Published: 9/25/2025

Overall Market Sentiment: Cautious risk-on. Traders lean toward an October Fed cut while waiting for Friday’s U.S. Core PCE to confirm disinflation.

Currency Outlooks

🔻 USD: Fed funds futures imply a near 90 percent chance of a 25 bp cut on Oct 28–29 and markets lean to another cut by December, making USD especially data sensitive. Consensus for core PCE is about 0.2 percent month on month and about 2.9 percent year on year. The 2s10s curve sits modestly positive near +50 to +60 bp, with the 2-year around 3.5 to 3.6 percent and the 10-year near 4.1 to 4.2 percent, trimming the carry edge versus low yielders. A firm durables print Thu and a 0.3 percent core PCE Fri would likely lift the dollar as the front end backs up. DXY context 97.2 to 97.9.

🔺 EUR: Policy divergence is tilting less negative for EUR as additional Fed easing is priced while the ECB stays patient. ECB held on Sep 11 with DF 2.00 percent, MRO 2.15 percent, MLF 2.40 percent. Flash PMIs show mixed momentum across Germany and France. A benign U.S. PCE should open a run toward 1.1875 to 1.1900, while a hot print caps rallies and pushes back toward 1.1760 support.

⚖️ GBP: BoE held Bank Rate at 4.0 percent with a 7–2 vote and slowed QT to 70 billion pounds, easing some gilt supply pressure. UK CPI is 3.8 percent year on year for August. With a light domestic slate, GBP will take its cue from U.S. data and global risk. Range 1.3450 support and 1.3625 to 1.3650 resistance. Consider describing cut odds as a “modest chance” into year-end unless you cite specific OIS.

🔻 CAD: BoC cut to 2.50 percent on Sep 17 and kept an easing bias. Oil is range-bound in the mid to high 60s, muting CAD’s usual offset. USDCAD focus 1.3735 support and 1.3850 resistance. Softer U.S. PCE would let the pair fade toward 1.37 while firmer data extends topside tests.

🔻 JPY: USDJPY remains sensitive to U.S. yields. BoJ held around 0.5 percent and will sell ETFs around 330 billion yen per year and J-REITs around 5 billion per year. With the U.S. 10-year near the low 4s, rallies toward 149 to 150 invite caution given intervention risk. Base case is 146.0 to 149.5 into Friday.

⚖️ AUD: Australia’s monthly CPI is 3.0 percent year on year in August while the trimmed mean eased to 2.6 percent. Markets now see November as roughly a coin flip, and the Sep 29–30 RBA meeting is seen on hold. AUDUSD trades cleanly on global risk and U.S. data, with 0.6580 support and 0.6660 resistance.

Day and Week Ahead

• Thu Sep 25: U.S. durable goods for August and Q2 GDP third estimate at 08:30 ET. Stronger capex would challenge the near-term easing narrative.
• Fri Sep 26: U.S. Personal Income and Outlays with Core PCE at 08:30 ET. Consensus about 0.2 percent m-m and about 2.9 percent y-y.
• Wed Sep 24: Germany Ifo due. A soft read would test EUR dip-buying.

🪙 Gold: Supported if core PCE prints 0.2 percent or lower as real yields ease. Recent highs 3,730 to 3,790.
🛢 Oil: Brent range mid to high 60s. CAD stays more flow-driven than commodity-led unless crude breaks higher.
📈 Stocks: Leadership remains narrow. Soft PCE helps growth and beta FX. A hot print favors defensives and a tactical USD bounce.