# Australia Hikes but the Aussie Falls as the Dollar Wins Again - Commodity FX - Week of October 3, 2026

> Commodity FX synthesis for the week of October 3, 2026. Podcast coverage on why the Australian dollar fell below 70 US cents even as the RBA hiked to 4.6%, a 3.6% dollar-index breakout that paused on a weak 29,000 US payrolls print, the Canadian dollar's 20-to-30-year-high yield gap with the US, J.P. Morgan's preference for the Aussie and Norwegian krone over the Swedish krona, oil holding near $100 on expensive Hormuz flows, and a copper split between J.P. Morgan's path to $15,000 a ton and 20-year-high stockpiles.

## Commodity FX

### Week of October 3, 2026: Australia Hikes but the Aussie Falls as the Dollar Wins Again

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On Tuesday, Australia's central bank raised interest rates for the fourth time this year, to 4.6%. That's the highest level since November 2011.

By Wednesday morning, the Australian dollar had dropped below 70 US cents. By Thursday, NAB's Skye Masters was calling it "the hardest hit of the major currencies."

Read that again. A country raised rates, and its currency fell.

Last week we wrote that this would be a tug-of-war: higher rates at home pulling the commodity currencies up, a strong US dollar pulling them down. This week the rope moved one way. The dollar index is up about 3.6% since mid-September and is at its best level since April 2025, according to Bannockburn's Marc Chandler. The loonie has strengthened on just two days in three and a half weeks.

Then, on Friday, a weak US jobs report gave the other side a little slack. Whether that's the start of a turn or just a breather is the question for October.

## TL;DR

- **The RBA hiked to 4.6%, but it sounded like it wants to stop.** The vote was 9-0. But Governor Michelle Bullock said the board discussed holding, and hoped four hikes this year "would be enough." NAB now expects a hold, with some risk of a November hike.

- **Australia's inflation came in softer than feared.** Headline inflation rose to 4.0% a year, below the 4.1% expected (and well below the 4.2% Nomura had pencilled in last week). Core inflation stayed at 3.6%.

- **The Aussie dollar fell from 72 cents on September 8 to about 69.5 cents.** Rates are rising everywhere, so Australia's higher rates no longer stand out.

- **The US dollar broke out, then paused.** Payrolls came in at just 29,000 jobs against about 70,000 expected. J.P. Morgan expects the dollar to "consolidate" rather than sell off. Chandler sees 102.85 on the dollar index as the point where betting on the dollar stops paying.

- **The Canadian dollar can't catch a break.** The gap between US and Canadian two-year bond yields is at a 20-30 year high, Chandler says.

- **J.P. Morgan still likes the Aussie and the krone.** Its FX team calls them its "preferred expressions" for betting on global growth, and sees room for "tactical" krone strength. Sweden's krona is still where it borrows.

- **Oil: more is flowing, and it's still expensive.** Middle East exports are back to 89% of pre-war levels, per J.P. Morgan. Brent still touched $108 early in the week. Getting a barrel through Hormuz costs "$30 plus," says Commodity Context's Rory Johnston, against about $2 before the war.

- **Copper split the experts.** J.P. Morgan sees a path to $15,000 a ton. A well-known resource investor says China is on a "buyer's strike" and global stockpiles are at 20-year highs.

## What's new

### Australia: the hike that sank the currency

**The decision.** On [NAB Morning Call: "RBA back on the narrow path" (Sep 29)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiVZvQcekhXgQKcIedHoRpyix7G3xn-2FQzRTnbZQG2w75vzzBBArllbRdvgkN-2BdkkRjt6DTc4O5UL85WJIQNcPxNki1AFBrFYOCy7E3MNAyHHQ-3D-3DqS2v_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LQR3u0YjI6sJpi8bexD1YfqIDFmiu3iyjIhQ4gRLtX-2FbnUpVuWrYHWJB9sa9zYJWJl9RQGXGwCdhcC3LPwn8Lw6ZB7qFSUxo1WBDWisCzO5E-2B6ndTePmuAi8D3zsA-2BrOzQ-3D-3D), NAB's **Taylor Nugent** walked through it. The Reserve Bank of Australia raised its cash rate by a quarter point to 4.6%. The vote was unanimous. The reason was inflation. Energy prices are higher than the RBA assumed in August, and the bank said some of its "upside risks to inflation" are now "materializing." *(Insider: a bank's markets economist.)*

The surprise was in Bullock's press conference afterwards. She said the board had discussed holding rates, that policy was already "restrictive," and that the hope is that this year's four increases "would be enough." Nugent read that as the RBA trying to do "the bare minimum":

> "It's certainly not a done deal that they'll... take out a bit more insurance and tighten more aggressively into the inflation challenge." (Taylor Nugent, NAB)

NAB's base case is now a hold, with "the risk still very much skewed towards a follow up increase" in November. Markets trimmed bets on where rates peak next year by about six basis points (0.06 percentage points). The Aussie lost half a percent and slipped below 70 US cents "for the first time in a while."

**The inflation report made it worse for the currency.** The next morning, on [NAB Morning Call: "It's All About Inflation" (Sep 30)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhknTm-2FNu7eBYXJRT6w7IKoIR8z8ggAulNCynIWepHA-2BaeVaAdFJKp6GzAy1Lm-2BuD0W9gskG9ohplYaxkk19H7yrFPbvY-2BsbzV0opVMpBV8-2FQ-3D-3DA9I-_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LVzEKvwLiNBbNn3vOb-2BBmOqbAZ2-2FJPfEQJWJ-2FsZNUHNsVM4qc811WYqkCjlm3wgo7pcqgxlf1NHq2BHUL0wy2QmyYdUzrByw4sa8W2ip3670tCpZCNrUvjClqpsBZQ1wmg-3D-3D), NAB's **Skye Masters** took apart the August inflation numbers. They came in a little cooler than expected:

- **Trimmed mean** (a core measure that strips out the most extreme price moves) rose 0.2% in the month, against 0.3% expected. The annual rate stayed at 3.6%.

- **Headline inflation** rose 0.4% in the month, against 0.5% expected. The annual rate rose from 3.5% to 4.0%, against 4.1% expected.

- Petrol was up about 14.8% in the month. But price rises slowed for groceries, new homes, cars and childcare.

Her read: July's jump was probably a seasonal quirk, not inflation speeding up. NAB's economists expect core prices to rise about 1% in the third quarter, with risks toward 0.9%. That is still above the RBA's own forecast. But it took the edge off bets on back-to-back hikes. *(Insider.)*

And the currency? "Big moves we've seen over the last month," Masters said. The Aussie was 72 cents on September 8. It was 69.48 when she spoke.

