[Middle East Situation and US Long-Term Interest Rates] Today's Market 2026/10/22

This summary focuses on daily foreign exchange, government bonds, stocks, commodities, VIX, and today’s key factors.

Amid fluctuations in crude oil prices due to reports on the US-Iran situation, the dollar-yen pair faced resistance ahead of the 200-day moving average located in the mid-158 yen range, leading to a continued stalemate around 158 yen.

Today, there is a strong wait-and-see mood ahead of next week’s FOMC and Bank of Japan meetings. While there are announcements such as US initial jobless claims, there is a lack of major market-moving factors, so attention is focused on headlines regarding the Middle East situation and movements in US long-term interest rates.

[2026/10/22] Today’s Key Points

In his parliamentary testimony the previous day, Bank of Japan Deputy Governor Himino stated that ‘underlying inflation is getting quite close to 2%’ and that ‘real interest rates are low and lending is growing, meaning an accommodative environment is being maintained even after the rate hike.’ He also expressed the view that if the adjustment of the degree of accommodation is delayed, it could lead to a deterioration in the economy.

In addition, there were reports that at the monetary policy meeting on the 29th and 30th of next week, the Bank of Japan will consider whether to judge that the 2% price stability target has been ‘reached.’ While a rate hike is unlikely, expectations for a hawkish hold are likely to provide short-term support for the yen. However, the reaction in the foreign exchange market was limited.

The dollar-yen pair is expected to see a strong wait-and-see trend ahead of the US Federal Open Market Committee (FOMC) on the 27th-28th and the Bank of Japan’s Monetary Policy Meeting on the 29th-30th of next week.

From a technical perspective, it can also be viewed that there is a lack of momentum to break out of the current level where chart points are crowded, such as the 200-day moving average in the mid-158 yen range and the upper limit of the Ichimoku Kinko Hyo ‘cloud’.

Today, US initial jobless claims and other data will be released, but they may not serve as major market-moving factors. However, depending on headlines regarding the Middle East situation, crude oil prices and US long-term interest rates are prone to volatility, so caution is required if the pair moves out of its range.

Overseas, Iranian President Pezeshkian stated, ‘The US cannot expect to be able to engage in dialogue while blockading and threatening Iran,’ and Foreign Minister Araghchi also remarked, ‘There is almost no reason to expect progress at this time.’

Additionally, there were reports that the US State Department was preparing to issue an evacuation order for some US embassy staff and their families in the Gulf region, and it was later reported that the scope would be limited to non-emergency staff and their families in Saudi Arabia.

Furthermore, attention should continue to be paid to credit risks regarding neo-cloud companies and the turmoil seen in France.

Domestically, Prime Minister Takaichi has stated, ‘The immediate challenge is to further strengthen measures in response to global inflation.’

Today’s Notable Events and Economic Indicators

■ Eurozone: EU New Car Registrations (YoY, September) Previous: 4.5%
■ Eurozone: Austrian Central Bank Governor Kocher Speech (18:30)
■ US: Initial Jobless Claims (10/17, in thousands) Forecast: 20.0 (Previous: 19.9)
■ Eurozone: Consumer Confidence Index (October Flash) Forecast: -17.0 (Previous: -16.5)
■ US: Leading Economic Index (September) Forecast: -0.1% (Previous: -0.1%)
■ Eurozone: Italian Central Bank Governor Panetta Speech (23:15)
■ Eurozone: Spanish Central Bank Governor, Portuguese Central Bank Governor Speech (1:00)
■ US: 5-Year TIPS Auction (2:00)

Previous Day’s Market

Overview

During the Tokyo session, the dollar-yen opened around 158.15 yen and the euro-yen around 177.80 yen. Lacking catalysts, the dollar-yen moved in the low 158 yen range, and the euro-yen in the high 177 yen range. Although it rose to around 158.40 yen during Asian hours, the weight of the 200-day moving average located in the mid-158 yen range was felt, capping the upside.

