Italy’s industrial output rose by 2.8% in September, beating the expected 1.5%. This strong performance indicates a healthy industrial sector in Italy during this time. In other market news, USD/CAD is holding steady around 1.4000 as excitement grows for the US reopening. Gold prices are also strong, nearing a three-week high, as investors anticipate the upcoming US House funding vote.

Currency Movements

In currency news, USD/JPY rose as the yen weakened following the Bank of Japan’s cautious approach. The dollar index, DXY, has dropped to a two-week low with a possible end to the government shutdown in sight. The pound is facing challenges due to weak job data in the UK, leading to expectations of a cautious Bank of England. Additionally, USD/CHF has seen six consecutive days of losses. Markets are optimistic about a potential solution to the US government funding issues, with European indices performing well. However, the FTSE 100 reported slight losses. Chainlink has a positive outlook as demand grows due to staking rewards. Italy’s surprising 2.8% increase in industrial output points to some resilience in the Eurozone economy. This strong data might help stabilize the EUR/USD, even as it struggles below the 1.1600 mark. This is a significant improvement compared to the volatile and often negative monthly results seen throughout much of 2024. We are closely monitoring the US House vote to end the government shutdown, which is influencing short-term market sentiment. A resolution could lead to a relief rally and boost the US Dollar, easing some of the uncertainty that caused the DXY to hit two-week lows. Historical reactions to similar budget resolutions in 2023 suggest that a risk-on move is likely.

Market Strategies

For currency derivatives, we recommend considering short volatility strategies on major dollar pairs after the US funding bill passes. The cautious approach from the Bank of England, supported by recent UK job data indicating unemployment rising to 4.5%, makes GBP/USD puts a good hedge against further weakness. On the other hand, the Bank of Japan’s contrasting position continues to favor buying USD/JPY call options. Gold holding above $4,100 an ounce signals ongoing market anxiety, despite any short-term optimism. This price level reflects enduring global inflation since the early 2020s and a widespread distrust in fiat currencies. Any dip in gold during a risk-on rally should be seen as a long-term buying opportunity rather than a reversal of the main trend. Create your live VT Markets account and start trading now.

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