**Why higher rates aren't helping.** The hosts of [The Property Couch: "(LIVE) RBA Sep 2026 | Rates Hit a 15-Year High" (Sep 29)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOisNgs-2F17hfr53FTIl4jd4SbO-2FSEb1-2FQ2MmPgZkDfXvyLToLxXYVSbBnUTdgGfEwXuiZ-2BOFirZThckxI-2BtNMfqUiSU5AI7uS3OgTCNcyS5pEw-3D-3D-zne_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LaH85CM8SHSqksSkvltHBl59qfiCrRgvAh9-2Bz6yChU5gY6-2F7ucEmCy0wcHfMwi4sjYi6IJYFGWAbnpsGz2PYbT2O9aTA5APL1vlT-2FDaChEtlT-2BJCbIoT3uB8b5Zpo5RQSg-3D-3D) explained it simply, live on air as the currency moved. Australia now has "the second highest rate in the developed world behind Iceland." But "most central banks around the world now are actively doing or thinking about raising rates." When "all ships move up," Australia's extra interest no longer pulls in buyers. "Instead of getting towards 75 cents," one host said, "we won't get there." *(Pundit: property educators.)*

They also flagged the next big date. Quarterly inflation lands on **October 28**, just before the RBA's Melbourne Cup meeting. If core prices rise about 1% in the quarter, "November becomes a live call."

**The cost lands on households.** On [Equity Mates: "RBA raises rates again..." (Sep 30)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjdd0wNZ8FoLNZ1LIxJ0NLe5uhEEn7k-2FjnRc-2FOHyxpE4srtapGrtvZ-2Bvui4IpNyQdq-2FEoO1UAQOmS3NzTdKEUWW9oldQKeA1CWPDi8tlYuK1g-3D-3DPGxr_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LaW-2BzJcH28at2OwKNuZU4GggkS1S6ktqEjLQbBs-2F1LVtsrZ-2F3bGrMsL8evxHkFyx3l1t-2B0Q57tTb6DW26a2Fnu0Ot8rKEDWFIxGx5tGg-2BZL1gtuRRvz2Vj2SVZsUy94xUg-3D-3D), the hosts put numbers on it:

- The cash rate started the year at 3.6%. Hikes in February, March, May and September took it to 4.6%.

- Those four hikes add about **$390 a month** to the repayments on a $600,000 mortgage.

- House prices have fallen five months in a row: down 0.9% in August, 3.6% below the March peak, and 7.1% below the peak in Sydney.

- Unemployment is 4.6%, and growth per person was flat.

Of the big four banks, **ANZ** is the most hawkish and expects another hike in November. Markets expect one more early next year, to 4.85%. They also noted Bullock recently told a Senate hearing that the AI data-centre boom is itself pushing up prices, by bidding for scarce resources and workers. *(Pundit: investing podcast hosts.)*

### The dollar: a breakout, then a breather

**How far it ran.** On [The KE Report: "Marc Chandler - Rates & The US Dollar" (Oct 2)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiYwB7O7yY1rS-2B2XWYjKtX-2B7BFHwyR5-2FJhU0zJagbRsVP5AXhYTIaixPauTJmcExyf2A1AXYIJ0-2Bo5Hzk3W56SkcDMabzmRJqJOiK9zWEOClw-3D-3DzCr7_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LdBlgtVeN6AwbQ8i8mnNb3fcgxOcc4r1TkebApu39JNHzkP-2FKVvtzTC1pIMyaXtKe9IZv-2B0iFha2wp3wcC6YcuYfDPJ4QjALRlGw2NujTAod4SvIQe-2BsghO2tV7LQ-2BXEyQ-3D-3D), **Marc Chandler, chief market strategist at Bannockburn Capital Markets**, said the dollar index "has gone basically ballistic." (The dollar index measures the dollar against a basket of other major currencies.) It's up about 3.6% since a week before the Fed's mid-September meeting. It's at its best level since April 2025.

The fuel was rising US interest rates. Ten-year Treasury yields rose about half a percentage point in a month. Up to Monday, markets priced a 70% chance of another Fed hike in October and nearly a full percentage point of hikes over the next year.

**Then it cooled.** New York Fed President John Williams and Fed Vice Chair Philip Jefferson both talked about a "lack of urgency." Then Friday's payrolls came in weak:

- 29,000 jobs added, against about 70,000 expected

- 60,000 jobs revised away from the prior two months

- Hourly pay up just 0.1%, against 0.3% expected

Chandler still expects at least two more Fed hikes, in December and early next year. But he thinks the dollar is close to tired. His target is **102.85** on the index, the halfway point of the fall from above 110 in January 2025 to about 95.55 this January. "As we approach that, the risk reward to be long dollars... changes." His momentum indicators say the dollar is "very overbought." *(Insider: a veteran currency strategist.)*

**J.P. Morgan's read: a pause, not a reversal.** On [At Any Rate: "Global FX: Spilled OATs, Payrolls, Risks to carry" (Oct 2)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiQjFWGdx-2FfYVBrjAlIQbiFn-2BaJ7SdWkkzmLcJaOEfsPqi0x4f6jglDCVLbJlVD6W4yl196MdOu1njuhmTI1vbOjf8-2BnP4M-2FXUeBC9qabfUnQ-3D-3DmPvO_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LapFX5e-2FZAT077mRaJaYrVHRJQJjO-2FlaFGksflWEK6ItSK1SrxNcuF37w4vx73mpYCAVKPDab-2BbUJgC0ejkndgaWN6bGdUa2aEozXF0-2FfO7NqVpb5sZxsgq4bGs6hEPXbg-3D-3D), **Patrick Locke** called the jobs report "generally a pretty soft print." But the US is still growing at a pace in the mid-3% range, and consumer spending is strong. "Consolidation for the USD more so than a sell-off, I think, is the appropriate response." Co-head of FX strategy **Meera Chandan** added that the dollar keeps its "yield supremacy" and still looks cheap compared with where interest rates are. *(Insider: a bank's FX desk.)*

### Canada: three and a half weeks of losing

**A currency stuck in one direction.** Chandler had the line of the week on the loonie:

> "In the past three and a half weeks, the Canadian dollar has only strengthened twice. And each time it was less than 0.1%." (Marc Chandler, Bannockburn Capital Markets)

His explanation: for most currencies, the direction of US interest rates matters more than the gap between two countries' rates. Canada is the exception. The extra yield on a US two-year bond over a Canadian one is at a 20-30 year high. That gap keeps "steadily" climbing, and the loonie keeps sliding with it ([The KE Report, Oct 2](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiYwB7O7yY1rS-2B2XWYjKtX-2B7BFHwyR5-2FJhU0zJagbRsVP5AXhYTIaixPauTJmcExyf2A1AXYIJ0-2Bo5Hzk3W56SkcDMabzmRJqJOiK9zWEOClw-3D-3DtlSr_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LYdyusmUyy3GuFGUuWIr-2BB5b8b5V5DnNRCVy5JdqbG-2FYOLb8xs2c4Yfepyj-2F-2BEZphDsS9XoVZ8H-2FshIvRtxs7qpTd-2BpnFDYXcmmj8fJFAgisvDTYhbADfASZUCYWswX5VQ-3D-3D)).

