FX Market Update: 30th October 2025
By the Strategic FX Desk at Lamera Capital
2025-10-30
Calm on the Surface, Shifting Beneath
Global FX markets opened Thursday in a cautious mood as traders digested three major developments: the Bank of Japan’s latest policy decision, the outcome of the Trump-Xi meeting in South Korea, and the Federal Reserve’s latest rate cut.
The result is a firmer U.S. dollar, a weaker yen, and continued pressure on Sterling as investors rebalance risk heading into November. These dynamics build on themes we highlighted in our recent central bank outlook.
The result is a firmer U.S. dollar, a weaker yen, and continued pressure on Sterling as investors rebalance risk heading into November. These dynamics build on themes we highlighted in our recent central bank outlook.
United Kingdom: Sterling Stays Under Pressure
Sterling remains under strain ahead of the UK Budget, with markets bracing for tax hikes and tighter spending. Traders increasingly expect the Bank of England to counter fiscal tightening with rate cuts early next year.
GBP/USD has rebounded slightly after touching a five-month low near, but the upside looks limited. Fiscal concerns and a lack of domestic catalysts leave the pound vulnerable to renewed weakness, particularly if U.S. yields stay firm.
GBP/USD has rebounded slightly after touching a five-month low near, but the upside looks limited. Fiscal concerns and a lack of domestic catalysts leave the pound vulnerable to renewed weakness, particularly if U.S. yields stay firm.
GBP/EUR sits near its lowest level since mid-2023. Technical indicators suggest short-term oversold conditions, so a tactical rebound is possible. But the broader trend remains bearish as investors price in deeper BoE easing relative to the ECB.
Bias: short-term rebounds possible, but the broader Sterling trend remains weak until fiscal clarity returns.
United States: Fed Cuts, But Dollar Holds Firm
The Federal Reserve delivered a widely expected 25bp rate cut but surprised markets with its tone. Chair Jerome Powell acknowledged divisions within the FOMC and noted that the government shutdown limits visibility on key data.
Markets now expect the Fed to pause after December - a “two-and-done” cycle - which has supported the dollar even after rate cuts. Understanding the shift from dovish to more cautious Fed positioning helps explain this dollar resilience. The DXY index is trading near a two-week high around 99.10.
Markets now expect the Fed to pause after December - a “two-and-done” cycle - which has supported the dollar even after rate cuts. Understanding the shift from dovish to more cautious Fed positioning helps explain this dollar resilience. The DXY index is trading near a two-week high around 99.10.
The end of quantitative tightening also improves global liquidity, but Powell’s cautious message reassures investors that the Fed won’t rush into an extended easing cycle. That balance of liquidity without recklessness continues to anchor USD demand.
Bias: short-term stability, medium-term downside bias as liquidity improves.
Eurozone: Stability Over Stimulus
The euro is steady near 1.1620, supported by improving German data and stronger PMIs.
Markets expect the ECB to hold rates this week and emphasise stability rather than fresh stimulus.
A neutral or slightly hawkish tone from President Lagarde could lift EUR/USD toward 1.17, while dovish commentary risks a retreat to 1.1550.
The euro’s quiet resilience reflects its new role as the G10’s stability anchor amid mixed global policy shifts.
Markets expect the ECB to hold rates this week and emphasise stability rather than fresh stimulus.
A neutral or slightly hawkish tone from President Lagarde could lift EUR/USD toward 1.17, while dovish commentary risks a retreat to 1.1550.
The euro’s quiet resilience reflects its new role as the G10’s stability anchor amid mixed global policy shifts.
Bias: neutral to mildly positive short-term, especially if U.S. yields ease.
Japan: BOJ Holds Steady, Yen Slides
The Bank of Japan kept rates unchanged at 0.5%, maintaining its pledge to raise borrowing costs only if the economy performs as expected.
Governor Kazuo Ueda’s cautious tone offered little clarity on timing, disappointing markets hoping for signs of faster normalisation.
