**Global FX Markets Outlook: October 2025 Recap and Forecast**
*Based on the original article by Chris Turner, ING – October 2025*
As we navigate through the last quarter of 2025, the global foreign exchange (FX) landscape remains highly dynamic and shaped by diverging monetary policies, geopolitical uncertainties, and macroeconomic conditions. The month of October saw notable shifts among G10 currencies, reflecting mixed data releases and evolving central bank narratives. This comprehensive overview summarizes the key FX themes that played out in October 2025 while offering insights into the months ahead.
**Key Themes in G10 FX Markets – October 2025**
– The US dollar (USD) remained firm amid persistent higher-for-longer expectations from the Federal Reserve.
– European currencies, including the euro (EUR) and the British pound (GBP), faced challenges due to weak economic data and dovish central bank signals.
– The Japanese yen (JPY) struggled under the weight of interest rate differentials and market skepticism around Bank of Japan (BoJ) policy normalization.
– Commodity-linked currencies like the Australian dollar (AUD) and Canadian dollar (CAD) were influenced by commodity prices and contrasting domestic economic signals.
– Scandinavian currencies like the Norwegian krone (NOK) and Swedish krona (SEK) showed some resilience, reacting to inflation concerns and rate expectations.
Let’s explore the performance and macro backdrop of each major currency in more detail.
—
**1. US Dollar (USD): Defying Dovish Expectations**
The USD remained robust in October, supported by:
– Strong US economic data, particularly in labor and consumer spending.
– Continued hawkish messaging from the Federal Reserve, which signaled renewed concerns about inflation persistence.
– Resilient Treasury yields, with the 10-year yield holding above 4.5 percent, helping attract global capital.
Although markets began the month pricing in potential Fed rate cuts in early 2026, the narrative shifted mid-October as policymakers stressed the risks of acting too soon. The outcome was a resilient dollar across the board, especially against low-yielding currencies like the yen.
Looking ahead:
– If US inflation data remains elevated, the Fed’s higher policy rate trajectory will underpin the USD.
– Focus will stay on labor market conditions and consumer strength to judge the durability of rate hikes.
ING forecasts suggest that USD strength may persist into early 2026 unless disinflation accelerates.
—
**2. Euro (EUR): Recovery Lags Behind**
The euro came under pressure in October amid signs of stagnation in the eurozone economy. Key factors included:
– Weak PMI figures, signaling contraction in both manufacturing and services sectors.
– Soft inflation data, reinforcing the European Central Bank’s (ECB) cautious outlook.
– Rising concerns of a prolonged slowdown in Germany, the bloc’s largest economy.
The ECB’s tone has shifted more dovishly, expressing comfort with holding rates at current levels without signaling further hikes. This kept EUR/USD below 1.05 for much of the month.
Outlook:
– Eurozone growth will need to surprise on the upside to lift the euro.
– Any signs of easing inflation or economic weakness could argue for ECB rate cuts in mid-2026.
– ING projects a subdued recovery in EUR/USD toward 1.07 by Q1 2026 only if US yields ease.
—
**3. British Pound (GBP): Dragged by Domestic Weakness**
The British pound struggled to gain traction in October. The Bank of England (BoE) maintained a cautious stance, highlighting balanced risks between sticky inflation and weakening demand.
Key GBP headwinds:
– Disappointing GDP growth and consumer sentiment data.
– Falling core inflation, trimming expectations of future hikes.
– Rising UK borrowing costs that failed to support the pound due to broader economic concerns.
While the BoE has not explicitly signaled a desire to cut rates soon, the lack of inflation exuberance and softening wage growth left investors pricing in cuts
Read more on EUR/USD trading.