The Eurozone’s Harmonized Index of Consumer Prices (HICP) rose by 0.2% in October, an increase from 0.1%. The annual inflation rate for the HICP slightly dipped to 2.1% in October, which matched analysts’ forecasts.

Forex Market Reactions

After the inflation data was released, the EUR/USD currency pair remained above 1.1550. In contrast, GBP/USD faced weekly losses, trading below 1.3150, due to the US Dollar’s strength driven by Fed Chair Powell’s hawkish comments. Gold prices stabilized above $4,000 after recovering on Thursday. This level held steady as US-China tensions eased. However, the absence of comments from Federal Reserve officials kept gold trading without much momentum. Meme cryptocurrencies like Dogecoin, Shiba Inu, and Pepe might break below their monthly support levels. The wider sell-off in the cryptocurrency market has led to significant losses for these coins, putting them in a precarious situation. Artificial intelligence continues to be a major influence in global markets, overshadowing other economic news. Despite various geopolitical issues, AI remains the key factor affecting market behavior. With the Eurozone’s annual inflation rate at 2.1%, pressure builds on the European Central Bank to avoid cutting rates too quickly. This ongoing inflation, echoing the persistent levels seen throughout 2023, indicates that the EUR/USD might trend lower. Consider buying put options that target a drop below the 1.1550 support level in the upcoming weeks.

Impact of Federal Reserve Policies

A hawkish Federal Reserve keeps enhancing the strength of the US dollar, which impacts currencies like the British pound. GBP/USD is struggling below 1.3150, reminiscent of late 2022 when the US Dollar Index (DXY) was consistently above 105 due to aggressive Fed strategies. This scenario supports taking short positions in GBP futures, with expectations of further declines. It’s essential to recognize that artificial intelligence is the primary driver of the market, more so than central bank decisions or geopolitical events. This situation mirrors the 2023 market, where the top seven tech stocks contributed significantly to S&P 500 gains. The best strategy is to use call options on AI-focused stocks and ETFs to keep invested in this leading trend. Gold’s stability above the $4,000 marks a pause after its significant rise from under $2,500 in 2024. As traders await new signals from Fed officials, we may see increased volatility soon. An options straddle, which benefits from large price moves in either direction, is a smart way to prepare for potential breakouts. In the cryptocurrency market, the decline in meme coins like Dogecoin and Shiba Inu acts as a clear warning sign for speculative investments. Breaking through their current support levels could lead to sharp drops, similar to the 2022 crypto market crash where numerous altcoins lost over 50% of their value quickly. Buying puts or shorting futures on these assets could be a solid protection against overall market weakness. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now