- A re-escalation of Middle East tensions weighed on markets overnight, as Iran stepped up attacks on shipping and Brent rose above US$105/bbl. Oil later pared some of those gains after President Trump said the US would not attack Iran ahead of the November midterm elections.
- Fed speakers struck a generally hawkish tone, with Governor Waller signalling that further hikes will likely be needed, though with flexibility on timing. With the four-week average of jobless claims falling to 198k, near historic lows, the Fed remains focused on the inflation side of its dual mandate.
- Next week’s September CPI will be key for the Fed’s October decision, with markets pricing less than a 20% chance of a hike, Waller’s guidance appears aimed at keeping the flexibility to respond to incoming data.
- Despite the hawkish tone, US yields eased back from recent 24-year highs, with the 10yr down 5bps to 5.23% and the 2yr down 1bp to 4.75%, while the Australian 10yr sits at 5.34%.
- Australian consumer inflation expectations rose to 5.3% in October from 4.9% in preceding months, their highest since June, this outlook was reinforced by August data showing elevated trimmed mean CPI at 3.6%.