**The trade fight, from Canada's side.** At the [Hudson Institute: "Getting Past the US-Canada Impasse" (Oct 1)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj3Upucx42hFLwyuw3RNBPaCm8KV5-2F4XFECgqQygVwuMW70UFjIT2EyOoe-2BshiLqfAptc3E8hOkfbm6cqe-2FR0BNuEuNL7r2kl7T48U-2B6g8t2w-3D-3D-Bmq_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LSBl-2FkVZkBiGQbSmcnZfzXSjAH-2F5fLEhdrtYqqkaS1o-2BpkV06MBlsbVDWfOYp6f-2BNBy111curwGLtwqQOQDT53pVoMnbrCjIM00UuPvO4m0nFN3mtrFy-2FiMPwcIXZJWMZw-3D-3D), Conservative MP **Shuvaloy Majumdar** laid out the damage. US tariffs on lumber, steel, autos and aluminum now look like "permanent tariffs that have a floor and not a ceiling." He said 90,000 Canadian jobs are directly affected. Steelmakers like Stelco are closing plants. About 2.5 million Canadian jobs depend on US trade, and the US takes 70% of Canada's exports. His answer for Canada: "unleash trillions of dollars of commodity strength, to build pipelines in every direction." *(Insider: an opposition politician.)*

**The case for a deal now.** On [Hub Podcasts: "Is Trump's trade war with Canada reaching a turning point?" (Sep 29)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiVCueT855jST-2F-2Fq0OFlzR4qW0f1iGUsWHHsxUQRoPnbRLlclagngPpgGHv6J5qmB-2F9HRtOLs8K-2FMxjPVRNY-2B-2B8nXuufyf8x4BsGzskb-2FBjgA-3D-3DPTCy_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LSnK0MZ7UtzbzZ70qMhewOLh6aemB1kGiCjk-2BSuJp3bz2KDqHA0ySq7CvEPNVrnbdh4G4s5Fm5ahAkYx2hzwWcrYY1DltnpRjd8orG-2BPR1EgQuyB9sHgfp6dgkt-2FQ7tAGw-3D-3D), **Sean Speer** argued against the popular Ottawa view that Canada should wait for the US midterms. He thinks there may be "a short window here to get a deal done that the president can champion" before the vote, especially since Canada's counter-tariffs target swing states. After the midterms, "all bets are off." *(Pundit: policy commentators.)*

**The energy bet behind the currency.** The most ambitious voice of the week was **Adam Waterous of Waterous Energy Fund**, the main backer of Strathcona Resources, on [The HC Commodities Podcast: "Making Canada an Energy Superpower" (Sep 29)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhvTmcyLhtjLznLa2HOxVrXD-2FryK3a6RA7Ikl0yjEgbV9iVXioBlG17hppGHnsmb0eHqerlIai4BlLOp-2B1H-2BG4Yq-2BW6ImLA3hp3TFeJaaPIzg-3D-3D9d_F_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LTJJi3pVnn3URuvQLH0Vzqhv3F7pgTp2qk-2F6RpEtWykVz3yk2tz81VMxpwVh0xwVVj4EzTkGc-2FMFj-2FUDYrgnFTjQLC4RHw4Kuhz4Kic0OM5Xu63mFD5t8Dy59J0ZHpVUNA-3D-3D). He wants Canada to double oil output from 5 to 10 million barrels a day over about a decade. His maths, citing ATB:

- Every extra million barrels a day adds about $21 billion a year to GDP, or 0.8%

- Five million more barrels would add over $100 billion a year, or roughly 4% growth a year

- The US added 8 million barrels a day between 2011 and 2019. "This can be done."

He gave Prime Minister Mark Carney "full marks for embracing the vision" but "a failing grade" on delivery, because Ottawa is setting up new project offices instead of fixing the rules. Central planning, he says, "has a 100% failure rate in democracies." *(Insider: one of Canada's biggest oil investors.)*

Two real steps on gas and oil came alongside it:

- **LNG Canada Phase 2 got its go-ahead.** On the [RBN Energy Blogcast (Oct 1)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi55otd9eceDAcRRqAQXCNFaCLBAevMqIleg2PjcrzbZJl9ifw91SDcb4AriuVj5NgWJl3BS3y6gNDMKHm-2B7cgrSzHfuO8omdtlOeU-2BXGsALA-3D-3Dg4lj_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LSGSNS1oIda9pIUx7d7SHqMjh29wXdhEt-2BcN0vunHPyeWY95DWFEqJ1omaEnoxVadIAv5tEC-2FKuZ8QB6du0Rkal4dws3qHlwd2CGIRD9ddbm38qQzsK38ZF75paJs3IIIw-3D-3D), RBN's **Housley Carr** said Canadian tax changes, including writing off 100% of capital costs in year one, tipped the decision. TC Energy will double the Coastal GasLink pipeline from 2.5 to 5 billion cubic feet a day. Producers will drill for 1.8 billion cubic feet a day of new supply from 2031-32. *(Insider: energy analytics firm.)*

- **The Pacific Link oil pipeline is "conditionally approved," sort of.** On [Hub Podcasts (Oct 1)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgh4YoZwhgkpiZajwRoUV0psDBBfHV1vCgJw-2Bfn7iKwRtXs2JfONzVaBzPJO3dTdx-2Bu9DGSiP8cClVjD-2FwRhQ3Ure3yEojRfoX8471RuVz3DQ-3D-3DIEjF_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LQZspqsUPy8aDESoO9kqS5R2MYX6PXfIVAFn502yekZLVej8MYwoekrmsQUta-2BMjB49l5PEupw-2F1uXQYWCK1bvI8nGb1HoLbvVjVtaSNqJoCR3JpblgoGTUrVLbSy5nNig-3D-3D), former Alberta deputy energy minister **Grant Sprague** put the cost at $35-44 billion. He called the approval "a promise they're not going to stop it," rather than real permission. It is "100% tied" to the Pathways carbon-capture project. *(Insider: a former senior official.)*

