MNI US OPEN - UK CPI Opens Door For Further BoE Cut This Year
EXECUTIVE SUMMARY:
- UK INFLATION OPENS DOOR TO FURTHER RATE CUT THIS YEAR
- US COULD CUT INDIA TARIFFS TO 15-16% IN TRADE DEAL
- RUSSIA BROADENS STRIKES AFTER BUDAPEST SUMMIT CANCELLED
- INDONESIA SURPRISES WITH UNCHANGED RATES, LOOKS TO DEFEND IDR STABILITY
Figure 1: UK 10y yield sinks to new multi-month lows on soft inflation print
Source: MNI/Bloomberg Finance L.P.
NEWS
US/INDIA (Mint): US May Cut India Tariff to 15-16% in Trade Deal, Mint Says
India and the US are nearing a trade deal that could lower tariffs on Indian exports to 15%–16% from about 50%, the Mint newspaper reported, citing three unidentified people aware of the matter. New Delhi may agree to gradually reduce its imports of Russian oil and allow the US to export more non-genetically modified American corn and soymeal, according to the report. An agreement may be announced when President Donald Trump and Prime Minister Narendra Modi possibly meet at the Association of Southeast Asian Nations summit in Malaysia, the newspaper said.
US (BBG): Trump Tells GOP to Stand Firm: ‘We Will Not Be Extorted’
President Donald Trump urged Senate Republicans to hold the line as the US government shutdown extended into its 21st day, warning Democrats that they would bear the political fallout for the impasse if they did not vote quickly to approve funding. “Our message has been very simple: We will not be extorted on this crazy plot of theirs,” Trump said Tuesday at an event in the White House’s Rose Garden, where he hosted Senate Republicans for lunch in a display of party unity.
US (FT): Trump administration on track to narrow deficit, according to Treasury analysis
A Treasury analysis has found the Trump administration’s economic policies have put the US on track to narrow its yawning deficit using a mix of spending cuts and tariff revenue to improve the fiscal outlook. The estimate shows that in the three months to June, the first full quarter of Trump’s second term, government outlays were up 0.2 per cent compared with a year earlier. The rise is much smaller than in the previous four quarters, when spending was up between 7.1 per cent and 28.5 per cent.
US (WSJ): The U.S. Is Trying to Drive a Wedge Between Argentina and China
The Trump administration is pushing officials in Argentina to limit China’s influence over the distressed South American nation at the same time the U.S. and Wall Street banks are working on a $40 billion lifeline for Buenos Aires.
Policy uncertainty is still weighing on euro area confidence despite recent trade agreements, EU leaders will say in a statement due to be released at their Summit on Thursday.
Japanese Prime Minister Sanae Takaichi has ordered a fresh package of economic measures aimed at easing the burden of inflation on households and companies. Takaichi, who became Japan’s first female premier on Tuesday, did not specify the size of the package or indicate whether additional bond issuance would be needed to finance it. A supplementary budget will be compiled to finance the measures, according to an order from Takaichi to compile the package.
RUSSIA/UKRAINE (BBG): Russia Hits Ukraine as Trump’s Latest Peace Efforts Falter
Russia launched multiple drone and missile strikes on Ukraine as the latest peace attempts by US President Donald Trump appeared to be floundering. The attack killed at least six civilians, including two children, with more then a dozen injured across the country in the early hours of Wednesday, Ukraine’s President Volodymyr Zelenskiy said in a post on X.
SOUTH KOREA/NORTH KOREA (BBG): North Korea Fires Multiple Missiles as Trump Prepares APEC Trip
North Korea fired suspected short-range missiles days before President Donald Trump and other world leaders are set to gather in South Korea for the Asia-Pacific Economic Cooperation summit starting next week. The projectiles were launched northeastward Wednesday morning, South Korea’s Joint Chiefs of Staff said in a text message. The missiles flew about 350 kilometers (217 miles), Yonhap News said.
Demand for financing by Japanese corporates via commercial banks increased from three months ago as sales and capital investment picked up, the Bank of Japan’s senior loan officer opinion survey on bank lending practices showed Wednesday.
Bank Indonesia unexpectedly kept its policy rate unchanged after three straight cuts, pausing to assess the impact of previous easing and ongoing fiscal stimulus on Southeast Asia’s largest economy. The central bank held its benchmark BI-Rate at 4.75% on Wednesday, as predicted by only ten of 39 economists in a Bloomberg survey. The majority had predicted the BI would make a fourth consecutive cut of 25 basis points.
