Daily Financial Breakfast 28 October 2026: Australian Underlying Inflation Exceeds RBA Projection; RBNZ Leaves Rate Unchanged at 2.75%

Market News Today: What Is Driving Currencies, Oil and Policy Expectations?

• The New Zealand dollar lost as much as 1.6% against the U.S. dollar after a surprise decision by the Reserve Bank of New Zealand to keep its cash rate at 2.75%, backed by a 4–3 vote.
• The Reserve Bank of Australia's 0.8% projection was surpassed by third-quarter trimmed mean inflation, which increased 1% quarter on quarter on a seasonally adjusted basis.
• A claim by Yemen's Houthis that they had fired a missile towards Saudi Arabia's Ras Tanura refinery lifted WTI crude futures 1.42% to near $101.00.
• With European gas inventories below average and LNG availability limited, the region had become more dependent on flexible LNG imports, according to Commerzbank.
• Markets assigned an 80% probability to a 25-basis-point rate increase as Canada's September headline inflation hit 3.1%, exceeding the Bank of Canada's third-quarter projection of 2.5%.
• Danske Bank reported that September credit-growth momentum in the eurozone was the strongest since 2022, even as banks tightened third-quarter credit standards by more than anticipated.

How Are Major Markets Performing?

Why Are U.S. Equity Futures Diverging?

U.S. equity futures moved in different directions during Wednesday's European session: a 0.22% fall left Dow Jones futures around 52,460, whereas gains of 0.08% and 0.45% took S&P 500 futures to around 7,760 and Nasdaq 100 futures to near 29,950, respectively.

Where Do Major Currency Pairs Stand?

Early in the European session, the U.S. Dollar Index hovered near 102.40, with EUR/USD close to its yearly low of 1.1113. The pair had been around 1.1145 on Tuesday before trading near 1.1125 in Wednesday's early Asian hours. Following Tuesday's 0.14% drop to 1.3321, sterling slipped under 1.3300. A fourth straight day of gains brought USD/CHF to around 0.8300 in Asian trading; USD/CAD, meanwhile, extended its advance into a second day before settling above 1.4000. Tuesday's trading had placed USD/JPY around 157.85.

How Did Gold Reach Its Weekly High?

A recovery of more than 1% from Tuesday's daily low of $3,989 brought gold to $4,061. In Wednesday's early Asian session, the metal traded around $4,065 before climbing to a weekly high near $4,070 and subsequently retreating.

What Is Shaping Asia-Pacific Central Bank Policy?

Why Did the RBNZ Keep Rates at 2.75% Despite Hike Expectations?

Widespread forecasts for a 25-basis-point increase were upended when the Reserve Bank of New Zealand voted 4–3 to retain its Official Cash Rate at 2.75%. Ahead of the decision, money-market pricing had implied a 100% probability of a move to 3%.

Despite holding rates, the central bank indicated that rising fourth-quarter inflation might warrant additional tightening. Asian trading saw the New Zealand dollar drop below 0.5600 against the U.S. dollar. On Wednesday, an initial reading put the currency near 0.5600, down 1.28%; later reports showed losses reaching as much as 1.6%.

New Zealand's surprise decision to leave rates unchanged, together with stronger Australian inflation data, also propelled the Australian dollar to its highest level against the New Zealand dollar since March 2013.

How Far Did Australian Underlying Inflation Overshoot the RBA Forecast?

Standard Chartered's Nicholas Chia reported a seasonally adjusted 1% quarter-on-quarter rise in Australia's third-quarter trimmed mean inflation, against a 0.8% projection from the Reserve Bank of Australia. There was also a slight increase in short-term inflation expectations.

Improvements in labour-market measures such as vacancies meant the steady rise in unemployment was not unduly worrying policymakers, Chia said, citing RBA communications and the September meeting minutes. In his assessment, prevailing capacity pressures and elevated oil prices were also shaping the inflation outlook.