### Oil: more barrels, same high prices

**The flows are back. The price isn't down.** On [At Any Rate: "Global Commodities: The final 11%" (Oct 2)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjlMQsnqb-2BPInSzUyyPBrDb9CmSO9DRMKNkZwqQKVCIgRMENlfXCKJ6jH86n1S-2FpUrSDIDKIPiDPtLBiPuNM83J6YlLuad2cUD-2FIJL8ZB4Lmw-3D-3DWXUk_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LSFAR0KasoKJlaz9qF-2FLMZ0cfcjBw1X54QieOzzFq0iYIygislNFl-2Fn5sZ3T-2FKN933wFS43zvApHr1m-2FfevFJ1aJUzDMFZzOAZsHHXmcbGCnIAptC1nRtJSdoqWdsd7K8A-3D-3D), J.P. Morgan commodities strategist **Natasha Kaneva** gave the numbers:

- Middle East exports, crude and fuel combined: about 20.5 million barrels a day, or 89% of 2025 levels. "A remarkable recovery given that this is a region still at war."

- Crude alone: 17.5 million barrels a day, 98% of pre-war levels

- Refined fuels like diesel and jet fuel: only about 58%

So crude has mostly normalised. Fuel hasn't. And yet Brent has been "remarkably resilient," just below $100. *(Insider.)*

**Why the price stays high.Rory Johnston of Commodity Context**, a Canada-based oil analyst, explained it twice this week. On [Facts vs Feelings: "Rory Johnston Returns" (Sep 30)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgO0YbDes3BH7lO5gHQfqldHEqt7AqIebXnwAxqrUj-2FAS1lJ6KC9BCZKDdfl59pxwEDZ4525ci9larL1TD2irT54HAgrwkIMkETr0hwKZXiRA-3D-3DherO_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LQJNECXShs8ol13tS0LFsNRbb41QbRX-2FRmCi42ndWBdcaYfoVbPgEwgQ4j6eVIUxoDHuLNBfDvaRyoJ2BKJ6vMsQ0AZAKa-2FOmci9FycBDiM-2B4ui1Fh0who42joQLzVN5Ew-3D-3D), he said about 13.5 million barrels a day now passes through Hormuz, against about 21 million before the war. That's the most since the war began. But the cost of getting it out is staggering:

- Supertanker rates hit an all-time high of $1.2 million a day

- That's about $25 a barrel just in shipping from the Gulf to China, against about $2 normally

- Iraq has been offering buyers $30-50 a barrel discounts to load at Basra

- Physical Brent trades more than $10 above the futures price, a sign of "an acute kind of gaping deficit"

> "Overall, you're mentioning like, yeah, like, look, Hormuz is half full again. We should be celebrating. It's like, oh, I'm really more of a Hormuz half empty kind of guy." (Rory Johnston, Commodity Context)

On [The David Lin Report (Oct 1)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhWySGJxNDMDR6Ay-2Fp0Y3zJhMQ04dgpXnK62u2Iu6DuH-2BOUgC-2BZNHPeuBQSCocQyTcDBsX46FMF7CCJ1Wou2wypMDvAHp7J-2BNc5YsOQaK1AEg-3D-3Dt6PU_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LQsjzb-2Fs0X443LaSHInCnKslTn61wVxshiowh3vRNkvGwspiu9rf-2FFs90cWhj-2BDZvV43dJujDAVvtzWgyV5ysAJA5ph0fTDuqQCNCuQbyOJbZqN-2BP2bfBzM8mzhyFhL-2BWA-3D-3D), he added that about 7 million barrels a day is still missing. All-in, a barrel through Hormuz "likely costs $30 plus." He also pointed to what he calls the "Beijing swing": at its peak, China cut its crude imports by about 5.5 million barrels a day, or 45% of its pre-war buying. *(Insider: specialist oil analyst.)*

**The futures market thinks it's temporary.** On [Big Digital Energy (Sep 29)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiwiIYCzQ5h8i7JH-2FIQtFZsQ03OdfUOn9F1SfODbU0ho6RyUQDX2rxGsSwzKXu5IoNntg7-2BYr6MDoeiaUUVzn3oOMGD-2BFMqMsVbSxLxwfErKw-3D-3DTwDt_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LetM83Eb5viC6y6TM5LUPgHPMNtTGjk1ihIh0KGiwQAdACrzz4dCHVfc7SiUhY-2FMUx6KJlbnA51x6thD52bpJsZSBE-2BRclVK8tctPahLPB91FoWOJmm-2FLYWwrjGSoRaxsA-3D-3D), with Brent at $108 and WTI at $93, the hosts pointed to the futures curve. WTI was priced at $91 for now, $81 a year out, $77 in two years and $69 in five. *(Pundit: energy industry hosts.)*

**Europe opens the diesel tap.** On [Squawk on the Street (Oct 2)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjGbuMT7ot-2BdvBHbmH5wH9Vq-2F5KfPCKBSF4mkmY-2Ft6IIds-2FKen7J-2Bp-2B-2BlApRlv1GR3c25iNlEC5FHhFmMMeb92hR35goaemqNcSaxIEfL1KEg-3D-3D7m3V_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LUmc14kOyyRi-2FifV8veJqBjuR-2FZQNMZ2iG5xg-2FDXWm-2FxlrGgoCYppASBDdUA-2BQTQguAZO3W5KVEEN-2FTCTzuPnfDiYSjsyjEBgyAugr8PSB0uniFnE0TkfKQeNoOKTzdSQw-3D-3D), CNBC's **Eamon Javers** reported President Trump's post that Europe had agreed to release "a massive amount" of its diesel stockpiles. Politico reported the US had asked France's President Macron for 100 million barrels of fuel, all diesel, with Germany reluctant. US diesel futures fell about 4-5% on the news. The host passed on a warning from Kpler's Amena Bakr: it pushes prices down now, but refilling those stocks will "buoy prices" later. *(Pundit: TV reporting.)* A European release may also make a US diesel export ban less likely. That ban is the one J.P. Morgan said last week would hit Mexico and Latin America hardest.

