Insights 
VT 
Russia’s S&P Global Manufacturing Purchasing Managers’ Index (PMI) dropped from 48.2 in the previous month to 48 in October. This marks a period where manufacturing activity remains in a contraction phase, as any figure below 50 indicates contraction.
Meta Platforms’ stock continued to decline following earnings results, and the Dow Jones Industrial Average stalled for a week, finishing Friday without significant change. The EUR/USD fell to its lowest in three months, affected by the Federal Reserve’s hawkish tone which boosted the US dollar.
Currency Market Update
Additionally, GBP/USD dropped to a seven-month low amid UK fiscal issues, while gold prices slipped below $4,000 for the second consecutive weekly loss. In the energy sector, WTI crude oil prices rebounded slightly amid modest energy recovery and focus on OPEC+ output hikes.
Bitcoin and other major cryptocurrencies were on edge as market demand wobbled, even as Bitcoin rebounded above $110,000. Finally, the Bitcoin whitepaper celebrated its 17th anniversary, marking its journey from a digital cash concept to a globally recognised financial asset.
The strong US Dollar is the main story, fueled by the Fed’s hawkish tone that is pushing both the Euro and the Pound to multi-month lows. We’re seeing the Dollar Index (DXY) push past 108, a level we have not consistently held since the aggressive tightening cycle of 2022-2023. Upcoming comments from Fed officials will be critical in determining if this trend continues.
We are positioning for continued weakness in EUR/USD and GBP/USD, as both pairs have broken key support levels at 1.1520 and 1.3100 respectively. With Eurozone inflation hovering near 2.1% while recent US CPI data remains sticky above 3.5%, the policy divergence between the ECB and the Fed is clear. This environment suggests put options on these currencies could be profitable.
Gold Market Challenges
Gold is struggling to hold the $4,000 level, and we anticipate more pressure in the coming weeks. The combination of a strong dollar and rising real yields, with the 10-year TIPS yield now pushing above 2.5%, creates significant headwinds for non-yielding assets. Derivative plays that short gold futures may be advantageous until we see a shift in Fed rhetoric.
Uncertainty is creeping back into risk assets, as seen with the stall in the Dow and the wobbling demand in crypto markets. Although Bitcoin has found temporary support at its 200-day moving average, the overall sentiment is cautious. We’ve seen the VIX index climb from the low teens to over 20 in the past two weeks, suggesting options traders should consider strategies that benefit from increased market choppiness.
We are watching the energy sector closely, as the rebound in WTI crude faces uncertainty from the upcoming OPEC+ meeting, where output hikes are in focus. The contracting manufacturing PMI out of Russia, which fell to 48.0, also hints at potential demand weakness from major producers. Given these conflicting signals, trading options on oil could be a way to play the expected volatility.
