Errante’s The Week Ahead: 27^th – 31^st October 2025

Highlights of the Week

• Macro Focus: PCE inflation, FOMC and ECB rate decisions, and US GDP dominate the week as markets reassess the Fed’s next policy steps following September CPI data.
• Policy Watch: Fed and ECB meetings to clarify rate trajectories amid cooling inflation and slowing global growth.
• Market Theme: The post-shutdown data flow returns with a focus on consumer confidence, durable goods, and PMIs, testing the sustainability of the global risk rally.
• Geopolitics & Commodities: Tariff rhetoric and energy market shifts keep volatility high, while gold corrects after record highs amid profit-taking and rising yields.

What Now

Macro Drivers and Market Landscape

After a data blackout caused by the US government shutdown, markets will finally receive a full week of tier-one releases. The September CPI confirmed disinflationary momentum, with core CPI rising 0.3% month-on-month, supporting expectations that the Fed will stay on hold at its October 29 FOMC meeting. The market consensus anticipates no rate change (4.00%), but traders will focus on Chair Powell’s tone for clues about potential December easing. With core PCE due Friday, any downside surprise could solidify expectations for a rate cut before year-end, especially given weak labor indicators and contracting manufacturing PMIs. Conversely, a strong PCE print could challenge that narrative, pushing Treasury yields and USD modestly higher.

Inflation and Growth Crosscurrents

US growth remains resilient on the surface, with Q3 GDP expected to expand 3.8% QoQ, though underlying consumption data are softening. Business confidence (CB index forecast at 94.2) remains subdued, reflecting weaker hiring and tightening credit. Globally, attention shifts to the ECB and BoJ, both facing mounting pressure to manage divergent inflation cycles. The ECB’s Thursday meeting could see dovish forward guidance as Germany’s GDP likely contracted (-0.3%), with inflation sliding toward 2.2%. Meanwhile, the BoJ faces renewed scrutiny after the yen’s volatility and capital outflows, even as it holds rates at 0.5%.

Tariffs, Debt, and Market Sentiment

The ongoing US–China tariff standoff continues to anchor risk premium across assets. Even with Trump’s latest signal that a Xi meeting is “still on,” the policy path remains binary: renewed tariff hikes would lift imported input costs, depress margins and trade volumes, and mechanically add ~0.1–0.3pp to US/EU headline inflation over 6–12 months via pass‑through; de‑escalation would unwind some of that premia. Positioning reflects this uncertainty: the DXY logged its biggest weekly drop since July (~‑0.7%) as haven demand rotated toward CHF and JPY, while US regional‑bank stress and Beige Book anecdotes of rising layoffs damped growth sentiment. At the same time, China’s softer demand backdrop (Q3 GDP tracking 4.7% YoY versus 5.2% earlier) and IEA projections for a 2025 supply surplus have weighed on the energy complex, tempering the inflation impulse that tariffs might otherwise amplify.

Gold’s retreat from the new record near $4,380 is the first meaningful technical correction of the cycle, largely profit‑taking as real yields steadied and the USD bounced off lows. Yet the structural bid remains intact: global public and private debt are at historic highs, central banks continue to diversify reserves, and policy uncertainty (tariffs, the US shutdown overhang, and bank‑funding concerns) keeps demand for debasement hedges elevated. Equities, led by AI beneficiaries, still ride easier financial conditions; unless core PCE re‑accelerates or the Fed leans hawkish, dips are likely supported into November. A hawkish surprise or fresh tariff escalation would flip the script—firmer USD, steeper risk‑off, and renewed upside in gold on safe‑haven flows.

Central Banks: What to Expect & FX Implications

FOMC (Wed 20:00 GMT+2): The Fed is widely expected to hold at 4.00% after September core CPI printed 0.3% m/m and labor indicators softened. Baseline: statement acknowledges cooler demand and progress on inflation; Powell guides data‑dependently with openness to one additional 25bp cut later in Q4/Q1 if disinflation persists. FX/Assets: A balanced hold with no push‑back against easing pricing is USD‑negative at the margin and supportive for risk (US indices) and gold; a hawkish tilt (emphasis on resilient growth, risks of sticky services inflation) would lift front‑end yields and support USD, weighing on EUR, GBP and gold.

ECB (Thu 15:15 GMT+2): Policy rates likely unchanged (Refi 2.15%, Deposit 2.00%) with Lagarde leaning dovish as Germany Q3 GDP is seen negative and euro‑area headline CPI hovers near 2.2% y/y. Watch the staff characterization of services inflation and any guidance on balance‑sheet run‑off. FX: Dovish guidance keeps EUR capped and favors EUR crosses lower versus CHF/JPY; a surprise firmer tone (concern about wages, slower QT pace) could squeeze EUR higher short‑term.

BoC (Wed 15:45 GMT+2): Expected to hold at 2.50% amid easing core inflation and soggy domestic demand. Statement likely stresses downside growth risks and housing sensitivity to rates. FX: Baseline is CAD neutral-to-soft, especially if oil stays range‑bound; any hint of earlier easing would pressure CAD, while a more resilient growth tone could see CAD out‑perform into year‑end.

BoJ (Thu 05:00 GMT+2): Policy rate seen unchanged at 0.50%. Focus on guidance around wage dynamics and tolerance for JGB yield volatility. With the yen sensitive to US‑Japan rate spreads, any nod toward further normalization (language upgrade on inflation/wages) would favor JPY strength; a steady‑dovish message risks renewed JPY underperformance, keeping EUR/JPY bid.

