Insights 
VT 
India’s cumulative industrial output decreased to 2.7% in September, down from the previous rate of 3%. This reflects a slight downward shift in the country’s industrial performance.
In related financial news, Copper and PGMs are expected to see increased gains as stockpiling activities surge. Meanwhile, the Japanese Yen experienced a 0.6% rise against the US Dollar due to hawkish signals from the Bank of Japan.
Currency And Commodity Markets
The EUR/USD pair reached a three-week peak near 1.1650, while the GBP/USD traded around 1.3270, both showing robust positions against a generally weaker US Dollar. Gold prices also reached a two-month high, trading past $4,260, as expectations grow for another Federal Reserve rate cut.
China has evolved beyond its former role as a mere revenue engine, becoming an innovation hub for Western brands. This shift highlights the changing perceptions and strategies multinational corporations have towards the Chinese market.
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The market is signalling a clear weakness in the US Dollar, which we see as the primary driver for the coming weeks. Traders are leaning heavily into the idea of a Federal Reserve rate cut this month, especially after November’s Core PCE Price Index showed inflation cooling to 2.8%, nearing the Fed’s target. We should consider using derivatives to position for further dollar downside against a basket of G10 currencies.
Opportunities In Gold And Currency Markets
Given this dollar softness, we see continued strength in EUR/USD, which has already pushed past 1.1600. The European Central Bank has held its policy rate steady, creating a policy divergence that favours the euro. Buying call options on the EUR/USD pair with January 2026 expiry dates could be an effective way to capture further upside.
Gold is also a direct beneficiary of lower rate expectations, and we have seen it clinch two-month highs above $4,260 an ounce. Historically, when the Fed entered easing cycles, as we saw in late 2018 and again in 2020, gold posted significant gains. We anticipate this trend will continue, making call options on gold futures a compelling trade.
A particularly interesting opportunity arises from the Japanese Yen, which is surging on hawkish signals from the Bank of Japan. While the Fed looks to cut, the BoJ is discussing policy normalization, a stark contrast that has driven the yen up 0.6% against the dollar recently. We should look at put options on the USD/JPY pair to capitalize on this powerful divergence.
The backdrop for this Fed pivot is slowing global growth, as evidenced by India’s industrial output declining to 2.7% back in September. This trend was echoed by last week’s global manufacturing PMI figures, which remained in contraction territory for a fourth consecutive month. Therefore, while we are positioned for a risk-on rally from a rate cut, we should also consider buying protective put options on major indices as a hedge against this underlying economic fragility.
