Daily Market Outlook, October 28, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

Global markets have taken a breather from their record-setting streak as investors brace for a packed week of earnings reports from major tech giants and key announcements from central banks. Asian markets dipped, and European futures signalled a weaker start. In Japan, stocks retreated from recent highs as the Yen strengthened against the Dollar, snapping a seven-day losing streak. Meanwhile, S&P 500 futures were flat after the index reached a new record high. This comes as Chinese and U.S. trade negotiators prepare to unveil a series of diplomatic agreements for Presidents Trump and Xi Jinping at an upcoming conference. The recent surge in equities has been driven by easing trade tensions, with U.S. corporations largely sidestepping tariff impacts by raising prices and cutting costs. However, this optimism faces a test this week as investors closely monitor the Federal Reserve's meeting for clues on interest rate adjustments and await earnings reports from tech heavyweights like Amazon and Microsoft to gauge whether their growth momentum will continue. Elsewhere, the Yen gained ground against the Dollar following discussions between U.S. Treasury Secretary Bessent and Japan's newly appointed Finance Minister Katayama regarding currency volatility. In other market movements, the Chinese Yuan climbed to its highest level in almost a year, buoyed by hopes of a potential trade deal between China and the U.S. The Dollar index declined for a second consecutive day, while gold prices stayed below $4,000 per ounce as progress in trade negotiations reduced demand for safe-haven assets.

The Financial Times has revealed that the UK Office for Budget Responsibility (OBR) is expected to significantly cut its trend productivity growth forecast by about 0.3 percentage points in the forthcoming Budget. This adjustment is steeper than the 0.2 percentage point reduction widely anticipated as a middle-ground estimate. According to calculations from the Institute for Fiscal Studies (IFS), this downgrade alone could result in a staggering £21 billion gap in the projected current budget balance for the target year 2029-30.Adding to the challenge, pressures from mandatory policy changes, such as rising welfare expenditures, indicate that securing even £10 billion of fiscal headroom might necessitate a total fiscal effort of at least £30 billion. If the government seeks to build a larger fiscal cushion to shield against future economic uncertainties, the task becomes even more daunting.

Recent weeks have seen notable shifts in the rates markets. A key example is the narrowing of the 10-year yield spread between UK gilts and US Treasuries (UST) by approximately 25 basis points (bps). Despite this, the 10-year gilt yield remains around 34bps higher than its UST counterpart. Upon closer examination, this tightening in the 10-year spread—and longer maturities—largely stems from evolving expectations for short-term rates. For instance, the 1-year forward GBP OIS rate has declined from roughly 3.70% to 3.43%, driven by weaker UK economic data, including softer wage growth and lower-than-expected inflation figures. However, the Monetary Policy Committee (MPC) still maintains a notably hawkish stance, and short-rate expectations are approaching historically significant support levels. This raises the argument that further narrowing of the gilt-UST spread may now hinge more on a reduction in the term premium in the UK compared to the US. The upcoming Budget could play a pivotal role here. Adjusted for expected policy rate differences, the 10-year gilt yield continues to appear elevated relative to USTs. The government has repeatedly emphasised its commitment to adhering to fiscal rules, but political dynamics may complicate matters. Reports suggesting plans to expand fiscal headroom beyond the previously stated £10 billion buffer could face challenges, especially after the political fallout from last week’s by-election result in Wales.

Overnight Headlines

  • Trump’s Trip Puts Focus On Asia And Meeting With Xi

  • Trump And Takaichi Promise ‘Golden Age’ For US-Japan Alliance

  • Fed Nears End Of QT Amid Signs Of Stress In Money Markets

  • Apple Tops $100B In Services Revenue Even As Legal Risks Grow

  • NXP Delivers Upbeat Forecast In Sign That Demand Is Rebounding

  • Qualcomm Announces New AI Chips In Data Centre Push, Shares Surge

  • Amazon To Lay Off Tens Of Thousands Of Corporate Workers

  • Paramount To Cut 1,000 Jobs In First Round Of Layoffs, Source Says

  • HSBC Revenue Beats As $1.1B Madoff Provision Dents Profit

  • Reeves Faces £20B UK Public Finances Hit To Productivity Downgrade

  • Google To Buy Power From NextEra Reactor That’s Being Revived

  • US DoE Forms $1B Supercomputer And AI Partnership With AMD

  • Russia’s Lukoil To Sell Off Foreign Assets As US Sanctions Bite

  • Copper Nears Record As Easing US-China Tensions Lift Demand Hope

  • UK Food Prices Fall By Most In Almost Five Years, BRC Says

FX Options Expiries For 10am New York Cut 

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

  • EUR/USD: 1.1600 (EU1.2b), 1.1630 (EU893.5m), 1.0605 (EU711m)

  • USD/JPY: 153.00 ($994.5m), 152.50 ($719.7m), 153.50 ($531.6m)

  • USD/CAD: 1.3900 ($449.6m), 1.3705 ($342m), 1.4100 ($304.2m)

  • AUD/USD: 0.6475 (AUD573m), 0.6665 (AUD400m), 0.6870 (AUD374.1m)

  • GBP/USD: 1.3565 (GBP338.4m), 1.3095 (GBP324m), 1.3330 (GBP311.3m

CFTC Positions as of the Week Ending 9/10/25 

  • 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 6765 Target 6896

  • Below 6755 Target 6692

EURUSD 

  • Daily VWAP Bullish

  • Weekly VWAP Bearish

  • Below 1.1668 Target 1.1526

  • Above 1.1668 Target 1.1739

GBPUSD 

  • Daily VWAP Bearish

  • Weekly VWAP Bearish

  • Below 1.3392 Target 1.3258

  • Above 1.3392 Target 1.3152

USDJPY 

  • Daily VWAP Bullish

  • Weekly VWAP Bullish

  • Below 150.50 Trgaet 147.78

  • Above 150.50 Target 154.48

XAUUSD

  • Daily VWAP Bearish

  • Weekly VWAP Bullish

  • Above 4046 Target 4345

  • Below 4046 Target 3684

BTCUSD 

  • Daily VWAP Bullish 

  • Weekly VWAP Bearish

  • Above 113k Target 118k

  • Below 112k Target 107k