Newsquawk European Market Wrap - 18th September 2025

• European stocks higher, USD up, yields rising, crude a touch firmer


• BoE stood pat on rates and cut the volume and maturity of its QT operations


• US weekly claims data reversed last week's spike higher

EQUITIES

• 
  European bourses opened firmer across the board and continued to hold an upward bias throughout the morning. Positive sentiment which comes after the Fed decided to cut rates by 25bps, but it has been described as a “hawkish cut” by some analysts. Nonetheless, sentiment was boosted, with indices generally looking to close the European session at highs.


• 
  European sectors opened mixed but looked to close the session with a positive tilt. The cyclical sectors mostly topped the pile. Tech continues its past couple of days of outperformance, largely led by Dutch semiconductor names; ASML (+7%), BE Semi (+5.6%). Consumer Products found itself in second place, buoyed by strength in Luxury names.


• 
  US equity futures are firmer across the board, and with clear outperformance in the tech-heavy NQ; largely thanks to very significant upside in Intel (+32%) after NVIDIA (+3%) announced it is to invest USD 5bln in Intel. Further for tech; Google (+1.5%, China drops Google antitrust probe during US trade talks), Amazon (-0.3%, US judge ruled it violated an online shopper protection law). On the data front, Jobless Claims cooled from the prior and below expectations. This sparked some modest pressure across equity futures (more pronounced in RTY) – whilst a positive for the economy, it is a slight push back against calls for further cuts, particularly in the context of Powell’s recent focus on weakness in the labour market.

FX

• 
  USD - Ultimately firmer after a subdued morning in the aftermath of the FOMC on Wednesday and following the Jobless Claims data today. As a reminder, on the former, the central bank opted to cut interest rates by 25bps, as expected, whilst the SEPs showed projections for two more cuts this year. Fed Chair Powell was hawkish at the presser as he said he doesn't feel the need to move quickly on rates, and that “you could think of the cut as a risk management cut”. Price action in Europe saw DXY trim some of yesterday's gains in early trade, although the sub-forecast and pullback (offsetting some of last week's rise) in Jobless Claims sparked a dollar rally, whilst year-end Fed pricing moved slightly less dovishly straight after the data to ~41.5bps of cuts from ~44bps this morning. DXY looks to end the European session closer to the top of today's 96.837-97.534 range, after topping Tuesday's peak at 97.388, and with Monday's peak at 97.702.


• 
  EUR - On a softer footing on account of the rebound in the buck as traders pondered over yesterday's FOMC coupled with today's US Jobless Claims. Newsflow for Europe has been light, although ECB's de Guindos hit the wires and suggested the ECB needs to pay a lot of attention to NEER rather than just EUR/USD, whilst the risk of undershooting for the ECB is "not big" or "especially relevant", and risks to inflation are balanced and two-sided. ING posits that their model "indicates that the hawkish repricing at the front end of the USD curve, relative to the EUR one, still places the short-term fair value at 1.185." EUR/USD resided in a 1.1756-1.1848 range at the time of writing, after pulling back from yesterday's 1.1919 peak.


• 
  GBP - As expected, the MPC opted to hold the Bank Rate at 4.0%, with the decision seeing a 7-2 vote. Dovish dissent came from Dhingra and Taylor, who preferred a 25bps reduction. On the Bank's QT programme, the MPC voted 7-2 to slow QT pace to GBP 70bln (exp. GBP 70bln; prev. GBP 100bln). As such, active sales will climb to GBP 21bln from GBP 13bln. Market pricing expects the BoE to remain cautious in the face of upside inflation risks and only price 9bps of loosening by year-end with the next 25bps reduction not fully priced in until April 2026. GBP/USD losses today largely came from the revival of the dollar, with the pair now back under Tuesday's low (1.3595) and towards the bottom of a 1.3550-1.3660 intraday range - the next downside is Monday's low at 1.3546.


• 
  JPY - Weaker intraday with USD/JPY venturing back to 148.00 territory following the aforementioned US data. The Japanese currency was not helped overnight by disappointing Machinery Orders, and the BoJ also kick-started its 2-day policy meeting, where it is widely expected to keep rates unchanged (full preview available in the Newsquawk Research Suite), and with Governor Ueda's presser at 07:30BST tomorrow following the decision. Elsewhere, Japanese LDP leadership candidate Hayashi, noted that Japan's consumption tax is an important source of revenue to fund social welfare costs, and added that "Abenomics" was an appropriate policy at a time when Japan was suffering. Hayashi also suggested that Japan's conditions have allowed the BoJ to raise rates, the economy is now at a new phase, and Japan's inflation is cost-push, not demand-driven. USD/JPY traded in a 146.77-148.20 range at the time of writing, as it topped the 12th Sep high at 148.07 and then tested the 11th Sep peak at 148.21.