- UK inflation rose at an unchanged annual rate in September, with CPI higher by 3.8% y/y, the same rate seen in July and August, the Office for National Statistics said Wednesday. Core CPI (CPI excluding energy, food, alcohol and tobacco) rose by 3.5%y/y, down from 3.6%, while the the CPI goods annual rate rose slightly from 2.8% to 2.9%. CPI services annual rate was unchanged in September, at 4.7%.
- Food and non-alcoholic beverages are the biggest surprise here, down to 4.53%Y/Y and 0.48ppt below the BOE's forecast. That contributed 0.06ppt to the downside surprise to headline CPI. Alcohol and tobacco were also softer than expected. Overall FAT had been expected to contribute a positive 0.03ppt to headline CPI but it contributed negative 0.06ppt. So that accounts for around 0.09ppt of the 0.21ppt downside surprise.
Japan’s exports rose 4.2% year-on-year in September, marking the first increase in five months, driven by stronger shipments of semiconductor manufacturing equipment and mineral fuels despite continued weakness in automobile exports, data from the Ministry of Finance showed Wednesday. Automobile exports fell 0.6% in September, extending their decline to a sixth consecutive month following a 7.9% drop in August. Exports of iron and steel products fell 7.2%, narrowing from a 14.9% fall the previous month.
BONDS: 10-year Gilt Bund Spread Testing August 1 Low Following Soft UK CPI
The 10-year Gilt/Bund spread is 7.5bps tighter on the session at 185bps, testing the August 1 closing low. Clearance of his level would expose the March 11 low at 177.5bps. The softer-than-expected UK CPI data has been the main event of the morning, with 10-year Gilt yields down 8bps and holding close to session lows of 4.404%. 10-year Bund yields have erased the earlier fall to trade little changed at 2.552%. Initial support in 10-year Gilt yields at 3.363% remains intact for now.
- The Gilt curve trades bull steeper, with 2-year yields down 9.5bps and 30-year yields down 7bps. The German curve has seen a much more modest bull steepening.
- BOE-dated OIS now price a ~30% implied probability of a 25bp cut in November, with around a 70% implied probability of a cut by year-end (up from ~40% at yesterday’s close).
- In futures, Gilts are +74 ticks at 93.66 on healthy cumulative volumes. Next resistance is the 1.500 proj of the Sep 3 - 11 - 26 price swing at 93.95. Today’s gap higher has strengthened the bullish condition.
- Bund futures are +9 ticks at 130.30, off session highs of 130.38 seen just ahead of the cash equity open.
- At 1030BST, Germany will reopen its on-the-run 7-year 2.50% Nov-32 Bund for the second and final time this year.
- Regional focus turns to Friday’s flash October PMIs in the UK and Eurozone. The remainder of today’s calendar is light – we don’t expect much new from ECB’s de Guindos or Lagarde.
FOREX: GBP Sinks as UK Markets Rush to Price Greater Cut Risk
- GBP is weaker against all others in G10 as markets rush forward BoE easing pricing after UK CPI surprised to the downside, notably on the back of lower food inflation. This means the prospect of Governor Bailey supporting a Q4 cut has risen, which is well reflected by SONIA pricing. Money markets now price 17bps of easing through year-end, up from 10bps yesterday. The MPC are particularly focused on food inflation driving inflation expectations and leading to inflation persistence. As such, if today's data marks the peak for the category, then those concerns can recede a little and combine with the softer wage data seen last week.
- Inflation numbers drove GBPUSD to lose around 70 pips to print 1.3316, strengthening the narrative that the recent recovery in the pair appears corrective. Key support and the bear trigger lies at 1.3249, the Oct 14 low. A break of it would resume the recent bear leg. There are no MPC appearances scheduled ahead of the November MPC meeting (although the blackout period doesn’t start for a while so there is plenty of time for unscheduled media appearances).
- After some potential profit taking in the early morning, EURUSD continues its downward trajectory seen during the last two sessions, narrowing the gap to the 1.1542 bear trigger in the pair. E1.47bln of EURUSD options expire today around the 1.1600 handle, which may act as a magnet for price action for the pair. French politics may move back into focus towards the end of the week, with the National Assembly set to begin debate on the 2026 budget on Friday.
- Ahead of tomorrow's inaugural SNB meeting minutes, EURCHF consolidates yesterday's bounce from key clustered support between 0.9206/21. Tomorrow's minutes will signal how far the SNB was away from cutting into negative territory in September, and we specifically look for any indication of whether Schlegel's decision not to mention of negative side effects of NIRP was a deliberate move, with potential commentary here posing two-way risks for Swiss STIR and subsequently EURCHF.
