The Dallas Fed Manufacturing Business Index for the U.S. fell to -8.7 in September from -1.8. This indicates a decline in the manufacturing sector’s business environment. In financial news, the AUD/USD remains below 0.6600 ahead of the RBA’s policy announcement. The Reserve Bank of Australia is expected to keep the key interest rate steady at 3.6% this month.

Commodities and Currency Markets

In commodities, gold continues to rise, supported by expectations of interest rate cuts from the Fed and uncertainty about the U.S. dollar. Bitcoin remains stable above $114,000 as investors wait for U.S. economic reports and consider the likelihood of a government shutdown. The USD/JPY is trading above 148.50 as the Bank of Japan’s recent statements bring uncertainty to potential rate hikes. Jerome Powell mentioned that the Federal Reserve faces a challenging situation in his latest speech. For forex traders, FXStreet warns that margin trading carries significant risk. It’s essential to assess your investment goals and risk tolerance before diving in. Please remember that the information from FXStreet is not formal investment advice. The steep fall in the Dallas Fed Manufacturing Index to -8.7 serves as a warning of a possible economic slowdown. This isn’t a one-off event; similar weakness has preceded weaker national data before, like during the manufacturing recession of 2015-2016. Recent figures from the Bureau of Economic Analysis show that business investment for the second quarter of 2025 was revised down, adding to concerns raised by this new manufacturing report. This economic slowdown helps explain why the Federal Reserve’s position is becoming more dovish, as noted in Chair Powell’s recent speech. Markets are increasingly pricing in rate cuts to support the economy. According to the CME FedWatch Tool, there’s a 70% chance of a rate cut before the end of 2025—a big change from under 20% just a month ago.

Market Trends and Volatility

As a result, investments are moving to safer options, with gold reaching new all-time highs. This surge is driven by the expectation of lower interest rates and concerns over a U.S. government shutdown, which the Congressional Budget Office estimates could reduce GDP by 0.2% for each week it continues. A similar trend occurred in the summer of 2020 when economic uncertainty and Fed support pushed gold prices to record levels. Bitcoin is also stabilizing around $114,000, benefiting from concerns about a potential government shutdown and the search for alternative assets. The market looks forward to a traditionally strong October for Bitcoin, which has seen positive returns in six out of the last nine years. Open interest in Bitcoin futures has steadily increased throughout September, indicating traders are preparing for potential gains. In currency trading, the Japanese Yen remains weak, keeping the USD/JPY above 148 despite a softer outlook for the U.S. dollar. The Bank of Japan has provided little information about its rate hike plans, making the Yen a popular choice for carry trades. This difference in central bank policies suggests that the USD/JPY could remain high, even if the Fed cuts rates. Given these factors, we can expect increased market volatility in the weeks ahead. The CBOE Volatility Index (VIX), often referred to as the market’s “fear gauge,” has risen from its summer lows and may spike even more, especially with U.S. Non-Farm Payroll data due this Friday. Strategies that profit from price fluctuations, like long straddles or strangles on major indices, could be worth considering. Create your live VT Markets account and start trading now.

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