• 
  Antipodeans - Both softer with the Kiwi the marked G10 laggard following weak GDP data for Q2 in which the economy contracted by 0.6% Y/Y (exp. 0.0%) and resulted in money markets fully pricing a cut at the RBNZ meeting in October with an off chance for an oversized 50bps reduction. NZD/USD slipped through its 100 DMA (0.5960) to levels under its 21 DMA (0.5904), in a current 0.5875-0.5970 range. AUD/USD was pressured after disappointing jobs data which showed a surprise decline in headline Employment Change-AUD/USD resides in a 0.6610-0.6659 range with the next downside level the 11th September low at 0.6591.


• 
  Others - Norges Bank opted to cut its Key Policy Rate by 25bps to 4.0% as expected and suggested the committee judges that a somewhat higher policy rate will likely be needed ahead compared with the outlook in June. A dovish reaction to the decision to cut, as while this was the base case for markets, it unwound the c. 40% implied probability of a cut that was implied heading into the meeting. Thereafter, the hawkish language in the statement and specifically Governor Bache saying they "do not envisage a large decrease in the policy rate ahead" sparked an unwinding of that dovish kneejerk. EUR/NOK traded in a 11.5555-11.6484 range. Elsewhere, South African Central Bank maintains its Repo Rate at 7.00%, as expected; via a split decision. USD/ZAR was little changed on the decision as it looks to end the European session around the middle of its 17.3186-17.4844 range.

FIXED

• Initially, a somewhat choppy but largely contained session for fixed income as USTs and Bunds continued to digest the FOMC. Gilts saw some modest moves around the open as they digested the two-way moves seen Wednesday night, however, this proved relatively minimal into the BoE.


• No move to supply this morning from Spain and France. Spain was a little softer than usual, but no issue. France was strong and another sign of orderly market functioning despite the downgrade by Fitch last Friday. Elsewhere, Germany announced it will be raising an additional EUR 10.5bln from the capital market in Q4 and will not be issuing a 50yr; Bunds traded in-line with EGB peers.


• The BoE held at 4.00% as expected via a 7-2 vote with Dhingra and Taylor unsurprisingly the dovish dissenters. Focus for Gilts on the APF update. Initial kneejerk lower as while the GBP 70bln headline (prev. GBP 100bln) was in-line with consensus, it disappointed some calls for a larger reduction and meant that the BoE’s active sales have now increased, a point highlighted by Mann in her dissent.


• Nonetheless, the pressure proved short-lived with Gilts climbing to a 91.72 high thereafter as markets digested the reduced QT pace and the skew of sales away from the long-end. Note, Chief Economist Pill dissented, wanting the pace maintained at GBP 100bln in order to provide consistency, arguing that recent Gilt market developments were mainly unrelated to QT.


• Thereafter, benchmarks all came under pressure on US jobless claims. A print that snaps the recent upward trend seen in initial claims and supports those on the hawkish side of the Fed who see just one or no more 2025 cuts. Reminder, Chair Powell placed heightened emphasis on the labour market in his remarks. As such, the release sparked a marked hawkish reaction sending USTs lower from 113-08 to a 112-25 trough; Bunds and Gilts also to lows of 128.49 and 91.17 respectively.


• Spain sells EUR 5.41bln vs exp. EUR 5-6bln 2.40% 2028, 3.20% 2035, and 4.00% 2054 Bono.


• France sells EUR 11.5bln vs exp. EUR 9.5-11.5bln 0.75% 2028, 2.40% 2028, 2.70% 2031, and 3.50% 2033 OAT.


• 
  German government to raise additional EUR 10.5bln via capital market in Q4.


• 
  German Debt Agency Head says the nation will not issue 50yr bonds; seeing good demand for long-dated bonds from central banks German paper is benefiting from uncertainty regarding France.

COMMODITIES

• 
  Crude - Choppy trade with crude benchmarks eking mild gains heading into the European close, unfazed by the surge in the dollar following the US Jobless Claims data. Note, between the 18th and 19th of September, OPEC+ delegates will meet in person in Vienna to discuss the issue of the production capacity assessments which will be used to determine the new baselines in 2027. "In general the unwinding process of the voluntary cuts is a very helpful way to find out how many each country can really produce" said Kpler's Bakr. Elsewhere, Russian Finance Minister Siluanov said they plan to lower the bar for oil and gas revenue formation when preparing the budget; intend to lower the cut-off price of oil, currently at USD 60/bbl, by USD 1bln every year until 2030. WTI resided in a USD 63.45-64.46/bbl range while Brent sat in USD 67.34-68.36/bbl parameters.


• 
  Precious Metals – Softer across the board and falling prey to the aforementioned surge in the USD following the Jobless Claims data. Aside from that, macro newsflow has been relatively light in the aftermath of the FOMC. The yellow metal slid from a USD 3,707.55/oz fresh all-time-high to a low at USD 3,627.96/oz.


• 
  Base Metals - Base metals posted losses since the morning as the downbeat sentiment seen across Chinese markets reverberated. Further downside in the complex was exacerbated by a rebound in the dollar. For copper, it was also reported that LME copper inventories at US warehouses rose for the first time since December 2023, meanwhile, Chinese NBS data showed refined copper output rising by 15% Y/Y. 3M LME copper fell back under USD 10k/t and found resistance at the level, printing a USD 9,923.80-9,999.95/t band.


