Insights 
VT 
The US Dollar (USD) showed a modest decline after a positive start, failing to extend its recovery. The decline aligns with no progress on a shutdown deal and a persistent risk-off environment.
On October 15, the US Dollar Index (DXY) faced losses, struggling near the 99.50 mark due to decreasing US Treasury yields and risk aversion. Scheduled economic data includes MBA Mortgage Applications and the NY Empire State Manufacturing Index, accompanied by speeches from several Fed officials.
Currency Movements
EUR/USD rebounded, regaining levels past the 1.1600 mark, while the Eurozone anticipates Industrial Production figures. Speeches from ECB officials will also be a focal point.
GBP/USD briefly dipped to multi-week lows but ended the day stable in the low 1.3300s. Key events in the UK include speeches from BoE members Ramsden and Breeden.
USD/JPY decreased, returning to the 151.60 region, with upcoming Industrial Production data and Capacity Utilisation readings in Japan. AUD/USD fell to the 0.6440 mark, with the Westpac Leading Index and RBA speeches pending.
WTI oil prices dropped below $58.00 per barrel, influenced by US-China trade tensions and future industry surplus predictions. Gold reached record highs of $4,180 per troy ounce, supported by rate cut expectations and a softer US Dollar. Silver also rose, surpassing $53.00 per ounce.
Market Opportunities
The US Dollar’s weakness near the 99.50 level looks set to continue, especially with government shutdown talks stalling and US Treasury yields falling. We saw similar political gridlock cause dollar volatility back in late 2023, which often leads to a flight from the currency. Traders could consider buying put options on dollar-centric ETFs to profit from further declines while capping their risk.
With gold hitting a record $4,180 an ounce, the flight to safety is clearly accelerating, driven by bets on Federal Reserve rate cuts. This mirrors the policy pivot signals in late 2023 that also sent precious metals soaring when inflation was still a concern. We believe buying call options on gold futures or silver ETFs offers a way to participate in further upside from trade fears without the full risk of buying at all-time highs.
The collapse of WTI crude below $58 a barrel signals deep concern over global demand, fueled by US-China trade friction and IEA surplus warnings. The latest government data showed U.S. crude inventories unexpectedly rose by 2.1 million barrels last week, confirming a weakening demand picture. We see opportunities in selling crude oil futures, anticipating prices will test the lows from early this year.
The stark difference between a rising Euro and a falling Australian dollar highlights a classic risk-off trade. Eurozone industrial production, which unexpectedly rose 0.5% last month, contrasts sharply with concerns over China’s economy impacting Australia. We anticipate this divergence will widen, making a long EUR/AUD position an effective way to play European relative strength against commodity-bloc weakness.
Given the combination of central bank speeches and geopolitical tensions, overall market volatility is the one clear trend we see continuing. The CBOE Volatility Index (VIX) has already climbed over 15% this month, a pattern we also observed during the rate hike cycles of 2022 when policy uncertainty was high. Traders should consider buying call options on the VIX to hedge portfolios or directly speculate on continued market choppiness.
