Insights 
VT 
The US Dollar Index rose to two-week highs beyond the 99.00 level, aided by a rise in US Treasury yields and remarks from Chair Jerome Powell following a Federal Reserve rate cut. Fed officials Bowman and Logan are set to speak.
The EUR/USD slipped to the 1.1580 area, with the European Central Bank’s rate decision and Germany’s key economic indicators next in focus. Additionally, Eurozone data including Q3 GDP, Consumer Confidence, and the Unemployment Rate are anticipated.
British Pound Weakness
GBP/USD fell to multi-month lows around 1.3140 as the US Dollar rebounded and expectations of a Bank of England rate cut intensified. Data on Nationwide Housing Prices is expected on October 31.
USD/JPY climbed above 153.00, continuing its upward trajectory. The Bank of Japan is likely to maintain its current policy rate, and Foreign Bond Investment data is pending.
AUD/USD decreased past the 0.6600 threshold as the US Dollar strengthened. Upcoming data will include Australia’s Export and Import Prices.
WTI recovered to $61.00 per barrel, influenced by trade developments and a substantial drop in US crude inventories. Gold declined for a fourth day due to a stronger US Dollar, while silver improved, surpassing $48.00 per ounce.
Federal Reserve Rate Cut Impact
The Federal Reserve’s recent rate cut seems to be a “one and done” for now, which explains why the US Dollar is strengthening. We’re seeing the US Dollar Index push above 99.00 because recent data, like the stronger-than-expected 2.5% Q3 GDP growth reported last week, suggests the economy doesn’t need more cuts immediately. This makes short-term options betting on further dollar strength a logical approach for the next few weeks.
In contrast, we expect the European Central Bank to sound much more cautious, creating a clear policy divergence with the Fed. With Germany’s flash Q3 GDP figures showing near-stagnation at just 0.1%, the pressure is on the ECB to signal potential easing. Traders could therefore look at buying puts on the EUR/USD, targeting a move below the 1.1500 level.
The situation is similar for the British Pound, which is testing lows near 1.3140 as the market is now pricing in a 60% chance of a Bank of England rate cut before year-end. We’ve seen UK inflation fall to 2.8% in September, faster than many anticipated, which gives the BoE room to act. This suggests that any short-term rallies in GBP/USD are likely selling opportunities.
The Bank of Japan’s unwavering policy provides a stable backdrop for a strong US Dollar against the Yen, pushing USD/JPY past 153.00. We saw this playbook run successfully back in 2023 and 2024, where the wide interest rate gap was the main driver. As long as the BoJ holds firm while US yields remain relatively high, buying dips in this pair continues to be a core strategy.
Crude oil is holding near $61 a barrel, supported by yesterday’s EIA report showing a larger-than-expected 4.1 million barrel decline in US inventories. However, the strong dollar is a major headwind for commodity prices, likely capping any significant rally from here. We would be cautious about taking large long positions until WTI can decisively break above the $65 resistance level.
Gold’s decline is a direct result of the rebound in US Treasury yields, with the 10-year note climbing back above 4.1% after the Fed meeting. This makes holding the non-yielding metal less attractive for investors seeking returns. Interestingly, silver’s push above $48 an ounce suggests its industrial demand component is currently outweighing the precious metals trend, a divergence worth monitoring closely.
