## FX Daily: China Isn't Backing Down - Market Analysis and Currency Forecasts (October 14, 2025) **Report Provider:** ING Think **Authors:** Francesco Pesole, Chris Turner **Date:** October 14, 2025 (referencing events and data from around this period) **Topic:** Markets (FX Currency Analysis) This report, the October edition of "FX Talking: No data, no bears," provides an updated outlook on G10 and Emerging Market currencies, with a particular focus on the escalating US-China trade tensions and their impact on global markets. ### Key Findings and Conclusions: * **US Dollar Facing Downward Pressure:** Despite initial expectations of safe-haven demand benefiting the dollar, re-escalation in US-China trade tensions is leading to safe-haven demand for JPY, CHF, and EUR, while the dollar itself faces potential downward pressure. * **China's Trade Resilience:** China's strong export diversification allows it to withstand trade pressure from the US, suggesting Beijing can "fight to the end" in a trade war. * **Uncertainty in US Politics:** The ongoing US government shutdown adds to market volatility, potentially magnifying the impact of limited data releases. * **Cautious Fed Stance:** Federal Reserve Chair Powell is expected to maintain a cautious narrative due to the lack of fresh jobs data. * **Short-Term Dollar Strength Possible:** Despite a longer-term bearish view on the dollar, a few extra bits of bullish momentum are anticipated in the near term due to data silence. * **Euro Vulnerable to French Politics:** The Euro's performance is heavily dependent on clarity regarding French political stability, with a potential government collapse threatening to overshadow any benefits from de-escalating US-China trade tensions. * **Mildly Dovish UK Jobs Data:** Recent UK jobs data suggests a cooling labor market and wage moderation, making a November Bank of England (BoE) rate cut unlikely but December a possibility. * **CEE Currencies Facing Downward Pressure:** The CEE region's currencies may experience downward pressure due to recent rapid rate movements and US dollar resilience, with policymaker statements at the IMF meeting being crucial. ### Key Statistics and Metrics: * **UK Wage Growth:** * Private sector wage growth fell to **4.4% YoY**. * The 3-month annualized rate is now at **2.4%**. * Forecast for the annual rate to drop to **3.7% by December**. * **Romanian Inflation:** Remained unchanged at **9.9% YoY**. * **Romanian Wage Growth:** Dipped below **5.0%**. * **ING Year-End Projections for Romania:** **9.6% for 2025** and **4.5% for 2026**. * **UK Unemployment:** Nudged higher. * **BoE Rate Cut Pricing:** * Pricing for a December cut increased from **7bp to 9bp**. * 2-year GBP swap rates are down **4bp**. * **EUR/GBP:** Rallied above **0.870**. ### Important Recommendations: * **Monitor US Data Closely:** The NFIB Small Business survey, particularly the "hiring plan" sub-index, is worth close monitoring for potential market reactions. * **Observe French Political Developments:** Clarity on French politics is crucial for any significant Euro rebound. * **Watch IMF Meeting Statements:** Policymaker comments at the IMF meeting will be key in setting the tone for CEE currencies. ### Significant Trends or Changes: * **Re-escalation of US-China Trade Tensions:** This is the primary driver of current market sentiment, impacting currency flows. * **Shift in Safe-Haven Demand:** JPY, CHF, and EUR are benefiting more than the USD from safe-haven demand. * **Cooling UK Labor Market:** Evidence suggests a moderation in wage growth and employment. * **Potential for CEE Currency Weakness:** Market sentiment suggests downward pressure on CEE currencies. ### Notable Risks or Concerns: * **Further Escalation of US-China Trade War:** This remains a significant risk, with China vowing to "fight to the end." * **French Political Instability:** A government collapse in France could negatively impact the Euro. * **US Government Shutdown:** The unresolved shutdown adds to market uncertainty. * **Data Quality Issues in UK Unemployment:** While improving, ONS notes persistent data quality issues. ### Material Financial Data: * **EUR/USD Target:** If US-China trade tensions de-escalate, EUR/USD would likely target **1.150**. * **USD Outlook:** ING's baseline view is that an extension of the tariff truce on November 1st is more likely than a full trade war. However, risks remain elevated, and in a scenario of further escalation, the dollar may face downward pressure. Once data resumes, evidence of worsening employment is expected to take the dollar back to early October levels and then down to fresh lows by year-end. ### Specific Dates and Timeframes: * **November 1:** Deadline for the US-China tariff truce. * **Thursday (of the week of Oct 14):** Expected no-confidence vote for the French government. * **Tomorrow (of the week of Oct 14):** French budget proposal announcement. * **December:** A BoE rate cut is more in play than markets are currently pricing. * **February:** ING's forecast for the next BoE rate cut. * **May (next year):** National Bank of Romania is expected to return to rate cuts. ### Critical Statements: * "The tone from Beijing remains firm, with the Ministry of Commerce vowing to 'fight to the end' in the trade war." * "Secretary Scott Bessent... claimed China wants to ‘pull everybody else down’." * "Our baseline view is still that an extension of the tariff truce on 1 November is more likely than a return to a fully-fledged trade war." * "Unless major USD-negative news comes from the US (macro or tariffs), we doubt the euro will stage any idiosyncratic rebound before getting any clarity on French politics." * "A November BoE cut now looks unlikely. But December – after the Autumn Budget – is more in play than markets are pricing." **Content Disclaimer:** This publication is for informational purposes only and does not constitute investment recommendations, advice, or an offer to purchase or sell financial instruments.
