MNI EUROPEAN OPEN: Aust U/E Rate Rises, RBA Cut Risks Back
EXECUTIVE SUMMARY
- MIRAN NOT CONVINCING FED COLLEAGUES ON ALGER CUTS - MNI BRIEF
- ECB’S MULLER WARNS CHINESE EXPORT CURBS COULD FUEL INFLATION - BBG
- BIG UK FISCAL CONSOLIDATION NEEDED TO MEET RULES - IFS - MNI
- BOJ'S TAMURA SAYS MOVE CLSOER TO 1% NEUTRAL RATE NEEDED - MNI
- AUSSIE UNEMPLOYMENT CLIMBS TO 4.5% IN SEPTEMBER - MNI BRIEF
Fig 1: Australian Unemployment Rate To Multi Year Highs
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
FISCAL (MNI): UK Chancellor of the Exchequer Rachel Reeves will need to adjust her 2029-30 borrowing outlook by GBP22 billion just to restore the GBP10 billion in headroom she left herself in the spring, the Institute for Fiscal Studies said on Thursday.
BUDGET (TIMES): “Rachel Reeves has said that she will tax the wealthy in the forthcoming budget as the Institute for Fiscal Studies (IFS) warned that she may need to raise about £40 billion to avoid a damaging “fiscal Groundhog Day” next year.”
POLITICS (POLITICO): “China’s intelligence services carried out “large scale espionage operations” that threatened the U.K.’s economy and security, a senior British government official told prosecutors in a collapsed alleged spying case that sparked a heated political row in Westminster.”
EU
ECB (BBG): “Chinese measures to curb the export of rare earths could reignite price pressures in the euro zone if they ripple through the global economy, according to European Central Bank Governing Council member Madis Muller.”
FISCAL (MNI): The European Union’s new more flexible fiscal rules should allow some scope for embattled French Prime Minister Sebastien Lecornu to achieve a compromise between political factions to secure support for a 2026 budget in the National Assembly, so long as this is in line with capping increases in net annual spending to 1.2% over the next three years, EU officials told MNI.
NATO (POLITICO): “A majority of NATO members on Wednesday said they were ready to cough up for a scheme spearheaded by Donald Trump that uses allied money to buy U.S. weapons for Ukraine. In July, the U.S. president said Washington was ready to free up stocks of critical weaponry desperately needed by Ukraine as long as NATO allies pay for them under a scheme called the Prioritized Ukraine Requirements List.”
DEFENCE (POLITICO): “EU countries have five years to prepare for war, according to a military plan that will be presented by the European Commission on Thursday and was seen by POLITICO.”
EU (POLITICO): ““I am not interested in dealing with new sanctions packages against Russia until I see, in the conclusions of the [European Council] summit, political instructions for the European Commission on how to address the crisis in the automotive industry and the high energy prices that are making the European economy completely uncompetitive,” Fico insisted.”
BULGARIA (MNI INTERVIEW): Bulgaria is likely to keep to its usual debt issuance calendar following the adoption of the euro in January 2026, the Bulgarian Finance Ministry told MNI, adding that joining the single currency could potentially improve the country’s credit rating and narrow spreads.
US
FED (MNI BRIEF): Stephen Miran said Wednesday he doesn't think he is yet convincing Federal Open Market Committee colleagues the economy needs faster and larger interest rate cuts to catch up with a lower neutral rate.
GROWTH (MNI BRIEF): U.S. economic activity was changed little in recent weeks with muted demand for labor and input costs rising, according to the Federal Reserve's latest report on Current Economic Conditions published Wednesday.
US/CHINA (MNI BRIEF): The U.S. and China are seeking to reduce the risk of becoming dependent on each other for strategic resources and technologies rather than a more fundamental economic break from each other according to Kevin Rudd, Australia's ambassador in Washington and a former prime minister.
OTHER
GEOPOLITICS (BBG): "Japan’s Finance Minister Katsunobu Kato voiced serious concern over China’s latest export controls on rare earths, stressing the importance of coordinated action from Group of Seven nations."
US/SOUTH KOREA (BBG): “- US Treasury Secretary Scott Bessent said South Korea and US can resolve their differences over how to implement Seoul’s $350b investment pledge, adding that he expects “something” to come “in the next 10 days,” according to Yonhap News.”
JAPAN (MNI): Bank of Japan board member Naoki Tamura said Thursday that the central bank needs to raise its policy interest rate to around 1%, the lower end of what he sees as the neutral range, as the current 0.5% rate remains well below that level.
