FX NOW! THE WEEK AHEAD – An FX compass in Central Bank Weeks (27.10.2025)

Central Bank Meetings:

⚪ Canada 29.10.2025

Expected:  2.00% (cut by 25bp / probability: 89%)

Canada’s economy is expected to grow by approximately 1.8% in 2025 and 2026, according to the Bank of Canada (BoC). Meanwhile, the Parliamentary Budget Officer (PBO) projects growth in 2025 somewhat higher than previously, although its most recent published number shows a downward revision. Various private-sector and government forecasts suggest growth may be lower than earlier expected — for example, some banks now forecast numbers as low as ~1.4% for 2025. Inflation is projected to remain close to the BoC’s 2% target: the Bank projects CPI inflation at about 2.3% in 2025, with core inflation gradually easing. The unemployment rate rose to 7.1% in August 2025, marking the highest level outside of the pandemic years since 2016. Job losses were concentrated in part-time roles and in the services sector. Youth unemployment remains especially elevated: for Canadians aged 15-24 the rate was 14.5% in August 2025. Given the weak labour market and modest growth outlook, the BoC is widely expected to consider lowering its policy rate further by 25 basis points to support activity and bring inflation sustainably down to target.

⚪ USA 29.10.2025

Expected 4.00% (cut by 25bp / probability: 97%)

The U.S. economy is now expected to grow by about 1.6% in 2025, according to the median projection from the Federal Reserve’s September Summary of Economic Projections. Other forecasters such as for example the International Monetary Fund previously projected 2.7% but later trimmed the outlook to 1.8% for 2025. Inflation (as measured by the Personal Consumption Expenditures – PCE – price index) is now expected to remain elevated: the Fed’s median projection for headline PCE inflation in 2025 is around 2.5%, and core PCE (excluding food and energy) around 3.1%. The unemployment rate is projected to be about 4.5% for 2025. Regarding monetary policy: the Fed cut its target range for the federal funds rate to 4.00%-4.25% in September 2025, and the median projection among FOMC participants is for the rate to fall to about 3.6% by end-2025.

⚪ Japan 30.10.2025

Expected: 0.50% (unchanged / probability: 88%)

Japan’s real GDP is now projected to grow by about 0.7% in the fiscal-year 2025 (April 2025 to March 2026), down from an earlier estimate of ~1.2%. The International Monetary Fund (IMF) has a slightly different projection: ~1.1% growth in 2025. The economy also registered a strong Q2 2025 growth (April-June quarter) of ~2.2% (annualised) in part thanks to resilient business investment and exports. Inflation remains elevated: the Consumer Price Index (CPI) rose ~3.6% year-on-year in March 2025, well above the Bank of Japan (BoJ) 2% target. Nominal wage growth has slowed compared to earlier expectations: cash earnings rose ~2.1% year-on-year in March 2025, below forecasts, and real wages remain under pressure. Household spending shows some improvement though still mixed: for example, consumption picked up in the April-June quarter (which helped the strong GDP growth) but remains vulnerable to inflation and weak external demand. Given these mixed signals, the BoJ is expected to proceed cautiously with monetary policy—having raised its short‐term policy rate to ~0.5% in January 2025.

⚪ ECB 30.10.2025

Expected 2.00% (unchanged / probability: 99%)

Real GDP is now projected to grow by about 0.9% in 2025 for the euro area, according to the European Commission’s Spring 2025 Economic Forecast. This is a modest pace reflecting ongoing headwinds (trade, investment, geopolitics). Inflation (HICP) is expected to ease, with the 2025 average for the euro area projected at about 2.1% (down from 2.4% in 2024). The European Central Bank (ECB) staff projections put headline inflation at approx. 2.3% in 2025 before declining further. Unemployment is forecast at around 6.3% in the euro area for 2025, broadly stable from 2024. Monetary policy: Given inflation approaching but not far above target, and growth remaining subdued, the ECB is expected to remain cautious holding its key policy rate at elevated levels until clearer signs of sustainable growth and disinflation come through.

References:

Canada: https://www.bankofcanada.ca/press/upcoming-events/

USA: https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

ECB: https://www.ecb.europa.eu/press/calendars/mgcgc/html/index.en.html

Japan: https://www.boj.or.jp/en/mopo/mpmsche_minu/index.htm