Euro-area growth in Q3 2025 was revised up to 0.3%, supported by stronger investment, consumption and solid wage growth, showing the economy has been more resilient than expected despite trade disruptions. This strength may lead ECB hawks to resist near-term easing, though easing pressures could return later as wage growth cools, with the ECB expected to raise its growth outlook next week. At the same time, a new Trump national security strategy signals a sharp shift away from Europe, adding geopolitical and market risks that have historically weighed on the euro and European equities. Looking ahead, upcoming data—particularly German industrial production—are likely to confirm fragile stabilization rather than a strong recovery, with industry still stuck in a low-growth environment.

USDJPY is slightly biased lower over the next one to two weeks, as markets increasingly price in a December BOJ rate hike and expect year-end dollar softness to support further yen strength. A hike from 0.5% to 0.75% is now the base case, helping pull USDJPY off recent highs, with officials seen pushing back against renewed weakness around the 158–160 zone. While Japanese data show moderate inflation, steady nominal wage growth and solid credit conditions, weak real wages and contracting GDP point to soft domestic demand. This supports a cautious BOJ outlook: policy normalization can continue gradually, but markets are likely to temper expectations for aggressive tightening beyond December.

The Australian dollar has climbed to a two-and-a-half-month high as markets anticipate diverging paths between the Fed and the RBA, with U.S. data reinforcing expectations of an imminent Fed rate cut. The RBA is widely expected to keep its cash rate unchanged at 3.6% in December, signaling a likely “hawkish hold” amid persistent inflation pressures, solid domestic demand, and an economy near full capacity, with some markets even pricing in possible rate hikes by 2026. While several analysts argue the next move in rates could be higher, others believe the easing cycle is not over, suggesting inflation may prove temporary and that economists’ forecasts still point to lower rates next year—highlighting a growing gap between market expectations and economist consensus on the AUD and policy outlook.