Average hourly earnings in the United States rose by 0.4% in October, a noticeable increase compared to the previous month’s 0.2% rise. Retail sales held steady at $732.6 billion, falling short of the anticipated 0.1% growth.
Gold prices climbed above $4,300, benefiting from a weaker USD, while the unemployment rate increased to 4.6%. The PMI indicated a slowdown in private sector growth. In contrast, BNB dropped to around $855, as rising retail activity suggested growing bearish sentiment according to on-chain and derivatives data.
Euro and British Pound Gains
The EUR/USD currency pair gained strength, nearing 1.1800 as the USD weakened. This came after reports showed a decline of 105,000 in Nonfarm Payrolls for October, but an increase of 64,000 in November.
GBP/USD also saw positive movement, trading above 1.3430. The British Pound rose due to encouraging PMI data, while the USD struggled with mixed employment figures and disappointing PMI results. Gold remained stable around $4,300 after recovering from earlier downward trends.
The details in this article are not to be taken as investment advice, and the authors are not registered investment advisors.
Current data indicates that the US economy is slowing down as we approach year-end. We see flat retail sales and a weak jobs report. Two months ago, there was a net loss of jobs, with only a small gain in November. This shows that consumers are weakening and businesses are reducing hiring.
US Economic Weakness and Market Strategy
The rise in the unemployment rate to 4.6% is a significant warning for the market. This is the highest unemployment rate we’ve seen since the recovery phase after the pandemic in early 2022, indicating a cooling labor market. Recent reports also highlight that US household credit card debt has surpassed a record $1.5 trillion, which could limit future spending.
In light of this US economic weakness, we should brace for ongoing dollar softness in the coming weeks. Derivative traders might consider buying put options on dollar-tracking ETFs or shorting dollar futures. The mixed signals of rising wages combined with a slowing economy also make buying volatility through VIX futures an attractive option to hedge against market uncertainty.
We can see this dollar weakness reflected in currency pairs, with both the Euro and British Pound rising higher. The pound appears particularly strong, trading above 1.3430 thanks to its positive economic reports. We believe that using call options or long futures on GBP/USD and EUR/USD is a straightforward way to capitalize on this trend.
Gold’s stability above $4,300 per ounce highlights a broader shift to safe-haven assets and a growing lack of confidence in the economic outlook. Historically, gold tends to perform well during periods of stagflation, which we may be entering now. It makes sense to consider long positions in gold futures or call options on gold ETFs.
On the other hand, the crypto market seems weak, evidenced by BNB’s decline to $855. The increase in retail derivative activity typically suggests potential declines, indicating that more downside could follow for these assets. This situation might present opportunities for bearish positions, such as buying put options or shorting BNB futures.
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