FX Daily: China isn’t backing down
Read original at ING Think →We have published the October edition of FX Talking: No data, no bears, which includes our latest views and forecasts for G10 and EM currencies. USD: Not an April re-run, but risks are mounting After the weekend de-escalation in tariff risk, market concerns have risen again overnight. China placed limits on five US entities of Hanwha Ocean, a Korean shipbuilding company, in response to the US investigation into China’s trade practices.
The tone from Beijing remains firm, with the Ministry of Commerce vowing to “fight to the end” in the trade war. Meanwhile, Secretary Scott Bessent – who struck a conciliatory tone after Friday’s escalation – claimed China wants to ‘pull everybody else down’ in this FT interview. The FX market is reacting to the re-escalation with safe haven demand benefitting JPY, CHF and EUR more than the dollar, while the highly China-sensitive AUD and NZD are taking a beating.
Our baseline view is still that an extension of the tariff truce on 1 November is more likely than a return to a fully-fledged trade war. The risks remain rather elevated, though. China’s trade numbers released on Monday showed Beijing can afford to stretch its muscles on trade with the US thanks to strong export diversification.
In a scenario of further escalation, the dollar may face downward pressure. However, its renewed status as a safe haven and expectations that the US administration might retreat could shift concern toward Treasuries. Should markets find reasons to ease their nerves about the Japanese political situation, the undervalued JPY is in a prime spot to benefit from further escalation.
US markets resume full trading schedules today after a long weekend, but the US shutdown remains far from being resolved. The few data releases we get should have a magnified impact, so it’s worth closely monitoring the NFIB Small Business surveys today. The “hiring plan” sub-index has been on a steady upward trend since May, but below year-end 2024 levels.
Any meaningful correction in this usually disregarded series could trigger a market reaction. On the Fed side, Chair Powell will discuss the economic outlook and monetary policy today, but with no fresh jobs data, he may simply stick to his recent cautious narrative. The impact amid data silence can still be felt in markets and the dollar probably faces some upside risks.
The speaker's agenda today also includes doves Bowman and Waller, and 2025 voter Collins. As discussed in our freshly-released monthly FX update, we aren’t supporters of an extended USD comeback. Once data resumes, we expect evidence of worsening employment to take the dollar back to early October levels, and then down to fresh lows by year-end.
But this week may not give us much sense of direction again, and a few extra bits of bullish dollar momentum are probably on the cards in the near term. Francesco Pesole EUR: French headaches remain Unless major USD-negative news comes from the US (macro or tariffs), we doubt the euro will stage any idiosyncratic rebound before getting any clarity on French politics.
Today, PM Lecornu is set to speak to parliament before announcing his budget proposal tomorrow, which will ultimately determine his chances of surviving a no-confidence vote, which is expected for Thursday. Another government collapse this week will likely make the euro miss out on any benefits from further escalation in the US-China trade spat.
And should the tariff story de-escalate, EUR/USD would likely set its eyes on 1.150. Elsewhere in the euro area, the ZEW survey out of Germany is expected to show some improvement in both the “expectations” and “current situation” metrics today. That is however unlikely to trigger much euro reaction at this stage.
Francesco Pesole GBP: Slightly dovish jobs data This morning’s UK jobs report was mildly dovish. Private sector wage growth, a key BoE metric, undershot expectations, falling to 4.4% YoY. In level terms, the past three months have been consistently more benign, with the 3M annualised rate now at 2.
4%. We expect the annual rate to drop to 3.7% by December – matching the BoE’s own forecast. Given wage growth has consistently overshot in recent years, simply seeing these numbers materialise would help ease concerns about upside inflation risks. The slight fly in the ointment is public sector pay, which was hot in the latest month.
But this reflects the current expansive fiscal stance, and the upcoming budget should make clear that this won’t be repeated next year. Separately, unemployment nudged higher. While data quality issues persist, the ONS notes improvements. The trend remains consistent with payroll data: a steady cooling in the labour market and ongoing wage moderation.
A November BoE cut now looks unlikely. But December – after the Autumn Budget – is more in play than markets are pricing. Our forecast remains for the next cut in February, allowing the Bank one more inflation and jobs print. Pricing for a December cut increased from 7bp to 9bp, and 2-year GBP swap rates are down 4bp after this morning’s release.
EUR/GBP has rallied above 0.870, although further gains are set to face the drag of more French political noise. Francesco Pesole CEE: Market suggest some weakness but waiting for policymakers to set the tone Yesterday's inflation figures in Romania surprisingly edged down slightly, remaining unchanged at 9.
9% YoY, with some relief coming from food prices. Services inflation continues to show resilience, and wage growth dipping below 5.0% adds further drag on demand. Our year-end projections remain 9.6% for 2025 and 4.5% for 2026. This should allow the National Bank of Romania to return to rate cuts in May next year in our forecast.
Elsewhere in the CEE region, today's calendar is light, and we will only see current account data from Poland and the Czech Republic. The market should return to full trading mode after yesterday's US holidays, and attention is shifting to this week's IMF meeting with several CEE speakers on the agenda.
Yesterday's rapid downward movement in rates and the resilience of the US dollar suggest that CEE currencies may see some downward pressure in the coming days, but the tone may be set by statements from policymakers in Washington. Chris Turner Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
