Insights 
VT 
In August, the United Kingdom’s industrial production increased by 0.4% compared to the previous month. This figure surpassed the anticipated growth rate of 0.2%.
The UK’s gross domestic product (GDP) expanded by 0.1% in August, aligning with forecasts. Manufacturing production also saw better-than-expected performance that month, lending support to the Pound Sterling amidst a stable recovery of the US Dollar.
Exchange Rate Movements
The EUR/GBP exchange rate continues to decline, reaching 0.8673 after robust UK economic data. The GBP/USD maintains a rebound above 1.3400 following the release of UK data.
Gold maintained a strong position near record highs against a backdrop of economic uncertainty and increased geopolitical risks. Amidst trade tensions with China and potential US government closures, gold has been bolstered by Federal Reserve’s rate-cut expectations.
Dogecoin stabilised at approximately $0.19, having corrected by nearly 5% this week. The cryptocurrency exhibits notable accumulation by large holders, hinting at potential price recovery if current support levels hold.
The S&P 500 experienced an “inside day” after a volatile period, indicating market indecision despite a temporary rebound. The market’s recent patterns reflect ongoing uncertainty and the need for cautious engagement.
Potential Impact on Currency and Commodity Strategies
The surprising strength in UK industrial production, which beat forecasts in August, suggests the Pound may have more room to run. This follows a period of sluggish growth we saw through much of 2024, making this uptick particularly noteworthy. We should consider call options on GBP/USD, targeting a move above the recent 1.3400 level, or put options on EUR/GBP to play the divergence.
Meanwhile, the market is betting on a dovish Federal Reserve, which is keeping the US Dollar under pressure and supporting assets like Gold. The latest US jobs report for September came in weaker than expected at just 140,000 new jobs, reinforcing the view that the Fed may need to cut rates soon. This environment favors strategies that benefit from a weaker dollar, such as buying calls on Gold or the Euro.
Overall uncertainty remains high due to ongoing geopolitical risks and trade tensions, which is why Gold is trading near its all-time highs. The VIX, a measure of stock market volatility, has remained elevated above 20 for the past month, reflecting investor nervousness after the tariff-related swings we witnessed. This suggests that buying protective put options on major indices like the S&P 500 could be a prudent way to hedge against any sudden downturns in the coming weeks.