### Copper: two smart people, opposite views

**The bull case: China is short of metal.** J.P. Morgan's **Greg Scheer**, who heads base and precious metals research, is "pretty firmly bullish" ([At Any Rate, Oct 2](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjlMQsnqb-2BPInSzUyyPBrDb9CmSO9DRMKNkZwqQKVCIgRMENlfXCKJ6jH86n1S-2FpUrSDIDKIPiDPtLBiPuNM83J6YlLuad2cUD-2FIJL8ZB4Lmw-3D-3Di4lD_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LYB3F0a89vvuaYpQV03YNUnplu1EQBcGueJypjOpForVZel3kj5LrZlAkuYsPe7Dr9xDc92vsgH1aVfvxKsKRm3n5MdI0VloQIaQA47aOCEgbdu-2FmbXp4pAC77-2F3Ec5UWA-3D-3D)). His reasons:

- China's imports of copper ore are down about 3% this year, and a new tax rule has disrupted scrap supply to its smelters

- China's onshore stocks are only about 75,000 tons heading into its busy year-end season

- Grid spending has lagged, but he thinks targets will still be met

- About 4% of global mine supply is at risk of strikes

- **Chile relies on US imports for more than 70% of its diesel**, so a US export ban would hit copper mining directly

- El Niño weather could disrupt mines in Chile, Peru and southern Africa

He sees "enough firepower here to drive us towards 15K," meaning $15,000 a ton, "and even potentially overshoot." *(Insider.)*

**The bear case: China has stopped buying.** On [Barron's Live: "The Outlook for Energy and Natural Resources Stocks" (Sep 29)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiHHfaE7AFn7kmR94mnP-2Bo5MMFVGwL7-2FYBobnFQILZZABOBxZ7RCy6K57xit1a8CmXDXWYU4r5G9NoPKgateT6CR1BNyroKW58dnHQ2-2FfyBuw-3D-3DIA8Q_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LYAKFMg-2Fa4C1igP6JCshKuK1uFwDxHHdmEiNT9So5FCnKG5ODZXWlxIBJZdc59ycbav7vTh4934OwBMVpLbI2JZVafZCwTL3W-2Flm3nnznzX-2BETlQzsFAc0Yl-2F3v89u3fYQ-3D-3D), **Adam Rozencwajg of Goehring & Rozencwajg** went the other way. His firm was bullish on copper a decade ago at $1.85-2 a pound. Now his model says China spent the past 18 months "overconsuming," and has installed as much copper as it needs for the foreseeable future. Chinese state and private miners are bringing new supply online in Africa. The result: global stockpiles are "essentially at 20-year highs."

> "You have a commodity trading at its all-time high nominal, all-time high real, with stockpiles growing, not shrinking, at high levels. And your biggest consumer potentially on a buyer's strike for the foreseeable future." (Adam Rozencwajg)

His alternative: "I think oil is the new oil." *(Insider: a resource fund manager.)*

**The tariff question, apparently settled.** Last week Bloomberg Intelligence warned that a US decision *against* copper tariffs could knock $1,500-2,000 off the price. On [The KE Report (Oct 1)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgMQgPEPifawNgGrG885SQmkyzYXJjM2Y-2FftRDkwqOqblmwgvjY2-2BgLrh1IG1SP-2B3qoRjDrq-2Bi-2B-2BQdV-2FMfHumYiB4P68oaDD0RUObemy4AQng-3D-3Dxnyl_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4Lfgz69d6NkHx-2FX7iQjpd4NsaTDIC2wFM2CxKzrBfnzUA6m79zqquokiBRR0TmHD-2BChtpN430wFWN-2FTQnxky0R7hse6oO4rQPNFGEfP89g65NNLwvZZqdX296oc-2BdaDPnzA-3D-3D), newsletter writer **Nick Hodge** said that, heading into the midterms with diesel at $6-7, Trump "didn't want to add tariffs." He called it "a pause or a non-decision." So far "the market hasn't seemed to mind." He also flagged a shutdown at Escondida after a fatality, and strike threats at other big mines. *(Pundit: newsletter writer.)* The Northern Miner's weekly price check had copper at $6.58 a pound, down 11 cents on the week ([Northern Miner, Sep 30](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhE1kVp8oxT261QXIoTKHjkiiYuPAxHCCIZArDerwJIiUOSaUluG-2B8O2CYtY2-2FxHTfr4Zaqbxf5OoOFRoCjJv45-2BWuu4wiAwHTa2cXkWdJmRA-3D-3DdcM8_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LUkSUQYotzVpeAKQ4bckgMrt5KMW8JkzzjBKvijx1Yzq6SCOrbyhbEl8rsBsZIrMpfKGwu0oiS4EpICmPszFM6IjibJQhhSpB7fkrF01uIE41087e3axTMLBjLS03naICA-3D-3D)).

### The Mexican peso: the carry trade's casualty

On State Street's [Street Signals: "Bytes, Bonds and the Yen" (Oct 1)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhmh8cbf9-2BMhHFlOABGD54sFku8Ptcchdp5YjtsE-2Fa2b8aNqn4SZBRWMnsm5pyTK67Bk3oscW1lwUXHhehKwsojeBw8TtYn2PeU3tB8mfmLdw-3D-3DhcZX_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LZEM6xivK3HM0ez-2F1fQSzi-2FFrtqcoqEdnhJAKaMd6n3DXqcZ-2FUjFC3xRn-2B4TIzCx-2FY2pzuRXCYq6VLkrrJfIbgnBGIAcdbaAHRUUpReE1K4PT-2BIjvQnCHPQCw59bB71JLw-3D-3D), a State Street FX strategist said the peso's gains for the year have been "completely unwound." The dollar is up almost 6% against the peso in a few weeks. The extra interest Mexico pays over the US is down to about 2.5 percentage points, "near historical, if not historical lows." Investors who borrowed in yen to buy the peso and Colombia's peso did "really, really well up until the last couple weeks." Now, with US yields rising, "is it worth the extra risk?" *(Insider: a custody bank's strategy team.)*

Last week this letter flagged the peso as one of the most crowded bets in the market. This week, some of that crowd left.

## The debate

Both sides had real voices this week. The bears had the better week on price. The bulls kept their argument.

