The UK RICS housing price balance for October stands at -17%. This is lower than the expected -14%, indicating weaker housing market conditions. In the forex market, AUD/JPY reached a yearly high near 101.60, thanks to strong Australian employment data. As a result, the Australian dollar gained value, leading to caution from the Reserve Bank of Australia.

UK GDP Expectations

The UK GDP is predicted to show a small increase for Q3, which may influence the Bank of England to ease its policies. The GBP/USD remained below 1.3150 ahead of the UK flash GDP report. The EUR/USD stayed cautious below 1.1600 as markets awaited comments from Federal Reserve officials. Additionally, the US Dollar Index rose to nearly 99.50 after the US government shutdown ended. In the cryptocurrency market, Sui (SUI) climbed above $2.00 with a 3.5% increase, even though the DeFi TVL dropped by 15%. This trend suggests a generally positive outlook in the cryptocurrency market. The UK housing market clearly shows signs of weakness. The October price balance at -17% is worse than expected. Recent data from the Bank of England revealed that mortgage approvals have fallen to the lowest level in a year, indicating a cooling trend. This economic decline is putting pressure on the Bank of England to consider easing monetary policy.

Interest Rate Expectations

There are strong expectations for a rate cut in December, with interest rate swaps indicating over an 85% chance of a 25-basis-point reduction. This expectation may put additional pressure on the British Pound, especially as GBP/USD struggles to stay above 1.3120. Options traders might consider buying GBP puts to hedge against or profit from further declines in the coming weeks. Meanwhile, the US Dollar is gaining strength now that the prolonged government shutdown has ended, eliminating a significant source of uncertainty. This mirrors a similar situation in early 2019, where a previous shutdown concluded with a dollar relief rally. The Dollar Index climbing toward 99.50 marks a significant breakout from the range it had held throughout the third quarter. This dollar strength is keeping EUR/USD below the 1.1600 level, a trend we expect to persist as we await Fed comments. In contrast, the Australian dollar benefits from strong employment figures, making it less likely for its central bank to cut rates compared to the Bank of England. This difference in policy makes currency pairs like AUD/GBP potentially attractive to buy. Gold remains resilient at nearly $4,200 an ounce, particularly with a stronger US dollar. This indicates that underlying demand is supported by persistent global inflation trends observed throughout 2024 and 2025. Thus, a strategy of buying call options during price dips may be more effective than selling into dollar strength. Create your live VT Markets account and start trading now.

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