Insights 
VT 
In September, Australia’s Westpac Leading Index showed a rise to 0% from the previous month’s -0.05%. This change reflects a possible shift in economic trends within the country.
The Australian dollar experienced an increase following the Reserve Bank of Australia’s cautious comments. Meanwhile, WTI Crude Oil prices remained around $58 due to oversupply issues and trade tensions between the US and China.
Japanese Yen Strength
The Japanese yen strengthened amid rising demand for safe-haven assets, despite potential caps due to political risks. The NZD/USD pair maintained its position above 0.5700 as China’s deflationary pressures appeared to ease in September.
The PBOC set the USD/CNY reference rate at 7.0995, slightly down from 7.1021. Additionally, the price of silver reached near $52.00, driven by renewed US-China trade tensions.
The EUR/USD climbed past 1.16 following comments from Fed Chair Jerome Powell, while the GBP/USD returned above 1.3300 after suffering from disappointing UK labour market figures. Gold stayed close to its record high, buoyed by geopolitical risks and tensions between the US and China.
The US Department of Justice seized 127,271 Bitcoin, increasing its cryptocurrency holdings to over $36 billion. This significant seizure was from the Cambodian-based Prince Holding Group and its founder.
Flight to Safety in Markets
Given the ongoing US-China tensions and political risks, we are seeing a clear flight to safety in the markets. This is confirmed by gold prices pushing near a record $4,200 an ounce and the Japanese Yen strengthening. The CBOE Volatility Index (VIX) has been persistently trading above 25, well over its historical average, signaling that we should prepare for continued market swings in the coming weeks.
The US Dollar is showing weakness after the Federal Reserve chair adopted a neutral tone, failing to meet hawkish expectations. This has pushed pairs like the EUR/USD above 1.1600 and helped the GBP/USD recover despite poor UK labor data. We see opportunities in buying call options on the Euro and Pound to capitalize on further dollar weakness while managing downside risk.
Gold’s rally is a direct response to global uncertainty and bets on future Fed rate cuts, reminiscent of the conditions we saw back in 2020 that fueled its last major ascent. Rather than buying futures at this peak, traders should consider using call option spreads to profit from a potential continued rise toward new highs. This allows for participation in the rally with a clearly defined and limited risk profile.
In Australia, the Westpac Leading Index has stopped contracting, which is a mildly positive sign for the local economy. However, the Australian Dollar’s fate is more closely tied to global risk sentiment and Chinese economic health right now. With Australia’s latest quarterly inflation remaining sticky at 3.8%, the Reserve Bank of Australia is in a difficult position, suggesting volatility trades like straddles on the AUD/USD could be effective.
Crude oil remains a point of weakness, with WTI stuck near $58 a barrel due to a persistent oversupply outlook. Recent reports from the Energy Information Administration showed another surprise build in US crude inventories, adding to bearish sentiment. We believe buying put options on WTI futures is a straightforward way to position for a potential slide towards the low $50s.
