Insights 
VT 
In October, Spain’s Services PMI showed an increase, reaching 56.6, surpassing previous expectations of 54.3. This indicates stronger performance in the service sector compared to earlier forecasts.
Elsewhere, the Eurozone’s services data was positive, yet the EUR/USD currency pair remained near its recent lows. Market attention is shifting towards upcoming US data releases, specifically the ADP Employment Report, which is anticipated to reveal modest job gains following a decline in September.
US Dollar Index And Gold Prices
The US DXY index is currently at 100, sparking discussions about a new upward trend or a temporary squeeze. Additionally, fluctuations in gold prices were observed, influenced by risk-off market conditions.
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We are seeing a classic disconnect in the market right now, which creates opportunity. The Spanish services sector is showing robust strength with its PMI at 56.6, well above expectations, yet the EUR/USD is struggling to gain any ground. This suggests that the dollar’s strength is overwhelming positive news from the Eurozone.
Market Sentiment Amid Political Uncertainty
The focus remains squarely on the United States, where the ongoing government shutdown is causing significant market jitters. This political uncertainty is pushing investors towards the dollar as a safe-haven asset, a trend we also observed during the debt ceiling debates back in 2024. The Dollar Index (DXY) is holding firm at the critical 100 level, and any break from here could be sharp.
Looking at recent data, the US ADP jobs report last week showed a gain of only 95,000 jobs, missing the 110,000 forecast and adding to the picture of a slowing US economy. Despite this weakness, the dollar is not selling off, indicating the market is more worried about political risk than economic fundamentals for now. This mixed signaling is a recipe for volatility in the coming weeks.
This is not a time for simple directional bets on currency pairs like the EUR/USD. Instead, traders should look at options strategies that profit from a spike in volatility, such as straddles, as the tension between strong European data and US political turmoil is unlikely to resolve quietly. We expect implied volatility on major currency pairs to rise ahead of the next US jobs report.
The risk-off sentiment is further confirmed by the price of gold, which has been consolidating above $3,950 an ounce. This tells us that bigger market players are hedging against uncertainty. Using call options on gold or VIX futures could be a prudent way to protect portfolios against a sudden market shock stemming from Washington.