Wednesday brought a 0.15% rise in the Australian dollar against the U.S. dollar to near 0.7035. After the inflation figures were released, AUD/JPY extended its gains to a fourth consecutive day, trading around 111.30 during Asian hours.

How Are Energy Markets Responding to Supply & Geopolitical Risks?

What Took WTI Towards $101 Following the Houthis' Saudi Refinery Claim?

According to Reuters, Yemen's Iran-aligned Houthis claimed on Tuesday to have fired a ballistic missile towards the Ras Tanura oil refinery in eastern Saudi Arabia. The facility is the kingdom's largest refinery. The Houthi statement did not constitute confirmation of either damage or disruption to production.

Renewed worries over Saudi supply reversed two days of declines in WTI crude. During Wednesday's Asian session, the benchmark was around $100.30 per barrel, moving to around $100.75 in early European hours. By later European trading, a 1.42% gain had taken NYMEX WTI futures to near $101.00.

Why Does Commerzbank See Greater European Dependence on Flexible LNG Supply?

Commerzbank economist Norman Liebke attributed Europe's greater reliance on flexibly available LNG cargoes to relatively low gas stocks and reduced LNG supply. Competition for LNG had intensified, even though European gas consumption was still below the levels seen in previous years.

Among the supply limitations Liebke cited was the medium-term loss of 17% of Qatar's capacity. Rather than pointing to a reported new disruption in deliveries to Europe, his assessment centred on low inventories coupled with restricted LNG availability.

What Do Canadian & Eurozone Data Signal for Monetary Conditions?

How Do Canada's Inflation and Growth Compare With Bank of Canada Forecasts?

Brown Brothers Harriman's Elias Haddad noted that Canada's September headline consumer inflation, at 3.1% year on year, exceeded the Bank of Canada's third-quarter projection of 2.5%. Real GDP growth in the second quarter also outpaced the bank's 2.5% projection, reaching an annualised 3.3%.

The underlying price measures presented a more contained picture. September's average of CPI trim and CPI median was 1.85%, slightly under the central bank's 2.0% third-quarter projection. Even so, businesses had raised their one- and two-year inflation expectations. A recent warning from Governor Tiff Macklem stated that “the risk that inflation broadens and becomes more persistent has gone up”.

After an unchanged rate setting since December 2025, market pricing implied an 80% probability of a 25-basis-point rise to 2.50%. According to National Bank of Canada economists Taylor Schleich and Ethan Currie, spare capacity in the economy and contained core inflation had earlier afforded policymakers time to wait. That assessment had shifted with persistently high oil prices and a stronger growth environment.

How Is Eurozone Credit Growth Strengthening Despite Tighter Lending Standards?

Danske Bank's research team said the European Central Bank's third-quarter Bank Lending Survey revealed a greater-than-anticipated tightening of banks' credit standards. French banks were responsible for much of that tightening, although the net proportion of banks reporting stricter standards was still low by historical comparison.

Credit-growth momentum strengthened further in separate September data, reaching its highest point since 2022. On Tuesday, the French OAT–German Bund yield spread widened modestly as the euro weakened broadly, Danske Bank also noted.

Which Key Events Come Next?

• Bank of Canada: Rate Announcement and Monetary Policy Report (28 October 2026, 9:45am New York): The scheduled releases from Canada's central bank comprise its policy decision and Monetary Policy Report.
• Federal Reserve: Rate Announcement Followed by Press Conference (28 October 2026): A press conference is due after the Federal Open Market Committee announces its scheduled interest-rate decision.
• UK Government Budget Announcement (28 October 2026): The government's UK budget is due to be published.
• Reserve Bank of Australia: Next Policy Review (3 November 2026): The third-quarter underlying inflation figures come ahead of the RBA's next policy meeting.
• European Central Bank: Forthcoming Rate Announcement: The ECB is due to deliver a monetary-policy decision.
• Bank of Japan: Forthcoming Policy Announcement: A monetary-policy decision is due from the Bank of Japan.