NZD reverses gains and turns lower; oil price rises to $102 and pushes up US Treasury yields

Sources indicate that next year’s French power delivery price has surpassed 100 euros for the first time since 2023.

(1) The impact of arbitrage trading on the Swiss franc has been very significant, with the franc's trade-weighted exchange rate falling sharply this year. (2) However, as currency volatility intensifies and risk aversion increases due to turbulence in the bond and energy markets, the market may have reasons to hedge against the risk of a franc rebound. (3) During the period from February to September 2026, which saw both arbitrage trading and a booming stock market, the franc’s trade-weighted exchange rate declined by about 5.5%, dropping from 114 to around 108—the lowest point since February 2025. (4) This low is close to several important technical indicators, including the 100-month moving average near 107.5 and the lower band of the 20-month Bollinger Bands, also near 107.5. (5) This decline is a correction following a larger price surge and may provide a platform for the franc to resume its upward momentum, especially since the current exchange rate has deviated from the 100-month moving average, and the franc has not traded below this average since 2023. (6) Given the potential formation of a bottom, franc short-sellers may have reasons to reduce their risk exposure following the increase in currency volatility and anxiety in the stock market triggered by bond market turmoil. (7) Such actions directly threaten arbitrage trading; considering the magnitude of the franc’s decline, there may still be a large number of short franc positions in the market. (8) If these positions are closed, it could trigger a further rise in the franc, which can be volatile; in October, it fell by 2.4% within just two trading days. (9) Going forward, attention should be paid to volatility in the bond market and the evolution of risk aversion sentiment. If risk appetite continues to weaken, franc short covering could become an important short-term variable in the foreign exchange market.

(1) As the Gulf of Mexico braces for an approaching tropical storm, oil companies operating in the region have begun reducing output and evacuating personnel from offshore facilities. (2) The US National Hurricane Center indicated that the storm is intensifying and is expected to strengthen into a major hurricane by the time it makes landfall on Friday. (3) Chevron announced on Wednesday that shutdown procedures have been initiated at four of its sites in the Gulf of Mexico, with all associated personnel being evacuated, while production at several other facilities remains at normal levels. (4) Shell stated it is shutting down production and evacuating personnel at five facilities and has moved non-essential staff from another location. (5) UK-based Harbour Energy said in an emailed statement that it has also begun reducing output and evacuating people from some of its facilities. (6) Due to the frequent storms in the area, oil companies operating in the Gulf of Mexico are well-accustomed to temporary production cuts and evacuations. (7) According to the US Bureau of Ocean Energy Management, as of midday Wednesday, about 510,000 barrels per day of production had been shut down, representing roughly a quarter of the Gulf's current output. (8) The short-term supply contraction offers some support for oil prices, with further attention focused on the storm's path and the pace of production recovery following landfall.