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Eurozone business activity continued to rise in September, with the composite PMI reaching a 16-month high at 51.2 (from 51 in August). Details couldn’t convince though. New orders and employment stalled while business confidence dropped to a 4-month low. Declining orders and job cuts in manufacturing were balanced by modest expansions in services. Companies often used the clearance of outstanding business to support output growth with work-in-hand now depleting on a monthly basis for the past two-and-a-half years. The manufacturing PMI dipped back into recessionary territory (49.5 from 50.7) after staying north of the 50 boom/bust mark for only the first month since the post-Covid recovery. Purchasing activity, stocks of purchases and stocks of finished goods keep depleting. The EMU services PMI hit a 9-month high at 51.4 (from 50.5). Cost inflation in the services sector eased slightly but remains unusually high. Selling prices cooled more notably. On a national level, Germany was a key driver of growth in September (52.4 from 50.5), recording a solid increase in output that was the joint-fastest since May 2023. France saw activity decrease for the thirteenth consecutive month, and at the sharpest pace since April (48.4 from 49.8), as the government shake-up likely threw a wrench into companies’ production plans. The rest of the Eurozone registered continued growth of output, but the rate of expansion moderated. Today’s PMI’s perfectly fit with the ECB view to keep its deposit rate steady at 2% for the time being. They didn’t impact trading on European bond or FX markets (EUR/USD 1.18) and didn’t spoil positive risk sentiment on European stock markets (+0.5%-+1%). The steady EMU composite PMI contrasted with a significant setback in the UK PMI (51 from 53.5). The latter was “a litany of worrying news including weakening growth, slumping overseas trade, worsening business confidence (fear of Budget measures outweighing BoE rate cuts) and further steep job losses”. September data indicated another sharp increase in average cost burdens across the private sector economy. When it comes to selling prices, service sector firms recorded a solid rise in their prices while manufacturers saw a marked slowdown in factory gate inflation. The weak UK PMI triggered temporary GBP-weakness with EUR/GBP jumping from 0.8720 to 0.8745, without testing the 0.8769 YtD top.

In other news, Washington-based Fed governor Bowman ruffled her dovish feathers. She dissented in July in favour of a 25 bps rate cut and joined last week’s consensus decision. Bowman believes the Fed is seriously at risk of falling behind the curve and said it’s time for the FOMC to act “decisively and proactively to address decreasing labor market dynamisms and emerging signs of fragility. Tariffs won’t have a significant effect on inflation according to her. US markets were unnerved on the comments going into tonight’s economic outlook by Fed Chair Powell.

News & Views

The Riksbank cut the policy rate by 25 bps to 1.75%. Sweden’s central bank expects it to remain there for some time to come, provided the outlook for the economy and inflation holds. The policy rate forecast suggests no changes through 2026. The semi-unexpected (hawkish) rate cut comes with the Riksbank growing more confident that still-high inflation (CPIF 3.2%) is transitory. It referred to a decline in companies’ pricing plans and the stronger currency. The Riksbank added that the tax cuts announced by the government wouldn’t materially affect inflationary pressures apart from slowing down price rises temporarily next year. Growth meanwhile is showing signs of improving but it has been weak for a long time and the timing of the expected recovery has been pushed forward several times. With the cut, the Riksbank aims to facilitate the process. The clear end to the easing cycle is lifting the Swedish crown, pushing EUR/SEK to around 11.

The OECD in its Interim Economic Outlook Report forecasts a 3.2% global expansion this year (up from 2.9% in June. The organization said the economy proved more resilient to tariffs than anticipated, adding, however, that the full impact of the increases has yet to be felt. The 2026 outlook stood unchanged at 2.9%. Among the largest countries, US growth was beefed up to 1.8% (+0.2 ppts) for this year with the 2026 forecast left at 1.5%. A 0.2 ppts bump to 1.2% for this year in the EMU came with a same-sized downward revision for the next (1%). UK activity should end up the second-highest in the G7 (1.4% in 2025) but the country is suffering from the highest inflation rate. The 3.5% for 2025 would ease to 2.7% next year. This compares to 2.7%-3% for the US and 2.1%-1.9% for the EMU.

US business activity softened in September, with PMI Composite falling from 54.6 to 53.6. Manufacturing slipped from 53.0 to 52.0, while services eased from 54.5 to 53.9. Despite the slowdown, the surveys still indicate the economy expanded at a solid 2.2% annualized pace in Q3.

Chris Williamson of S&P Global noted that growth has cooled since peaking in July, with hiring momentum also weakening. Firms reported softer demand conditions, limiting their ability to raise prices.

