Quartet of Central Banks

No major economic announcements recently due to the ongoing American shutdown, which leaves traders unfazed. Ultimately, everyone seems satisfied. Investors trust the American economy and, in the worst case, the quarterly financial results of major American companies suggest that everything is going well across the Atlantic. As for the politicians, the Democrats are ready for a long battle, similar to the Trump administration, which sees it as a quick and easy way to cut spending. It is therefore likely that the shutdown will drag on... with nearly zero impact on currencies.

The macro point

Four central banks are meeting this week. But only one of them is expected to change its rates. According to the money market, the Fed is expected to lower its rate by -25 basis points and pave the way for a similar cut in early December. Negative for the dollar?

In Europe, there is also little excitement. Inflation remains contained, indicating structurally weak demand. The rise in government bond yields is no longer relevant. This is one less point of tension. As for growth dynamics, the gap is widening between core countries like France and Germany, which are experiencing sluggish activity, and southern countries that are showing impressive health. Barring any surprises in the fourth quarter, Portuguese growth should reach +2.3% this year and Spanish growth +2.8%. This is the result of efforts made before Covid to improve public finances. But it must also be acknowledged that the payment of significant European funds is also helping a lot.

France and its political troubles are a non-issue for financial markets. This is perhaps good news.

Technical point

In the foreign exchange market, the debate rages between those who believe that the US dollar has reached a low point and those who think the decline could shrink a little further. We tend to be in the latter camp. The low point could be reached early next year. If we are right, it means that the consolidation phase on the EUR/USD that has been in place for a few weeks is not intended to last. However, given the current level, a surge to 1.20 seems unlikely in the short term. We are revising our target, now 1.17-1.18 for the end of the year. For 2026, the average level could be around 1.25. However, the dollar's decline does not affect all currencies.

In terms of emerging currencies, there are losers. Take the Indian rupee. Last week, it hit a new historic low against the greenback. The cause is the tariff war between the Americans and the Indians. So far, purchases of rupees by the Indian central bank and local public banks seem unable to stop the hemorrhage.

Finally, some movement on the EUR/CHF pair. For much of the year, it has evolved between 0.9300 and 0.9400. Ultimately, the decline prevails. It is aligning with its recent lows around 0.9150-0.9200. It's difficult at this stage to know if it's a lasting trend.

The supports and resistances displayed below indicate, respectively, the low and high points within which the prices should evolve during the week.

	Weekly Supports		Weekly Resistances
	S2	S1	R1	R2
EUR/USD	1.1434	1.1500	1.1700	1.1733
EUR/GBP	0.8510	0.8599	0.8788	0.8890
EUR/CHF	0.9150	0.9200	0.931	0.9400
EUR/CAD	1.6139	1.6200	1.6345	1.6402
EUR/JPY	173.10	173.99	176.09	177.12

Announcements to follow

The agenda is dominated by a quartet of central banks this week. The Bank of Canada (BoC), the Bank of Japan (BoJ), and the European Central Bank (ECB) are not expected to change their rates. In Japan, the challenge is mainly to continue selling ETFs to tidy up the balance sheet. In the eurozone, the market expects no changes to the rates, which should remain at 2% - the terminal rate. Some members of the Governing Council, like Frenchman François Villeroy de Galhau, have not ruled out a new cut of -25 basis points in the future if the macroeconomic situation deteriorates. But it's clearly not for now. A new cut in the cost of money would have little effect on the economy as monetary conditions are already flexible. Europe's problem hasn't changed in recent years. Domestic demand is too weak. A rate cut to 1.75% won't change that.

It is rather the Fed that is in the spotlight. We are more cautious about the speed of rate cuts than the rest of the market. We anticipate two additional rate cuts within 6 months, to 3.75% against 3.50% for futures markets, with a first cut this week. Why? Because of the persistent inflation risk. We consider that the inflationary effect of the American tariff policy will be less significant than initially anticipated. However, it will not be painless. Once the impact of the shutdown on the publication of statistics is behind us, we should start to perceive a rebound in inflation in the fourth quarter. Caution is therefore necessary. If our predictions are accurate, this can be a support factor for the dollar in the medium term.

Below you will find the publications and events expected to have a major impact on currency rate developments.

Day	Time	Country	Indicator	What to expect?
On 27/10/2025	11:00	Germany	IFO Business Climate Index (October)	Previous at 87.7.
On 29/10/2025	15:45	Canada	Central Bank Decision	Keeping the policy rate unchanged.
On 29/10/2025	20:00	USA	Central Bank Decision	Policy rate cut by -25 basis points.
On 30/10/2025	05:00	Japan	Central Bank Decision	Keeping the policy rate unchanged.
On 30/10/2025	15:15	Eurozone	Central Bank Decision	Keeping the policy rate unchanged.

The information presented in this publication is provided purely for informational purposes and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should not be used or considered as an inducement to engage in any investment.