Insights 
VT 
The United States Consumer Price Index, seasonally adjusted, rose from 329.79 to 330.54 in September. This change reflects a slight increase in the cost of living from the previous month.
The British pound remains stable against the dollar, unaffected by recent UK retail sales and PMI data. Meanwhile, the USD/JPY currency pair gained momentum due to robust US PMI data, despite softer CPI figures.
Euro Dollar Retreat Impact
EUR/USD saw a retreat, impacted by stronger-than-expected US flash PMIs in October, which boosted the US dollar’s recovery. This has led to a renewed focus on the upcoming Federal Reserve and European Central Bank meetings.
Gold prices rose above the $4,100 mark influenced by US-China trade developments and the ongoing US government shutdown. In the cryptocurrency market, Bitcoin increased to over $111,000, with Ethereum and Ripple also experiencing modest growth due to stable retail demand.
In a notable development, JPMorgan Chase plans to introduce Bitcoin and Ethereum-backed loans for institutional clients by the year-end. This move is seen as an evolution in the bank’s strategy, anticipated to reshape its approach to digital assets.
We see the Federal Reserve in a difficult position ahead of next week’s meeting. The new Core CPI data shows inflation remains persistent, with the year-over-year figure now at 3.8%, well above target. Yet, the market is overwhelmingly pricing in a rate cut, driven by fears over the economic impact of the ongoing government shutdown.
US Dollar Dynamics in Currency Markets
This conflict is creating choppy conditions in the currency markets, particularly for the US dollar. We’ve seen the dollar index rebound to 106.50 on the strong PMI data, after initially dipping on the inflation report. Derivative traders should consider the high implied volatility in EUR/USD options, as the pair struggles to hold the 1.1600 level.
Given the uncertainty from the US shutdown, now in its third week, capital is flowing into traditional safe havens. Gold’s rally above $4,100 an ounce is a direct result of this, marking a significant breakout not seen since the brief recession of early 2024. We anticipate bullish positions, such as long call spreads on gold futures, will be a popular strategy to capture further upside while managing premium costs.
In the digital asset space, Bitcoin is showing sustained strength above $111,000, decoupling from some traditional risk assets. News that major banks are rolling out crypto-backed loans for institutional clients is adding to the bullish momentum. We expect heightened activity in options on BTC and ETH futures, with a clear bias towards call buying as retail and institutional demand remains solid.
