Insights 
VT 
US CPI Headline inflation is projected to increase by 3.1% year-over-year in September. In contrast, Sweden’s Producer Price Index (PPI) decreased from a previous 0.5% to -0.7% in the same month.
Economic Data Releases
Economic data releases significantly affect market reactions. The US Bureau of Labor Statistics will soon release the Consumer Price Index (CPI) for September, with focus on inflation’s development amid recent geopolitical tensions and trade discussions.
The pound sterling is experiencing growth due to favourable UK retail sales and positive flash PMI data. The EUR/USD recently rebounded from lows due to encouraging Eurozone PMI figures. Meanwhile, gold prices have declined as markets anticipate key economic reports.
September’s CPI data is anticipated to show increased inflation, potentially influencing the US dollar and the Federal Reserve’s interest rate strategy. Various factors, including trade relations and monetary policies in the US and internationally, are shaping the economic environment.
The September US CPI data, which was confirmed last week at a 3.1% year-over-year rise, keeps inflation risk on the table. We believe this reinforces the Federal Reserve’s commitment to maintaining restrictive policy, delaying any potential rate cuts well into 2026. This outlook suggests traders should consider strategies that benefit from a strong US dollar and continued pressure on assets sensitive to interest rates.
US Inflation and Market Strategy
We are seeing this uncertainty priced into the options market, with the CBOE Volatility Index (VIX) rising to 17.5 this past week from its lows earlier in the month. The CME FedWatch Tool now reflects a greater than 80% probability that the Fed will hold rates steady at its December meeting. This environment makes protective put options on equity indices a prudent consideration for hedging downside risk in the weeks ahead.
In Europe, the picture is more mixed, as Sweden’s producer price decline of -0.7% signals disinflationary pressures that are not yet apparent in the US. This reminds us of the policy divergence we observed in 2023, where central banks moved at different speeds. We see opportunities in using currency options to trade the range in pairs like EUR/USD, which has shown resilience following recent optimistic PMI figures.
Gold’s recent slide to the $2,240 level is a direct result of the market adjusting to higher real yields, with the 10-year Treasury yield now holding firm above 4.5%. This makes non-yielding bullion less appealing in the short term. Traders may look to use futures to express a bearish view or sell call options against existing positions to generate income, assuming gold’s upside remains capped by a hawkish Fed.