JAPAN (BBG): "US Treasury Secretary Scott Bessent said the yen will settle at an appropriate level if the Bank of Japan continues to conduct the right monetary policy, Japanese media reported, citing a group interview."
AUSTRALIA (MNI BRIEF): Australia’s unemployment rate rose to 4.5% in September, 20 basis points higher than expected, as the economy added 14,900 jobs, data from the Australian Bureau of Statistics showed Thursday.
RBA (MNI BRIEF): The Reserve Bank of Australia sees the cash rate as still slightly restrictive despite evidence of easing financial conditions, Assistant Governor Chris Kent said Thursday.
CHINA
US/CHINA (BBG): " US Treasury Secretary Scott Bessent dangled the possibility of extending a pause of import duties on Chinese goods for longer than three months if China halts its plan for strict new export controls on rare-earth elements."
INFLATION (SECURITIES DAILY): "Higher prices for home appliances, mobile phones and gold offset the wider year-on-year decline of food in September, helping lift China’s CPI to -0.3% year-on-year from -0.4% in August, according to Feng Lin, executive director at China Golden Credit Rating."
MNI: PBOC Net Drains CNY376 Bln via OMO Thursday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY236 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY376 billion after offsetting maturities of CNY612 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4141% at 09:40 am local time from the close of 1.4170% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 48 on Wednesday, the same as the close on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.0968 Thurs; +0.04% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0968 on Thursday, compared with 7.0995 set on Wednesday. The fixing was estimated at 7.1208 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND SEPT. FOOD PRICES -0.4% M/M; AUG. +0.3%
NEW ZEALAND SEP. NON-RESIDENT BOND HOLDINGS 59.6%; AUG. 61.5%
AUSTRALIA SEPT. JOBLESS RATE 4.5%; EST. 4.3%; AUG. 4.3%
AUSTRALIA SEPT. EMPLOYMENT +14.9K M/M; EST. +20.K; AUG. -11.9K
AUSTRALIA SEPT. FULL-TIME EMPLOYMENT +8.7K M/M; AUG. -48.6K
AUSTRALIA SEPT. PART-TIME EMPLOYMENT +6.3K M/M; AUG. +36.7K
AUSTRALIA SEPT. PARTICIPATION RATE 67.0%; EST. 66.8%; AUG. 66.9%
JAPAN AUG. CORE MACHINE ORDERS -0.9% M/M; EST. +0.5%; JUL. -4.6%
JAPAN AUG. CORE MACHINE ORDERS +1.6% Y/Y; EST. +4.9%; JUL. +4.9%
S.KOREA SEPT BANK LENDING TO HOUSEHOLDS NET +KRW2.0 TLN; AUG +KRW4.1 TLN WON
MARKETS
US TSYS: Yields Grind Lower, Watching 10-Yr for Potential Break Lower
TYZ5 is up at 113-12 in morning trade after US close of 113-07+ and opening at 113-10+. Volumes are moderate with some signs of a slight up tick in the afternoon session.
- The US 2-Yr yield has edged lower again at 3.493% as some traders suggest that a 50bps cut could be the risk at the next meeting.
- The 5-Yr is trying to rally with the yield -0.5bp lower at 3.61%
- The US 10-Yr had tried overnight to break the recent bottom of the range of 4.00% but bounced on that level back to 4.04%, before settling at 4.03% into the US close and is now lower again at 4.025%. The 4.00 -4.20% range remains in place for now and looking at data out tonight, it seems likely that the releases may not be enough of a catalyst to alter this range.
- The 30-Yr is marginally lower at 4.621%
- In the calendar tonight is Retail Sales, PPI, Initial Jobless Claims, Continuing Claims, the NY services business activity and the Philly Fed.
- The trend seems to be for a gradual grinding tighter in yield from here with data showing that via options linked to the Secured Overnight Financing Rate, traders are now wagering that a 50bps cut could be the outlier for the next Fed meeting. This would be against recent trends and represent a potential catalyst for yields to break current trends and potentially gap lower.
JGBS: Hawkish BOJ Tamura Fuels Twist-Flattener, BOJ Dep Gov Speech Tomorrow
JGB futures are weaker, -23 compared to settlement levels, and at session lows after today’s speech by BOJ Tamura.
- (MNI) Bank of Japan board member Naoki Tamura said Thursday that the central bank needs to raise its policy interest rate to around 1%, the lower end of what he sees as the neutral range, as the current 0.5% rate remains well below that level.
- Tamura, one of the board’s more hawkish members, argued that the impact of recent hikes on Japan’s economy has been “extremely limited” and that the only way to determine the true level of the neutral rate is to assess economic and price responses as rates rise.
