Insights 
VT 
New Zealand’s Consumer Price Index (CPI) increased by 3.0% year-on-year in the third quarter, aligning with expectations. This data suggests stable consumer inflation rates in the region.
The cryptocurrency market suffered liquidations exceeding $1 billion within 24 hours. BNB, Solana, and Cardano saw losses exceeding 10%, marking these as significant declines among the leading cryptocurrencies.
Currency Market Overview
The EUR/USD rate has retracted to daily lows around the 1.1650 level amid a recovering US Dollar. In contrast, the GBP/USD faces downward pressure, hovering near the 1.3400 support.
Gold experienced a sharp rise, attaining a new peak above $4,370. However, trade discussions between the US and China may influence future market moves, alongside the release of September US inflation data.
The forthcoming week is packed with releases including US CPI and PMI data, alongside UK inflation figures. These reports may sway forecasts regarding central bank rate adjustments across various economies.
Around $1 billion in liquidations occurred in the crypto markets, with BNB, Solana, and Cardano experiencing losses over 10%, marking the largest declines among top cryptocurrencies.
New Zealand Dollar and Market Strategies
With New Zealand’s inflation hitting the 3% target, we see the Reserve Bank of New Zealand having little reason to surprise the market with aggressive rate hikes. This suggests the New Zealand Dollar’s recent strength may be capped. We can use options to bet on stability or a slight decline, such as selling out-of-the-money NZD call options.
The US Dollar is regaining its footing as a safe-haven asset amid geopolitical uncertainty, putting pressure on pairs like EUR/USD and GBP/USD. We expect significant swings around the upcoming US inflation data, as recent figures from the Bureau of Labor Statistics have shown core inflation remaining stubbornly above the Fed’s 2% target. Using straddles on major currency pairs could be a way to profit from the high volatility we anticipate, regardless of the direction.
Gold’s recent surge to over $4,370 an ounce, followed by a sharp 2% drop, shows just how sensitive it is to news about US-China trade relations. We remember similar volatility during the trade disputes of 2019, which caused wild fluctuations in precious metals. The implied volatility in gold options is likely at multi-year highs, making defined-risk strategies like buying put or call spreads a prudent way to trade without being exposed to unlimited losses.
The stock market is attempting to climb, but we must protect our portfolios from the same geopolitical risks affecting currencies and gold. The CBOE Volatility Index (VIX) has already crept up from its lows below 14 earlier this month, signaling rising fear among investors. We believe buying protective put options on major indices like the S&P 500 is a necessary hedge against a sudden market downturn.
