This week’s diary is led by the US, with October ISM manufacturing due alongside the QRA borrowing estimates, while Fed speaker appearances include Goolsbee and follow earlier remarks from Barkin and Logan. Attention also falls on Tuesday’s midterm election and Friday’s nonfarm payrolls. In the euro area, the final October manufacturing PMI is expected to confirm 52.4, while Sweden’s October PMI follows September’s 58.1 reading and a run above its long-term average through 2026. In Australia, the central bank decision is expected to deliver a 25bp hike to 4.85% from 4.60%, which would be the fifth increase of 2026; rate calls also arrive from the Riksbank, Norges Bank and the Bank of England, alongside preliminary euro area and Swedish inflation prints.
Overnight, China’s official manufacturing PMI slipped to 49.3 in October from 50.1, while a private gauge held at 52.0 versus 52.1. In the US, the Employment Cost Index rose 0.8% q/q in Q3, easing from 0.9% in Q2. Euro area GDP grew 0.4% q/q in Q3, or 0.2% q/q ex-Ireland; unemployment held at 6.5% in September, with the jobless total up 120k. Inflation expectations centre on a euro area HICP rise to 4.0% y/y from 3.8%, with core at 2.50%. Norway’s unemployment stayed at 2.0%, Norges Bank flagged NOK 300mn/day FX sales for November, and Brent traded just under USD 110/bbl after OPEC+ held targets. Binance began reopening withdrawals after a USD 6.3bn hack; net outflows totalled USD 3.64bn, or 2.1% of prior-day assets. France was placed on negative outlook by Fitch; EUR/USD sat near 1.1150, with EURNOK at 10.2724 and SEKNOK at 0.9366.
Derivative Strategy Advice Across Markets
We advise rate derivative traders to adjust positions ahead of upcoming monetary decisions, starting with an expected 25 basis point hike by the Reserve Bank of Australia to 4.85%. US dollar options are likely to see heightened implied volatility due to the confluence of midterm elections, manufacturing surveys, and labor market releases this week. Historical index option data shows that US election weeks frequently drive short-term implied volatility up by 2 to 4 points, making volatility-buying strategies attractive.
In European fixed income and currency markets, we recommend hedging euro exposure following France’s surprise sovereign outlook downgrade to negative. French government bond futures will likely face selling pressure, widening the 10-year French-German yield spread, which historically widens by 8 to 12 basis points after unexpected rating actions. With EUR/USD hovering near 1.1150 and Eurozone inflation expected to rise to 4.0%, purchasing out-of-the-money put options offers prudent downside protection.
For commodity derivative traders, we suggest holding upside call spreads on Brent crude futures while prices remain elevated near $110 per barrel. The decision by OPEC+ to maintain production targets shifts all market focus to their late November meeting, where future supply quotas will be debated. Implied volatility skews for crude options typically lean heavily bullish ahead of policy meetings during periods of heightened supply disruption.
Digital Asset Market Stability Measures
In digital asset derivatives, we urge market participants to utilize put options to hedge against secondary liquidation cascades following recent multi-billion-dollar security breaches and exchange outflows. Historical market data indicates that net asset drains exceeding 2% often trigger liquidity crunches, driving perpetual swap funding rates negative for multiple weeks. We should lower overall leverage and avoid uncovered short options until underlying market depth fully stabilizes.
