The United States 4-week bill auction indicates a yield of 3.875%, slightly down from the previous 3.91%. Currency markets see EUR/USD rising due to weak US jobs data, fuelling anticipation of Federal Reserve rate cuts.
GBP/USD hits new highs around 1.3140, while Gold rebounds, aiming for the $4,000 mark. Conversely, Ethereum drops below $3,300 amid widespread market capitulation.
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Given the weak US jobs data, we see a clear signal that the Federal Reserve may be preparing to cut interest rates. The recent Non-Farm Payrolls report, which showed the economy added only 95,000 jobs last month, well below the 170,000 consensus, supports this view. We should consider buying call options on EUR/USD and GBP/USD to capitalize on further dollar weakness in the coming weeks.
The Strength Of The Pound
The pound is showing particular strength, breaking near 1.3140 as the Bank of England holds its rate steady, creating a policy divergence with the Fed. This situation is reminiscent of the divergence we saw in late 2023 that propelled cable higher. Traders could implement bull call spreads on GBP/USD to capture upside while limiting the premium paid.
Gold’s surge toward $4,000 is directly tied to falling US yields and a softer dollar, which reduces the opportunity cost of holding the non-yielding asset. Central bank buying continues to be a major factor, with official data from the World Gold Council showing over 800 metric tons were added to global reserves in 2024, providing a strong price floor. We believe buying call options with strike prices of $4,000 and $4,050 offers a good risk-reward profile.
In the crypto space, we are witnessing a clear rotation of capital. The capitulation in Ethereum below $3,300, contrasted with Solana’s rebound, suggests traders are favoring assets with fresh narratives like the new spot Solana ETFs. This dynamic echoes the launch of the spot Bitcoin ETFs back in 2024, which triggered massive inflows; a pairs trade, going long SOL futures while shorting ETH futures, could hedge against broad market downturns while capturing this relative strength.
