ground troops there, Reuters reported.

Market Developments

Foreign Exchange

Sterling rose 0.56% to $1.3267 on Thursday after touching $1.3184, reaching its highest level since 6 October. The euro traded around $1.1230 during Friday's Asian session after modest gains the previous day. USD/JPY rose to around 158.10 in early Asian trading before retreating to near 157.85 in early European trading. GBP/JPY extended its gains for a second day, trading around 209.80 during Asian hours.

Oil

WTI traded around $96.10 per barrel during Friday's Asian session as its six-day advance paused, then held near $96.00 in European trading while retaining weekly gains. Brent remained above $100 per barrel, with ING citing Middle East tensions and concerns about the sustainability of flows through the Strait of Hormuz.

Global Economy & Energy

U.S. Producer Inflation Accelerates as Fed Officials Warn About Price Pressures

U.S. producer prices rose 6.3% year on year in September, up from 5.6% in August and above market expectations of 5.3%, the Bureau of Labor Statistics reported. Prices increased 1.3% from the previous month, compared with a 0.5% forecast. Excluding food and energy, producer prices rose 0.7% month on month and 5% year on year.

Separate labour-market figures showed initial jobless claims increased to 199,000 for the week ending 10 October, from 198,000 previously, but remained below the 200,000 forecast. Continuing claims fell by 4,000 to 1.710 million.

Chicago Fed President Austan Goolsbee described September as “a disappointing month for inflation” and warned that demand associated with artificial intelligence could keep inflation elevated. Cleveland Fed President Beth Hammack urged further tightening and said lower-income Americans were struggling with inflation. Her comments followed a warning three days earlier about early signs of a possible problem with inflation expectations.

Following the releases, market-implied odds of an October Fed rate increase stood at 26%, while the probability assigned to a December increase reached 92%.

IEA Members Agree to Release 100 Million Barrels from Emergency Stocks

International Energy Agency member countries agreed to complete the release of 100 million barrels still outstanding from their March intervention to ease rising fuel prices, Bloomberg reported. The original agreement covered 400 million barrels to address the Persian Gulf supply shortfall.

ING analysts Warren Patterson and Ewa Manthey said the release includes 20 million barrels of diesel, to be made available as soon as possible. They noted that earlier suggestions had envisaged about 50 million barrels of diesel.

U.S. commercial crude inventories fell by 8.56 million barrels in the latest week, the largest weekly decline since February, according to Energy Information Administration data cited by ING. The analysts said hurricane activity in the Gulf contributed to the draw.

China's Export Growth Accelerates to 36.3% as Trade Surplus Widens

China's September exports rose 36.3% year on year in dollar terms, accelerating from 25.0% in August and exceeding the 25.7% Bloomberg consensus forecast, according to figures cited by Commerzbank's Dr. Henry Hao. It was the fastest growth since February. Imports increased 31.0%, against a 25.0% forecast and August's 28.2% rise.

The monthly trade surplus reached $133.5 billion, its largest in 20 months, bringing the cumulative surplus for the first nine months of 2026 to $938 billion. China recorded record bilateral surpluses with both the United States and the European Union.

Producer prices increased 5.0% year on year, compared with 3.8% previously and a 4.4% forecast, marking the fastest increase since 2022. Commerzbank attributed the acceleration primarily to elevated oil prices amid Middle East tensions and rising costs for AI-related goods.

Aggregate social financing expanded by CNY3.55 trillion in September, its largest monthly increase since June, supported by the biggest government bond issuance in more than a year. New yuan loans totalled CNY1.3 trillion, although household borrowing remained subdued.

The trade figures coincided with pressure to broaden EU safeguards on Chinese goods. Following an EU-China hybrid-vehicle cap agreed the previous weekend, Germany was pushing for safeguard quotas in additional sectors, including chemicals and mechanical engineering.

European Gas Hits Highest Level Since 2022 as Gulf LNG Supply Remains Constrained

European benchmark TTF natural gas prices traded at their highest level since December 2022, while LNG flows from the Persian Gulf remained about 80% lower than a year earlier, according to ING's Warren Patterson. The recovery in the region's oil flows had not been matched by a comparable recovery in LNG shipments.

European gas storage was just under 75% full, compared with a five-year average of 89%. The German government instructed state-owned SEFE to purchase and store an additional 8 TWh of natural gas by 15 December.

IMF Managing Director Kristalina Georgieva separately said northern countries needed to rebuild depleted fuel and strategic energy reserves as winter approached.

Central Banks & Regional Economies

BoJ's Koeda Emphasises Inflation Risks and Accommodative Financial Conditions

Bank of Japan board member Junko Koeda placed greater emphasis on upside price risks and still-accommodative financial conditions in her latest remarks, according to MUFG's Michael Wan. She judged the neutral interest rate to be considerably above 1% and warned more explicitly against excessive caution than in her previous speech.

MUFG said the remarks supported continued policy normalisation but did not signal the timing of the next move. Overnight swaps implied about a 4% probability of an October increase and an 82% probability of an increase by December.

U.S. Treasury Undersecretary for International Affairs Erin Browne separately said Japan no longer faced a deflationary environment and that the yen's level and monetary policy needed to adjust to that change.

Australia Sheds 39,300 Jobs as Unemployment Rises to 4.72%

Australian employment fell by 39,300 and the unemployment rate rose to 4.72%. The Australian dollar weakened against the U.S. dollar and most G7 currencies following the labour-market figures.

Bailey Says It Is Too Early to Judge Second-Round Inflation Effects

Bank of England Governor Andrew Bailey said it was too early to form strong views on the strength of second-round inflation effects. He was participating in a moderated discussion at the Institute of International Finance Annual Membership Meeting in Bangkok on Friday.

Geopolitical Developments

Trump Rules Out Nuclear Bomb Use in Iran and Says Ground Deployment Is Not Envisaged

U.S. President Donald Trump said he would not use a nuclear bomb in Iran and did not envisage deploying U.S. ground troops in the country, Reuters reported on Friday. Trump also said he had spoken with Russia and China about nuclear disarmament.