Tariffs continued to push up input costs across manufacturing and services, but fewer companies were able to pass those costs on, hinting at "squeezed margins but boding well for inflation to moderate"..

The survey suggested consumer inflation will remain above the Fed’s 2% target in the near term, though signs of inventory accumulation in manufacturing could further dampen price pressures ahead.

Full US PMI flash release here.

Fed Governor Michelle Bowman said in a speech that she welcomes the Fed’s decision to start easing last week, noting that the balance of risks between inflation and employment has shifted. She said tariffs no longer appear likely to deliver a persistent inflation shock, which has reduced upside risks to price stability.

With demand softening and labor market conditions turning fragile, Bowman emphasized that the Fed must focus on its employment mandate. She cited benchmark payroll revisions as a clear warning, saying the Fed is at “serious risk of already being behind the curve” in addressing job market deterioration.

She argued the Fed should “preemptively stabilize and support labor market conditions.” If the current conditions continue, Bowman said, “we will need to adjust policy at a faster pace and to a larger degree going forward.”

Additionally, Bowman cautioned against a strict, backward-looking interpretation of data dependence, saying it could force the Fed to implement "abrupt and dramatic policy actions" later if it delays action now. Instead, Bowsheman urged a more "proactive forward-looking approach" framework, one that accounts for how the economy is likely to evolve rather than relying solely on the latest data points.

Full speech of Fed's Bowman here.

Daily Pivots: (S1) 1.3471; (P) 1.3496; (R1) 1.3538; More...

Intraday bias in GBP/USD stays neutral for the moment. On the downside, below 1.3451 will resume the fall from 1.3725, as the third leg of the pattern from 1.3787, and target 1.3332 support first. Nevertheless, decisive break of 1.3561 will turn bias back to the upside for retesting 1.3725 instead.

In the bigger picture, rise from 1.3051 (2022 low) is in progress, and would target 61.8% projection of 1.0351 to 1.3433 (2024 high) from 1.2099 (2025 low) at 1.4004. However, with 1.4248 resistance (2021 high) intact, this rally is more likely a corrective move. Sustained break of 55 W EMA (now at 1.3157) will argue that a medium term top has already formed and bring deeper fall back to 1.2099.

Daily Pivots: (S1) 0.7906; (P) 0.7940; (R1) 0.7958; More…

Intraday bias in USDCHF remains neutral for the moment. On the upside, above 0.7971 will resume the rebound from 0.7828 short term bottom to 0.8006 resistance. Firm break there will bring stronger rise back to 0.8170. On the downside though, below 0.7904 minor support will bring retest of 0.7828 low instead.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low).

Daily Pivots: (S1) 147.47; (P) 147.93; (R1) 148.19; More...

Intraday bias in USD/JPY stays neutral at this point. Current development suggests that rise from 139.87 might still be in progress. On the upside, break of 149.12 will bring stronger rally to retest 150.90 high. However, break of 145.47 will resume the fall from 150.90 instead.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

Daily Pivots: (S1) 1.1751; (P) 1.1777; (R1) 1.1829; More...

Intraday bias in EUR/USD remains neutral at this point. On the downside, break of 1.1724 will resume the fall from 1.1917 to 55 D EMA (now at 1.1663). Considering bearish divergence condition in D EMA, sustained break of 55 D EMA will argue that 1.1917 is already a medium term top. Deeper fall should then be seen to 1.1390 support next. However, sustained break of 1.1917 will resume larger up trend to 1.2 psychological level.

In the bigger picture, rise from 1.0176 (2025 low) is seen as the third leg of the pattern from 0.9534 (2022 low). 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916 was already met. For now, further rally will remain in favor as long as 1.1390 support holds, and firm break of 1.2000 psychological level will carry larger bullish implications. However, firm break of 1.1390 will suggest that rise from 1.0176 has already completed and bring deeper fall to 55 W EMA (now at 1.1214).

The forex markets remained largely directionless today, with consolidative trading dominating across major pairs. Price action was muted, and the release of PMI data failed to provide much impetus, with investors largely shrugging off the surveys.

Eurozone PMIs offered a mixed picture. Germany showed a promising improvement, but sluggish readings in France offset the optimism. Overall, the bloc remains on a growth path, though easing price pressures could give the ECB room to weigh another rate cut.

That said, most ECB officials have sounded comfortable with the deposit rate at 2.00%, and the bar for an additional move appears high. With inflation steadily at target and growth still intact, policymakers may prefer to stay patient unless a sharp downturn forces their hand.

