Daily Financial Breakfast 29 October 2026: ECB Says Lagarde to Resign While Fed Holds Rates at 3.75–4.00%

Market News Today: Key Takeaways

• The European Central Bank said President Christine Lagarde will resign on 7 February 2027.
• The Federal Reserve held its target rate at 3.75–4.00% in a 10–2 vote, with both dissenters favouring a 25-basis-point increase.
• MUFG reported a sharp French government bond sell-off and a roughly 40% rise in European natural gas prices this month as euro-area financial conditions tightened.
• The Bank of Canada raised its overnight rate by 25 basis points to 2.50%, warning about inflation risks from energy prices and cost pass-through.
• The Reserve Bank of New Zealand held its Official Cash Rate at 2.75% in a narrow 4–3 decision while signalling that tighter policy was likely to be required.
• Australia’s September headline inflation rose to 4.3% from 4.0% in August, while third-quarter trimmed mean inflation reached 3.7%.
• WTI crude eased on Thursday but remained above $100 as comments from U.S. and Iranian officials pointed to de-escalation efforts.
• UK Finance Minister Healey pledged fiscal discipline and household energy-cost protection in a Budget that Deutsche Bank estimated had a broadly neutral GBP 1.3 billion impact.

Market Developments

U.S. Equity Futures

During European trading on Thursday, Dow Jones futures rose 0.37% to near 52,890, while S&P 500 futures fell 0.38% to around 7,750 and Nasdaq 100 futures declined 1.2% to near 29,620.

Foreign Exchange

The U.S. Dollar Index traded near 102.30 during European hours after modest losses on Wednesday. EUR/USD traded around 1.1140 in Asia and remained below 1.1150 in Europe, close to its lowest level since May 2025. Sterling edged down to near $1.3312, while USD/JPY was almost flat around 157.80. EUR/CAD traded around 1.5580, extending a losing streak that began on 16 October.

Gold

Gold eased to around $4,050 in early Asian trading on Thursday before slipping below that level, interrupting a three-day advance to Wednesday’s weekly high. The metal remained weaker during later trading.

Cryptocurrencies

Bitcoin slipped below $80,000 on Thursday, erasing most of its weekly gains following the Federal Reserve’s decision to leave interest rates unchanged.

Central Banks & Inflation

ECB Announces Lagarde’s Resignation for 7 February 2027

European Central Bank President Christine Lagarde has informed the Governing Council that she will resign from her position on 7 February 2027, the ECB announced on Thursday.

Fed Holds Rates at 3.75–4.00% as Cook and Hammack Seek an Increase

The Federal Reserve left its federal funds target range unchanged at 3.75–4.00% on Wednesday in a 10–2 vote. Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack dissented, favouring a 25-basis-point increase.

The policy statement described economic activity as expanding at a “strong pace”, supported by “strong” productivity growth and “robust” capital investment. It said accumulating more information would help the committee determine the policy stance appropriate to secure a timely return of inflation to its target.

Chair Kevin Warsh said inflation remained too high and stressed the need to prevent relative price changes in individual sectors from broadening across the economy. He nevertheless said inflation expectations and inflation compensation were moving in the right direction. “Quashing inflation is not about some fixed individual date on a calendar,” he said, without affirming a December increase.

Warsh acknowledged tighter financial conditions but said he was “unwilling and unable to call them tight”. MUFG reported that the two-year Treasury yield remained around 9 basis points below its level before the policy announcement. Brown Brothers Harriman cited an 83% market-implied probability of a December rate increase.

Warsh also announced changes to the Fed’s meeting structure, according to Commerzbank. The central bank intends to retain eight meetings annually, but one meeting in 2027 will be devoted to strategy without a rate decision or statement. Two meetings will follow that format in 2028, leaving six rate decisions that year.

French Bond Sell-Off Tightens Conditions as European Gas Prices Jump

A sharp sell-off in French government bonds has tightened euro-area financial conditions, while rising energy prices have added to inflation pressures. MUFG’s Lee Hardman said European natural gas prices had reached fresh year-to-date highs after rising by around 40% this month.

Hardman cited September inflation of 3.8% and said the unwanted tightening caused by higher sovereign yields, particularly in France, complicated monetary policy decisions. Germany’s two-year government bond yield had fallen around 25 basis points from last month’s highs as rate-increase expectations were scaled back, he said.

Commerzbank’s Antje Praefcke noted that the yield spread between French and German government bonds had widened further. She said ECB officials had characterised France’s debt problem as primarily a matter for the French government to resolve.

Bank of Canada Raises Overnight Rate to 2.50%

The Bank of Canada increased its overnight rate by 25 basis points to 2.50% on Wednesday. It warned that prolonged high energy prices and stronger pass-through of costs could keep inflation elevated, while leaving the door open to further tightening.

