A Three-Ring Circus of Market Influences – Currency Thoughts

A Three-Ring Circus of Market Influences

October 30, 2025

1. A 90-minute meeting between Presidents Trump and Xi in South Korea resulted in a de-escalation of trade tensions but a rise in national security brinkmanship. While a formal trade deal was not signed, an understanding was reached on several points. The treat of a 100% U.S. tariff on China was dropped, and the fentanyl-related levy was halved to 10%. The overall average tariff on U.S. imports of Chinese goods still exceeds 40%, however. China has agreed to buy U.S. soybeans again and will not go ahead on its threatened halt of rare-earth exports for at least a year. Mutual shipping fees imposed by the two governments will be scaled back. The big headline-attracting surprise was Trump’s announcement that after a 33-year halt the United States plans to resume nuclear weapons tests in response to similar actions by other nuclear powers.
2. As expected, central banks in Japan and Euroland left their monetary policies unchanged a day after the federal funds interest rate target was cut by 25 basis points for a second straight time. In the Bank of Japan‘s instance, the short-term interest rate target has been just 0.50% since a hike of 25 basis points last January that followed earlier increases of 20 bps in March 2024 and 15 bps in in July 2024. As happened at the prior September review, the Board’s vote of 7-2 included dissents by Takata and Tamura that favored raising the rate by another 25 basis points. The release of a new quarterly Outlook for Economic Activity and Prices coincided with today’s meeting, which did not change forecasts in a meaningful way. Growth risks are skewed downward, but price risks are deemed to be in balance, and the Board majority needs a little more time to discern the ultimate economic effect of U.S. tariffs. A comment by U.S. Treasury Secretary Bessent, who has accompanied the president on the Asian trip, urged Japan’s government scope to counter inflation, which has exceeded target for some time. The BOJ reiterated its promise to lift the interest rate carefully once monetary authorities are confident that the economy is in fact evolving as they have projected. Regarding the European Central Bank, whose deposit rate was kept at the 2.0% level such has been since a 25-basis point reduction in June, a statement explaining officials’ latest thinking asserts that their assessment of economic conditions and prospects remains “broadly unchanged” amid a considerably uncertain global outlook. Positive growth continues in the euro area. “The economy has continued to grow despite the challenging global environment. The robust labour market, solid private sector balance sheets and the Governing Council’s past interest rate cuts remain important sources of resilience.” Besides the Fed, the Bank of Canada yesterday also cut its interest rate by 25 basis points but signaled that it’s easing cycle may now be done. And late yesterday came word from the Central Bank of Brazil that its Selic interest rate was being left unchanged at 15.0%, the level since a June hike of 25 basis points well above the 10.5% low maintained for just over four months in the middle of 2024.
3. Today’s third big attraction was the release of third quarter GDP data for Euroland and many individual economies in Europe.

In overnight financial market reactions to the plethora of news and data, The dollar advanced strongly against the Japanese yen, Chinese offshore yuan, and South Korean won but underwent little change in relation to other key currencies. Japan’s ten-year JGB yield stayed flat at 1.64%, but other comparable yields are up five basis points in the U.K., four bps in Italy, three bps in Germany, Spain and France and two bps in the United States. At 4.10% the U.S. gain overnight was in addition a sharp immediate response to Powell’s press conference yesterday in which comments were made to dispel speculation that a further interest rate cut in December was highly likely.

Outside of a 0.4% rise in the DOW, other major U.S. stock market indices and those in Europe and the Pacific Rim are either flat or lower today. Prices for oil, gold and Bitcoin have also dropped.

Real GDP in the euro area rose 0.2% between the second and third quarters of this year, a little more than the consensus of forecasts but not enough so to change the picture of broadly sluggish but positive growth. Compared to a year earlier, GDP was up just 1.3%, following 1.5% in the first half of the year, 0.9% in 2024 and 0.4% in 2023. The common currency area’s jobless rate held at 6.3% in September, same as in the previous seven months and in September 2024.

Real GDP in the third quarter among individual countries in Europe

• Slipped 0.2% on quarter in Lithuania and by 0.1% in in Finland and Ireland with respective on-year changes of +1.9%, -0.9% and +12.3%
• Remained unchanged in Germany and Italy, resulting in respective rises from 3Q 2024 of only 0.3% and 0.4%.
• Edged up just 0.1% in Austria compared to 2Q and by 0.6% from the year-earlier level.
• Expanded 0.6% on quarter and 2.8% on year in Spain.
• Rose 0.5% in France (most since the spring of 2023) but just 0.9% on year.
• Climbed 0.8% in Portugal and 2.4% from a year earlier.
• Rose 0.4% on quarter and 1.6% on year in the Netherlands.
• Rose 0.3% in Belgium and 1.1% from the third quarter of 2024.
• Posted quarterly growth of 0.7% in the Czech Republic but remained unchanged in the more authoritarian Hungary. Their respective year-on-year growth rates were a disparate 2.7% and 0.6%.
• Swedish quarterly GDP growth of 1.1% outpaced all the above economies and raised on-year growth to 2.4% from 1.5% in 2Q25.

Euroland’s monthly economic sentiment index for October was 1.2 points above the September reading and the best score in 30 months. Industrial sector sentiment climbed to a 28-month high, while services edged up to a 3-month high. An 8-month high in consumer sentiment was unrevised from a preliminary indicator.

Among price data released around the world this Thursday, German consumer price inflation settled back 0.1 percentage point to 2.3% in October, which aside from September’s 2.4% was the highest since February and noticeably below the low of 1.6% touched in September 2024. In Germany’s most populous region, North Rhine Westphalia, inflation actually edged a bit higher this month.

Spanish consumer prices jumped 0.7% in October, lifting the inflation rate to a 16-month high of 3.1%. Icelandic CPI inflation accelerated to a 9-month high of 4.3%. Slovenian CPI inflation rose to a 19-month high of 3.1% this month.

Producer prices in South Africa dipped 0.1% in September but posted their largest 12-month rate of increase (2.3%) since August 2024. Austrian PPI deflation persisted in September with a reading of negative 1.1%. Bulgarian PPI inflation, in contrast, rose a half percentage point higher to 8.4% in the month. Greek producer prices rose 0.2% on month but fell 1.1% from the year-earlier level.

A 0.4% quarterly drop in Australian import prices in the third quarter didn’t prevent their year-on-year change from rising to +2.3% from +1.4% in the prior quarter.

Mexican GDP declined 0.3% in the third quarter, resulting in the first negative year-on-year growth rate (-0.2%) in 4-1/2 years.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Bank of Japan, Central Bank of Brazil, Euroland GDP and unemployment, European Central Bank, Trump and Xi

ShareThis

This entry was posted
on Thursday, October 30th, 2025 at 8:16 am and is filed under New Overnight Developments Abroad – Daily Update, Uncategorized.
You can follow any responses to this entry through the RSS 2.0 feed.