Canada’s retail sales, excluding autos, dropped by 0.7% in August, which was below the expected 1.2% increase. This suggests weaker economic activity in the Canadian retail sector than anticipated. The USD/JPY increased as both Japan and the US prepared for inflation reports. Meanwhile, the USD/CHF experienced slight declines as the Swiss National Bank continued to oppose negative interest rates.

Gold Price Movement

Gold prices rose above $4,100, driven by buyers ahead of the US CPI release. The AUD/USD pair gained from strong commodity prices, even as attention turned to US inflation data and possible Federal Reserve rate cuts. In currency trading, the EUR/USD remained above 1.1600 amid concerns about trade and a US government shutdown. The GBP/USD fell to daily lows as expectations grew for a possible rate cut by the Bank of England. In the cryptocurrency market, Bitcoin tested the $110,000 resistance with renewed optimism. Ethereum and XRP also showed increases, with Ethereum approaching a 100-day EMA hurdle. Overall, the cryptocurrency market remains active, and Aster’s price is above $1.00, boosted by positive sentiment. The recent Canadian retail sales data from August indicates a potential slowdown. Statistics Canada recently reported that GDP growth for the third quarter is below the Bank of Canada’s expectations, suggesting that the Canadian economy is losing momentum more quickly than thought.

Canadian Economic Indicators

This situation points to buying call options on USD/CAD, anticipating that the Canadian dollar will weaken. We are considering options that expire in late November or early December to take advantage of this economic trend. The implied volatility for these options is reasonable, indicating that the market hasn’t fully accounted for this difference yet. The US dollar side of this trade looks strong, especially after the last Non-Farm Payrolls report showed over 210,000 jobs added, surpassing expectations. This creates a clear policy difference between a potentially dovish Bank of Canada and a cautious Federal Reserve. We recall the significant currency movements during the rate hikes of 2022-2023, and a similar divergence may be developing now. Additionally, gold remains strong, consistently trading above $4,100 an ounce. This reflects ongoing inflation concerns that central banks have struggled to address over the past two years. For those holding riskier assets, investing in gold futures or call options on gold ETFs can act as a safeguard against unexpected inflation surges. While rising oil prices, with WTI crude near $95 a barrel, usually bolster the Canadian dollar, we believe this influence is being overshadowed. The focus is shifting from commodity strength to the fundamental weakness in consumer demand. Currently, the central bank’s narrative is the more dominant factor. Create your live VT Markets account and start trading now.

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