Insights 
VT 
The US Dollar has softened, influenced by low short-dated US rates and the Federal Reserve’s Beige Book suggesting possible rate cuts. The ongoing US government shutdown fuels speculation about prolonged closures, with betting markets predicting it may last into November.
Us China Relations
US-China relations are a focal point, with upcoming meetings of Presidents Trump and Xi at the APEC summit. China’s export controls on rare earths could disrupt global supply chains, affecting semiconductors and EVs. G7 nations plan a statement against these controls, while the US offers a possible extension on tariffs to ease tensions.
Positive news from France has buoyed the euro, affecting the DXY. A possible political deal in Japan could influence the yen and support DXY. US data delays are overshadowed by speeches from Fed members, potentially affecting the dollar’s performance. Despite these movements, DXY is likely to stay around 98.50.
The broader financial landscape sees gold surging past $4,250, while silver dips after high gains due to trade tensions. Elsewhere, markets await developments in the S&P 500, Dogecoin, and top broker insights for 2025. FXStreet stresses investors should conduct due diligence, as the information provided is not investment advice.
With the Fed signaling a rate cut at the end of the month, we are looking at options to express a bearish view on the dollar. The CME FedWatch Tool is currently pricing in over a 90% probability of a 25-basis-point cut, confirming this dovish stance. Put options on the Dollar Index (DXY) expiring in November offer a direct way to position for further greenback weakness.
Market Uncertainty
The upcoming US-China meeting at the end of October is the main event driving uncertainty, and we are positioning for a sharp move in either direction. We are buying volatility, similar to how the VIX index spiked above 25 during the trade disputes we saw back in 2018 and 2019. Options straddles on major equity indices expiring just after the November 10th tariff deadline could capture a breakout if negotiations fail.
Given the geopolitical tensions and the flight to safety, we see continued strength in gold, which has already broken well past its previous inflation-adjusted highs from the early 2020s. We are adding to long positions through call options on gold futures, as the combination of a dovish Fed and the rare earths supply chain threat provides strong support. Data from the World Gold Council has shown consistent inflows into gold-backed ETFs this quarter, reinforcing this bullish sentiment.
We are also watching the Japanese political situation closely ahead of the expected vote on October 21st. A victory for Sanae Takaichi is seen as a catalyst for further yen weakness, widening the interest rate differential that has driven USD/JPY higher over the past few years. We are considering short-dated call options on USD/JPY to capitalize on a potential policy shift that favors a weaker currency.