Entering the afternoon, Bank of Japan Deputy Governor Himino made remarks such as ‘Given the rise in medium- to long-term expected inflation rates, underlying inflation is approaching 2%,’ and it was reported that the Bank of Japan would judge whether the inflation rate has reached its 2% target at this month’s meeting. However, neither was new information, and the impact on the foreign exchange market was limited.

Even after entering the European session, the dollar-yen continued to fluctuate within a narrow range of 158.00 to 158.20 yen. In the morning, when Iranian President Pezeshkian’s statement that ‘The US cannot expect to be able to engage in dialogue while blockading and threatening Iran’ was reported, crude oil prices rose, and WTI briefly broke through $100 per barrel, but it immediately fell back.

The UK Consumer Price Index (CPI) for September, released during this period, came in at +3.5% year-on-year, exceeding market expectations. With signs of improvement in the UK labor market also being noted, the pound remained firm, and the pound-dollar pair moved toward recovering the 1.34 dollar level.

In the early New York session, with no major economic indicators released, US interest rates, particularly short-term rates, declined in line with the drop in crude oil prices. Driven by the decline in US long-term interest rates, dollar selling took precedence, and the dollar-yen pair hit its intraday low of 157.85 yen.

Subsequently, as the decline in crude oil prices paused, US Treasuries were sold off in tandem with US stock buying, causing interest rates to rise. The dollar-yen pair also rebounded, recovering to around 158.10 yen.

Entering the afternoon, reports surfaced that the US State Department was preparing to issue evacuation orders for some embassy staff and their families in Gulf countries, causing crude oil prices to rise again. The dollar-yen pair briefly climbed to the 158.30 yen level. However, after the US State Department announced that the evacuation order was limited to non-emergency staff and their families in Saudi Arabia, the pair retraced to its previous levels.

Toward the close, the market moved sideways, with the dollar-yen pair closing around 158.20 yen and the euro-yen pair around 177.70 yen. The euro-dollar pair remained heavy throughout the day, hovering around 1.1230 dollars, and finished trading at 1.1234 dollars. There was almost no change in levels from the previous day, and the deadlock around 158 yen continues.

Economic Indicators and Their Impact

■ Japan: Trade Balance (Customs-cleared, seasonally adjusted, September, 100 million yen)
Forecast: -2,501 Result: -7,040

The deficit exceeded market expectations.

■ UK: Consumer Price Index (CPI, month-on-month, September)
Forecast: 0.3% Result: 0.4%

The result exceeded market expectations.

■ UK: Consumer Price Index (CPI, year-on-year, September)
Forecast: 3.4% Result: 3.5%

The result exceeded market expectations, becoming a factor for the pound’s firm performance.

■ UK: Core Consumer Price Index (CPI, year-on-year, September)
Forecast: 2.8% Result: 2.8%

The result was in line with market expectations.

■ UK: Core Consumer Price Index (CPI, month-on-month, September)
Forecast: 0.2% Result: 0.2% Previous: 0.3%

The result was in line with market expectations.

Stock Market

On the 21st, the Japanese stock market saw the Nikkei Stock Average rebound for the first time in three trading days. Following the previous day’s stock price gains in the US market and the drop in crude oil prices, investor risk appetite increased, leading to buying. AI and semiconductor-related stocks lifted the index, reacting also to the strong earnings of US-based SpaceX announced after the close. However, upside momentum was heavy once it crossed the 65,000 yen milestone, as it appears there is a desire to gauge the earnings content of US tech giants, particularly hyperscalers, which will be announced one after another.

On the 21st, the US market saw all three major indices rise. Driven by factors such as strong earnings from SpaceX, which reported growth in its AI business, buying flowed into high-tech stocks on the view that AI demand remains firm. The Philadelphia Semiconductor Index (SOX) rose +1.97%, and the Nasdaq Composite Index also performed well at +1.05%.

