• Iran receives US proposal to reopen Strait of Hormuz
• Softer than feared US Core PCE inflation despite robust spending
• Brexit referendum possible in Labour election manifesto, says Burnham
• Tech leads stock gainers as broader S&P 500 and Dow slide

FX Analysis

USD was choppy as the greenback initially sold off after soft US core PCE inflation data and steady oil prices. But crude reversed and gained through the day pushing yields to fresh 24-year highs. The 10-year Treasury yield touched 5.30% though bets on an October Fed rate hikes slid further to 37% from 50% a day earlier. Cooler inflation supported the Fed Williams’ assertion that there is no immediate rush to hike rates again, even though more tightening will likely be required in time. Meanwhile, revisions to household income and spending data suggest the US economy is in a better balanced position than thought. A pick up in risk sentiment also didn’t dent dollar bulls, who are aiming for the 2026 top at 101.80.

EUR fell for third day but didn’t make a fresh cycle low. Both French and German annual inflation rates accelerated faster than expected in September, primarily driven by sharp spikes in energy and fuel costs. These follow on from hotter numbers out of Spain. There’s now a 26% chance of an ECB October rate hike with around 30bps priced in until year end. Will this week’s surprisingly more dovish tilt from President Lagarde have to be reversed if the region’s data tallies with the countrywide figures?

GBP outperformed as cable touched a minor Fib level at 1.3310 before paring gains. GDP was revised higher by one-tenth to 0.5% q/q. Together with the 0.6% Q1 expansion, there appears to be decent momentum going into the second half. But we note the seasonal nature of the UK economy, with weakness typically from June onwards. See more below.

JPY tracked sideways for a third straight day as it outperformed most of its peers. This came in spite of poor industrial production. The 50-day and 200-day SMAs sit above at 158.26 and 158.45.  In the European session, Nikkei reported that PM Takaichi will vow a nimble response to unexpected market moves.

AUD continued to underperform after cooler than forecast inflation data. Core CPI, as measured by the trimmed mean gauge, which both excluded fuel and electricity prices, rose by 0.2% m/m to stabilise at 3.6% y/y. Odds of another RBA rate hike fell to 20% at its early November meeting, and just 40% by year end.

Stock Market Analysis

US stocks: The S&P 500 was down 0.2% at 7,656. The Nasdaq closed higher by 0.23% at 30,409. The Dow Jones settled off by 0.86% at 5`0,909.  Four sectors were green with Technology, Consumer Discretionary, Energy and Communication Services above water. Consumer Staples, Real Estate, Healthcare and Industrials were the laggard sectors. Moderna sold off 5.4% as Wall Street analysts warned the pioneering biotech may struggle to justify its valuation. Sales estimates are also seen as aggressive. The stock has surged nearly seven times in 2026. After the close, Micron posted record revenue of $54.2bn versus the $51.3bn estimate. EPS printed at $33.42 versus $31.72. The stock added 1.6% after the announcement ahead of the press conference.

Asian Stocks: Futures are mostly positive. APAC stocks were mixed with rising yields and oil mixed in with month end and quarter data. The ASX 200 rallied with real estate leading gains after weak inflation figures reduced chances of another rate hike. The Nikkei 225 gapped above 66,000 and held advances in spite of disappointing data releases. The Hang Seng and Shanghai Comp were mixed again even after a solid China PMI report.

Gold & Silver Analysis

Gold pulled back after initially gaining as yields slid. But their reversal saw gold lose ground and finish lower on the day. Silver posted a fresh 7-week low and looks to be heading towards big support around $56.

Day Ahead – US ISM Manufacturing

The ISM survey is seen as more reliable than PMI data. Manufacturing is predicted to rise to 55.0 from 54.6, while prices paid are expected to tick up to 72.0 from 71.1. Markets will analyse new orders, employment and prices paid for evidence that demand remains strong while energy, transport and tariff costs feed through supply chains. The Middle East conflict and the AI buildout add to the mix of price pressures, which is raising concerns about inflation broadening out. Another elevated price reading would strengthen concerns that manufacturing inflation could slow progress towards the Fed’s target.

Chart of the Day – EUR/GBP breaking down?

Sterling has been performing well versus its peers in September, but not so against the greenback. Sentiment was recently bolstered by PM Burnham’s address at the Labour Party conference, where he pledged strict adherence to fiscal discipline ahead of the October 28 Budget. Burnham also noted that the government will discuss closer future alignments with the European Union (including a customs union or single market options) at an upcoming summit. He repeated this again elsewhere, triggering optimistic currency positioning. EUR/GBP had been tracking sideways around 0.8550 and above the 50-day SMA, now at 0.8567. Wednesday saw a breakdown below here and the midpoint of the 2025 low to high move at 0.8553. There’s short-term support around 0.8535 before long-term lows at 0.8454.