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(1) The euro rebounded on Tuesday after having fallen to a 17-month low the previous day, as a rally in French government bonds eased some concerns over debt market pressures in the eurozone. (2) The euro rose about 0.5% against the US dollar to near 1.127, after having dropped to a low of around 1.116 on Monday, its lowest since May 2025, extending last week’s more than 1% decline. (3) This trend pushed the dollar index down by around 0.4% to near 101.75, after it touched an 18-month high of about 102.53 on Monday. (4) Global bond markets have been battered in recent months due to soaring energy prices caused by the US, Israel, and Iran conflicts, expectations of steep central bank rate hikes, and concerns over high borrowing costs. (5) French debt was hit particularly hard, as politicians struggled to control the budget deficit ahead of the divisive 2027 elections. Monday's sell-off dragged on the euro, and Spain’s early general elections added further pressure. (6) However, a decline in energy prices on Tuesday helped French government bonds rebound, with the key 10-year yield falling by more than 0.1 percentage points, which in turn stabilized the euro. (7) On Tuesday, French far-right presidential candidate Le Pen increased her planned spending cuts from the original 125 billion euros to 140 billion euros. (8) According to a Commerzbank foreign exchange analyst, current French bond yields suggest market tensions have eased, but the risk remains that conditions could tighten again at any moment. (9) The pullback in the US dollar gave other currencies some respite, with the pound rising about 0.4% to around 1.328. (10) However, the dollar rose about 0.1% against the yen to near 158.07. (11) According to sources, the Bank of Japan may signal this month that underlying inflation has roughly reached the 2% target, highlighting its readiness for another rate hike in the coming months. (12) The US dollar has strengthened recently despite weaker-than-expected US employment data dampening expectations for a Fed rate hike this month, as investors still bet the Fed will tighten policy further. (13) The CME FedWatch Tool shows about a 22% probability of a rate hike in October, and about an 85% chance of at least one hike before December. (14) According to an ING FX strategist, the euro’s own weakness continues to play a role, and rising global bond yields are also a factor.

(1) According to informed sources, the International Energy Agency (IEA) Governing Board is expected to finalize the details regarding the release of diesel and crude oil reserves announced by the G7 last week during its meeting scheduled for October 14 to 15. (2) Last Friday, the G7 agreed to release approximately 100 million barrels of diesel and crude oil from emergency reserves and pledged not to implement energy export restrictions; this move was made following pressure from US President Trump. (3) However, specific volumes to be released for crude oil, diesel, and other products were not disclosed at the time, nor was it clarified which countries would participate. (4) One source indicated that G7 member Italy would participate in the release. (5) The IEA did not immediately respond to a request for comment on whether the details would be finalized at the Governing Board meeting.

(1) Some analysts believe that the recent decline in crude oil prices may be due to increased traffic through the Strait of Hormuz, which could further exceed the capacity of refineries. (2) Crude oil prices have become less representative of transportation fuel costs, as the supply and demand for crude oil and that for gasoline, diesel, and jet fuel have become two relatively independent markets. (3) The former involves producers and refineries, while the latter involves refineries and end consumers. (4) As of last week, from the perspective of gasoline buyers, the "perceived" price of WTI was about $120 per barrel. (5) For diesel buyers, this "perceived" price was about $180 per barrel. (6) The disconnect between refined product prices and crude oil prices suggests that simply observing crude oil trends may underestimate actual fuel cost pressures. (7) Moving forward, attention should be paid to refinery utilization rates, the crack spread of refined products, and changes in shipping volumes through the Strait.

(1) EUR/USD: 1.1100 (approximately 440 millions EUR), 1.1245 to 1.1250 (approximately 1.2 billions EUR). (2) USD/CHF: 0.8230 (approximately 150 millions USD), 0.8275 (approximately 150 millions USD). (3) EUR/CHF: 0.9365 to 0.9375 (approximately 180 millions EUR), 0.9390 to 0.9400 (approximately 207 millions EUR). (4) GBP/USD: 1.3200 (approximately 152 millions GBP), 1.3275 (approximately 375 millions GBP), 1.3340 to 1.3350 (approximately 723 millions GBP). (5) EUR/GBP: 0.8550 (approximately 225 millions EUR). (6) AUD/USD: 0.6990 to 0.7000 (approximately 1 billion AUD). (7) EUR/JPY: 177.00 (approximately 300 millions EUR). (8) CHF/JPY: 192.90 to 193.00 (approximately 455 millions CHF). (9) USD/JPY: 155.90 to 156.00 (approximately 4.8 billions USD), 156.50 to 156.55 (approximately 942 millions USD), 158.00 to 158.10 (approximately 1.5 billions USD), 158.25 (approximately 220 millions USD), 158.50 to 158.55 (approximately 887 millions USD). (10) The above option strike prices are concentrated for expiry at 10:00 a.m. New York time; relevant currency pairs may experience short-term volatility as expiry approaches. (11) Subsequent attention should be paid to price reactions and changes in volatility near large option strikes.