Daily Market Outlook, October 6, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

Global markets responded positively following Japan's election of a pro-stimulus leader, which sparked anticipation of substantial fiscal spending. This led to a spike in stock prices while currencies and bonds fell. Investors turned to alternative assets like gold and Bitcoin due to the policy upheaval. Asian shares reached new heights, with the Nikkei 225 Index jumping 4.8% to an unprecedented peak after Sanae Takaichi was seen as the likely new prime minister. The yen plummeted nearly 2% to 150 per dollar, marking a record low against the euro. Long-term Japanese bonds faced their most significant drop in months amidst concerns that a Takaichi government would increase borrowing for tax reductions. US Treasuries and Australian bond futures also declined. Gold surpassed $3,900 an ounce, continuing this year’s substantial commodity rally, while Bitcoin achieved a new all-time high over the weekend. Oil prices rose after OPEC+ decided to reinstate only 137,000 barrels per day of previously suspended supply, a slower increase than earlier in the year. Futures for American and European stocks also indicated a rise. Global stocks have surged sharply, disregarding the US government shutdown and potential mass federal layoffs, as traders bet on the long-term profitability of artificial intelligence investments for tech companies. Many investors refer to the shift towards gold and crypto as the emerging “debasement trade,” serving as a safeguard against fiscal irresponsibility and political instability. This momentum has been amplified by a flurry of new AI collaborations and OpenAI achieving a $500 billion valuation, solidifying its position as the world's most valuable startup. Equity markets have reached successive record highs this year, supported by enthusiasm for AI, hopes for looser monetary policies, and strong corporate earnings. Although the shutdown has postponed the release of crucial economic data, such as nonfarm payrolls, swap markets remain optimistic that the Federal Reserve will implement another quarter-point rate cut at its meeting in October.

As expectations for a Bank of England interest rate cut in November diminish, focus has shifted toward the supply-side issues plaguing the economy. While demand for labour is declining and employment rates are decreasing, overall slack in the economy may not be increasing due to constraints on aggregate supply. This is occurring even with immigration contributing to the workforce. Essentially, the rise in labour inactivity is predominantly counterbalancing the gains from an increased population. The accompanying chart illustrates how the growing population corresponds with a continued increase in employment and the labour force size. However, we must also consider the growing inactivity rate. If we were to merge the current employment figures with a hypothetical scenario where inactivity levels remained unchanged since before the pandemic, we would see a significantly larger labour force. Consequently, the unemployment rate wouldn't just reflect the current figure of 4.7%, but instead would rise to 8.1%, an increase of 3.4 percentage points (the pink area). Although this is a simplistic model, it effectively highlights the magnitude of the inactivity issue, especially considering that a 3.4 percentage point change aligns with the average fluctuation in the unemployment rate during recent recessions. The impact on labour supply has likely negated much of the slack that would typically have emerged following a recession.

US public statistics offices will remain closed for the foreseeable future, and even if they reopen soon, there will still be disruptions to the regular schedule. Therefore, we can expect to be in catch-up mode for several weeks. However, the Fed minutes are still set to be released and should be quite intriguing. The market will be scrutinizing not only the discussions surrounding the rate cut—specifically how members viewed the discrepancies between labor and inflation data—but also the confidence in the guidance indicated by the dots, as well as the influence of Trump's appointee, Miran, on the board. In the UK, the calendar is relatively low-key, highlighted by the RICS survey on Thursday and the REC jobs report on Friday. In Europe, attention will turn to Germany, with September factory orders due on Tuesday and industrial production numbers on Wednesday, along with trade statistics on Thursday. Additionally, strong Japanese labor earnings figures on Wednesday may provide the BoJ with insights into wage persistence and potentially lead the committee to consider raising rates at the end of this month. The RBNZ is expected to announce another rate cut on Wednesday, although there is some division in the market over whether this will be 50 basis points or just a quarter-point reduction. Unlike data, speakers cannot be easily silenced; Fed’s Bostic, Miran, Barr, and Goolsbee are already scheduled to speak. Meanwhile, Bailey will address the BoE on Monday evening and Pill on Wednesday, while Lane, Nagel, Villeroy, and Kazaks are officially on the ECB schedule.

Overnight Headlines

  • Takaichi Elected As First Female Leader Of Japan’s Ruling LDP

  • Takaichi’s Win A Boon For Stocks, May Weigh On Yen, Strategists Say

  • Takaichi’s Win May Delay, Not Derail BoJ Rate Hikes

  • Short-Term JGBs Climb On Reduced BoJ Hike Expectations

  • Gold, Silver, BTC, Surge As ‘Debasement Trade’ Weighs On Currencies

  • Oil Market Rallies After OPEC+ Agrees To Modest Production Hike

  • UK Govt Undermined China Spying Probe To Protect Beijing Ties

  • Tories Tout £47B In Spending Cuts In Bid To Reclaim UK’s Fiscal Rep

  • Reeves Weighs Up Tax Hike On Banks That Could Raise £2B

  • Greens’ Polanski Sets Out ‘Patriotic’ Case For UK Wealth Tax

  • Macron Appoints Roland Lescure As French Finance Minister

  • Race For ECB’s No. 2 Job To Shape Search For Lagarde Succession

  • Iran Signals Push To Address Nuclear Standoff Despite Sanctions

  • Gaza Cease-Fire Talks Are Set To Start In Egypt

  • World’s Largest Reinsurer Hannover Re Boosts Dividend Target

FX Options Expiries For 10am New York Cut 

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

  • EUR/USD: 1.1675-80 (770M), 1.1700 (2.3BLN), 1.1730 (651M)

  • 1.1750-60 (777M), 1.1800 (1.6BLN)

  • USD/CHF: 0.7945 (410M), 0.7995 (320M)

  • EUR/GBP: 0.8700 (225M), 0.8800-05 (1.4BLN)

  • GBP/USD: 1.3400 (202M), 1.3425 (200M), 1.3450 (186M), 1.3475 (182M)

  • AUD/USD: 0.6540-50 (1.6BLN), 0.6600 (2.1BLN)

  • USD/CAD: 1.3950-55 (351M), 1.3965-75 (693M)

  • USD/JPY: 147.00 (1.4BLN), 147.20-25 (500M), 148.00 (1.4BLN)

  • EUR/JPY: 173.50 (304M)

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 1.1650

  • 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 1.4690 Target 1.46

  • Above 1.49 Target 1.51

XAUUSD

  • Daily VWAP Bullish 

  • Weekly VWAP Bullish

  • Above 3600 Target 3885

  • Below 3500 Target 3400

BTCUSD 

  • Daily VWAP Bullish 

  • Weekly VWAP Bullish

  • Above 122k Target 126k

  • Below 122k Target 120k