New Zealand’s Business NZ Performance of Services Index (PSI) rose to 48.7 in October, an increase from 48.3. This index shows activity levels in the services sector, where readings below 50 indicate a slowdown. In related markets, the EUR/USD currency pair remains near 1.1600 despite a weekly drop. The Dow Jones Industrial Average is lagging behind as AI stocks recover, and delays in US data present challenges.

Movements in British Pound and US Dollar

The GBP/USD pair has dropped to 1.3140 as the US Dollar gains strength. Concerns about the UK’s fiscal policies and political stability are weighing down the British Pound. Gold prices are nearing $4,000, pressured by the US Dollar’s strength and rising US Treasury yields. Bitcoin is trading above $97,000, but low demand continues to affect other cryptocurrencies like Ethereum and Ripple. VeChain is upgrading its mainnet from Proof of Authority to Delegated Proof of Stake, part of its growth plan. This upgrade might result in a 15% price drop. The focus is now on US data post-shutdown, as market weakness persists by the week’s end. Although the US government shutdown has ended, market risk appetite remains low, impacting stocks and bonds.

Currency Strategies and Market Insights

The market’s response indicates a strengthening US Dollar, as traders scale back on expectations for a December rate cut from the Federal Reserve. This trend is lowering major currency pairs and commodities. It mirrors early 2024 when persistent inflation data led markets to retract aggressive rate cut hopes established after the Fed’s less aggressive stance in late 2023. For currency traders, this suggests that bearish bets on EUR/USD and GBP/USD could have more potential. With EUR/USD struggling at 1.1600, buying put options or selling call spreads might help position for further declines. Likewise, the UK’s political and fiscal issues could push GBP/USD below 1.3100, making protective puts a wise choice. The significant drop in gold prices toward the $4,000 level results directly from rising US Treasury yields and a strong dollar. We’ve seen this inverse relationship, particularly during the tightening phase of 2022-2023. Traders should note that as long as the Fed maintains a hawkish stance, any rallies in gold could be short-lived, so strategies like buying puts on gold futures can help manage risk. The end of the US government shutdown didn’t spark a rally in equities, leaving markets looking vulnerable. Delayed economic data has caused uncertainty, and a hawkish Fed is a typical headwind for stocks. Consider buying VIX calls to hedge against potential spikes in volatility or out-of-the-money puts on major indices like the S&P 500. The small gain in New Zealand’s services sector, with the PSI still at 48.7, indicates ongoing economic weakness outside the US. This continues the contraction trend seen in 2023 and 2024, suggesting that the Reserve Bank of New Zealand may not align with the Fed’s policies. This further supports the case for US Dollar strength against smaller currencies like the Kiwi dollar. Finally, the decline in cryptocurrencies aligns with a risk-off sentiment, as high interest rates make non-yielding assets less attractive. Even with Bitcoin above $97,000, the lack of new demand points to potential vulnerability. Derivative traders might consider selling call spreads on Bitcoin and Ethereum futures to benefit from sideways or downward price movements in the coming weeks. Create your live VT Markets account and start trading now.

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