Insights 
VT 
In October, China’s Manufacturing Purchasing Managers’ Index (PMI) was reported at 50.6, falling short of the expected 50.9. This performance has impacted related currencies, with the NZD/USD stagnating near 0.5700 due to the weaker Chinese data.
The Australian dollar experienced some backing on the market’s expectation that the Reserve Bank of Australia (RBA) will keep interest rates unchanged. Meanwhile, the USD/CAD maintained its level above 1.4000 as caution surrounds the US Federal Reserve’s policy outlook.
The Japanese Yen’s Weakness
The Japanese yen remains weak against a strong US dollar due to uncertainties with the Bank of Japan. Concurrently, WTI crude oil prices have surpassed $61.00 following indications from OPEC+ of a possible pause in production increases.
Elsewhere, US President Donald Trump has announced intentions to prevent NVIDIA’s AI chip sales to China. In currency markets, the EUR/USD is staying under the 1.1550 mark as expectations for a Fed rate cut are falling. Across the Atlantic, GBP/USD is holding near lows seen since April, dipping below the mid-1.3100s area.
The weaker-than-expected Chinese manufacturing PMI of 50.6 signals a potential global slowdown, even though it’s still in expansion territory. This has us looking at commodities tied to Chinese growth, as we’ve seen copper prices already slide over 3% this past month to around $7,800 per tonne. Derivative traders might consider buying puts on industrial metals or commodity-linked currencies to position for further weakness.
This Chinese data is directly weighing on the New Zealand dollar, while the Australian dollar’s support may prove temporary if this trend continues. We are cautious on both currencies, especially since any sign of a global slowdown often strengthens the US dollar as a safe haven. Exploring options strategies like bear put spreads on the AUD/USD could offer downside protection in the coming weeks.
Increasing Geopolitical Risk
Geopolitical risk is also increasing with the US set to block key AI chip sales to China, adding to market uncertainty. This kind of tension tends to boost volatility, and we have already seen the VIX index climb from lows near 14 to over 18 in recent weeks. We believe buying VIX call options is a direct way to hedge portfolios against a potential spike in market turbulence.
Meanwhile, the US dollar remains bullish as bets on a Federal Reserve rate cut decrease. This trend is clearest against the Japanese yen, where the interest rate differential is huge with the Fed Funds Rate at 4.75% versus the Bank of Japan’s policy rate near zero. We see continued opportunity in using long call options on the USD/JPY pair to ride this persistent momentum.
In energy, the decision by OPEC+ to pause output increases is keeping oil prices firm, with WTI crude holding above $61 a barrel. This supply discipline suggests a solid price floor heading into the Northern Hemisphere’s winter demand season. We think buying call options on crude futures or energy sector ETFs is a straightforward way to trade this supportive backdrop.