- More ECB speakers are on the schedule today but they are mostly expected to reiterate the previous "rates are in a good place" rhetoric. The data calendar is light given the continued US government shutdown until Friday's flash PMIs as well as the rescheduled US CPI.
EQUITIES: FTSE-100 Stands Out in Soft Europe Trade
The trend condition in S&P E-Minis remains bullish and the contract is trading above support at the 50-day EMA. The average, currently at 6627.92, has been pierced but remains intact - for now. Note that the Oct 10 low of 6540.25 marks the key short-term support. The trend direction in Eurostoxx 50 futures is up and This week’s gains reinforce this theme. The breach of 5689.00, the Oct 2 high and bull trigger, confirms a resumption of the uptrend.
- Japan's NIKKEI closed lower by 8.27 pts or -0.02% at 49307.79 and the TOPIX ended 16.93 pts higher or +0.52% at 3266.43.
- Elsewhere, in China the SHANGHAI closed lower by 2.574 pts or -0.07% at 3913.758 and the HANG SENG ended 245.78 pts lower or -0.94% at 25781.77.
- Across Europe, Germany's DAX trades lower by 64.63 pts or -0.27% at 24263.12, FTSE 100 higher by 60.69 pts or +0.64% at 9487.18, CAC 40 down 43.81 pts or -0.53% at 8214.14 and Euro Stoxx 50 down 22.8 pts or -0.4% at 5663.71.
- Dow Jones mini down 22 pts or -0.05% at 47120, S&P 500 mini up 0.5 pts or +0.01% at 6774.25, NASDAQ mini down 31.5 pts or -0.12% at 25265.75.
COMMODITIES: Gold Pullback Deemed Corrective
A sharp pullback in Gold yesterday appears corrective - for now. Note that the trend is overbought and a deeper retracement would allow this condition to unwind. Support at the 20-day EMA, at $4031.4, has been pierced. A bearish theme in WTI futures remains intact and the move down last week reinforces current conditions. Note that moving average studies are in a bear-mode position, highlighting a dominant downtrend.
- WTI Crude up $0.97 or +1.69% at $58.21
- Natural Gas down $0.03 or -0.72% at $3.453
- Gold spot down $17.97 or -0.44% at $4106.71
- Copper up $0.7 or +0.14% at $497.15
- Silver down $0.03 or -0.07% at $48.6885
- Platinum down $16.74 or -1.08% at $1530.79
| Date | GMT/Local | Impact | Country | Event |
| 22/10/2025 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 22/10/2025 | 1100/1300 |  EU | ECB de Guindos at Barcelona Real Assets Meeting | |
| 22/10/2025 | 1225/1425 | EU | ECB Lagarde Keynote at Frankfurt Finance & Future Summit | |
| 22/10/2025 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 22/10/2025 | 1430/1030 | ** | US | US DOE Petroleum Supply |
| 22/10/2025 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 22/10/2025 | 2000/1600 | US | Fed Governor Michael Barr | |
| 23/10/2025 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 23/10/2025 | 0900/1000 | ** |  GB | Gilt Outright Auction Result |
| 23/10/2025 | 1000/1100 | ** | GB | CBI Industrial Trends |
| 23/10/2025 | 1100/0700 | *** |  TR | Turkey Benchmark Rate |
| 23/10/2025 | - | EU | ECB Lagarde at Euro Summit in Brussels | |
| 23/10/2025 | 1230/0830 | *** | US | Jobless Claims |
| 23/10/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 23/10/2025 | 1230/0830 | ** |  CA | Retail Trade |
| 23/10/2025 | 1230/0830 | ** | CA | Retail Trade |
| 23/10/2025 | 1330/1530 | EU | ECB Lane Award Acceptance Speech | |
| 23/10/2025 | 1400/1000 | *** | US | NAR existing home sales |
| 23/10/2025 | 1400/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 23/10/2025 | 1400/1000 | US | Fed Vice Chair Michelle Bowman | |
| 23/10/2025 | 1425/1025 | US | Fed Governor Michael Barr | |
| 23/10/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 23/10/2025 | 1500/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 23/10/2025 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 23/10/2025 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 23/10/2025 | 1700/1300 | ** | US | US Treasury Auction Result for TIPS 5 Year Note |
| 24/10/2025 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |
