Global FX Market Summary: Monetary Policy and the Federal Reserve’s Outlook, US Government Shutdown, Gold 3 October 2025

Fed debates rate cuts, shutdown delays data, raising risks. Markets view 87.5% cut odds; gold rallies on secure-haven demand.

Monetary Policy and the Federal Reserve’s Outlook

Fed policymaker Stephen Miran stressed that monetary policy should be forward-looking, cautioning that using backward-looking data is misguided. He highlighted housing costs as central to inflation dynamics, anticipating an easing of shelter inflation that would contribute to disinflation in services. Factually, Miran noted that inflation expectations are reasonably well anchored and that the public expects the Fed to achieve low inflation. He also stated that the neutral interest rate has come down to the low end of estimates, a view based on forward-looking assessments. Despite “loose” financial conditions, Miran argues that policy is “tight” due to the lower neutral rate. In contrast, Dallas Fed President Lorie Logan struck a hawkish note, warning that the central bank must be “very cautious about rate cuts” because inflation remains above the target. Market expectations, however, have increased the probability of the Fed cutting interest rates by 50 basis points (bps) by the end of the year to 87.5%, according to the CME FedWatch tool.

Impact of US Government Shutdown and Data Delays

The ongoing US government shutdown presents significant economic and data-related challenges. A White House memo cited an estimated cost to the US economy of about $15 billion in GDP each week the government remains closed, with a month-long stalemate potentially adding 43,000 people to unemployment. The shutdown has led to the delay of key official economic data releases, including the September Nonfarm Payrolls (NFP) report, and there is a risk that the September Consumer Price Index (CPI), scheduled for October 15, could also be postponed. Chicago Fed President Austan Goolsbee confirmed that in the absence of official BLS statistics, the Fed would “turn to other data sources,” noting the Chicago Fed’s real-time indicator points to a stable labor market with the unemployment rate around 4.3%. Consequently, market attention is shifting to macro figures offered by independent organizations, such as the ISM Services Purchasing Managers Index (PMI), which was expected at 51.7 for September.

secure-Haven Demand and Gold’s Performance

Gold (XAU/USD) exhibited gains, trading above $3,850, an increase of nahead 0.70% on the day, primarily supported by two factual elements: secure-haven demand and expectations of a Fed interest rate cut. Gold is regarded as a secure-haven asset, a hedge against inflation and depreciating currencies, and its appeal increases during uncertain times, such as the US government shutdown. The price rise is also assisted by the slight easing of the US Dollar Index (DXY), which traded around 97.81, as Gold typically has an inverse correlation with the dollar. Technically, the outlook for Gold remains tilted to the upside, with dip-purchaseing interest emerging on pullbacks.

Top upcoming economic events:

1. ISM Services PMI (Friday, October 3, 2025)

• Date: 10/03/2025 at 14:00:00
• Importance: This is the most critical gauge of health for the U.S. services sector, which dominates the economy. Rated as HIGH impact, a reading above 50 indicates expansion. A stronger-than-expected number is bullish for the USD as it suggests economic resilience, potentially supporting a tighter monetary policy stance from the Federal Reserve.

1. BoE’s Governor Bailey speech (Friday, October 3, 2025)

• Date: 10/03/2025 at 13:20:00
• Importance: As the Governor of the Bank of England (BoE), Andrew Bailey’s comments are a HIGH impact driver for the British Pound (GBP). Traders scrutinize his remarks for any forward guidance on the UK’s interest rate path and the BoE’s assessment of inflation and economic risks.

1. BoE’s Governor Bailey speech (Monday, October 6, 2025)

• Date: 10/06/2025 at 17:30:00
• Importance: This second scheduled speech from the BoE Governor maintains its HIGH impact for the GBP. It provides another key opportunity for market participants to assess the central bank’s conviction and potential next steps regarding monetary policy.

1. ECB’s President Lagarde speech (Monday, October 6, 2025)

• Date: 10/06/2025 at 17:00:00
• Importance: Speeches by the President of the European Central Bank (ECB) are a HIGH impact event for the Euro (EUR). Christine Lagarde’s statements offer direct insights into the ECB’s economic outlook, inflation forecast, and potential adjustments to monetary policy, often leading to significant EUR volatility.

1. Retail Sales (YoY) (Monday, October 6, 2025)

• Date: 10/06/2025 at 09:00:00
• Importance: Rated as HIGH impact, this data measures the change in consumer spending, a core component of the Eurozone’s economic activity. A strong year-over-year figure suggests solid consumer confidence and demand, which can support the EUR by signaling potential inflationary pressures.

1. S&P Global Composite PMI (Friday, October 3, 2025)

• Date: 10/03/2025 at 13:45:00
• Importance: This MEDIUM impact index provides a broad measure of private sector activity (both manufacturing and services) in the U.S. It is a leading indicator of economic health that informs the market’s expectations for GDP and Federal Reserve policy.

1. ISM Services New Orders Index (Friday, October 3, 2025)

• Date: 10/03/2025 at 14:00:00
• Importance: This MEDIUM impact sub-component of the ISM Services PMI is a key forward-looking indicator. It measures the demand for new business, and a strong reading suggests future expansion in the services sector, which is supportive of the USD.

1. ISM Services Employment Index (Friday, October 3, 2025)

• Date: 10/03/2025 at 14:00:00
• Importance: Also a MEDIUM impact sub-component, this index provides an ahead look at hiring trends in the largest U.S. sector. It is watched closely because employment is a core component of the Federal Reserve’s dual mandate, making it crucial for monetary policy expectations and the USD.

1. LDP Presidential Election (Saturday, October 4, 2025)

• Date: 10/04/2025 at 00:00:00
• Importance: This MEDIUM impact political event is highly significant as the winner will likely become the next Prime Minister of Japan. The new leader’s policy agenda, particularly on economic and fiscal matters, will set the tone for the country and can influence the valuation of the Japanese Yen (JPY).

1. TD-MI Inflation Gauge (YoY) (Monday, October 6, 2025)

• Date: 10/06/2025 at 00:00:00
• Importance: This MEDIUM impact gauge provides a timely, monthly estimate of year-over-year inflation in Australia. As a precursor to the RBA’s quarterly CPI data, it is crucial for setting market expectations on the Reserve Bank of Australia’s (RBA) next move on interest rates, thereby impacting the Australian Dollar (AUD).

 The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

The information does not constitute advice or a recommendation on any course of action and does not take into account your personal circumstances, financial situation, or individual needs. We strongly recommend you viewk independent professional advice or conduct your own independent research before acting upon any information contained in this article.