In the UK, PMI data painted a more troubling picture. Weakening growth, rising unemployment, and softer inflation pressures raise the possibility that the BoE could tilt more dovish in coming months. However, the MPC is known for its divisions, and members may interpret the same data differently, keeping the November meeting very much live.

Looking ahead to Asia, Australia’s monthly CPI is due in the next session. The index is expected to hold steady at 2.8% in August, and only a major surprise would meaningfully alter expectations. The RBA is widely expected to keep policy unchanged next week, awaiting quarterly inflation figures before reconsidering whether to cut in November. For the Aussie, sensitivity remains higher to Chinese market sentiment rather than domestic data for now.

Performance rankings show Swiss Franc leading gains this week, followed by Euro and Sterling. At the bottom, Loonie has been the weakest, trailed by Dollar and Kiwi. Aussie and Yen are sitting mid-pack. But with nearly all major pairs and crosses still contained within last week’s ranges, the FX market is marking time.

OECD upgrades 2025 growth forecast, tariff impact less severe

OECD’s latest Interim Economic Outlook projected global GDP growth of 3.2% in 2025, an upward revision from 2.9% in June, before easing to 2.9% in 2026. The agency said tariffs and policy uncertainty remain headwinds for trade and investment, but the upward revision shows the drag is proving smaller than previously feared.

In the U.S., GDP growth is projected to slow sharply, from 2.8% in 2024 to 1.8% in 2025 and 1.5% in 2026. The drag reflects the combined effect of tariff hikes, weaker net immigration, and a reduced federal government workforce.

China is also expected to lose momentum, easing from 4.9% in 2025 to 4.4% in 2026 as earlier stimulus fades and tariffs start to bite more fully.

In the Eurozone, growth is forecast at 1.2% in 2025 and 1.0% in 2026. The region continues to face increased trade frictions and geopolitical uncertainty, though these will be partially offset by stronger public investment programs and looser credit conditions.

On prices, the OECD expects headline G20 inflation to fall from 3.4% in 2025 to 2.9% in 2026, reflecting weaker growth and softening labor markets. Core inflation in advanced economies is forecast to decline only marginally, from 2.6% to 2.5%, suggesting underlying price stickiness remains.

The report warned that risks to disinflation persist. Goods prices have edged higher again in some economies, and services inflation remains stubborn.

BoE’s Pill more comfortable on inflation, opposed slower QT pace

BoE Chief Economist Huw Pill signaled a softer tone on inflation risks, saying in a speech he is “more comfortable now” than six to twelve months ago. While he had previously stressed the balance of risks lay more on the inflationary side, he acknowledged that as time has passed and markets have repriced, the risks are shifting.

Pill has been among the more hawkish members of the MPC, opposing last week’s decision to slow the pace of quantitative tightening. The Bank will now reduce its gilt holdings by GBP 70bn over the coming year, down from GBP100bn last year, a move Pill resisted.

He explained his preference for “continuity and consistency” in QT, arguing that the framework works best when Bank Rate is the active tool for policy adjustments. With rates far from the lower bound, the MPC has flexibility to use Bank Rate to achieve its inflation target while QT runs in the background.

UK PMI composite falls to 51, raises pressure on BoE to turn dovish

UK business activity weakened sharply in September, with the flash composite PMI dropping from 53.5 to 51.0, a 4-month low. Manufacturing fell further into contraction from 47.0 to 46.2. Services slipped from 54.2 to 51.9, pointing to a broad loss of momentum across sectors.

S&P Global’s Chris Williamson described the report as a “litany of worrying news,” citing slumping overseas trade, worsening confidence, and steep job losses. The survey signalled around 50,000 job cuts over the past three months, underscoring that the economy is “almost stalling.”

The only bright spot was softer price pressures, with firms reporting one of the smallest increases in goods and services prices since the pandemic. For the BoE, the combination of weakening growth, easing inflation, and rising unemployment may shift the debate back toward a "more dovish stance" in the months ahead.

Eurozone PMI composite at 16-month high of 51.2, Germany lifts while France drags

Eurozone flash PMIs for September showed a mixed picture, with manufacturing slipping back into contraction while services drove growth. The manufacturing index fell from 50.7 to 49.5, but services rose from 50.5 to 51.4, a 9-month high, lifting the Composite PMI from 51.0to 51.2 — its strongest in 16 months.

