Insights 
VT 
The Canadian unemployment rate is expected to rise in September. EUR/USD has strengthened to 1.1575, recovering from earlier losses, while GBP/USD holds at 1.3310 amid cautious sentiment regarding the Bank of England’s monetary policy.
Gold remains under pressure, trading below $4,000, as geopolitical risks and potential Federal Reserve rate cuts lend support. Bitcoin trades around $121,000 following a recent high, with Ethereum and Ripple also experiencing corrections.
Use of Tariffs in Foreign Policy
US tariffs continue to serve as a key foreign policy tool for the government, reaffirmed in the past month. Coinbase and Mastercard are engaged in talks to acquire BVNK, a stablecoin firm, with a deal value ranging between $1.5 billion and $2.5 billion.
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Given the combination of a potential US government shutdown and chatter about Fed rate cuts, we should view the US Dollar’s recent strength as a peak. This situation is reminiscent of the market volatility we saw during the 2018-2019 shutdown, which caused the VIX to spike above 30. We can use options to position for increased turbulence and a weaker dollar over the next month.
The environment is extremely supportive for Gold, and any dip below $4,000 should be seen as a buying opportunity. The trifecta of geopolitical risk, a dovish Fed, and US fiscal uncertainty is historically bullish for the precious metal. We saw a similar, though less dramatic, setup in the early 2020s that propelled Gold to what were then record highs.
EUR USD and Economic Impact
For the EUR/USD, the French political crisis caps the upside, making a straight long position risky. It is better to sell out-of-the-money puts or structure bull call spreads to profit from a modest, contained rise toward the 1.1650 level. The market seems to be pricing in political risks similar to those surrounding France’s credit rating outlook that we saw back in 2024.
The Bank of England’s cautious stance, in contrast to the Federal Reserve, makes going long on GBP/USD an attractive trade. UK inflation has proven sticky, with core figures struggling to fall in the years leading up to 2025, meaning the BoE has less room to cut rates than the Fed. This interest rate differential should provide a tailwind for the pound, targeting a move towards 1.3500.
The expectation for a higher Canadian unemployment rate signals weakness for the Canadian dollar. Based on data from Statistics Canada in 2024 which showed a steady rise in the unemployment rate past 6.1%, this coming report could confirm a worrying trend. We should look to short USD/CAD on any dollar weakness or consider pairing a short CAD position against a stronger currency like the pound.
The bearish sentiment in crude oil is a direct reflection of fears of a US economic slowdown. US crude inventories have been building, a pattern consistent with weakening demand we monitored throughout late 2024. Traders should consider buying puts on WTI futures or shorting the commodity, as a government shutdown would likely accelerate this downward price pressure.