**The bull case: the growth story is intact, and the dollar is tired.** J.P. Morgan says global growth "metrics are in pretty good shape," and "it's really hard not to be pro-cyclical here," meaning bet on growth-sensitive currencies. Its picks are still the Aussie and the krone, and it says positioning in the Aussie is "fairly neutral," so there's no crowd to stampede out ([At Any Rate, Oct 2](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiQjFWGdx-2FfYVBrjAlIQbiFn-2BaJ7SdWkkzmLcJaOEfsPqi0x4f6jglDCVLbJlVD6W4yl196MdOu1njuhmTI1vbOjf8-2BnP4M-2FXUeBC9qabfUnQ-3D-3DnfLB_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LSKm3RojNYDwzSOnJr119jOBoKzFpIc-2B9ihA-2FRibzHvlLa64s0tyUgRNZPh9gRD-2FRCZXnPF4l2mP0IYu5IRa-2BUgGpApwueoeFQmfQwOqwWqAz63N0ozActldY25N9PH7Lg-3D-3D)). Chandler thinks the dollar is "very overbought" and near a top ([KE Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiYwB7O7yY1rS-2B2XWYjKtX-2B7BFHwyR5-2FJhU0zJagbRsVP5AXhYTIaixPauTJmcExyf2A1AXYIJ0-2Bo5Hzk3W56SkcDMabzmRJqJOiK9zWEOClw-3D-3DBr83_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LbYb52-2FWtthQ3WS0ow30j24CCvjcBxrjKwCkwZqlo4RwZfR4DSb-2FLxWqkcsSlljEMw5OdALINnaF7uly1cCgbTGvC1VRiBFsRTsC1-2FG7YE5AfcYda9fBQRCjDBb6fnlv2g-3D-3D)). NAB's Masters saw signs in China's latest business surveys that "fiscal stimulus is starting to gain traction" ([NAB, Sep 30](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhknTm-2FNu7eBYXJRT6w7IKoIR8z8ggAulNCynIWepHA-2BaeVaAdFJKp6GzAy1Lm-2BuD0W9gskG9ohplYaxkk19H7yrFPbvY-2BsbzV0opVMpBV8-2FQ-3D-3DbcOr_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LXjPw38gOx6BAyBfAzin12ok46eDox4KrNerGes604EWdhuIyOZufVuGgODE-2B1mqQCdtIze8FjIwgs1U88NJ6NOG5DuEjr-2FyQMQlUIGFtWLu8F627TuzGXVExsFR-2B69ARw-3D-3D)). And J.P. Morgan's metals team expects a rebound in Chinese copper demand into year-end.

**The bear case: everyone's hiking, so nobody's special, and China isn't buying.** Australia raised rates and its currency still fell, because "if all ships move up," the extra yield doesn't pull in money ([The Property Couch](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOisNgs-2F17hfr53FTIl4jd4SbO-2FSEb1-2FQ2MmPgZkDfXvyLToLxXYVSbBnUTdgGfEwXuiZ-2BOFirZThckxI-2BtNMfqUiSU5AI7uS3OgTCNcyS5pEw-3D-3Dio9o_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LZmh62xb1c1qRjYbFEOpgLo2IExJv8jNIXQjwttyqWg1mln5XJkwKcPNh-2BapjV1gsCWctJ5Y9QIsfckDW-2FoEzHW8G0P-2B1VQGLzUXZ2mYaJPpabNze4I1TKyvwEpzDjy-2BAw-3D-3D)). Its central bank sounds like it wants to stop, and inflation is cooling a little ([NAB](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiVZvQcekhXgQKcIedHoRpyix7G3xn-2FQzRTnbZQG2w75vzzBBArllbRdvgkN-2BdkkRjt6DTc4O5UL85WJIQNcPxNki1AFBrFYOCy7E3MNAyHHQ-3D-3DR-Ni_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4Le-2FvZEG8bVVbKaWdCTM6maIlpls4EU2HZXbjRny7ttk7fZWmEqLSs-2F2Sm0nIuwlX4vi75mI7viypuv2byp-2BU0cXQM-2Bb7Z2KyW-2BTaiOvWXEjsg4Iv9zEbzyI6MhNv6QdpOw-3D-3D)). Canada's currency is losing almost every day as its yield gap with the US sits at a 20-30 year high ([KE Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiYwB7O7yY1rS-2B2XWYjKtX-2B7BFHwyR5-2FJhU0zJagbRsVP5AXhYTIaixPauTJmcExyf2A1AXYIJ0-2Bo5Hzk3W56SkcDMabzmRJqJOiK9zWEOClw-3D-3DExt__7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LaD4tJsqMYKx7pDaTOo1lC2UKhj9E8xzalGWyeZ16-2BOzU1Y1l-2BRMLDLdU4V2wZ-2Bx6XN4JOWzgPTxG-2BthTr1D-2BlW-2BVK6ZGovvPC-2BV6sfrKdhvixNFPaCfuUtBoWA8LS-2B-2B-2BA-3D-3D)). The peso has given back its whole year ([Street Signals](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhmh8cbf9-2BMhHFlOABGD54sFku8Ptcchdp5YjtsE-2Fa2b8aNqn4SZBRWMnsm5pyTK67Bk3oscW1lwUXHhehKwsojeBw8TtYn2PeU3tB8mfmLdw-3D-3DUjzD_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LZS3xObF-2B1I19aeKo4RrUVKr65C6zm4JZIOyVVKHlixwuIyXPeovEe0uilleheaf3x-2FSfn9lbJOm347QJqImYcqJzbVkD7Gt-2FlUwpTbQQ7SWkr3BWeH-2BL7mwxd6BVK5Bvw-3D-3D)). And Rozencwajg says China, the world's biggest buyer of metals, is on "a buyer's strike" ([Barron's Live](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiHHfaE7AFn7kmR94mnP-2Bo5MMFVGwL7-2FYBobnFQILZZABOBxZ7RCy6K57xit1a8CmXDXWYU4r5G9NoPKgateT6CR1BNyroKW58dnHQ2-2FfyBuw-3D-3Dy8tK_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LZd5H7RGW4-2F2QHnl79-2BQTFyQgu4nPsNYCX7eWZiaWnxff8Jx1FsaLV5XMIdG7MHrY6jPZ-2FXn95ZTRiS5HR4SAKpN0Vv49-2FYiL4e3YI9cVpCFKOij5dNSYrLPzQOkk8PeEw-3D-3D)).

**Where it nets out.** The lesson of the week is that higher rates only help a currency when they stand out. Norway's still do, so J.P. Morgan sticks with the krone. Australia's no longer do, and the RBA's soft tone made that worse. Canada's gap is going the wrong way. The swing factor is the US: a weak jobs report bought the Fed time, and if US yields keep falling, the whole group gets breathing room. If they don't, a 3.6% dollar rally in three weeks can easily become 5%.

## Trades in play

These are the views as stated on the podcasts, not recommendations from us.

- **Stay long the Aussie and the krone, but add hedges.** J.P. Morgan's Meera Chandan: "Aussie and NOKI are the preferred options." The new advice is to add protection against European bond stress, through bets that the euro falls against the Swiss franc and the yen ([At Any Rate, Oct 2](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiQjFWGdx-2FfYVBrjAlIQbiFn-2BaJ7SdWkkzmLcJaOEfsPqi0x4f6jglDCVLbJlVD6W4yl196MdOu1njuhmTI1vbOjf8-2BnP4M-2FXUeBC9qabfUnQ-3D-3DhvYM_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LUkxaAKT2UnIUl2HxLqUyAvWdyY8G1ffvH6XcLR1YZsrAzE6H1o0M-2F8jZkjGHUh4MwSISmFDOQbUq-2B20BjhnSOtVijA6l6WxgLRsC56plxH4tuXLQGq2HUaf-2Fmp71Ljg1Q-3D-3D)).