Hamburg Commercial Bank’s Cyrus de la Rubia said the bloc is “still on a growth path,” though far from gaining "any real momentum". Germany’s recovery stood out, with manufacturing falling from 59.8 to 48.5 but services jumping to 52.5, pushing its Composite PMI from 50.5 to 52.4 (a 16-month high). France lagged, with both manufacturing and services sliding back below 50, leaving its composite at 48.4, down from 49.8 and a 5-month low.

De la Rubia cautioned that French political uncertainty had disrupted production plans, while order books in both Germany and France showed significant declines. Hiring has now “come to a halt” across the bloc, with sluggish job creation in services and sharper losses in manufacturing. Confidence in rising output has dipped.

On the inflation side, cost pressures in services have "eased slightly" but remain unusually high, while selling prices "cooled more noticeably". That combination could give the ECB reason to consider whether a rate cut before year-end is back on the table.

Australia PMI composite hits three-month low at 52.1, confidence slumps

Australia’s private sector momentum slowed sharply in September, with PMI Composite falling from 55.5 to 52.1, its lowest in three months. Manufacturing eased from 53.0 to 51.6, while services slipped more heavily from 55.8 to 52.0, signaling a broad moderation in activity.

S&P Global’s Jingyi Pan noted that new business growth weakened after two strong months, with manufacturing orders slipping back into contraction as U.S. tariffs began to weigh. Export orders also faltered, while overall business confidence dropped to its lowest in a year, hinting at a softer growth outlook into Q4.

The survey did show resilience in employment, with job creation little changed from August. However, selling price inflation remained "at a level that was above the long-run average", and a steep rise in manufacturing cost inflation underscored margin pressures for goods producers.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1751; (P) 1.1777; (R1) 1.1829; More...

Intraday bias in EUR/USD remains neutral at this point. On the downside, break of 1.1724 will resume the fall from 1.1917 to 55 D EMA (now at 1.1663). Considering bearish divergence condition in D EMA, sustained break of 55 D EMA will argue that 1.1917 is already a medium term top. Deeper fall should then be seen to 1.1390 support next. However, sustained break of 1.1917 will resume larger up trend to 1.2 psychological level.

In the bigger picture, rise from 1.0176 (2025 low) is seen as the third leg of the pattern from 0.9534 (2022 low). 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916 was already met. For now, further rally will remain in favor as long as 1.1390 support holds, and firm break of 1.2000 psychological level will carry larger bullish implications. However, firm break of 1.1390 will suggest that rise from 1.0176 has already completed and bring deeper fall to 55 W EMA (now at 1.1214).

OECD’s latest Interim Economic Outlook projected global GDP growth of 3.2% in 2025, an upward revision from 2.9% in June, before easing to 2.9% in 2026. The agency said tariffs and policy uncertainty remain headwinds for trade and investment, but the upward revision shows the drag is proving smaller than previously feared.

In the U.S., GDP growth is projected to slow sharply, from 2.8% in 2024 to 1.8% in 2025 and 1.5% in 2026. The drag reflects the combined effect of tariff hikes, weaker net immigration, and a reduced federal government workforce.

China is also expected to lose momentum, easing from 4.9% in 2025 to 4.4% in 2026 as earlier stimulus fades and tariffs start to bite more fully.

In the Eurozone, growth is forecast at 1.2% in 2025 and 1.0% in 2026. The region continues to face increased trade frictions and geopolitical uncertainty, though these will be partially offset by stronger public investment programs and looser credit conditions.

On prices, the OECD expects headline G20 inflation to fall from 3.4% in 2025 to 2.9% in 2026, reflecting weaker growth and softening labor markets. Core inflation in advanced economies is forecast to decline only marginally, from 2.6% to 2.5%, suggesting underlying price stickiness remains.

The report warned that risks to disinflation persist. Goods prices have edged higher again in some economies, and services inflation remains stubborn.

Full OECD Economic Outlook, Interim Report here.

BoE Chief Economist Huw Pill signaled a softer tone on inflation risks, saying in a speech he is “more comfortable now” than six to twelve months ago. While he had previously stressed the balance of risks lay more on the inflationary side, he acknowledged that as time has passed and markets have repriced, the risks are shifting.

Pill has been among the more hawkish members of the MPC, opposing last week’s decision to slow the pace of quantitative tightening. The Bank will now reduce its gilt holdings by GBP 70bn over the coming year, down from GBP100bn last year, a move Pill resisted.

He explained his preference for “continuity and consistency” in QT, arguing that the framework works best when Bank Rate is the active tool for policy adjustments. With rates far from the lower bound, the MPC has flexibility to use Bank Rate to achieve its inflation target while QT runs in the background.