The USD/CNH exchange rate has risen above 7.1200. This increase follows a weaker-than-expected manufacturing PMI from China for October, which dropped to 50.6 from 51.2, falling short of the predicted 50.7. Despite the lower PMI, the outlook for China’s manufacturing sector looks better due to the ongoing trade truce between the US and China. Analysts believe that this change in trade relations continues to support the yuan.

AUD/USD Declines

In related market trends, the AUD/USD pair has fallen as the US dollar strengthens. People are paying close attention to the Reserve Bank of Australia’s policy meeting. The US ISM manufacturing PMI also showed a decline, decreasing to 48.7 in October from an expected 49.5. The GBP/USD pair started the week weak but later rose to 1.3130, hovering near its lowest levels since April. Meanwhile, gold is trading above $4,000 per troy ounce, bouncing back from recent dips but facing pressure from rising US Treasury yields. The US dollar is gaining ground against the Chinese yuan, moving above 7.12 as China’s manufacturing activity appears to be slowing. This trend isn’t new; we have seen similar sluggish PMI readings, including a 50.8 figure from late 2024, indicating a lingering slowdown. Traders might consider buying USD/CNH call options to benefit from further yuan weakness while managing their risk. However, the dollar’s strength is complicated by domestic weakness. US manufacturing is now in its fourth month of contraction, with the latest ISM PMI reading at 48.7. This indicates that the dollar is primarily acting as a safe haven rather than reflecting a strong American economy. We might think about buying puts on the Dollar Index as protection if weak US data starts to outweigh global concerns.

Gold as a Safe Haven

The demand for safety is clear in gold, which remains steady around the $4,000 mark. This price is supported by substantial gold purchases made by central banks between 2022 and 2024, which reached record levels as a hedge against inflation and geopolitical risks. Continuing to buy call options on gold futures could be a smart strategy to capitalize on ongoing economic uncertainty. This risk-averse sentiment is also evident in the crypto markets, where speculative assets like meme coins are experiencing sharp declines. The withdrawal from riskier assets indicates a rising anxiety within the broader market. We should keep an eye on increasing market volatility, and purchasing VIX call options could be a cost-effective way to safeguard portfolios against potential stock market downturns in the coming weeks. Looking ahead, central bank meetings in Australia and the UK will introduce significant risks, especially for the Pound. The Bank of England faces a tough decision between addressing stubborn inflation and supporting a fragile economy. This uncertainty makes options strategies like straddles on GBP/USD appealing for playing the expected volatility without committing to a specific direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now