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Canada’s building permits for August showed a decline of 1.2%, falling short of the forecasted decrease of 0.1%. This data suggests a contraction in the construction sector for that month.
In foreign exchange markets, the US Dollar’s recent movement influenced various currency pairs. The EUR/USD climbed above the 1.1600 level as the Dollar lost momentum, while GBP/USD rebounded above 1.3300 amidst weak UK labour market data.
Gold’s Rise And Market Influences
Gold continued its rise, with prices exceeding $4,100 per troy ounce. This increase was supported by safe-haven demand, a weaker US Dollar, and falling US Treasury yields.
There is anticipation for upcoming comments from Fed Chair Jerome Powell, which might hint at two additional rate cuts. The remarks could impact the US Dollar in the absence of new significant data releases.
Karim AbdelMawla, a senior digital asset researcher, shared insights into the crypto market’s potential longevity at a recent event in Spain. The market sentiment presently reflects a possible continued bullish trend for up to a year.
Canadian Economy And Market Reactions
We are seeing clear signs of a cooling Canadian economy, with the August building permit decline now reinforced by recent data showing a drop in September housing starts of 3% year-over-year. This slowdown in a key sector suggests the Bank of Canada will adopt a more dovish stance. Derivative traders should consider strategies that benefit from a weaker Canadian dollar, such as buying puts on the CAD, anticipating potential rate cuts before the year is over.
The market is pricing in two more rate cuts from the U.S. Federal Reserve this year, yet Powell continues to flag risks of persistent inflation, a view supported by September’s sticky core CPI print of 3.4%. This conflict between market hopes and Fed warnings is a recipe for volatility in the US Dollar. Using options like straddles on major pairs like EUR/USD could be a smart way to trade the sharp move that is likely to come after the next Fed policy announcement.
Economic weakness is not isolated to North America, as both the Bank of England and European Central Bank are signaling downside risks. With the UK unemployment rate ticking up to 4.5% in the last report from 2025 and Eurozone manufacturing PMI figures remaining in contractionary territory, the pound and euro look vulnerable. We see opportunities in pair trades that short these currencies against the Japanese Yen, which is benefiting from safe-haven flows amidst global trade frictions.
Gold’s strong rally past $4,100 an ounce is a direct response to this environment of global uncertainty and falling bond yields. Looking back, this trend has been building since gold broke the key $3,500 resistance level earlier in 2025. With the U.S. 10-year Treasury yield now below 3.9%, the momentum for non-yielding safe havens remains strong, making call options on gold futures a viable strategy to capture further upside.
