Why October matters for currency risk
October 2025 has delivered a clutch of economic releases across Europe and the United States, culminating in the Federal Open Market Committee (FOMC) meeting on 28–29 October. Together, these releases and policy decisions influence exchange‑rate expectations and therefore the cost of hedging for UK importers and exporters. Below we summarise the data, explain what to watch at the FOMC, and outline practical steps for managing currency risk.
Euro area inflation: final September data
On 17 October 2025, Eurostat released the final harmonised index of consumer prices (HICP) data for September. The flash estimate earlier in the month had shown euro‑area inflation ticking up to around 2.2 % from 2.0 % in Augustec.europa.eu. Core inflation remained sticky, reflecting services and wage pressures even as energy prices cooled. Although a slight rise keeps inflation above the European Central Bank’s (ECB) 2 % target, the improvement from double‑digit rates seen in 2022–23 underscores progress in bringing price growth down. For UK corporates importing from the euro area or selling into the bloc, the main takeaway is that the inflation gap between the UK and euro area has narrowed, reducing some of the recent EUR/GBP volatility.
What this means: If euro‑area inflation continues to moderate, the ECB may maintain its current policy stance at its 19 November meeting. A stable rate outlook tends to dampen EUR swings, but importers should still monitor energy‑price developments and the ECB’s commentary on wage growth, as these can shift rate expectations and move EUR/GBP.
UK consumer‑price inflation: September release
The Office for National Statistics (ONS) published UK consumer‑price data for September on 22 October 2025. While we cannot quote specific percentages without misrepresenting the most recent data, the ONS bulletin emphasised that annual inflation remains well above the Bank of England’s 2 % target. Food and services continued to contribute more than half of the monthly rise, though energy prices provided a partial offset as price caps reset downward earlier in the year. Core inflation (excluding energy, food, alcohol and tobacco) has trended down, but the pace is slow and labour‑market tightness keeps wage growth elevated.
What this means: Sticky inflation pressures complicate the Bank of England’s policy calculus. The Monetary Policy Committee meets again in November and December, and markets will be watching whether policymakers signal a prolonged hold or further tightening. Higher‑than‑expected inflation tends to support sterling, whereas downside surprises could see GBP weaken. Businesses paying overseas suppliers should therefore consider whether their budget rates remain appropriate and review hedging cover ahead of the BoE’s 6 November meeting.
US consumer‑price inflation: shutdown‑delayed release
The U.S. government shutdown at the start of October led the Bureau of Labor Statistics (BLS) to delay its September CPI release until 24 October 2025. The data are particularly important because they shape Federal Reserve expectations just before the October FOMC meeting. While precise numbers vary by data provider, analysts generally expected annual headline CPI to remain around the mid‑3 % range, with core CPI slightly higher and services inflation persistently strong. Moderating goods prices help offset higher shelter costs, but the overall rate remains above the Fed’s 2 % objective.
What this means: A warmer‑ or colder‑than‑expected CPI print can sway expectations for when the Fed might next adjust rates, which feeds directly into USD strength. UK importers paying USD invoices should be mindful that a resurgent dollar could increase the sterling cost of upcoming settlements. Pre‑placing stop‑loss orders to cap downside or limit orders to target favourable levels around the budget rate can help maintain margin certainty.
FOMC meeting (28–29 October 2025): what to watch
The Federal Open Market Committee meets on 28–29 October. The September meeting delivered the first rate cut of 2025, but policymakers stressed data dependence. The October statement (due at 14:00 ET on 29 October) and Chair’s press conference (~14:30 ET) will reveal whether further easing is on the table or if the Committee plans to hold rates steady while assessing progress. Here’s what UK corporates should monitor:
- Labour‑market language: Any shift from balanced risks to concerns about rising unemployment could signal a lower policy‑rate path.
- Inflation commentary: Watch for phrases like “persistent services inflation” or “moderating shelter costs,” which can tilt market expectations.
- Financial conditions: If minutes (released in mid‑November) later reveal that the Committee sees conditions as insufficiently restrictive, the market could price in a longer hold.
- Balance‑sheet runoff: Even brief references to the pace of quantitative tightening can influence longer‑dated yields and, by extension, the dollar.
What this means: Regardless of the outcome, the FOMC event often triggers intraday volatility in USD pairs. UK importers and exporters should have hedging orders in place ahead of the meeting and review their coverage against policy outcomes afterward.
Practical risk‑management steps
Volatile data and policy events remind us that currency management is not a set‑and‑forget exercise. The following framework, adapted from our five‑step playbook, can help finance teams navigate October’s releases and the FOMC meeting:
- Refresh your exposure map: List USD, EUR and other exposures by settlement month and mark committed vs forecast cash flows. Identify exposures that fall close to the event dates.
- Set or revisit budget rates: Agree planning rates for each pair (e.g., GBP/USD 1.25, EUR/GBP 0.85). Use these as triggers to add hedges if markets move through them.
- Choose a blend of hedges: Combine forwards (to secure rates on committed purchases), market orders (limit/stop‑loss) to automate execution around the budget rate and natural hedging (matching inflows/outflows). Options can provide additional protection but may not be cost‑effective for routine purchases.
- Execute and monitor: Prepare a simple pre‑trade pack (PO values, dates, approvals); avoid bunching execution on event days; use named multi‑currency accounts and keep proof of settlement (e.g., MT103) for audit.
- Review weekly through November: After the FOMC statement and November data, assess coverage vs policy bands and adjust hedge ratios if the outlook shifts.
Sector notes
- Electronics & industrials: Thin margins mean small FX moves can wipe out profits. Consider layering forwards around PCB production schedules and using market orders to target favourable USD levels during volatility.
- Food & agriculture: Seasonality and perishability create timing risk. When official U.S. data is delayed (as during the shutdown), rely on exchange prices and broker reports; tighten approval thresholds for large orders.
- Metals & raw materials: LME‑linked contracts and USD/CNY exposures benefit from layered hedging. Align forward tenors with shipment and payment schedules to avoid mismatches.
