US
10-year Treasury yields are consolidating within a 4.95-5.00% range, while crude oil prices hold near multi-month highs. Anthropic’s filing for an initial public offering renewed optimism over the AI trade. Q3 earnings will test the sustainability of that rebound, with Alphabet and Microsoft reporting Wednesday, followed by Amazon and Intel Thursday.
USD extended yesterday’s gains largely driven by EUR weakness. The ECB’s October bank lending survey showed a further net tightening of credit standards and weaker loan demand in Q3. That’s a headwind to Eurozone economic activity and challenges the nearly 75bps of ECB hikes priced by markets over the next twelve months.
Today’s US data should back the Fed’s tightening bias and support USD. September durable goods orders and ADP weekly employment change will likely underscore the resilience of the economy. Meanwhile, rising gasoline prices point to worsening near-term inflation expectations in October’s consumer confidence survey.
BRAZIL
The election shock to Brazilian assets was brutal. USD/BRL stabilized around 5.4200 after spiking nearly 12% to as high as 5.6000 intraday yesterday. The move was the largest single-day drop in BRL since the currency was introduced in July 1994 and more than reversed the rally sparked by Flávio Bolsonaro’s strong first round showing earlier this month. The Ibovespa plunged 17.3%, triggering a circuit breaker, before closing down 13.9%. Local government bonds also sold off sharply, with 10-year yields jumping 246bps to 15.16%, the highest since April 2025.
President Luiz Inácio Lula da Silva greater tolerance for rising debt may keep Brazilian assets under pressure. However, legislative constraints should keep BRL weakness in check. Lula faces a conservative Congress and needs centrist support to pass legislation, limiting the scope for runaway fiscal expansion. Importantly, Brazil’s attractive carry and strategic exposure to commodities linked to energy, AI, and defense remain key structural tailwinds for BRL.
ISRAEL
ILS is outperforming across the board. Israel legislative election is today with exit polls expected shortly after 10:00pm local time (8:00pm London, 4:00pm New York). A party bloc requires 61 of the 120-seat Knesset to form a stable government. Polls show Prime Minister Benjamin Netanyahu’s bloc and the anti-Netanyahu bloc led by Gadi Eisenkot falling short of a majority. However, the Eisenkot camp is leading and could cross the 61 seats threshold with support from the Arab parties.
A Netanyahu bloc victory would revive the judicial overhaul, raising concerns about the rule of law and political stability, and weigh on ILS. A centrist Eisenkot government would likely reduce institutional and geopolitical risk and support ILS.
CHILE
Chile’s central bank is widely expected to keep the policy rate on hold at 4.50% for a sixth straight meeting (9:00pm London, 5:00pm New York). The swaps curve implies 50bps of hikes to 5.00% in the next twelve months and 100bps of cumulative tightening over the next two years.
We think this is too aggressive given weak domestic economic activity and the policy rate already near the upper end of the bank’s 3.75-4.75% neutral range. That leaves CLP vulnerable to a dovish repricing. The decline in the copper/oil ratio also weighs on CLP as higher energy import costs dilute the benefit of firm copper prices.
