Italy’s unemployment rate was 6% in August, matching expectations. This steady rate continues despite economic changes in Europe and globally. In September, inflation in the Eurozone rose to 2.2%, mainly due to energy costs. This increase is expected to decrease in the coming months, potentially lowering inflation by the end of the year.

Currency Markets Update

In the currency markets, the EUR/USD pair stayed above 1.1750 as the US Dollar weakened due to worries about a possible US government shutdown. Meanwhile, GBP/USD climbed to 1.3500, boosted by positive sentiment for the Pound Sterling. Gold prices have stabilized below recent highs, remaining steady despite the partial US government shutdown and the overall market sentiment is relatively positive. Both Dogecoin (DOGE) and Shiba Inu (SHIB) gained this week, with increases of over 7% and 5%, respectively. This uptick indicates reduced bearish pressure and the potential for more gains. Litecoin has also shown strength, surpassing $118 with more than a 10% rally this week. Increased Open Interest and trading volume support the positive outlook for the LTC token. We are witnessing market unease similar to late 2023 when fears of a US government shutdown and a softening job market briefly weakened the dollar. At that time, data revealed US job openings falling below 9 million for the first time since early 2021, signaling weakness to traders. This led currencies like the Euro and the Pound to reach multi-month highs against the dollar.

US Labor Market Trends

Today, the US labor market has softened but remains stable, with job growth averaging about 150,000 per month for most of 2025. This slow cooling trend suggests that the Federal Reserve can be patient regarding further rate cuts. It may be wise to consider options that bet on a strengthening dollar, as its fundamental support seems stronger than during the scare in 2023. The European Central Bank’s situation differs significantly from 2023 when they kept rates firm. They began lowering rates in mid-2024 and have cut them three times already in response to sluggish annual Eurozone growth around 0.5%. This policy divergence from the Fed implies that any Euro strength above 1.10 should be seen as a selling opportunity. In the UK, inflation has proven more persistent, as indicated by business surveys in 2023. Although the UK’s headline CPI has dropped to 3.1%, it remains above the Bank of England’s target, making them the most cautious major central bank regarding rate cuts. This context makes long Pound positions against the Euro a potentially attractive trade in the coming weeks. Looking ahead, implied volatility in major currency pairs is low compared to the highs seen during the 2022-2023 rate hike cycles. The VIX index, which measures stock market fear, is around a calm 14, indicating complacency. This environment makes buying options, such as puts on EUR/USD, a cost-effective strategy to guard against unexpected economic shocks. Create your live VT Markets account and start trading now.

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