- Cash US tsys are ~1bp richer in today's Asia-Pac session.
- Cash JGBs have twist-flattened across benchmarks, pivoting at the 20-year, with yields 2ps higher to 5bps lower.
- Today's move leaves the 2/30 yield curve at 222bps, within its recent trading range, but approaching the lower bound around 220bps.
- Swap rates are 3bp higher to 4bps lower.
- Tomorrow, the local calendar will see Weekly International Investment Flow data alongside a speech by BOJ Deputy Governor Uchida.
Bloomberg Finance LP
AUSSIE BONDS: Weak Jobs Data Allows AU-US10Y To Move From Range's Upper Bound
ACGBs (YM +9.5 & XM +6.0) are sharply stronger, but well off session bests, after the release of today’s September labour force data.
- Labour market conditions eased in September. The generally softer Q3 is likely to drive RBA revisions in the near-term, but it may want to see further developments before changing its medium-term view. There are now signs that job growth can’t keep up with increases in the labour force, resulting in higher unemployment and that any additional demand is being met by increasing hours. This makes a November rate cut more likel,y but given the RBA’s inflation concerns, Q3 CPI on 29 October remains the key input.
- Cash US tsys are ~1bp richer in today's Asia-Pac session.
- Cash ACGBs are 6-9bps richer on the day with the AU-US 10-year yield differential at +14bps, the lowest since mid-September. (see chart)
- The bills strip has bull-steepened, with ricing +8 to +11bp.
- RBA-dated OIS pricing shunts 8-11bps softer across meetings versus pre-data levels. A 25bp rate cut in November is now given a 74% probability (38% pre-data), with a cumulative 24bps of easing (13bps pre-data) priced by year-end.
- Tomorrow, the local calendar will be empty apart from the AOFM's planned sale of A$800mn of the Dec-30 bond.
Bloomberg Finance LP
BONDS: NZGBS: Bull-Flattener, Strong Demand At Auction, NZ-US 10Y Tighter
NZGBs closed showing a bull-flattener, with benchmark yields 1-4bps lower, despite mixed signals from today’s monthly price series.
- The series for September accounts for around 46% of the quarterly CPI (to be released on 20 October). There was an easing in food and rental inflation, but power price, petrol and air travel inflation picked up. Q3 average annual inflation saw upward pressure from food, electricity and accommodation, with petrol making less of a negative contribution. RBNZ’s Conway said that he’s nervous that inflation is around 3% but significant spare capacity should bring it towards 2%.
- The weekly auctions showed very strong demand metrics, with cover ranging from 4.02x (May-32) to 5.84x (May-54).
- NZGBs delivered a mixed performance versus the $-bloc. The NZ-US 10-year differential closed 3bps lower at -3bps, the lowest level since February (see chart). However, the NZ-AU differential closed 7bps higher after Australia’s September employment data showed a much larger than expected jump in the unemployment rate.
- RBNZ dated OIS pricing closed little changed across meetings. 26bps of easing is priced for November, with a cumulative 356bps by February 2026.
- Tomorrow, the local calendar will be empty, ahead of Q3 CPI on Monday.
Bloomberg Finance LP
FOREX: AUD/NZD Uptrend Stalls Post AU Jobs Data, Dollar Down But Up From Lows
The USD has stayed on the backfoot, albeit away from worst levels. The BBDXY is down a further 0.10% to 1209/10, fresh lows in around a week for the index. Carry over USD weakness following Powell rhetoric (labor market softening concerns) remains a theme, although the 4.00% level continues to hold for the US 10yr. The USD/CNY fix was also set lower again but USD/CNH has struggled to break lower. The AUD has been the exception to these broader softer USD trends, with a rise in the Sep unemployment rate (more than forecast) pushing us back under 0.6500 and underperforming on key crosses.
- AUD/USD got lows of 0.6480 (last near 0.6490), off 0.35%. Recent lows at 0.6440 remain intact for now. Labour market conditions eased in September. with the jobless rate now at 4.5%, fresh highs back to 2021. This makes a November rate cut more likely but given the RBA's inflation concerns, Q3 CPI on 29 October remains the key input.
- The AUD/NZD cross has tested back under 1.1300, fresh lows for Oct and sub 20-day EMA support. We get Q3 CPI for NZ next Monday. AU-NZ 2yr swap rates sit around 8bps off recent highs, last +97bps, which is not implying further sharp AUD/NZD downside.
- NZD/USD couldn't test above recent highs near 0.5760 (last 0.5740, still +0.30% higher).
- USD/JPY got to lows of 150.51, before support emerged. We were last 150.90/95 only down marginally versus end Wednesday levels. The following option expiries may be influencing spot: Y150.50($729mln), Y151.00($511mln).