- **Krone over krona.** J.P. Morgan's **James Mulligan** sees "enough on the table probably to see some tactical NOK strength from here," puts fair value for the euro at about 10.70 krone, and still favours the krone over the Swedish krona.

- **Borrow in euros, not Swiss francs.** The euro-Swiss move on October 1 was a "5-sigma" shock, meaning a move that size almost never happens. Chandan's takeaway: "it's better almost to use euro as a funder" (the currency you borrow in).

- **Watch 102.85 on the dollar index.** Chandler's level where the case for owning dollars weakens. He wants to see a reversal before acting ([KE Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiYwB7O7yY1rS-2B2XWYjKtX-2B7BFHwyR5-2FJhU0zJagbRsVP5AXhYTIaixPauTJmcExyf2A1AXYIJ0-2Bo5Hzk3W56SkcDMabzmRJqJOiK9zWEOClw-3D-3DxWnq_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LQoxLBhCUos1f7ud5O6UwbUaxXuB091CPzGIJaVW7T6ohTqUhQZTqM9MsVqx-2FFAVeKaGvDdJCejcG3oPI2uswtqYuMl8yT3qI6aHub7pGuV2Kw3Lwx1gLGqsNEtILpHVWQ-3D-3D)).

## Read-throughs

- **Iron ore + BHP / RIO / Fortescue:** Quiet. Iron ore was $96.92 a ton, down 59 cents on the week. Rio Tinto is starting a carbon-capture trial at China's Shougang steel plant, part of a 2022 agreement ([Northern Miner, Sep 30](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhE1kVp8oxT261QXIoTKHjkiiYuPAxHCCIZArDerwJIiUOSaUluG-2B8O2CYtY2-2FxHTfr4Zaqbxf5OoOFRoCjJv45-2BWuu4wiAwHTa2cXkWdJmRA-3D-3DkyIN_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LV4aQI0j2CJSUEDe8YCx-2FhUroIjAr9RhLx0yhPE8vEILy-2FppkeqKQnCm-2F6mX8vWAj5fSNmajpPRtnEv5A9kMntcDdcBnkulB8nR0kEhiIl1ccatMgCH1E86PhxrkrE5kDQ-3D-3D)). A falling Aussie dollar helps Australian miners: they sell in US dollars and pay many of their costs in Australian dollars.

- **WTI / Brent + Canadian energy (CNQ, SU, ENB):** Brent touched $108 early in the week and was back near $100 by midweek. The futures curve shows WTI falling to $69 in five years ([Big Digital Energy](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiwiIYCzQ5h8i7JH-2FIQtFZsQ03OdfUOn9F1SfODbU0ho6RyUQDX2rxGsSwzKXu5IoNntg7-2BYr6MDoeiaUUVzn3oOMGD-2BFMqMsVbSxLxwfErKw-3D-3DGg_G_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LdOAHDnEd4GIVIZgBsMcsBFjtBSS40OP8Pm8eoKA1UvNYNpANdbBAdYnDdrnb9thvkhOgoDHUHRTizV3sno-2Bm63bF5l2oO5vMicd-2FkDlBhd8NAbIzXkcsCwi8BQD9DJbFA-3D-3D)). For Canadian producers, high oil plus a weak loonie is a strong mix. The bigger structural news was gas: LNG Canada Phase 2 and a doubled Coastal GasLink ([RBN](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi55otd9eceDAcRRqAQXCNFaCLBAevMqIleg2PjcrzbZJl9ifw91SDcb4AriuVj5NgWJl3BS3y6gNDMKHm-2B7cgrSzHfuO8omdtlOeU-2BXGsALA-3D-3D80f6_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LRIRXfG8-2BhcCM46b7S-2BPlEDaNXfexyYdfvQD4SCp3j2GWo0uQID5Mvsii7ixlu-2FjS1diLSKMMFOrd67eON3-2FDFshFGx79STCdBg4eKUMGcOThv9qhoNqCo8u-2FXHKFGb1UA-3D-3D)). Waterous's 10-million-barrel vision depends on new pipes like Pacific Link getting built ([HC Commodities](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhvTmcyLhtjLznLa2HOxVrXD-2FryK3a6RA7Ikl0yjEgbV9iVXioBlG17hppGHnsmb0eHqerlIai4BlLOp-2B1H-2BG4Yq-2BW6ImLA3hp3TFeJaaPIzg-3D-3DDsYV_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LdPtAl0PGovqigAra-2FtlgqtO-2B6-2Bdl9XrDld0scBnWeYna-2BuQb3qbbiBaN6V-2BAW8WazHYTmXg8x3YJ0eZnx3AbuOAUTL5Po2iVyKw77nwEa87jjGlG0HlaeptKuFEbtv3tg-3D-3D); [Hub](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgh4YoZwhgkpiZajwRoUV0psDBBfHV1vCgJw-2Bfn7iKwRtXs2JfONzVaBzPJO3dTdx-2Bu9DGSiP8cClVjD-2FwRhQ3Ure3yEojRfoX8471RuVz3DQ-3D-3DNCm5_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4La-2BoDD9cuE6895b7xCDmOpHxrobvZRGnO6JNTFTqTk98ROazuUvg-2BnWTRyOJFvjWImzf3TM6HUqhCk-2Fc-2BKOUTFy86dH0Ktu18p2GBYAqVs-2FjdXVlsB9XPRgaKKqw-2FcD-2Bdw-3D-3D)).

- **Copper:** A straight fight between J.P. Morgan's path to $15,000 a ton and Rozencwajg's 20-year-high stockpiles ([At Any Rate](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjlMQsnqb-2BPInSzUyyPBrDb9CmSO9DRMKNkZwqQKVCIgRMENlfXCKJ6jH86n1S-2FpUrSDIDKIPiDPtLBiPuNM83J6YlLuad2cUD-2FIJL8ZB4Lmw-3D-3DEw2i_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LZFsaf8T-2F9-2BEQIOCxtNa1uVy1P1W4OZ767ouCO3MAal25ClDhPQ23YsVuLlc-2FPTQQxY4cnjeSAfuu3TOuOleGwfUgPnt02F75A-2BG1bcSnJf8cdPd373fN4gY9CDrAUd8IA-3D-3D); [Barron's Live](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiHHfaE7AFn7kmR94mnP-2Bo5MMFVGwL7-2FYBobnFQILZZABOBxZ7RCy6K57xit1a8CmXDXWYU4r5G9NoPKgateT6CR1BNyroKW58dnHQ2-2FfyBuw-3D-3DlIdP_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4Le-2BXTQyydHKEUQSeq7Nb5pEyGH8Fecbq7uH1OS1RIXV0O18QQT0cZ2UL9yEzX0WqWgI5b17iaLNpFoWt6QQ4JmpByvFJKVrfQyN6FP47X5sJAeA7IUbIKVzQitsUKnJzGw-3D-3D)). The underrated link is diesel. Chile gets over 70% of its diesel from the US, so a US export ban would hit copper supply.

