Drivers for the Week of October 26, 2026

Persistent inflation and resilient activity should keep major central banks hawkish, while fiscal and electoral events create differentiated opportunities and risks across currencies and rates.

• The Fed is expected to hold its target range at 3.75%-4.00% on Wednesday, but a projected 9-3 vote, September PCE inflation of 3.6% year-on-year, and expected Q3 GDP growth of 3.2% keep a December hike in play.
• The ECB is expected to hold rates at 2.50%, although markets price a 75% probability of a December hike to 2.75%; France's fiscal stress could push EUR/USD toward 1.1000.
• The BOJ is expected to keep rates at 1.25%, while swaps price a 75% probability of a December hike to 1.50%; the BOC and RBNZ are expected to raise rates by 25 basis points to 2.50% and 3.00%, respectively.
• UK fiscal policy and Australian inflation are key market tests: gilt sales are forecast at £249.6 billion for 2026/27, while Australian headline and trimmed-mean CPI are expected at 4.2% and 3.6% year-on-year, supporting expectations of an RBA hike to 4.85%.
• Brazil's prediction markets assign an 80% probability to Flávio Bolsonaro winning the runoff, while Israel's election outcome could shift institutional and geopolitical risk and determine the direction of ILS.

Takeaway: The combination of robust growth, persistent inflation and fiscal uncertainty favors higher-for-longer rate expectations, USD and selected commodity-linked currencies, but investors should manage event risk around central-bank decisions, the UK budget and the Brazilian and Israeli elections.