- BoJ hawk Tamura reiterated his hawkish outlook, which may have benefited the yen at the margins. We do hear from the Deputy Governor tomorrow. US Tsy Bessent stated that USD/JPY will settle at the appropriate level if BoJ conducts the right policy (via BBG). FinMin Kato also noted they were seeing rapid FX moves in a weak yen direction, leaving intervention risks on the table.
- Japan core machine orders were weaker, implying some downside capex risks. It was also reported that Ishin leaders will make a decision on the coalition with the LDP. Takaichi PM odds sit near 92 per Polymarket.
Asia Stocks Buoyed by Tech Sector Ahead of TSMC Later
- The NIKKEI's gains of +0.75%, adds to yesterday's close +1.76% higher taking Japan's major bourse back towards the recent all time high of 45,580 a the tech sector was a key driver in the region today.
- The KOSPI is up at new highs today with positive tech sector results and the comments by Treasury Secretary Bessent that he is expecting an outcome of negotiations between Korea and the US in the coming days.
- The TAIEX in Taiwan is up 1.00% today ahead of TSMC's results due later. Wednesday saw strong regional gains for semi-conductor stocks after ASML reported better than expected orders, driving by soaring AI demand. This gave Nvidia and AMD a boost in the US and the tailwinds for Asia's sector today.
- China's major bourses were mixed as the Hang Seng's fall of -0.50% came as it was unable to hold above the 50-day EMA of 25,871. The falls in recent days took the HSI south of the 20-day and 50-day EMA. Below the 100-day EMA is at 25,096
- The rally in Jakarta by the JCI sees the index back above the 20-day EMA of 8,092, which it had broken below briefly. After closing at a new all time high last Friday, the Jakarta Comp fell for three successive days as markets reacted to the US China threats.
OIL: Crude Higher, India Yet To Confirm End To Russian Oil Purchases
Oil prices are off their intraday highs but still up on the day supported by comments from US President Trump that India’s PM Modi assented to stop buying Russian oil, which would increase demand for non-Russian supplies, but it will take time for India to switch. It will remain to be seen if this can be achieved and India is yet to confirm. The US imposed a 25% punitive tariff on imports from India in August due to its Russian fuel consumption.
- China was the largest buyers of Russian crude in August, according to CREA, followed by India, Turkey and the EU. Trump has said he will now work to persuade China to stop its Russian oil purchases. The fuel is attractive as it trades at a discount following Russia’s invasion of Ukraine.
- WTI fell to $58.55/bbl before the report on the back of the excess supply outlook which was exacerbated by data showing a US crude stock build. It then rose to $59.01. It is currently 0.9% higher at $58.78. Brent reached a peak of $62.68 and is now up 0.8% to $62.40.
- Bloomberg reported a US crude inventory build of 7.4mn barrels last week, according to people familiar with the API data. Gasoline stocks rose 3.0mn while distillate fell 4.8mn. The official EIA figures are out today.
- Later the Fed’s Waller, Barr, Miran, Bowman and Kashkari appear. ECB President Lagarde participates in an IMF debate and Board members Lane, Machado and Donnery speak, and BoE’s Mann and Greene. Data continue to be delayed in the US but Philly Fed October business outlook, NY Fed October services and October NAHB housing are released. There are also UK August GDP, IP, services and trade and euro area August trade.
Gold Rallies Further On Fed Easing Prospects, Flashing Overbought
Gold continues to rally unhindered reaching another new high at $4242.12/oz and is up 0.6% to $4234.2 moving further into overbought territory and breaking above resistance at $4239.7 opening $4317.7. It has been supported by a number of factors including Fed Chair Powell’s comments this week regarding labour market concerns and associated rate cut expectations. The slightly lower US dollar (BBDXY -0.1%) and yields have been supportive.
- The USD OIS market has a full 25bp cut priced in for 29 October with around 22bp for 12 December. ANZ has lifted its gold forecast to $4600/oz by June 2026 with $4400 by end-2025 as it expects the Fed to cut four more times by March, according to Bloomberg.
- Gold prices continue to be driven by ongoing US-China trade risks, the continued US government shutdown and persistent uncertainty over Fed independence, while central bank buying should remain a medium-term support. ETF flows also continue.
- Silver reached a high of $53.278 today, short of Tuesday’s record $53.546. It is currently up 0.2% to $53.12. Very tight liquidity in London has been a driver of its 13.9% October rise. ANZ expects it to top out at $57.50 by mid-2026 (Bloomberg).
