Insights 
VT 
US Dollar Index on the Rise
The US Dollar Index (DXY) rose by 0.8% to approximately 98.45. In the US, potential lay-offs loom amid a government shutdown, with President Trump confirming impending lay-offs.
The Federal Reserve’s dovish outlook is another factor potentially weighing on the US Dollar. The CME FedWatch tool indicates an 84% probability of two more rate cuts of 25 basis points each in the year’s remaining policy meetings. The Australian Dollar is currently performing better against the US Dollar, as expectations of the RBA cutting interest rates decline amidst a robust domestic job market.
We are seeing the AUD/USD pair caught in a tight range around the 0.6600 mark. The Australian dollar is finding support from a robust domestic job market, with recent September 2025 figures from the Australian Bureau of Statistics showing the unemployment rate holding firm at 3.8%. This strength reduces the likelihood of the Reserve Bank of Australia cutting rates, but upside for the pair is limited by the strong US Dollar.
The US Dollar’s current strength is a direct result of a flight to safety amid political chaos in France and the US government shutdown. We have seen this before; the 35-day shutdown back in 2018-2019 wiped an estimated $11 billion from the US economy, raising recession fears. This time, the uncertainty is propping up the dollar, even with the market pricing in an 84% chance of two more Federal Reserve rate cuts before the end of the year.
Strategies for Traders
This creates a tense environment where short-term fear is overriding long-term monetary policy expectations. For traders, this suggests that implied volatility is likely to remain elevated in the coming weeks. Options strategies like straddles, which profit from a large price move in either direction, could be useful to navigate the uncertainty surrounding the Fed’s upcoming November meeting.
We believe it is also wise to look at currency crosses to bypass the noise from the US Dollar. The Australian dollar’s fundamental strength, based on its job market, appears much clearer when paired against the Euro, which is currently weighed down by the French political crisis. The AUD/EUR pair may present a more direct opportunity to capitalize on the relative strength of the Australian economy.
The incredible surge in gold to over $3,900 an ounce confirms the deep level of fear in the market, drawing parallels to the risk-off panic we witnessed during the 2020 global pandemic. As long as gold remains this high, it serves as a powerful indicator that any strength in risk-sensitive currencies like the Aussie will be fragile. This environment favors strategies that are long volatility or positioned for further safe-haven flows.