Bottom line: A status‑quo FOMC + dovish ECB + steady BoC/BoJ mix argues for a softer USD only if core PCE undershoots on Friday. A hotter PCE or hawkish Fed rhetoric would revive USD support, cap EUR and GBP, and likely spark a brief risk‑off wobble that benefits JPY/CHF and weighs on gold.

Outlook:

The upcoming week will test whether inflation moderation and cautious central banks can sustain the equity and bond rally into November. The interplay between Fed tone, PCE outcomes, and ECB forward guidance will determine if this soft-landing narrative holds or cracks under policy recalibration.

Market Events and Announcements (GMT+2)

Note: Cyprus transitions to wintertime (GMT+2) this week. Traders should check Errante’s official announcements for any adjustments to trading and market operating hours during the time change.

Monday, 27^th October 2025

• 14:30 – USD – Durable Goods Orders (Sep): Key capex indicator, expected -2.7%, testing industrial resilience.

Tuesday, 28^th October 2025

• 16:00 – USD – CB Consumer Confidence (Oct): Forecast steady at 94.2; weak reading may highlight demand fatigue.

Wednesday, 29^th October 2025

• 15:45 – CAD – BoC Interest Rate Decision: Seen unchanged at 2.50%; focus on dovish tone amid softening inflation.
• 16:30 – USD – Crude Oil Inventories: Gauging the balance amid OPEC+ discipline and weaker Chinese demand.
• 20:00 – USD – FOMC Statement and Rate Decision: Expected unchanged at 4.00%; Powell’s press conference key for rate path clues.

Thursday, 30^th October 2025

• 05:00 – JPY – BoJ Interest Rate Decision: No change at 0.5% expected; guidance on inflation and FX crucial.
• 12:00 – EUR – German GDP (Q3): Consensus -0.3%; confirming eurozone stagnation.
• 14:30 – USD – US GDP (Q3): Forecast 3.8%; resilience would cushion equities.
• 16:00 – EUR – German CPI (MoM): Seen at 0.2%; soft reading reinforces dovish ECB.
• 16:15 – EUR – ECB Rate Decision: Policy likely steady at 2.15%, with dovish rhetoric.
• 16:45 – EUR – ECB Press Conference: Lagarde’s tone pivotal for EUR direction.
  
  

Friday, 31^st October 2025

• 03:30 – CNY – Manufacturing PMI (Oct): Key gauge for Asian risk appetite.
• 13:00 – EUR – CPI (YoY, Oct): Expected 2.2%; steady disinflation in focus.
• 14:30 – USD – Core PCE Price Index (Sep): Expected 0.2% MoM, 2.9% YoY; a miss may trigger renewed USD weakness.
• 15:45 – USD – Chicago PMI (Oct): Activity pulse after weak ISM prints.

Market Insights: Key Charts to Watch

GBP/USD – Daily

Structure & Momentum:

GBP/USD trades near 1.3345, consolidating around the mid‑fan trendline, where the 61.8% Fibonacci retracement (1.3331) and fan-line confluence act as key short‑term supports. However, MACD shows a slight negative tilt, with the signal line threatening to cross below the histogram — suggesting weakening bullish momentum. MFI near 36 reflects subdued inflows, consistent with fading buyer commitment as volatility compresses.

Main Scenario:

While the broader structure remains technically constructive, failure to defend 1.3330 — particularly on rising volume — would expose the pair to 1.3187 and 1.3110, where the lower fan trendline and 161.8% extension converge. A bearish MACD crossover coupled with persistent USD strength or a hawkish Fed narrative could accelerate losses toward 1.3025 (200% projection), confirming a short-term trend reversal.

Key Levels:

Support: 1.3330 (61.8% Fib), 1.3248 (trendline), 1.3187 (127.2% extension).
Resistance: 1.3470 (swing high), 1.3550, 1.3620.

Alternative Scenario:

If sustained momentum hinges on reclaiming 1.3470, the last swing high and upper boundary of the recent consolidation, a decisive daily close above this zone would invalidate the short-term bearish divergence on MACD and open measured move targets toward 1.3550 and 1.3620. Momentum confirmation would likely coincide with a softer USD post‑FOMC or a dovish PCE outcome.

EUR/JPY – Daily

Structure & Momentum:

EUR/JPY at 177.70 shows accelerating momentum, holding firmly above the 100% Fibonacci extension at 177.93 with support at 176.74 (61.8%). MACD remains in positive territory with widening histogram; RSI near 60 confirms bullish bias.

Main Scenario:

Bias remains upward but conditional on a decisive daily close above the last swing high at 177.93. A confirmed breakout would extend targets toward 178.80 (127.2%) and 179.86 (161.8%), with a potential move to 181.05 (200%) if ECB and BoJ remain dovish and momentum sustains. Should price fail to break this swing high, expect consolidation or mild retracement back to 176.74 before bulls reattempt higher levels. The broader uptrend is still reinforced by steady higher lows and strengthening momentum since mid-September.

Key Levels:

Support: 176.74, 174.80.
Resistance: 178.80, 179.86, 181.05.

Alternative Scenario:

A sudden risk-off shift (hawkish ECB, weak global PMIs) could push a break below 176.74, targeting 174.80. Only a daily close under this zone would neutralize the current bullish structure.

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