Guarded Confidence in Financial Community – Currency Thoughts
Guarded Confidence in Financial Community
October 21, 2025
Investors are looking ahead with a modicum of hope. Specific events of special interest in the near term are the rare earths trade deal between Australia and the United States, Friday’s delayed release of U.S. September consumer price data, trade talks this week in Malaysia between Treasury Secretary Bessent and China’s Deputy Premier that are meant to be followed next week by a Trump-Xi meeting in South Korea, continuing respectable corporate earnings reports, and an expected Federal Reserve interest rate cut next week and signals of more possible reductions soon.
The weighted DXY dollar index is 0.4% higher today. Dollar gains have been led by a 0.9% overnight advance against the Japanese yen, followed by rises of 0.7% vis-a-vis the South Korean won, 0.5% versus the Turkish lira, 0.4% relative to the New Zealand dollar, 0.3% against the euro, Swiss franc and Aussie dollar, and 0.2% versus sterling.
Prior to today’s opening, there has not been an extension of yesterday significant U.S. stock market gains, but equities in the Pacific Rim closed up 1.4% in China, 1.8% in Indonesia, 1.2% in Singapore, 0.7% in Australia and Hong Kong and 0.3% in Japan and New Zealand. European stock markets are up around 1% in Italy but by less than 0.5% in other key centers.
Ten-year sovereign debt yields rose two basis point in Great Britain where it was reported today that public sector net borrowing in the first half of the current fiscal year was larger than in any of the previous four post-covid years. Ten-year yields elsewhere have slid a basis point in the United States, Germany, Japan, France, Italy and Spain.
From a record high of $4,382 touched intra-day on Monday, the price of gold has retreated 3.4%. Amid signs of growing supply but weakening global demand, WTI oil at $58.05 per barrel is 3% above the 4.5-year low touched during Monday. The price of Bitcoin is also in retreat, falling 1.7% thus far today.
LDP leader Sanae Takaichi in Japan won the parliamentary vote in Japan and will be that country’s first woman to hold the top political post. Mentored by former Prime minister Abe and a huge admirer of former British Prime Minister Thatcher’s style and politics, Takaichi favors a more stimulative fiscal policy and nationalistic defense and foreign policy positions.
As was widely expected, the National Bank of Hungary’s Base Rate was left unchanged after this month’s review at 6.50%, its level since a 25-basis point cut in September 2024 culminated 650 basis points of reductions that began in October 2023. Consumer price inflation of 4.3% in each month of the third quarter of this year was above the 3.0% low in September 2024 and, more importantly, the central bank’s medium-term target of 2-4%. Monetary authorities do not next inflation to settle back to the target mid-point until early 2027. They assert that
Restrictive monetary policy contributes to the maintenance of financial market stability, the anchoring of inflation expectations consistently with the central bank target and, as a result, to the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates.
Canadian consumer price inflation increased by a half percentage point in September to 2.4% from 1.9% in August and 1.7% in July, which had matched the lowest 12-month rate of increase in 53-months. Core inflation also rose last month, reaching 3.1% on the trimmed-mean measure.
Slovenian producer price inflation edged down to a 7-month low of 0.7% in September from a 2025 high of 1.3% in June and 22.5% in mid-2022. Latvian PPI inflation of 1.4% last month was at a 7-month high, by contrast, but down from as much as 37.7% in August 2022.
Lebanon’s 15.1% rate of consumer price inflation last month was the most in seven months but well below the April 2023 peak of 268.8%.
New Zealand’s NZD 1.355 billion trade deficit in September was 37% narrower than a year earlier.
Switzerland, which faces a 39% tariff on exports to the United States, recorded its smallest trade surplus (CHF 2.8 billion in September) since May.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Canada CPI, Japanese Prime Minister Takaichi, National Bank of Hungary, U.S. Chinese trade talks
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