• Russian Finance Minister says they plan to lower the bar for oil and gas revenue formation when preparing the budget; plan to lower cut-off price of oil, currently at USD 60/bbl, by USD 1bln every year to 2030.


• Ukrainian drones hit Russian oil refinery in Bashkortostan overnight, according to Reuters, citing a SBU official; Ukraine targeted primary oil distillation installations, causing fires.


• Russia has reportedly increased its loading plan from Ust-Luga and Novorossiisk for September, via Reuters citing sources.

TRADE/TARIFFS

• Canadian PM Carney and Mexican President Sheinbaum are to meet today, reportedly intend to discuss a stronger economy partnership, via Bloomberg citing sources.

EUROPEAN DATA

• 
  EU Current Account SA, EUR (Jul) 27.7B (Prev. 35.8B); Current Account NSA,EUR (Jul) 35.0B (Prev. 38.9B)

CENTRAL BANKS

• 
  BoE Statement: Rates kept at 4.00% (exp. 4.00%) in a 7-2 vote (exp. 7-2; prev. 5-4 to cut rates); maintains 'gradual and careful' language. Statement maintains language that monpol not on pre-set path. CPI forecast to peak at 4% in September 2025 (vs August forecast to peak at 4% in September). Staff forecast Q3 GDP to increase by around 0.4% Q/Q (August: +0.3%). BoE Governor Bailey says we're not out of the woods yet so any future rate cuts will need to be made gradually and carefully. Click for full details.


• 
  BoE Asset Purchase Facility Update: GBP 70bln (exp. GBP 70bln, prev. GBP 100bln); The Bank will aim to sell fewer long maturity sector gilts than gilts at other maturities, to better reflect demand conditions. Click for full details.


• JP Morgan expects the BoE to lower rates by 25bps in February 2026 and May 2026 (vs. prev. view of November 2025 and February 2026).


• 
  Norwegian Key Policy Rate 4.0% vs. Exp. 4.0% (Prev. 4.25%); Committee judges that a somewhat higher policy rate will likely be needed ahead compared with the outlook in June. Updated MPR: Q4-2025 4.00% (prev. 3.98%), Q1-2026 4.00% (prev. 3.81%), Q2-2026 3.92% (prev. 3.62%), Q3-2026 3.85% (prev. 3.49%), Q4-2026 3.74% (prev. 3.39%). Q4-2027 3.34% (prev. 3.14%).


• 
  Norges Bank Governor Bache says activity picked up more than expected The timing of the next move is not certain.


• 
  ECB's de Guindos says need to pay a lot of attention to NEER rather than just EUR/USD Risk of undershooting for the ECB is "not big" or "especially relevant". Risks to inflation are balanced and two-sided. Do not target a specific EUR level.


• 
  South African Central Bank maintains its Repo Rate at 7.00%, as expected; decision split.

GEOPOLITICS

• 
  UAE may withdraw ambassador and downgrade ties with Israel if West Bank annexation proceeds, according to Reuters sources.


• 
  EU is reportedly to propose new Russian sanctions as soon as this week, according to Bloomberg sources.


• 
  "Gulf Cooperation Council (GCC) Secretary-General: Any attack on any of the Gulf countries is an attack on all of them", according to Sky News Arabia.


• 
  Iran reportedly made a new offer to the E3 on Wednesday, according to WSJ Norman's understanding; Norman adds, "One which frankly is barely a bit credible. I am not alone in thinking that.".


• Israeli Military says it will shortly issue a warning to residents of South Lebanon.

NOTABLE NORTH AMERICAN NEWS

• 
  NVIDIA (NVDA) to invest USD 5bln in Intel (INTC) and to pay USD 23.38/shr of Intel common stock.


• 
  NEC Director Hassett says the Fed rate decision is a good first step, framed it as prudent. Given incoming data, expects 4% GDP growth without inflation.

NORTH AMERICAN DATA

• US Initial Jobless Claims 231.0k vs. Exp. 240.0k (Prev. 263.0k, Rev. 264k)


• US Continued Jobless Claims 1.92M vs. Exp. 1.95M (Prev. 1.939M, Rev. 1.927M)


• US Philly Fed Business Indx (Sep) 23.2 vs. Exp. 2.5 (Prev. -0.3)


• US Philly Fed Prices Paid (Sep) 46.8 (Prev. 66.8)


• US Philly Fed New Orders (Sep) 12.4 (Prev. -1.9)


• US Philly Fed Employment (Sep) 5.6 (Prev. 5.9)


• US Philly Fed Capex Index (Sep) 12.5 (Prev. 38.4)


• US Philly Fed 6M Index* (Sep) 31.5 (Prev. 25.0)

NOTABLE APAC NEWS

• Japanese former digital minister Kono is to back Koizumi in the LDP leadership race, according to Kyodo News

18 Sep 2025 - 15:00- ForexEU Research- Source: Newsquawk