Insights 
VT 
The S&P Global Manufacturing PMI for the United States stood at 52.2 in October, exceeding forecasts of 52. This data follows mixed economic figures from the US that have influenced market behaviour.
The Dow Jones Industrial Average achieved new heights driven by US CPI data, boosting beliefs in potential rate cuts. Concurrently, gold prices bounced back due to soft inflation data, maintaining trader interest amid US-China trade updates and government shutdowns.
Currency News
In currency news, EUR/GBP increased, counteracting strong UK economic performance with dovish UK rate forecasts. The British Pound weakened, pulling GBP/USD below 1.3300 due to US Dollar strength and speculation of Bank of England rate cuts.
Cryptocurrency markets saw Bitcoin trading above $111,000, supported by steady retail demand. Additionally, JPMorgan Chase plans to launch Bitcoin and Ethereum-backed loans for institutional clients by year’s end, indicating a shift in financial strategies.
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US Manufacturing PMI Reading
The US manufacturing PMI reading of 52.2 shows the economy is still expanding, which is a positive sign. However, this single data point is being overshadowed by the market’s intense focus on the Federal Reserve’s next move. We believe the expectation of an interest rate cut is the primary driver across all asset classes right now.
This anticipation for a rate cut comes after recent inflation data was softer than expected, with the latest year-over-year CPI coming in around 2.1%. After the high interest rates we saw during the 2023-2024 period, this pivot from the Fed is fueling a risk-on sentiment in the markets. The ongoing US government shutdown is also creating uncertainty, pushing the Fed towards a more cautious and accommodative stance.
For equity traders, with the Dow Jones reaching new peaks, we see this as a time to consider bullish strategies. Call options on the S&P 500 or Nasdaq 100 indices could benefit from the continued push higher fueled by cheaper money. The CBOE Volatility Index (VIX) has been trending lower, recently trading near 13, suggesting that selling out-of-the-money puts could also be a viable strategy to collect premium.
In the commodities space, Gold’s move above $4,100 per ounce is a direct reaction to falling real yields and a weaker dollar. We expect this strength to continue as long as the market is pricing in Fed easing. Buying gold futures or call options on gold-related ETFs are logical ways to express this view in the coming weeks.
Looking at currencies, the US Dollar is understandably weak, but the British Pound is even weaker on bets the Bank of England will also cut rates. This setup makes a short GBP/USD position compelling, as the Pound is likely to underperform even a soft dollar. We are also watching for increased volatility in EUR/USD around the upcoming Fed and ECB meetings, which could be traded using options straddles.
Finally, the cryptocurrency market is showing strong bullish momentum, with Bitcoin firmly above $111,000. News that major institutions are now offering crypto-backed loans adds a new layer of legitimacy and demand. We see this as a supportive environment for long futures positions or buying call options on major digital assets like Bitcoin and Ethereum.
