Insights 
VT 
Major currency pairs were stable on Monday as last week saw increased volatility, with no major macroeconomic data releases expected. Instead, focus remained on the trade relations between the US and China.
China’s GDP grew at an annual rate of 4.8% in Q3, following a 5.2% growth in the previous quarter, while retail sales increased by 3% in September. The People’s Bank of China kept its interest rates steady, aligning with expectations.
The US Dollar Index
The US Dollar Index ended a three-day decline by closing positively on Friday but struggled to gain momentum, holding steady around 98.50. US stock index futures improved between 0.35% and 0.55%.
Gold saw a correction, falling over 1.5% from a new high of $4,380 to around $4,250. NZD/USD saw moderate gains as New Zealand’s CPI rose 1% in Q3, in line with expectations.
GBP/USD remained stable above 1.3400, with upcoming UK CPI data anticipated. USD/CAD hovered above 1.4000 after continued weekly gains.
EUR/USD snapped a winning streak on Friday, holding above 1.1650. BoJ member Hajime Takata noted Japan’s inflation goals had been reached, impacting USD/JPY to trade above 150.50.
Market Sentiment And Projections
We are seeing a cautious “risk-on” mood to start the week, though this calm feels fragile after last week’s volatility. The primary driver for the coming weeks will be any news regarding US-China trade relations. A positive headline could fuel further gains in equities and riskier currencies, making short-term call options on stock indexes an interesting play.
The US Dollar is currently stable, but we should be mindful of underlying pressures. With the US Federal Reserve having held interest rates at 4.75% for several months now to tame the persistent inflation we saw from 2022 to 2024, the market is looking for any signs of a pivot. Futures markets are now pricing in a more than 60% probability of a rate cut by the end of the first quarter of 2026, which could weigh on the dollar if that sentiment strengthens.
The Japanese Yen is particularly weak, which is not surprising given the interest rate difference between the US and Japan. Even though the Bank of Japan finally moved its policy rate to 0.10% early last year, the gap remains wide enough to encourage carry trades, pushing USD/JPY above 150.50. Traders holding these positions should consider using derivatives to hedge against a sudden reversal, as this has become a crowded trade and is vulnerable to shifts in global risk sentiment.
Gold’s recent massive rally to $4,380 and subsequent sharp pullback signals significant underlying market anxiety. This price action is a clear reminder of the geopolitical instability and inflation fears that have defined the markets since the early 2020s. We believe using options strategies like straddles, which profit from large price moves in either direction, could be a prudent way to trade gold’s expected volatility.
China’s reported GDP growth of 4.8% aligns with the theme of a managed economic slowdown we have been watching for over a year. This steady but uninspiring growth path creates a mixed outlook for commodity-exporting nations. Consequently, we would advise against taking large, unhedged positions in currencies like the Australian Dollar until there is more clarity on Chinese demand for industrial metals.
