Insights 
VT 
The UK RICS housing price balance for September recorded a rate of -15%, surpassing forecasts which had expected a rate of -18%. These figures indicate a less negative housing market sentiment than previously anticipated.
Several market updates include the USD/CAD currency holding losses below 1.3950 due to a perceived dovish stance from Fed policymakers. Also, WTI prices have fallen to nearly $61.50, driven by an increase in EIA crude oil inventories.
Currency Movements
Currency movements show the Japanese yen gaining despite challenges from potential delays in Bank of Japan interest rate hikes. The Australian dollar has risen following the release of consumer inflation expectations, while the US Dollar Index has dropped below 99.00 amidst a continuing US government shutdown.
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The UK housing market is showing tentative signs of stabilization, as the price balance of -15% is a marked improvement from the deeply negative territory we saw back in late 2023, when readings were below -60. While still in contraction, this better-than-expected figure may reduce pressure on the Bank of England for aggressive rate cuts. We should consider positioning for less dovish policy, which could support the pound against currencies with a more cautious outlook.
Weakness In The US Dollar
We are seeing clear weakness in the US dollar, with the index now trading below 99.00 amid a government shutdown and a Federal Reserve that appears to be shifting its stance. This is a significant change from the strong-dollar environment fueled by the aggressive rate hikes of 2022-2023. This trend suggests traders should look at options strategies that benefit from a continued dollar slide, particularly against currencies backed by more hawkish central banks.
In the commodities space, there are conflicting signals that create opportunities for volatility trading. WTI crude oil’s decline to near $61.50 a barrel, a price reflecting soft global demand, contrasts sharply with China’s decision to tighten its grip on rare earth exports. This move by China could trigger supply chain disruptions and inflationary pressures in specific sectors like technology and electric vehicles, creating a divergence between energy and industrial metals.
The FX markets are shifting towards trades based on relative economic strength. The Australian dollar is gaining ground as consumer inflation expectations remain elevated, a persistent theme we have been tracking since the stubborn inflation reports of 2024. Meanwhile, the Japanese yen is edging higher as the interest rate gap with the U.S. narrows, even as we await a decisive policy move from the Bank of Japan.