■ Nikkei Average 64,621.24 (+545.82 / +0.85%)
■ Euro Stoxx 50 6,207.52 (+85.86 / +1.40%)
■ FTSE 100 10,752.88 (+19.88 / +0.19%)
■ NY Dow 52,856.09 (+360.21 / +0.69%)
■ Nasdaq 26,702.86 (+278.04 / +1.05%)
■ Shanghai Composite Index 3,713.03 (-22.34 / -0.60%)

Government Bond Market

In the US Treasury market on the 21st, bond prices showed mixed results depending on the maturity. Crude oil prices rose following reports suggesting heightened tensions in the Middle East, and concerns over inflation led to selling, primarily in the short-term zone. The 2-year yield rose to around 4.81%, and the 10-year yield rose to around 5.12%. With the market also mindful of the impact of high interest rates on AI-related companies and the economy, there were instances of buying in medium- to long-term bonds.

In Japan, the 20-year bond auction held the previous day saw the lowest accepted price exceed market expectations, with the bid-to-cover ratio reaching a record high, reaffirming investor demand for high-yield levels.

With this month’s government bond auctions being digested smoothly one after another, concerns over supply and demand have receded, and a firm trend is expected today, particularly in the super-long-term zone.

However, in addition to the unstable movement of crude oil prices against the backdrop of the Middle East situation, factors that have led to rising interest rates remain, such as uncertainty surrounding the Bank of Japan’s terminal rate and caution regarding the fiscal 2027 budget formulation and government bond issuance plan.

Japan 2Y 1.900% (-0.002%) 10Y 2.882% (-0.019%)
Germany 2Y 3.127% (+0.044%) 10Y 3.421% (+0.021%)
US 2Y 4.808% (+0.030%) 10Y 5.121% (+0.010%)
UK 2Y 4.923% (-0.035%) 10Y 5.378% (-0.032%)

Crude Oil, Gold, and VIX

■CRB Commodity Index 415.19 (-1.75 / -0.42%)
■WTI Crude Oil Futures 97.15 (-0.67 / -0.68%)
■Gold Futures 4,150.00 (+7.40 / +0.18%)
■VIX Index 16.68 (-0.63 / -3.64%)

Today’s Market Sentiment

For the dollar-yen today, there is a strong wait-and-see mood ahead of next week’s FOMC and BOJ meetings, and a range-bound market around 158 yen is expected to continue. While the US will release data such as initial jobless claims, it is unlikely to be a major catalyst, and as with the previous business day, the reaction of crude oil prices and US long-term interest rates to Middle East-related reports will likely be important.

In the stock market, following the rise in US tech stocks, the Japanese market is also expected to continue its upward trend today. The night session of Nikkei 225 futures (Osaka, December contract) is up 250 yen (+0.38%) from the previous business day, but with Middle East tensions rising, there is a possibility that the upside will be capped.

In the bond market, buying is likely to enter super-long-term bonds against the backdrop of favorable auction supply and demand, and there is likely to be pressure for the yield curve to flatten, but the upside for the market as a whole is likely to be limited due to remaining uncertainties regarding financial and fiscal policies and the Middle East situation.

In the foreign exchange market, even if swayed by sudden headlines, there is little momentum to break out of the current levels where chart points are crowded, such as the 200-day moving average and the upper limit of the daily Ichimoku Kinko Hyo cloud, and it can be viewed that it will eventually return to the range. On the other hand, reports on the US-Iran situation and the Ukraine situation are continuing, and caution is required for sudden changes or reversals due to expectations or disappointments regarding rapid developments in the situation.

In a word, today’s market is likely to be a day of “searching for a range while being swayed by Middle East reports ahead of next week’s BOJ meeting and FOMC.”

Article summarizing interest rates
→ “Thinking about the impact of interest rates“

If you want to look back at September’s market sentiment, click here
→[September Review]

If you want to grasp last week’s market sentiment, please refer to last week’s summary article.
Click here→[October 12 – October 16]

May you all enjoy your own path today as well.
Prosperity