Insights 
VT 
In September, Japan’s bank lending rose by 3.8% year-on-year, surpassing the predicted 3.7%. FXStreet provides more insights into financial markets and related trends, offering a newsletter with expert analysis.
The silver price rose above $49.50 due to uncertainties and potential Fed rate cuts. The Japanese yen remained near an eight-month low against the USD, influenced by fiscal concerns and the Bank of Japan’s outlook.
Currency Movements
Recent unilateral, rapid moves have been noted by Japan’s Kato. Meanwhile, the Australian dollar has gained support following cautious remarks by RBA’s Bullock.
US Federal Reserve’s Daly noted inflation was less than anticipated. Japan’s Akazawa stated that the US-Japan trade deal has been smoothly implemented.
EUR/USD dropped to nine-week lows, reflecting the strong US dollar and risk-off market sentiment. GBP/USD fell to 1.3300 amid a risk-averse environment, driven by concerns over the US government shutdown.
Gold remains above $3,950, benefitting from the cautious market mood and Fed rate cut expectations. Ethereum faced a 4% drop after substantial distribution by medium-scale holders, reducing their holdings by 1.22 million ETH. US tariffs continue beyond the headlines, as a persistent policy tool.
Zcash extended its rally amid rising interest in privacy protocols. All information provided is for informational purposes only and not an investment recommendation.
Market Influences
The ongoing US government shutdown, now entering its second week, is the primary driver of market sentiment. We are seeing a classic flight to safety, which is pushing the US Dollar Index (DXY) to multi-month highs above 108. This dollar strength explains the sharp declines in pairs like EUR/USD and GBP/USD, overriding other factors for now.
At the same time, we hear dovish signals from the Federal Reserve, with officials acknowledging that inflation has cooled significantly. Derivative markets reflect this, with Fed funds futures now pricing in a greater than 70% probability of a rate cut before the end of the year. This creates a tense dynamic where the dollar is strong due to current fear, but its long-term outlook is softening.
The Japanese Yen is a key focus, as it weakens past the 162 level against the dollar. We’ve heard officials warn about “one-sided moves,” which is language that has preceded direct market intervention in the past, similar to what we saw in 2024. Implied volatility in USD/JPY options is rising as traders begin to price in the risk of sudden action from the Bank of Japan.
This uncertainty is providing strong support for precious metals. Gold is holding firm above $3,950, with the combination of geopolitical risk and future rate cuts creating a perfect environment for the bullion. We have seen a notable increase in demand for call options on both gold and silver, suggesting traders are positioning for a potential break toward new all-time highs.
While domestic data from Japan, such as the slightly better-than-expected bank lending figures, would normally be a minor positive, it is being completely overshadowed. The market’s attention is fixed on the major macro forces of the US shutdown and the yen’s precarious position. Traders should expect these larger themes to dictate price action in the coming weeks.
