China’s house price index fell by 3.5% in May, which is a smaller drop than last month’s 4%. This shows some trends in China’s housing market. The EUR/USD pair is slightly down, trading below the mid-1.1500s as the US Dollar rises. Traders are waiting for the FOMC policy decision for further direction.

GBP Recovery and Market Trends

The GBP/USD pair has started to recover, sitting around 1.3570 during Asian trading. This movement appears within an upward channel, influencing market expectations. Gold prices are holding near two-month highs but are facing resistance due to a slight increase in the USD. Ongoing geopolitical risks are balancing gains and losses in the precious metals market. Bitcoin, Ethereum, and Ripple are stabilizing after a recent drop. These cryptocurrencies are near significant support levels, which may affect their future prices. As markets prepare for central bank meetings, expectations vary regarding rate hike timelines. Key economic indicators and central bank positions continue to shape market sentiment and trading strategies. Markets are showing signs of impatience, especially since macro data raises more questions than it answers. The recent 3.5% drop in Chinese house prices, while less severe than last month’s 4%, indicates that the property sector is still under pressure. However, we may now see a slowdown in the rate of decline. It’s too soon to call a recovery, but this trend may lead to adjustments in some Asia-influenced investments, particularly short-term holdings related to construction materials or regional debt. In Europe, the Euro is lagging behind the US Dollar. The EUR/USD pair is under pressure, staying below 1.1500s, primarily due to a stronger Dollar. This aligns with rising US yields and the Dollar’s appeal as a safe haven. With the FOMC decision approaching, traders seem to be adjusting for potential volatility rather than simply reacting to it. We are focusing not just on the rate outcome but also on discussions around balance sheets and pricing stability. Meanwhile, the Pound shows resilience, sitting at 1.3570 during quiet Asian trading. The pair remains in a broader upward trend, held within a technical channel established since late March. This rebound might encourage short-term positioning, especially as the Bank of England’s rate path may diverge from its peers. Bailey’s earlier comments suggested that inflation may be more stubborn than expected, leading to conversations about tightening. During our morning call, we discussed whether the pricing of short-term gilts is underestimating this situation.

Gold and Cryptocurrency Developments

Gold is stabilizing near multi-week highs, holding onto much of its recent gains but facing some challenges from the rising Dollar. It is being influenced by multiple factors: ongoing geopolitical concerns have generated defensive bids, while a stronger Dollar is limiting upward momentum. In the options market, the demand for calls indicates ongoing interest in upside risk, although this interest has decreased since last Thursday. Digital assets have entered a phase of lower volatility. Major cryptocurrencies like Bitcoin, Ethereum, and Ripple are showing less directional movement, sticking close to crucial support levels identified by market participants. For those involved in derivatives, implied volatilities are tapering off from their peaks—this is easing enough for short gamma strategies to seem more appealing. However, from a risk management perspective, testing these levels a couple more times could require adjustments to models. Attention is now focused on upcoming meetings from major central banks. What’s crucial is less about the process of rate increases and more about when policymakers will show confidence in their inflation strategies. In our positioning strategy, we emphasize forward guidance over fixed rate forecasts. A significant change in expectations could quickly affect cross-assets following any unexpected news. For option traders, particularly in rate-sensitive sectors, maintaining short-term flexibility is now more important than having a specific directional bias. Create your live VT Markets account and start trading now.

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