The yen slid to 153.50 per dollar - an eight-month low - and hit record lows against both the euro and Sterling.
With Japan remaining the only major central bank still easing, the yen’s weakness reflects a widening global policy gap.
Governor Kazuo Ueda’s cautious tone offered little clarity on timing, disappointing markets hoping for signs of faster normalisation.
The yen slid to 153.50 per dollar - an eight-month low - and hit record lows against both the euro and Sterling.
With Japan remaining the only major central bank still easing, the yen’s weakness reflects a widening global policy gap.
Bias: structurally weak while BOJ remains cautious.
China & Trade: Cautious Optimism Returns
Markets responded calmly to the Trump–Xi meeting in South Korea, where both leaders signalled progress on trade talks.
Trump said a deal could be signed “as soon as Thursday,” involving lower tariffs and renewed Chinese purchases of U.S. goods.
The yuan strengthened to 7.09 its highest level in nearly a year, boosting risk sentiment and lifting the Australian and New Zealand dollars.
Still, traders remain wary that any truce could prove temporary, given the geopolitical rivalry between the two economies.
Trump said a deal could be signed “as soon as Thursday,” involving lower tariffs and renewed Chinese purchases of U.S. goods.
The yuan strengthened to 7.09 its highest level in nearly a year, boosting risk sentiment and lifting the Australian and New Zealand dollars.
Still, traders remain wary that any truce could prove temporary, given the geopolitical rivalry between the two economies.
Macro Drivers This Week
1. UK Fiscal Anxiety:
Fears of a tax-heavy, growth-restrictive Budget are weighing on Sterling. The OBR’s warning of a £20bn fiscal gap has amplified expectations for BoE easing into early 2026. Our detailed Budget analysis explores the potential measures and their implications for sterling.
Fears of a tax-heavy, growth-restrictive Budget are weighing on Sterling. The OBR’s warning of a £20bn fiscal gap has amplified expectations for BoE easing into early 2026. Our detailed Budget analysis explores the potential measures and their implications for sterling.
2. The Fed’s Controlled Dovish Shift:
The Fed has improved global liquidity by ending QT while maintaining cautious forward guidance. This mix supports markets but limits the dollar’s downside.
The Fed has improved global liquidity by ending QT while maintaining cautious forward guidance. This mix supports markets but limits the dollar’s downside.
3. Eurozone Stability:
Stronger German PMIs and steady inflation give the ECB space to hold firm. The euro is quietly regaining credibility as a stability benchmark within G10 FX.
Stronger German PMIs and steady inflation give the ECB space to hold firm. The euro is quietly regaining credibility as a stability benchmark within G10 FX.
4. BOJ’s Slow Normalisation:
With no new dissenters and minimal change in tone, the yen remains under pressure. A cautious BOJ contrasts sharply with a Fed that’s slowing, not reversing, its tightening cycle.
With no new dissenters and minimal change in tone, the yen remains under pressure. A cautious BOJ contrasts sharply with a Fed that’s slowing, not reversing, its tightening cycle.
Why the Dollar Strengthened
Despite rate cuts, the dollar has firmed because:
- Powell’s tone was cautious, not dovish.
- Markets now expect fewer total cuts ahead.
- Other central banks are turning more dovish than the Fed.
- Fiscal and political risks in the UK, Japan, and Europe make the dollar safer.
- Investors remain risk-aware and defensive.
In short, the dollar’s strength is built on relative stability, not new optimism.
Lamera View
Sterling’s weakness looks slightly overdone but justified in the short term.
A small short-term GBP/EUR recovery is possible, but broader momentum stays fragile until the UK Budget restores confidence.
Liquidity conditions are improving globally, yet caution prevails and in FX, timing remains everything.
A small short-term GBP/EUR recovery is possible, but broader momentum stays fragile until the UK Budget restores confidence.
Liquidity conditions are improving globally, yet caution prevails and in FX, timing remains everything.