Daily Financial Breakfast 28 October 2026: 2.75% RBNZ Rate Hold as Australian Underlying Inflation Exceeds RBA Projection

2.75% RBNZ Rate Hold: Today's Market News Highlights

• 2.75% was the Reserve Bank of New Zealand's unexpected cash-rate decision. The 4–3 vote to leave rates unchanged sent the New Zealand dollar down as much as 1.6% against the US dollar.
• At 1% quarter on quarter, Australia's seasonally adjusted third-quarter trimmed mean inflation exceeded the Reserve Bank of Australia's 0.8% projection.
• A 1.42% advance took WTI crude futures to near $101.00 after Yemen's Houthis claimed to have fired a missile towards Saudi Arabia's Ras Tanura refinery.
• With European gas storage below average and LNG supply constrained, the region had become more reliant on flexible LNG imports, according to Commerzbank.
• September headline inflation in Canada reached 3.1%, exceeding the Bank of Canada's third-quarter projection of 2.5%. Markets assigned an 80% probability to a 25-basis-point rate increase.
• Despite a greater-than-expected tightening of eurozone banks' third-quarter credit standards, September credit-growth momentum hit its strongest level since 2022, according to Danske Bank.

Market Moves at a Glance

0.22% Dow Futures Decline Contrasts With S&P 500 and Nasdaq Gains

Dow Jones futures traded around 52,460, down 0.22%, during Wednesday's European session. By contrast, S&P 500 futures added 0.08% to around 7,760, while Nasdaq 100 futures advanced 0.45% to near 29,950.

102.40 Dollar Index as EUR/USD Trades Near Yearly Low

Early European trading put the U.S. Dollar Index near 102.40. EUR/USD hovered close to its yearly low of 1.1113, having traded around 1.1145 on Tuesday and near 1.1125 in early Asian trading on Wednesday. After Tuesday's 0.14% decline to 1.3321, sterling moved below 1.3300. Asian trading saw USD/CHF extend its gains for a fourth consecutive day to around 0.8300. USD/CAD rose for a second day before holding above 1.4000, while USD/JPY had traded around 157.85 on Tuesday.

$4,070 Weekly High Precedes Gold Pullback

From Tuesday's daily low of $3,989, gold recovered more than 1% to trade at $4,061. Early Asian trading on Wednesday then saw prices around $4,065. Gold subsequently touched a weekly high near $4,070 before retreating.

Asia-Pacific Monetary Policy in Focus

2.75% RBNZ Hold Defies Rate-Hike Expectations in 4–3 Vote

A narrow 4–3 vote kept the Reserve Bank of New Zealand's Official Cash Rate at 2.75%, contrary to widespread expectations of a 25-basis-point increase. Money markets had assigned a 100% probability to a rise to 3% ahead of the announcement.

Even so, the central bank indicated that rising fourth-quarter inflation might require further tightening. During Asian trading, the New Zealand dollar dropped below 0.5600 against the US dollar. An earlier Wednesday reading recorded a 1.28% fall to near 0.5600, while later reports put the loss at as much as 1.6%.

Against the New Zealand dollar, the Australian dollar climbed to its strongest level since March 2013. The move followed New Zealand's surprise rate hold and Australia's stronger inflation figures.

1% Australian Underlying Inflation Tops RBA's 0.8% Projection

Standard Chartered's Nicholas Chia said Australia's seasonally adjusted third-quarter trimmed mean inflation increased 1% quarter on quarter, above the Reserve Bank of Australia's 0.8% projection. Short-term inflation expectations also moved slightly higher.

According to Chia, RBA communications and the September meeting minutes suggested that the steady rise in unemployment was not causing policymakers undue concern. Other labour-market indicators, including vacancies, had improved. Existing capacity pressures and high oil prices were also influencing the inflation outlook, he said.

On Wednesday, the Australian dollar advanced 0.15% against the US dollar to near 0.7035. Following the inflation release, AUD/JPY extended its rise to a fourth consecutive day, reaching around 111.30 in Asian trading.

Energy & Geopolitical Developments

$101 WTI in Sight After Houthi Missile Claim Targets Saudi Refinery

Reuters reported that Yemen's Iran-aligned Houthis said on Tuesday they had fired a ballistic missile towards the Ras Tanura oil refinery in eastern Saudi Arabia. The refinery is the kingdom's largest. The Houthi statement did not confirm damage or an interruption to output.

Renewed concerns over Saudi supply lifted WTI crude after two losing sessions. On Wednesday, the benchmark traded around $100.30 per barrel in Asian hours, then around $100.75 in early European trading. Later in the European session, NYMEX WTI futures gained 1.42% to near $101.00.

Low European Gas Stocks Increase LNG Reliance, Commerzbank Says

Commerzbank economist Norman Liebke said comparatively low European gas inventories and reduced LNG supply had left the region more dependent on flexibly available LNG cargoes. Although European gas consumption stayed below previous years' levels, competition for LNG had intensified.

A medium-term loss of 17% of Qatar's capacity was among the supply constraints Liebke identified. His assessment focused on lower storage combined with limited LNG availability, not a reported new disruption to European deliveries.

Canada & Eurozone Policy and Credit Conditions

3.1% Canadian Inflation and 3.3% Growth Beat Central Bank Projections

Brown Brothers Harriman's Elias Haddad put Canada's September headline consumer inflation at 3.1% year on year, above the Bank of Canada's 2.5% third-quarter projection. Annualised second-quarter real GDP growth of 3.3% likewise exceeded the bank's 2.5% projection.

The underlying inflation picture was more restrained. In September, the average of CPI trim and CPI median was 1.85%, marginally below the central bank's third-quarter projection of 2.0%. Nevertheless, firms' one- and two-year inflation expectations had risen. In a recent warning, Governor Tiff Macklem said “the risk that inflation broadens and becomes more persistent has gone up”.

With rates unchanged since December 2025, markets assigned an 80% probability to a 25-basis-point increase to 2.50%. National Bank of Canada economists Taylor Schleich and Ethan Currie said economic slack and contained core inflation had earlier given policymakers scope to wait. Persistently high oil prices and a stronger growth backdrop had since altered that assessment.

2022 High in Eurozone Credit-Growth Momentum Despite Tighter Standards

According to Danske Bank's research team, the European Central Bank's third-quarter Bank Lending Survey revealed more tightening in banks' credit standards than expected. Historically, however, the net share of banks reporting tighter standards was still low. French banks drove much of the tightening.

September data separately showed credit-growth momentum strengthening further to its highest level since 2022. Danske Bank also noted a modest widening of the French OAT–German Bund yield spread on Tuesday, accompanied by broad euro weakness.

Key Events Ahead

• 28 October: Bank of Canada Rate Decision and Monetary Policy Report (28 October 2026, 9:45am New York): The policy decision and Monetary Policy Report are due for release by Canada's central bank.
• 28 October: Federal Reserve Rate Decision and Press Conference (28 October 2026): An interest-rate announcement from the Federal Open Market Committee is scheduled, with a press conference to follow.
• 28 October: UK Budget Release (28 October 2026): Publication of the UK government's budget is scheduled.
• 3 November: Reserve Bank of Australia Policy Meeting (3 November 2026): The third-quarter underlying inflation reading precedes the RBA's next policy meeting.
• European Central Bank Rate Announcement Ahead: A monetary-policy decision from the ECB is forthcoming.
• Bank of Japan Policy Announcement Ahead: A monetary-policy decision from the Bank of Japan is forthcoming.