Market Summary by AFORTI: USA and ECB interest rates, USA-China trade agreement, USA government shutdown

2025-11-03

Last week was dominated by the Fed's interest rate cut to 4.00%, accompanied by hawkish rhetoric, resulting in a strong appreciation of the US dollar, while the ECB kept rates unchanged. A positive surprise in the form of an increase in PMI indices in the eurozone and a higher-than-expected CPI index in Poland signalled an economic recovery, while on the currency markets the zloty weakened against both the USD and the EUR, and the WIG Index reached a historic high. In the coming week, market attention will focus on the decision of the Monetary Policy Council (RPP) in Poland on interest rates and on key data from the labour market and industry in the USA, which are gaining in importance due to the ongoing paralysis of the federal administration.

Economic indicators

Poland

1. Car registrations (m/m) (September): 17.40%; previously: -15.50%;

2. Car registrations (y/y) (September): 20.20%; previously: 14.60%;

3. CPI (y/y) (October) P: 3.0%; forecast: 2.8%; previous: 2.9%;

4. CPI (m/m) (October) P: 0.1%; forecast: 0.0%; previous: none;

Eurozone

1. Ifo Business Climate Index in Germany (October): 88.4; forecast: 88.1; previous: 87.7;

2. GDP (q/q) (Q3) P: 0.2%; forecast: 0.1%; previous: 0.1%;

3. GDP (y/y) (Q3) P: 1.3%; forecast: 1.2%; previous: 1.5%;

4. Unemployment rate (September): 6.3%; forecast: 6.3%; previous: 6.3%;

5. CPI (y/y) (October) P: 2.1%; forecast: 2.1%; previous: 2.2%;

6. Core CPI (y/y) (October) P: 2.3%; forecast: 2.4%; previous: 2.4%;

7. Deposit rate (October): 2.00%; forecast: 2.00%; previous: 2.00%;

8. ECB marginal lending rate (October): 2.40%; previous: 2.40%;

9. Interest rate decision (October): 2.15%; forecast: 2.15%; previous: 2.15%;

Germany

1. German GDP (q/q) (Q3) P: 0.0%; forecast: 0.0%; previous: -0.3%;

2. German CPI (m/m) (October) P: 0.3%; forecast: 0.2%; previous: 0.2%;

3. CPI in Germany (y/y) (October) P: 2.3%; forecast: 2.3%; previous: 2.4%;

4. Business expectations in Germany (October): 91.6; previous: 89.8;

5. German GDP (y/y) (Q3): 0.3%; forecast: 0.3%; previous: 0.2%;

6. German HICP (y/y) (October) P: 2.3%; forecast: 2.2%; previous: 2.4%;

France

1. France GDP (y/y) (Q3) P: 0.9%; forecast: 0.6%; previous: 0.7%;

2. France GDP (q/q) (Q3): 0.5%; forecast: 0.2%; previous: 0.3%;

3. French consumer spending (m/m) (September): 0.3%; forecast: 0.0%; previous: 0.2%;

4. HICP in France (m/m) (October) P: 0.1%; forecast: 0.1%; previous: -1.1%;

5. CPI in France (m/m) (October) P: 0.1%; forecast: 0.1%; previous: -1.0%;

United Kingdom

1. Approved mortgage applications (September): 65.94K; forecast: 64.00K; previous: 64.96K;

2. Nationwide House Price Index (HPI) (MoM) (October): 0.0%; forecast: 0.3%; previous: 0.5%;

3. Nationwide House Price Index (HPI) (y/y) (October): 2.3%; forecast: 2.4%; previous: 2.2%;

4. BRC Shop Price Index (y/y) (October): 1.0%; forecast: 1.6%; previous: 1.4%;

USA

1. Conference Board Consumer Confidence Index (October): 94.6; forecast: 93.4; previous: 95.6;

2. Crude oil inventories (weekly): -6.858M; forecast: -0.900M; previous: -0.961M;

3. FOMC statement (October): none; previous: none;

4. FOMC press conference (October): none; previous: none;

5. Weekly API crude oil stocks (weekly): -4.000M; forecast: -2.900M; previous: -2.980M;

6. 5-year Treasury note auction (October): 3.625%; previous: 3.710%;

7. 7-year Treasury note auction (October): 3.790%; previous: 3.953%;

8. Interest rate decision (October): 4.00%; forecast: 4.00%; previous: 4.25%;

9. Chicago PMI index (October): 43.8; forecast: 42.3; previous: 40.6;

China

1. China Composite PMI (October): 50.0; previous: 50.6;

2. Manufacturing PMI (October): 49.6; forecast: 49.0; previous: 49.8;

3. Services PMI (October): 50.1; forecast: 50.1; previous: 50.0;

Currency market

This week, the euro (EUR) strengthened against the Polish zloty (PLN) by 0.26% after sharp declines in the middle of the week. The euro traded in the range of 4.2282 – 4.2583.

