Markets Raise Expectations of BOE Rate Increase in November — Market Talk

0704 GMT - Investors raise their bets on the Bank of England increasing interest rates in November as oil prices advance. The absence of a breakthrough in the U.S.-Iran conflict is causing oil prices to climb, raising concerns about high inflation. Brent crude rises 2.3% to $106.7 a barrel. Markets price in an 81% chance of a BOE rate rise at the next policy meeting in November, up from a 62% probability a week ago, LSEG data show. ([email protected])0653 GMT - Bitcoin falls as renewed geopolitical concerns and expectations for further U.S. interest-rate rises dampen appetite for risky assets. U.S. officials said President Trump rejected a proposal for a seven-day ceasefire and told aides he expects to resume bombing Iran after the November midterms, The Wall Street Journal reports. For bitcoin, the Middle East conflict, higher oil prices and inflation concerns push yields higher and pressure speculative and long-duration assets, Zaye Capital Markets analyst Naeem Aslam says in a note. Recent strong U.S. data support the case for further rate rises, also weighing on bitcoin, he says. Bitcoin falls 1.7% to $83,108, having earlier hit a one-week low of $82,773, LSEG data show. ([email protected])0640 GMT - The dollar rises as hopes for U.S.-Iran diplomacy fade, lifting oil prices and driving investors towards safe-haven assets. U.S. officials said President Trump rejected a proposal for a seven-day ceasefire and told aides he expects to resume bombing Iran after the November midterms, WSJ reports. Higher oil prices support the dollar as the U.S. is a net oil exporter. The dollar is also lifted by expectations that the Federal Reserve could raise interest rates further. The U.S. nonfarm payrolls report on Friday will prove key for these expectations. The DXY dollar index rises 0.2% to 101.181. ([email protected])0551 GMT - Jefferies continues to avoid long-end government bonds, global economist Mohit Kumar says in a note. "We still wouldn't touch the long end of the curve," he says. Higher rates aren't just driven by inflation, but also deficit concerns, he says. Over the medium term, deficits are a bigger concern than oil price-led inflation, with no visible signs either in the U.S. or Europe to try to bring back deficits under control, according to Jefferies's view. "With sovereign and corporate issuance remaining high and likely to increase over coming quarters, we see the long end remaining under pressure," Kumar says. ([email protected])0538 GMT - The week has started with a renewed advance in oil prices, as the U.S. and Iran are still talking with no resolution in sight. Bonds are under pressure, and multi-decade-high sovereign yields are making equity investors uncomfortable, says Ipek Ozkardeskaya, senior analyst at Swissquote. Yields at current levels are starting to look appealing--an appeal that could encourage outflows from equities and inflows into safer bonds, she says. On the other hand, investors are warming up to the idea that the global economy has now shifted to a structurally higher inflation regime, so it might be better to continue waiting, she adds. ([email protected]; @JamesGlynnWSJ)0537 GMT - Being short in French government bonds is now a consensually owned position, while French spreads could narrow a bit once next year's budget is approved, RBC BlueBay Asset Management's Mark Dowding says. "Passage of a budget over the coming month could well see a retracement in spreads and we would favour a neutral stance here, looking to re-establish a short position at more favourable levels," the fixed income CIO says. The 10-year French OAT-German Bund yield spread widened above 110 bps lately, its widest since 2012. ([email protected])0534 GMT - U.S. Treasurys could see a respite this week, but no obvious catalyst for a large rally is visible either unless there is material progress toward lower oil prices, says Jason Williams at Citi in a note. Cumulatively the front-end repricing over the past month has reached historic levels since the 90s, so valuations could be temporarily stretched, the strategist says. Treasury supply was likely a partial driver of last week's selloff, and this week has no Treasury auctions, he says. "So far in 2026, Treasurys have tended to sell off more so on auction weeks than no supply weeks." ([email protected])0530 GMT - The Australian dollar unwound early losses in Asia and is currently trading near 70.30 U.S. cents. The Aussie dollar will likely continue to ease this week and test technical support around 69.51 U.S. cents, says Kristina Clifton, currency strategist at CBA. The strength of the U.S. economy is attracting capital and weighing on all currencies, she adds. The Aussie dollar may receive some brief support if the Reserve Bank of Australia raises interest rates this week and points to another in the coming months. But any gain won't be sustained given pricing for an interest rate hike in November is already high, she adds. ([email protected]; X @JamesGlynnWSJ)0522 GMT - U.S. Treasury yields rise on the day pressured by higher oil prices, trading close to but below recent multiyear highs, as U.S.-Iran peace talks stall. Peace negotiators are pressing Iran to make a concession on its nuclear program to revive ceasefire talks with the U.S. after President Trump rejected Iran's truce proposal. The two-year Treasury yield rises 4.4 basis points to 4.907%, the 10-year Treasury yield rises 2.8 basis points to 5.208%, while the 30-year Treasury yield is up 1.7 basis points at 5.518%, according to Tradeweb. ([email protected])0519 GMT - ​The U.S. Treasury market is going through a light buyers' strike, says Jason Williams at Citi in a note. Last Wednesday's strong PMI print added fuel to the fire, while Federal Reserve speeches remained very hawkish last week, "likely keeping buyers at bay," the strategist says. "Continued hawkish rhetoric has us wondering why the SEP [Summary of Economic Projections] dot plot was not more hawkish given the median implied one more hike," he says. U.S. Treasury yields rise in Asian trade with the 10-year yield up 2.8 basis points to 5.208%, according to Tradewb. ([email protected])0519 GMT - The Monetary Authority of Singapore's tightening cycle is likely over, after adjusting its policy twice this year, Capital Economics say in a note. August inflation figures showed price pressures are building, with core CPI rising to a nearly a two-year high. While food price inflation remains low, there is a growing chance that El Nino would disrupt food supplies and push up imported food costs, CE says. CE notes evidence of higher energy costs feeding through into broader price pressures or rising food costs could prompt more policy tightening.([email protected])0518 GMT - The U.S. dollar was a little higher in the Asian trading session as risk sentiment weakened. Brent oil increased as Iran said it would not soften its conditions to reopen the Strait of Hormuz after President Trump rejected its proposal. The U.S dollar will likely continue to grind higher this week because of the strong U.S. economy, says Kristina Clifton, currency strategist at CBA. The U.S. Dollar Index could even set a new year-to-date high above 101.8 points this week, she adds. The next hurdle for traders is U.S. inflation data for August on Wednesday with the risk for a strong result, she says. ([email protected]; @JamesGlynnWSJ)