Major currency pairs were stable on Monday after a week of increased volatility. No significant macroeconomic data is expected this week, which means attention is on US-China trade relations. China’s GDP grew by 4.8% in Q3, down from 5.2% the previous quarter. Retail sales rose by 3% in September. The People’s Bank of China kept interest rates steady, as expected.

The US Dollar Index

The US Dollar Index ended a three-day drop with a positive closing on Friday, remaining steady around 98.50. US stock index futures rose between 0.35% and 0.55%. Gold corrected itself, falling over 1.5% from a high of $4,380 to about $4,250. NZD/USD saw some gains as New Zealand’s CPI rose 1% in Q3, matching expectations. GBP/USD stayed stable above 1.3400, with UK CPI data expected soon. USD/CAD remained above 1.4000 after a series of weekly gains. EUR/USD ended its winning streak on Friday, holding above 1.1650. A Bank of Japan member noted that Japan had reached its inflation goals, causing USD/JPY to trade above 150.50.

Market Sentiment And Projections

We are starting the week with a cautious “risk-on” mood, although this feeling is delicate after last week’s fluctuations. Trade relations between the US and China will be crucial in the coming weeks. Any positive news could boost equities and riskier currencies, making short-term call options on stock indexes an appealing choice. The US Dollar is stable now, but underlying pressures remain. The US Federal Reserve has held interest rates at 4.75% for several months to control the high inflation seen from 2022 to 2024. The market is watching for signals of a potential pivot. Futures markets now indicate a greater than 60% chance of a rate cut by the end of the first quarter of 2026, which could negatively impact the dollar if this sentiment grows. The Japanese Yen is notably weak, largely due to the interest rate gap between the US and Japan. Although the Bank of Japan raised its policy rate to 0.10% early last year, the difference is still wide enough to promote carry trades, pushing USD/JPY above 150.50. Traders in these positions may want to consider using derivatives to guard against sudden reversals, as this crowded trade is sensitive to changes in global risk sentiment. Gold’s recent surge to $4,380 and sharp pullback highlight ongoing market anxiety. This price movement underscores the geopolitical instability and inflation fears that have been prevalent since the early 2020s. We think using options strategies like straddles, which profit from significant price moves in either direction, is a smart way to trade gold’s potential volatility. China’s GDP growth of 4.8% aligns with a managed economic slowdown we have observed over the past year. This steady but lackluster growth affects the outlook for commodity-exporting nations. Therefore, we recommend avoiding large, unhedged positions in currencies like the Australian Dollar until we have more clarity on Chinese demand for industrial metals. Create your live VT Markets account and start trading now.

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