Insights 
VT 
Eurozone industrial production recorded a growth of 0.2% in September, falling short of the anticipated 0.7%. This outcome reflects the ongoing challenges faced by the region’s industrial sector.
The Canadian Dollar edged slightly higher amidst these developments. The US Dollar experienced a decline due to the reopening of the government, influencing market dynamics.
Euro Hits Multi Year Highs
EUR/JPY reached multi-year highs, attributed to the weak performance of the Yen amidst risk sentiment. Meanwhile, EUR/CHF stabilised after previous losses, as Swiss deflation provided support for the Franc.
Comments from the Federal Reserve’s Daly indicated that inflation is decreasing but remains resistant. EUR/USD rose, benefiting from the US government reopening and the resulting positive market sentiment.
The EUR/USD pair stayed above 1.1600 due to diminished demand for the US Dollar. GBP/USD also regained ground above 1.3150, despite weak UK GDP data.
Gold extended its rally, reaching a three-week high above $4,200 due to decreased USD strength. Bitcoin remained around $102,800, reflecting market indecision.
Bank Of Japan Under Scrutiny
The Bank of Japan faces scrutiny regarding interest rate hikes, with rates maintained at 0.5%. Hyperliquid (HYPE) faced an 8% drop, with its market maker reporting a $4.9 million loss.
With the US government reopening, we see a clear risk-on sentiment taking hold, which is putting significant pressure on the US Dollar. This follows a familiar pattern seen in past shutdowns, like the one in 2018, where the dollar weakened once political gridlock was resolved. Given that the latest US CPI print came in at a stubborn 3.5%, the Federal Reserve is unlikely to cut rates, but the dollar’s safe-haven appeal is fading for now.
The Euro is gaining against the dollar, but we should be cautious as its own fundamentals are shaky. The surprise 0.2% drop in Eurozone industrial production continues a pattern of manufacturing weakness that has been a concern since 2024. This suggests the EUR/USD rally is driven purely by dollar weakness and could be fragile, making options strategies like buying puts a sensible hedge against a reversal.
A clearer opportunity lies in the Japanese Yen, which remains weak as the Bank of Japan lags far behind other central banks on rate hikes. With the BoJ’s policy rate at just 0.5%, the interest rate differential with other major economies is at its widest in years, fueling carry trades. We should consider maintaining long positions in pairs like EUR/JPY, which are hitting multi-year highs.
Gold’s rally above $4,200 an ounce reflects persistent inflation fears that have been building since the price shocks of 2022 and 2023. The current dip in the dollar makes precious metals an attractive hedge against this stubborn inflation. We see this as a chance to add to long gold positions through futures contracts.
The British Pound is also rising on the back of broad dollar selling, but this move ignores underlying domestic weakness. The UK’s economy has been struggling, as evidenced by the recent Q3 GDP figures which showed growth of only 0.1%. This makes the pound’s rally look unsustainable and vulnerable against currencies with stronger fundamentals.
