Insights 
VT 
MBA mortgage applications in the United States increased to -4.7% as of October 3, improving from a previous figure of -12.7%. This change reflects a lessening decline in the mortgage market amid varied economic pressures.
Key market movements include GBP/JPY reaching 205.00, influenced by postponed Bank of Japan rate hike expectations. The USD/CHF rate is rising, supported by a robust US Dollar and speculation of Swiss National Bank rate cuts.
Market Insights
The Federal Reserve’s minutes are eagerly anticipated to provide insights on rate cuts, particularly as a government shutdown delays the release of US jobs data. Meanwhile, the GBP/USD stabilises as the US Dollar eases, with traders awaiting further Fed communication.
Gold is maintaining its position just above $4,000 per troy ounce, influenced by heightened safe-haven demand amid political unrest in France and US economic uncertainties. The Fed’s September meeting minutes are expected to clarify the future path of rate cuts during the ongoing US government shutdown.
Solana, a cryptocurrency, is trading above $220, with bulls aiming for a $250 breakout. However, declining on-chain activity suggests that this target may face delays.
The ongoing US government shutdown introduces significant uncertainty, making volatility the primary asset to trade. We should consider buying options on major indices, as implied volatility is likely to rise further. Historically, like during the prolonged shutdown of 2018-2019, the CBOE Volatility Index (VIX) saw sharp spikes, rewarding those positioned for turbulence.
Trading Strategies During Uncertainty
With crucial economic data like the jobs report postponed, the upcoming Fed minutes are our main guide for future rate cuts. Expectations for another cut are solidifying, so trading derivatives tied to the SOFR (Secured Overnight Financing Rate) could be a direct play. We can use options on futures to position for an even more aggressive cutting cycle if the economic picture darkens.
Gold breaking $4,000 is a clear signal of a flight to safety, fueled by the US shutdown and French political worries. This move is reminiscent of the safe-haven rallies we saw during the global financial crisis of 2008 and the pandemic in 2020. Buying call options on gold futures or related ETFs remains a prudent strategy to hedge against further instability.
The US Dollar is currently benefiting from safe-haven flows, but this strength may be short-lived if the Fed’s rate-cutting path becomes aggressive. Meanwhile, the Euro is under pressure from French political turmoil, pushing EUR/USD towards the critical 1.1600 support level. Buying put options on the Euro seems like a cleaner trade until European political risks subside.
We’ve seen an improvement in mortgage applications to -4.7%, but this is still a contraction that signals a weak housing market. This is not yet a buy signal for housing-related assets. For context, these negative readings are similar to the slowdown we experienced in 2023, which preceded a period of sluggish home sales.
