In September, pending home sales in the United States fell from a yearly increase of 3.8% to a decrease of -0.9%. This decline occurs as the US Federal Reserve considers lowering the policy rate after its October meeting. This week, the European Central Bank is expected to keep interest rates unchanged. The euro area economy remains strong, and growth forecasts might be updated in December, with inflation risks appearing balanced.

Trading and Investment Analysis

The Pi Network (PI) is trading above $0.2600, exceeding the 50-day Exponential Moving Average of $0.2618. This suggests a possible breakout. Detailed guides on the best forex brokers for 2025 cover various markets like EUR/USD, Mena, Latam, and Indonesia, including options for high leverage and Islamic accounts. FXStreet warns investors to be cautious, as the information may contain inaccuracies. Investing carries significant risks and potential losses, so it is crucial to assess the market carefully. The drop in pending home sales to -0.9% signals a cooling US economy. The recent Case-Shiller index also shows its first monthly home price decline since early 2024. These trends give the Federal Reserve a strong reason to consider easing monetary policy. With the Fed likely to announce its first interest rate cut since 2022 tomorrow, we should prepare for lower rates. The CME FedWatch Tool indicates an 85% chance of a 25-basis-point cut, which the market has largely anticipated. The true potential lies in derivatives like options on Treasury bond ETFs, such as TLT, which would rise as yields decrease.

Trading Strategies and Market Implications

In Europe, the European Central Bank is expected to hold its current position, creating a policy gap that traders can take advantage of. The Eurozone economy has shown resilience, with the latest composite PMI data remaining in a growth phase at 51.2 for six months running. This difference between a cutting Fed and a steady ECB should lift the EUR/USD currency pair. To benefit from this divergence, we should think about buying EUR/USD call options that expire in the coming weeks. This strategy offers a low-risk way to gain exposure to the potential rise of the euro against the dollar. The reaction could be rapid if Fed Chair Powell’s comments are particularly dovish, signaling an ongoing easing cycle. In equity markets, a rate cut usually indicates a bullish trend, suggesting a potential rally in stock indices. We can consider using call options on the S&P 500 to capitalize on this upside with limited risk. However, we need to monitor implied volatility, which might be high around major central bank announcements. We must remain cautious, however, as the Fed is cutting rates due to economic weakness rather than strength. Historically, when the Fed began cutting rates in late 2007, the stock market continued to decline as a recession set in. This initial cut could signal deeper issues, so we should be ready to adjust our positions if economic data worsens. Create your live VT Markets account and start trading now.

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