Daily Market Outlook, October 8, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

Global stock markets took a pause from the relentless advance of record highs as investors became increasingly cautious about inflated valuations and the surge of capital flowing into artificial intelligence. This shift raised questions about the sustainability of the recent market rally. In Asia, stocks were poised for their most significant decline in two weeks, following a retreat in both the MSCI All-Country World Index and the S&P 500 after a week-long winning streak. However, US equity futures showed a slight uptick, suggesting that this pullback could be brief. Meanwhile, gold prices continued their impressive climb, surpassing $4,000 an ounce, driven by concerns over the US economic outlook and an ongoing government shutdown. The US dollar strengthened to its highest level in over a month, while the yen weakened, reaching its lowest point against the dollar since February. This decline was influenced by Sanae Takaichi’s surprising election as the new leader of Japan’s ruling Liberal Democratic Party, which has put additional pressure on the currency. The S&P 500 saw a dip alongside technology stocks as worries grew that the $16 trillion gain since April might have outpaced underlying economic fundamentals. Speculation about inflated valuations in the AI sector and the massive investments in data centres and infrastructure echoed memories of the dot-com bubble from two decades ago. This market pullback followed weeks of excitement surrounding major AI partnerships, including those involving OpenAI, Nvidia Corp., and prominent Japanese tech firms like Hitachi Ltd. and Fujitsu Ltd. Additionally, xAI, the artificial intelligence startup backed by Elon Musk, is reportedly looking to expand its latest fundraising efforts to $20 billion, with Nvidia among its investors. In Asia, attention also turned to the yen, which fell to 152.34 per dollar, marking a record low against the euro since its introduction in 1999. Traders adjusted their expectations for a potential rate hike from the Bank of Japan after the pro-stimulus lawmaker's victory. Recent data revealed that Japanese wage growth has slowed to its weakest pace in three months, with real wages continuing to decline.

In recent months, major currencies have been trading within a defined range, but this stability has coincided with a significant reassessment of the respective central bank policies. Notably, the market sentiment is shifting towards the expectation that the European Central Bank (ECB) will maintain its current policy stance for an extended period. In contrast, U.S. interest rates are anticipated to decline gradually, with around 100 basis points of easing priced in over the next year. The situation in the UK presents a more complex picture. The Bank of England (BoE) is keen to lower its policy rate; however, it faces challenges due to persistent inflationary pressures. This dynamic has led to a diminishing interest rate premium for the U.S. dollar, which previously helped stabilise the currency amid earlier uncertainties this year. Some participants might interpret the current currency levels as a new equilibrium, where range-bound currencies coexist with a declining U.S. dollar rate premium. Nevertheless, expectations regarding U.S. rates could still shift, especially if labour market weaknesses become more pronounced. While the Federal Reserve may currently feel constrained by inflationary risks linked to tariffs, the limited pass-through effects observed so far make it difficult to foresee a significant increase in inflation threats alongside a weakening demand environment. In such a scenario, companies may opt to mitigate rising costs through workforce reductions and decreased investments—trends that are already starting to emerge. This environment could pave the way for the Fed to implement a more aggressive cutting cycle, potentially leading to renewed weakness in the U.S. dollar.

The German economy showed signs of weakening over the summer, highlighted by a disappointing August industrial production report (-4.3% m/m) and weak factory orders (-0.8% m/m). Manufacturing fell sharply (-5.6% m/m), with domestic orders improving slightly but export interest declining. Sector-wise, intermediate and capital goods orders rose, while consumer goods orders dropped. Although year-on-year orders increased (+1.5%), this was due to weak data last August and is likely to reverse next month. Despite this, confidence remains relatively stable, with Ifo and ZEW reports showing optimism. However, President Lagarde warned export conditions will remain challenging through 2023, with a stronger recovery expected by 2026 as lower interest rates and fiscal measures take effect.

Today's Macro Slate: September FOMC Minutes; Speeches from ECB’s Escriva, Muller, Elderson; BoE’s Pill; Fed’s Musalem, Kashkari, Barr.

Overnight Headlines

  • RBNZ Surprises With 50bps Rate Cut To 2.5%, NZD Slumps

  • US Lawmakers Push Expanded Chip Export Curbs On China

  • BoJ’s Ueda Faces Hike Dilemma As Takaichi Takes LDP Helm

  • Big Bond Investors Tell UK’s Reeves To Build Bigger Fiscal Buffer

  • UBS Flags Growing Vulnerabilities In Credit Markets

  • Companies Struggle To Assess Financial Risks Emerging From AI

  • Nvidia To Finance Musk’s xAI Chips As Part Of $20B Deal

  • US May Revoke $1.1B In Auto Plant Funding For Stellantis, GM

  • Trump Eyes $12B In Energy Cuts As Shutdown Drags On

  • Gold Tops $4,000 As Shutdown, France Crisis Fuel Record Rally

  • Trump Says ‘Real Chance’ To End Gaza War, Hamas Seeks US

  • UK Car Finance Industry Faces $11B–$13B Mis-Selling Hit

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

  • EUR/USD: 1.1450 (670M), 1.1540-50 (624M), 1.1590-00 (715M)

  • 1.1625-30 (808M), 1.1650-60 (2.3BLN), 1.1675 (285M)

  • 1.1700 (1.8BLN), 1.1750-60 (1.11BLN), 1.1770-80 (1.6BLN)

  • 1.1800 (2.4BLN), 1.1850-60 (1.5BLN), 1.1875 (404M)

  • USD/JPY: 151.00 (864M), 152.00 (300M). EUR/JPY: 175.00 (340M)

  • USD/CHF: 0.7925 (319M), 0.7950 (201M), 0.7965-75 (867M)

  • GBP/USD: 1.3250 (424M),

  • AUD/USD: 0.6300 (900M), 0.6350-55 (301M), 0.6490-00 (482M)

  • 0.6595-00 (330M), 0.6725 (399M)

  • NZD/USD: 0.5675 (200M)

  • USD/CAD: 1.3975 (562M), 1.4000 (690M)

CFTC Positions as of the Week Ending 3/10/25 

  • Special Announcement. October 1, 2025: During the shutdown of the federal government, Commitments of Traders Reports will not be published

Technical & Trade Views

SP500

  • Daily VWAP Bullish

  • Weekly VWAP Bullish

  • Above 6440 Target 6800

  • Below 6700 Target 6630

EURUSD 

  • Daily VWAP Bearish

  • Weekly VWAP Bullish

  • Below 1.1750 Target 1.1580

  • Above 1.1750 Target 1.1850

GBPUSD 

  • Daily VWAP Bearish 

  • Weekly VWAP Bearish

  • Below 1.34 Target 1.3330

  • Above 1.35 Target 1.3580

USDJPY 

  • Daily VWAP Bearish 

  • Weekly VWAP Bullish

  • Below 150 Trgaet 148.5

  • Above 151 Target 154

XAUUSD

  • Daily VWAP Bullish 

  • Weekly VWAP Bullish

  • Above 4000 Target 4120

  • Below 3850 Target 3770

BTCUSD 

  • Daily VWAP Bullish 

  • Weekly VWAP Bullish

  • Above 122k Target 126k

  • Below 122k Target 120k