🧠 Tokyo’s pivot cools BoJ bets as gold hits records

Published: 10/6/2025

Overall Market Sentiment: Cautious risk-on. Japan’s leadership shift has slashed near-term BoJ hike odds, the U.S. shutdown keeps data uncertainty high, and markets lean toward an October Fed cut ahead of Wednesday’s minutes. Gold and equities hover at records.

Currency Outlooks

🔻 USD: Futures imply about a 95 percent chance of a 25 bp cut on Oct 29. The curve remains positively sloped near +55 to +60 bp with the 10-year ~4.15 percent and 2-year ~3.58 percent, a setup that usually caps USD when growth is fragile. August core PCE 0.2 percent m m, 2.9 percent y y fits a gentle disinflation glide, and ISM services at 50.0 underscores softer momentum. DXY support 97.80, resistance 98.80 then 99.20. Nuance, if minutes read less dovish and Washington restores data flow quickly, a squeeze toward 99.00 is feasible.

🔺 EUR: The euro benefits from softer USD and a steady ECB-on-hold stance. Flash HICP ~2.2 percent headline keeps policymakers comfortable barring downside surprises. Focus is on Fed minutes as the bigger swing factor. EURUSD support 1.1680 then 1.1650, resistance 1.1760 then 1.1810.

⚖️ GBP: Sterling trades the U.S. rates story more than domestic themes. With scant U.K. data and BoE communication on deck, markets keep only a small probability of additional 2025 easing. GBPUSD 1.3400 support and 1.3600 resistance remain the key bands.

🔻 CAD: OPEC+ approved a 137k bpd hike for November. Brent in the mid-60s leaves terms of trade soft and keeps USD/CAD dips shallow. Levels, 1.3850 support, 1.3950 and 1.4000 resistance. CAD needs crude back into the low-70s for traction.

🔺 JPY: After Takaichi’s win, market odds for an October BoJ hike slipped toward the 40 percent area, Japanese equities surged, and yen weakened toward 150. The policy gap narrows only if U.S. front-end yields slide further. USDJPY resistance 148.80 and 150.00, support 147.20 then 146.50; intervention risk perception rises near 150.

⚖️ AUD: With the RBA quiet this week and global risk tentatively firmer, AUD trades the USD and China tone. 0.6500 support, 0.6670 resistance; a sustained break higher targets 0.6750.

🪙 Gold: Fresh records, with intraday highs near $3,958, reflect shutdown uncertainty and easier Fed pricing. Unless real yields back up, dips likely find buyers.

🛢 Oil: The 137k bpd OPEC+ hike steadies balances yet leaves a Q4 surplus risk. Without Brent reclaiming the low-70s, energy-beta FX underperforms.

📈 Stocks: Japan leads with a ~5 percent Nikkei surge on reflation hopes. U.S. futures are supported into Wednesday’s minutes, favoring quality growth while official data are disrupted.

Week Ahead Playbook

• Wednesday: FOMC minutes from the September meeting, key USD catalyst.

• All week: Shutdown complicates data timing, so private surveys and Fed speakers steer FX.

• Euro Area and UK: Heavy central-bank speaking calendar, baseline steady unless inflation surprises.

• Japan: Cabinet signals and BoJ rhetoric guide hike probabilities into month end; equity strength versus yen weakness remains the mix.