UK FISCAL: Income tax rates may not be increased, thresholds under consideration
- As our overnight team reported last night, the FT is leading with a sourced report that Chancellor Rachel Reeves will not raise income tax in the upcoming Budget.
- The Times had originally reported just over a week ago that a plan to raise all rates of income tax by 2ppt and to lower employee NICs (at basic rate) was included in the first round of measures submitted to the OBR. There has not been another round needed to be submitted in full yet but (that will be due some time next week before the OBR replies on 21 November). However, the OBR was reportedly informed on Wednesday that an income tax increase was no longer a central consideration. The basic rate income tax / NIC plan was estimated by the Treasury to raise GBP6bln per year with higher/additional rate tax rises increasing the total to GBP10.5-11.0bln. However, the FT quotes the potential raised as GBP8-10bln.
- One alternative option said to be under consideration is a change to income tax thresholds instead. We wrote extensively about some options for this in October when Sky News was reporting that the definition of a "working person" was someone earning below GBP45k. We looked at the scenario of lowering the higher rate threshold from GBP50,270 to around GBP45,000 and that would raise around GBP7bln/year.
- See more on that analysis in "Could the income tax higher rate threshold be lowered?", 30 October 2025).
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USDCAD TECHS: Bullish Theme
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4080 Intraday high
- PRICE: 1.4033 @ 08:04 BST Oct 15
- SUP 1: 1.3939/3870 20- and 50-day EMA values
- SUP 2: 1.3802 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3727 Low Aug 29 and a bear trigger
- SUP 4: 1.3689 Low Jul 28
A bull cycle in USDCAD remains intact and this week’s gains reinforce current conditions. Last Thursday’s rally confirmed a recent bull flag on the daily chart and a resumption of the current uptrend. MA studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4111, the Apr 10 high, and further out scope is seen for an extension towards 1.4167, a Fibonacci retracement. First key support is 1.3870, 50-day EMA.
STIR: Euribor Futures Off Yesterday's Highs As French Risks Fade
Euribor futures are flat to +3.0 ticks through the blues, but ERZ6 (+2.0 at 98.100) remains shy of yesterday’s 98.115 high. An easing of French political risks helped futures away from dovish extremes through the course of yesterday afternoon.
- Yesterday evening, Banque de France Governor Villeroy said that if the ECB was to move again, a cut is more likely than a hike. This is in line with his prior rhetoric and not a surprise to us.
- Makhlouf’s comments this morning are somewhat more interesting. He said that inflation risks are slightly skewed to the upside. Most other Governing Council members (other than Schnabel) have said that risks are broadly balanced, with a handful expressing downside concerns.
- Today’s regional data calendar includes Eurozone August IP. Country level data has pointed to weak IP developments, culminating in a -1.6% M/M consensus. It's not expected to be market moving.
- ECB’s de Guindos and Villeroy (again) are scheduled to speak today.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Oct-25 | 1.923 | -0.4 |
| Dec-25 | 1.889 | -3.8 |
| Feb-26 | 1.869 | -5.8 |
| Mar-26 | 1.813 | -11.4 |
| Apr-26 | 1.795 | -13.2 |
| Jun-26 | 1.765 | -16.2 |
| Jul-26 | 1.758 | -16.9 |
| Sep-26 | 1.752 | -17.5 |
| Source: MNI/Bloomberg Finance L.P. | ||
EGBS: Bund Futures Lifted by French OATs as Political Risk Recedes
Bund futures trade in positive territory through the European cash open, supported by yesterday's appearance from Fed's Powell. Speaking just after the European close, Powell signaled that the FOMC were on track for another rate cut at its next meeting.
Bunds are testing session highs, but are led by French OATs as political risks continue to ease in France after key opposition members announced they would not support a no confidence motion.
- TECHNICALS: The next target for the French 10yr Yield is at 3.35% (123.22). For the German 10yr Yield this comes at 2.55% which Equated to 130.23 Yesterday. The initial support is unchanged at 129.13.
- DATA: Today's Data include France, Spain final CPIs and out of the US, MBA, Empire State Manufacturing.
- SUPPLY: UK £1.5bn 2031 linker (unlikely to impact Gilts), German 25s, 30s (equates combined 17.7k Buxl), which should weigh into the bidding deadline.
- SPEAKERS: ECB's de Guindos, Villeroy, BoE's Ramsden, Breeden, Fed's Miran (x2), Waller and Schmid.