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Similarly, the dollar (USD) strengthened against the zloty (PLN) by 1.04%, despite the interest rate cut. The dollar price fluctuated between 3.6246 and 3.6957.

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Oil and gold market

The price of BRENT crude oil fell by 1.76%. The price fluctuated between USD 63.44 and USD 65.50 per barrel.

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Gold, on the other hand, fell by 2.74%. The price of gold fluctuated between USD 3,901.94 and USD 4,085.35 per ounce.

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Stock exchange

The WIG index rose by 0.05%, reaching its highest value ever on Tuesday. The price of the WIG index fluctuated between 111,354 and 114,067.

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Cryptocurrencies

The price of Bitcoin (BTC) fell by 0.24%. The price of Bitcoin fluctuated between PLN 392,100 and PLN 422,209.

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Important events of the past week

Interest rates in the USA: The US Federal Reserve (Fed) announced a 25 basis point cut in interest rates to 4.00%. This decision was widely anticipated by the financial markets. Despite the rate cut itself, Chairman Powell's communication after the FOMC meeting was hawkish. As a result, the US dollar (USD) strengthened significantly, the EUR/USD exchange rate fell for the second day in a row, approaching 1.1550, and the USD/PLN exchange rate approached 3.6900.

ECB interest rates: The Governing Council of the European Central Bank (ECB) decided to keep interest rates stable, maintaining the deposit rate at 2.00% and the refinancing rate at 2.15%. This was the third consecutive decision to leave rates unchanged, following an earlier cycle of cuts. ECB President Christine Lagarde said that monetary policy is in a ‘good place’ and that the bank feels ‘quite comfortable’ with the current level of rates. Such rhetoric from the ECB contributed to strengthening market expectations for interest rate stability at least until the end of the year, thus curbing potential declines in the EUR-USD exchange rate after the strong appreciation of the dollar.

PMI growth in Europe: Economic activity in the eurozone accelerated in October, surprising the market positively. The preliminary PMI index for industry rose to 50.0 points, exceeding expectations (49.8 points) and the recession threshold. The PMI index for services reached 52.6 points (against forecasts of 51.2 points), which was the highest level in over a year. These data suggest a ‘long-awaited awakening in the European economy’, which is a positive signal supporting the euro (EUR) exchange rate.

USA-China trade agreement: US President Donald Trump and Chinese President Xi Jinping met in South Korea, where they reached a short-term, one-year trade agreement. Trump announced a 10 percentage point reduction in US tariffs on Chinese goods in exchange for Beijing's promise to limit exports of chemicals used in the production of fentanyl. Importantly for global supply chains, Beijing also committed to suspending announced restrictions on rare earth exports for at least a year. The agreement created a temporary détente and allowed for a scenario of de-escalation of tensions, which had a positive impact on global market sentiment.

Federal Government Shutdown: The period covered by the report saw the continuation of the federal government shutdown that began in October. The suspension of US government operations caused delays in the publication of many key macroeconomic reports, including inflation and employment data. This had an impact on the Fed, as the lack of official data prompted some Committee members to hold off on the decision to cut rates in December, thereby increasing monetary uncertainty. Although sources do not provide direct currency quotes, this paralysis reinforced uncertainty and complicated the decision-making environment for the central bank.

Events to watch this week

Outlook for the zloty: The most important event for the zloty will be the Monetary Policy Council's (RPP) decision on interest rates, expected on Wednesday, 5 November 2025, at 2:00 p.m. As last week's preliminary CPI inflation estimate turned out to be lower than the market consensus (2.8% y/y), the likelihood of the MPC deciding on another rate cut has increased significantly, leaving analysts divided in their forecasts. A possible rate cut could cause further weakening of the PLN and bonds, as financial markets are already pricing in this move.

Outlook for the euro: In the coming week, euro markets will focus on economic activity indicators, in particular the publication of the eurozone manufacturing PMI on Monday, 3 November 2025, at 10:00. This will be followed by the release of S&P Global's composite PMI index on Wednesday, 5 November, at 10:00. The economic improvement already indicated by the European Commission's October surveys (ESI) and GDP for Q3 2025 may have a positive impact on the EUR, but the stabilisation of ECB rates limits the potential for large gains.

Outlook for the dollar: Labour market and industrial data will be key for the US dollar, such as the ISM manufacturing index on Monday, 3 November 2025, at 16:00, and the ADP non-farm employment change on Wednesday, 5 November, at 14:15. These indicators are important because the ongoing federal government shutdown is delaying the release of many key official reports, increasing investors' reliance on available data. Stronger-than-expected data could sustain the hawkish sentiment that prevailed after last week's Fed meeting, thereby supporting the USD.

Outlook for the pound: The most important event for the pound in the coming week is the Bank of England (BoE) interest rate decision, which will take place on Thursday, 6 November 2025, at 13:00. The market consensus is for the reference rate to remain at 4.00%. In addition, markets will be monitoring the release of the manufacturing PMI on Monday, 3 November, at 10:30 to assess the health of the UK economy.

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