Sterling held above $1.335, its highest level in a month, as stronger-than-expected UK economic data reinforced expectations of a Bank of England rate hike next month. UK inflation climbed to 3.5% in September, its highest level since October 2025, exceeding forecasts of 3.4%, driven by motor fuels. Core and services inflation also came in above expectations. Public sector net borrowing reached £24.5 billion, higher than forecast, ahead of next week’s budget. The data follow signs of a resilient economy, including an unexpected fall in unemployment, 0.1% GDP growth in August and a narrower trade deficit. Markets are now fully pricing in a 25-basis-point increase in Bank Rate in November. The central bank has so far been the only major central bank yet to begin a policy-tightening cycle. However, Governor Andrew Bailey’s recent remarks suggesting that a prolonged war could increase pressure on policymakers to act suggest that a rate hike may be approaching.

Bank Indonesia (BI) unexpectedly maintained its key interest rate at 5.75% for the fourth straight meeting on October 21, defying expectations of a 25 bps hike. BI lowered banks’ reserve requirements (RR) to 7% from 9% for conventional banks and to 5.5% from 7.5% for Islamic banks. However, the central bank remained focused on keeping inflation within its target range while supporting GDP growth. BI raised rates by a total of 100 bps in May and June combined, bringing the policy rate to its highest level since April 2025 to attract foreign inflows and shore up the rupiah. The annual inflation rate accelerated to a three-month high of 3.28% in September, while core inflation eased to 2.84%. BI expects inflation to remain within its 2.5% ± 1% target range and has maintained its GDP growth forecast of 4.9%–5.7% for 2026. BI also kept the rate on its lending facility at 6.5% but raised the overnight deposit facility rate (DFR) by 25 bps to 5%.

European equity markets were set to open in positive territory on Wednesday as robust earnings from major US technology companies eased concerns surrounding AI-related investments and lifted global investor sentiment. AI stocks had faced significant selling pressure in recent sessions amid growing doubts about the sustainability of heavy spending in the sector. Meanwhile, oil prices resumed their upward trend after a diplomat disputed reports that a deal to end the US-Iran conflict was imminent, keeping inflation risks in focus. In Europe, investors will turn their attention to UK inflation data for September, alongside earnings reports from SAP, Iberdrola, and Enagas. In premarket trading, Euro Stoxx 50 futures rose 0.2%, while Stoxx 600 futures gained 0.1%.

The Australian dollar rose above $0.70, extending its rally to a more than three-week high as hawkish comments from a top central bank official boosted the odds of another interest rate hike. RBA Deputy Governor Andrew Hauser said tighter monetary policy was working, but warned that the inflation outlook remained “materially worse” partly due to elevated oil prices. Hauser stressed the need to anchor inflation expectations ahead of the RBA’s November 3 policy meeting, where policymakers will consider whether to raise rates for a fifth time this year. Markets now price in a 44% chance of a November hike, up from 30% at the start of the week, while the probability of a December move has climbed to 64%. Focus now turns to third-quarter inflation data due next week, with core inflation expected to rise 1.0% quarter-on-quarter, up from 0.9% previously. Annual core inflation is also projected to remain at 3.5%, well above the RBA’s 2%-3% target range.

Japan's exports increased 16.7% yoy to JPY 10,972.3 billion in September 2026, below the market consensus of 20.1%, amid robust demand for AI-related chips, semiconductors, and cars. It was the 13th consecutive month of growth, though the increase was the softest since April, amid risks of supply chain disruptions from the Middle East conflict. Shipments grew to China (8.6%), the U.S. (22.9%), ASEAN (25.3%), the EU (10.5%), and Taiwan (37.8%), while exports fell to Hong Kong (-8.0%) and the Middle East (-12.0%). By category, exports rose across almost all major components, led by transport equipment (10.8%), driven by stronger shipments of motor vehicles and cars. Electrical machinery surged 30.4%, mainly on higher exports of semiconductors and ICs, while machinery rose 18.4%, led by semiconductor-related products. Other exports grew 9.8%, boosted by scientific and optical instruments. Manufactured goods climbed 12.7%, driven by iron and steel products, while chemicals rose 16.4%.

Brent crude rose above $110 per barrel on Wednesday, resuming its advance toward five-month highs as investors assessed mixed reports on diplomatic progress between the US and Iran. Prices fell sharply on Tuesday after Pakistan’s army chief, Field Marshal Asim Munir, met with senior Iranian diplomatic and military officials in Tehran to discuss bilateral ties and the status of negotiations with Washington. However, a diplomat involved in the discussions dismissed reports that a deal was imminent, while confirming that efforts to end the conflict remain underway. Oil prices have gained more than 10% this month as intensifying hostilities involving Saudi Arabia and Iran-backed Houthi forces, as well as Russia and Ukraine raised supply risks further. At least 18 vessels have also come under attack in the Strait of Hormuz over the past two weeks. Despite these risks, oil flows from the Middle East have largely recovered to around 80% of prewar levels.