Dollar forecast: Forex Friday | October 24, 2025

The financial markets were largely mixed in the first half of Friday’s session. European shares were lower while Asian markets and US futures were higher, with S&P and Nasdaq futures hitting new records. In FX, the USD/JPY tested recent highs near 153.00 amid an overall risk on tone, with the dollar also firming up against the euro and pound despite stronger PMI data out of Europe (except France). Gold also fell back following yesterday’s mild recovery. Investors were awaiting the release of CPI data and following what was a brutal couple of days in the precious metals space in mid-week, they were happy to take quick profits while the metal decides whether it wants to stay above the key $4000 level or break below it. Anyway, the US dollar and financial markets will face a busy week ahead. We will maintain a largely bearish dollar forecast but the greenback’s performance will be mixed against different currencies. A potential in-line CPI report should not move the needle much today given the Fed’s focus has shifted to employment now.

 

US–China trade talks is key risk event for dollar forecast

 

In the week ahead, while we have many central bank meetings taking place, most of those decisions are likely to be within expectations, meaning the market impact will likely be limited. Instead, all eyes will be turning east as the next round of US–China trade discussions get underway this weekend. The high-level talks in Malaysia, headed by Vice Premier He Lifeng and US Treasury Secretary Scott Bessent, are expected to set the stage for a potential Xi–Trump meeting in South Korea on Thursday 30^th October, which would be their first face-to-face since the G20 in Osaka back in 2019.

 

After years of tit-for-tat tariffs and tense exchanges, the mood music has softened slightly in recent weeks. President Trump has hinted at a “fantastic deal” with China and even floated a possible visit to Beijing in early 2026. Still, in typical Trump fashion, he’s left himself an escape route, suggesting the meeting might not happen at all.

 

Assuming there’s no last-minute drama, the expectation is that the two leaders will meet on 30 October. Still, teal progress may be modest, but even an extension of the fragile trade truce would be welcomed by markets hungry for stability between the world’s two largest economies. This outcome should boost the appeal of commodity dollars against the US dollar.

 

BOC likely to cut rates despite inflation surprise

 

Canada has been in the news this week, firstly because of stronger inflation data than expected, and then overnight a surprise announcement from US President Donald Trump, saying he would immediately halt all trade negotiations with Canada. The reason? Well, apparently a Canadian advertisement against his signature tariffs plan featuring the voice of former President Ronald Reagan, which Trump didn’t find funny to say the least, calling it an “egregious behaviour.” The focus will be on Canadian GDP today, which may further complicate the BoC’s decision to cut next week. All told however, the weakness in the North American economy and trade uncertainty calls for another 25 basis point cut on Wednesday, which could keep the pressure on the CAD if the central bank accompanies the expected rate cut with some dovish commentary.

 

FOMC rate decision: A 25bp cut is a foregone conclusion

 

The FOMC meeting will be on Wednesday, coming in an hour earlier than usual for European investors due to the end of the summer time (meaning at 18:00 instead of 19:00 GMT). While concerns over inflation persist, the Fed’s focus has shifted to its other mandate: employment. Thanks to the ongoing US government shutdown, crucial labour market data has not been released to cause a rethink of policy direction by Fed officials. As a result, the FOMC is widely expected to deliver a 25 basis point rate cut and follow this up with another one in December. The dollar forecast may may well take a hit should the Fed voice concerns about the state of the economy or delivers a dovish assessment of inflation. In this potential scenario, the EUR/USD could climb back towards the 1.18 handle having tested waters beath 1.16 in recent days.

 

Bank of Japan likely to stay on hold – for now

 

The Bank of Japan meets on Thursday 30th October and is widely expected to leave its policy rate unchanged at 0.5%. Despite divisions within the board, the consensus view appears to be one of patience rather than haste, especially in light of the fiscal dove Sanae Takaichi winning a historic vote to become Japan's first female prime minister. Inflation remains comfortably above target at 2.9%, while the broader economy continues to weather the impact of US tariffs with surprising resilience. This backdrop should, in theory, support the BoJ’s gradual move toward policy normalisation. However, policymakers remain wary of tightening too soon and snuffing out growth momentum. A December rate hike, therefore, looks increasingly plausible, particularly if inflation holds firm. The USD/JPY may end up staying above 150.00 unless the BoJ delivers a surprise hike or is very hawkish about future policy.

 

 

 

ECB sees little reason to cut – steady as she goes

 

Across Europe, the latest PMI data painted a more upbeat picture. The composite flash estimate for October rose to a 17-month high, hinting at sustained growth across the eurozone. While inflation pressures remain mixed – with input costs easing but output prices climbing at their fastest pace in seven months – the broader trend suggests the European Central Bank can afford to hold its nerve.

 

Energy prices have eased in recent months owing to excess crude oil production although there is a risk for a trend reversal should there be any major disruptions to Russian oil flows. This means that there’s little evidence of deflationary dangers, especially with manufacturers having raised prices for the first time in half a year, according to the latest PMI data.

 

While some dovish voices at the ECB may still argue for rate cuts, the data hardly support that case. Stable inflation, firmer growth, and resilient labour markets – particularly in Spain, where employment continues to expand – all reinforce the view that rates are likely to remain unchanged for the foreseeable future.

 

Against this backdrop, we maintain a bullish EUR/USD forecast, which should keep the dollar index under pressure – especially with the longer term lower highs still intact. A new bearish trend could be established if support at 98.50 breaks decisively on the DXY chart.

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R