The Canadian dollar initially struggled to gain traction after the widely anticipated decision, with USD/CAD little changed during Wednesday’s American session. The currency strengthened in early Asian trading on Thursday, when USD/CAD fell to near 1.3975. Canada’s increase, alongside the Fed’s unchanged rate, narrowed the policy-rate gap between the two central banks by a quarter of a percentage point.

RBNZ Holds at 2.75% in a 4–3 Vote and Retains Tightening Guidance

The Reserve Bank of New Zealand kept its Official Cash Rate at 2.75% in a narrow 4–3 decision, surprising markets that had widely anticipated a 25-basis-point increase to 3.00%. NZD/USD fell 0.98% to around 0.5625 during Wednesday’s trading.

The central bank said tighter monetary policy was likely to be required, with the timing and scale dependent on the economic outlook. It projected headline inflation of 4.4% year on year in the December quarter, largely reflecting higher global fuel prices and the New Zealand dollar’s depreciation since the September policy meeting.

Australian Inflation Accelerates to 4.3% as Rate-Increase Pricing Rises

Australia’s September headline consumer price inflation rose to 4.3% year on year from 4.0% in August, exceeding the 4.2% consensus, Brown Brothers Harriman’s Elias Haddad reported. Rising housing and transport costs contributed to the increase.

September trimmed mean inflation rose to 3.6% from 3.5%, matching consensus. The policy-relevant third-quarter trimmed mean measure reached 3.7%, above the 3.6% consensus and the second quarter’s 3.6%. Both headline and underlying inflation were above the RBA’s August year-end projections of 3.6% and 3.3%, respectively.

Haddad said cash-rate futures raised the implied probability of a 25-basis-point increase to 4.85% from 60% to 85%. AUD/USD rose 0.40% to 0.7053 on Wednesday and traded near 0.7055 during Thursday’s Asian session.

Energy & Geopolitics

WTI Eases but Remains Above $100 Amid Iran De-Escalation Efforts

WTI crude edged lower on Thursday but remained above $100 as comments from U.S. and Iranian officials pointed to efforts to de-escalate tensions. Renewed concerns about Middle East energy-supply disruptions had supported prices earlier in the session, when WTI traded around $101.20 in Asia.

Oil had rebounded on Wednesday after two days of losses. WTI traded near $102.00 following the Fed announcement, below a pre-decision session high just short of $103.00. Iran was weighing a Qatari draft deal to end the war, with a response expected before the weekend.

Government & Fiscal Policy

Healey’s UK Budget Combines Investment and Energy Relief With Fiscal Discipline

UK Finance Minister Healey presented the annual Budget to Parliament on Wednesday, pledging fiscal discipline while protecting households from rising energy costs linked to the war in Iran. The package increased investment and limited tax increases.

Deutsche Bank chief UK economist Sanjay Raja estimated the package’s impact on the public finances at a broadly neutral GBP 1.3 billion. He said policy measures were projected to reduce borrowing by around GBP 10 billion by the end of the forecast horizon, although the tax burden remained on course to reach new post-war highs.

Raja cited a borrowing path of 4.2% of GDP this fiscal year, falling to 3.4% and eventually reaching 1.8% by 2031/32. The medium-term path was nearly 0.2 percentage points above the Spring Statement projections. Deutsche Bank estimated a fiscal gap of roughly GBP 25–40 billion to address in the new year and questioned the backloaded nature of the planned consolidation.

Upcoming Key Events

• U.S. September PCE Inflation (29 October 2026, 8:30 a.m. New York): September Personal Consumption Expenditures inflation is scheduled for release; DBS cited expectations for headline inflation of 3.6% year on year and 0.5% month on month.
• U.S. Third-Quarter GDP Advance Estimate (29 October 2026, 8:30 a.m. New York): The Bureau of Economic Analysis is scheduled to publish its initial July–September GDP estimate; analysts anticipated 3.2% annualised growth, compared with 2.2% in the second quarter.
• ECB Monetary Policy Decision (29 October 2026, 13:15 GMT): The European Central Bank is scheduled to announce its policy decision at the conclusion of its two-day meeting.
• Bank of Japan Monetary Policy Announcement (30 October 2026): The Bank of Japan is scheduled to announce its monetary policy decision on Friday.
• Tokyo Consumer Price Inflation: Tokyo CPI is an upcoming inflation release alongside the Bank of Japan policy announcement.
• RBA Cash Rate Decision (3 November 2026): The Reserve Bank of Australia’s next cash rate decision follows the September and third-quarter inflation releases.
• RBNZ Monetary Policy Meeting (9 December 2026): The Reserve Bank of New Zealand’s December policy meeting follows its October decision to leave the Official Cash Rate unchanged.