- Later the Fed’s Waller, Barr, Miran, Bowman and Kashkari appear. ECB President Lagarde participates in an IMF debate and Board members Lane, Machado and Donnery speak, and BoE’s Mann and Greene. Data continue to be delayed in the US but Philly Fed October business outlook, NY Fed October services and October NAHB housing are released. There are also UK August GDP, IP, services and trade and euro area August trade.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 16/10/2025 | 0600/0700 | *** |  GB | UK Monthly GDP |
| 16/10/2025 | 0600/0700 | ** | GB | Trade Balance |
| 16/10/2025 | 0600/0700 | ** | GB | Index of Services |
| 16/10/2025 | 0600/0700 | ** | GB | Index of Production |
| 16/10/2025 | 0600/0700 | ** | GB | Output in the Construction Industry |
| 16/10/2025 | 0800/1000 | *** |  IT | HICP (f) |
| 16/10/2025 | 0830/0930 | GB | BOE Credit Conditions Survey | |
| 16/10/2025 | 0900/1100 | * |  EU | Trade Balance |
| 16/10/2025 | 0900/0500 | * |  CA | CREA Existing Home Sales |
| 16/10/2025 | 0900/1100 | IT | Foreign Trade | |
| 16/10/2025 | 1200/0800 |  US | Richmond Fed's Tom Barkin | |
| 16/10/2025 | 1215/0815 | ** | CA | CMHC Housing Starts |
| 16/10/2025 | 1230/0830 | *** | US | Jobless Claims |
| 16/10/2025 | 1230/0830 | *** | US | Retail Sales |
| 16/10/2025 | 1230/0830 | *** | US | PPI |
| 16/10/2025 | 1230/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 16/10/2025 | 1230/0830 | *** | US | PPI |
| 16/10/2025 | 1230/0830 | *** | US | Retail Sales |
| 16/10/2025 | 1300/1400 | GB | BOE Mann in Panel on MonPol and Trade Shocks | |
| 16/10/2025 | 1300/0900 | US | Fed Governor Christopher Waller | |
| 16/10/2025 | 1300/0900 | US | Fed Governor Michael Barr | |
| 16/10/2025 | 1300/0900 | US | Fed Governor Stephen Miran | |
| 16/10/2025 | 1400/1000 | * | US | Business Inventories |
| 16/10/2025 | 1400/1000 | ** | US | NAHB Home Builder Index |
| 16/10/2025 | 1400/1000 | * | US | Business Inventories |
| 16/10/2025 | 1400/1000 | US | Fed Governor Michelle Bowman | |
| 16/10/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 16/10/2025 | 1445/1545 | GB | BOE Mann in MonPol Panel at IMF/World Bank Meetings | |
| 16/10/2025 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 16/10/2025 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 16/10/2025 | 1545/1745 | EU | ECB Lane in Policy Panel at IIF Annual Meeting | |
| 16/10/2025 | 1600/1200 | ** | US | DOE Weekly Crude Oil Stocks |
| 16/10/2025 | 1600/1200 | ** | US | US DOE Petroleum Supply |
| 16/10/2025 | 1600/1800 | EU | ECB Lagarde in IMF Policy Debate | |
| 16/10/2025 | 1645/1245 | US | Richmond Fed's Tom Barkin | |
| 16/10/2025 | 1730/1330 | CA | BOC Governor Macklem speaks at Peterson Institute event in Washington. | |
| 16/10/2025 | 1830/1930 | GB | BOE Greene in Panel on UK/EU Relations | |
| 16/10/2025 | 2015/1615 | US | Fed Governor Stephen Miran | |
| 16/10/2025 | 2030/1630 | US | Richmond Fed's Tom Barkin | |
| 16/10/2025 | 2200/1800 | US | Minneapolis Fed's Neel Kashkari | |
| 17/10/2025 | 0600/0800 | ** |  SE | Unemployment |
| 17/10/2025 | 0900/1100 | *** | EU | EZ HICP Final |
| 17/10/2025 | 0935/1035 | GB | BOE Pill Speech at Institute of Chartered Accountants Conference | |
| 17/10/2025 | 1100/1200 | GB | BOE Greene Roundtable at Atlantic Council | |
| 17/10/2025 | 1230/0830 | * | CA | International Canadian Transaction in Securities |
| 17/10/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 17/10/2025 | 1230/0830 | *** | US | Housing Starts |
| 17/10/2025 | 1230/0830 | ** | US | Import/Export Price Index |
| 17/10/2025 | 1230/0830 | *** | US | Housing Starts |
| 17/10/2025 | 1315/0915 | *** | US | Industrial Production |