- **The China growth cue / yuan:** Mixed. China's official and private business surveys both showed services growing and factories slowing, with signs that "fiscal stimulus is starting to gain traction" ([NAB](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhknTm-2FNu7eBYXJRT6w7IKoIR8z8ggAulNCynIWepHA-2BaeVaAdFJKp6GzAy1Lm-2BuD0W9gskG9ohplYaxkk19H7yrFPbvY-2BsbzV0opVMpBV8-2FQ-3D-3Dmewc_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LXjSH5ynBOP7m4xa4A8BiBiYNxaViE-2B122UN6XdvdpkQBXiG2Jme4zanXTqfRSt5583-2BL4o-2BT5rinIdOmXrUY43JRM-2F-2BMYi23Pi-2B5EfVmAtfcQcb1CDLZUF-2F0xHpS4pTbw-3D-3D)). On oil, China cut imports by up to 45% during the war ([David Lin Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhWySGJxNDMDR6Ay-2Fp0Y3zJhMQ04dgpXnK62u2Iu6DuH-2BOUgC-2BZNHPeuBQSCocQyTcDBsX46FMF7CCJ1Wou2wypMDvAHp7J-2BNc5YsOQaK1AEg-3D-3DIzP3_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LXLsKTkAmc66LIQmtgCemjdL51RTEHNPElJmjn1wxuhFDDtkiks8x-2FPNLabVtF4Wl2G6diLMsczJgD41wBYg0WwHcdH5d3ztsFa46WxIRBlnBqGVDn1qAc4kTfQ29HeSfw-3D-3D)). On metals, J.P. Morgan sees China short of copper, while Rozencwajg sees it done buying.

- **MXN as fellow USMCA peso:** Its gains for the year are gone, and its interest-rate cushion over the US is near record lows ([Street Signals](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhmh8cbf9-2BMhHFlOABGD54sFku8Ptcchdp5YjtsE-2Fa2b8aNqn4SZBRWMnsm5pyTK67Bk3oscW1lwUXHhehKwsojeBw8TtYn2PeU3tB8mfmLdw-3D-3DOJtZ_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LYXwTVmXRoMvI4N98hoVKvXpLQKE4WCS5CzRibHeTE1JMktJB163DW3mlLTICUGlF5wJdVRb-2BQzV1RbuGSOZlRLk2jZC-2FCD7C9VQ15VSyosMS8WIDpaKjhql9XBdP9Lyag-3D-3D)). Europe's diesel release eases one specific risk: last week J.P. Morgan ranked Mexico among the currencies most exposed to a US diesel export ban.

- **Norway (krone):** J.P. Morgan's favourite in the group, after last week's Norges Bank hike. Norges Bank's currency purchases held "pretty steady... at pretty low levels" this week ([At Any Rate](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiQjFWGdx-2FfYVBrjAlIQbiFn-2BaJ7SdWkkzmLcJaOEfsPqi0x4f6jglDCVLbJlVD6W4yl196MdOu1njuhmTI1vbOjf8-2BnP4M-2FXUeBC9qabfUnQ-3D-3Dcciu_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LTSU8JzyRbyvXT6lqS7LJ52Mu7wfOj02nFTPHUd2Vxqz7CFgIhBUrU9fqNT79ajHXH99eT3noG7pwNbRCvVBWeJ2PEWoH6i3QZ9A6GhlAtHeU-2BBS8dhsMG6TzYOK5VHuPw-3D-3D)).

- **Swedish housing / banks:** Riksbank Governor **Erik Thedéen**, on [Macro Musings (Sep 28)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgLZ3lAkh3eX5iOjuha0IMvQUg-2Fm0Lv85VZIc-2BHbIlJSwdBQ-2BoM5G5P-2FHbO6Ikhyo8CXr57PUgQMjwOs9oDZ3EAZTgiqPt6sUHmrSp7QLYcrA-3D-3DhsCE_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbW0PyfYZmovvmjcXMjT108maM8jXP3XS4t8FtHoIJZ4LdlDEq0CGDoYvfBYmhHBjCm-2FZpbEyeDqrFClGR4XqFo9DS-2B7anMQ-2BEM3FbpbSI1bvSJ8KvHJR2hjf4R-2BZuHMhBEFgyWxgs6OER69-2FbHNK5sHDnOxJFf7-2B6MZR9i5LzGOpg-3D-3D), reminded listeners why Swedish rate moves bite fast: "the borrowing that goes on from the household sector, but also from corporate sector, is variable rates." That is also why he sets a high bar for restarting bond buying (QE). The upshot: the hikes the Riksbank promised last week will reach Swedish mortgage holders, and bank customers, almost immediately. J.P. Morgan noted Sweden's business survey "beat comfortably," but still treats the krona as a borrowing currency because of a "dovish Riksbank." *(Insider: a sitting central bank governor.)*

## What changed

**Australia went from "next to hike, good for the Aussie" to "hiked, and the Aussie fell."** Last week MUFG said a hike "should be fairly supportive for Aussie," and Nomura expected headline inflation at 4.2%. This week the RBA hiked but sounded done, and inflation came in at 4.0%. The Aussie went from J.P. Morgan's "worth having a look at" to "the hardest hit of the major currencies."

**The dollar went from "finally breaking higher" to "very overbought."** Last week J.P. Morgan said the dollar was breaking out. It did, about 3.6% from mid-September. After Friday's 29,000 jobs, the debate has moved to where it tops out.

**The loonie's problem got a number.** Last week the Canadian dollar showed "no reaction whatsoever" to Governor Macklem's hint of higher rates. This week Chandler explained why: the US-Canada yield gap is at a 20-30 year high, and the loonie has risen on just two days in three and a half weeks.

**The copper tariff threat faded.** Last week the big risk was a US decision against tariffs knocking $1,500-2,000 off the price. That decision appears to have come, as a pause, and copper held near its highs.

**Oil flows recovered, prices didn't.** Middle East crude exports are back to 98% of pre-war levels. Brent still traded between about $98 and $108.

---

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