Eurozone industrial production grew by 0.2% in September, which is below the expected 0.7%. This highlights the ongoing difficulties in the region’s industrial sector. The Canadian Dollar rose slightly during these events. In contrast, the US Dollar fell as the government reopened, affecting market trends.

Euro Reaches Multi-Year Highs

The EUR/JPY reached multi-year highs due to the Yen’s poor performance amid overall market sentiment. Meanwhile, EUR/CHF stabilized after previous losses, gaining support from Swiss deflation. Federal Reserve’s Daly commented that while inflation is decreasing, it remains stubborn. As a result, EUR/USD increased, benefiting from positive sentiment following the US government reopening. The EUR/USD stayed above 1.1600 due to lower demand for the US Dollar. GBP/USD also regained strength above 1.3150, despite disappointing UK GDP data. Gold prices continued to rise, hitting a three-week high above $4,200, as the USD weakened. Bitcoin stayed around $102,800, showing mixed market feelings.

Bank of Japan Under Pressure

The Bank of Japan is under pressure regarding interest rate increases, with rates held at 0.5%. Hyperliquid (HYPE) saw an 8% drop, with its market maker reporting a $4.9 million loss. With the US government now reopened, there’s a clear risk-on sentiment that is putting pressure on the US Dollar. This pattern is similar to past shutdowns, like in 2018, when the dollar weakened after political issues were resolved. The recent US CPI is still high at 3.5%, making it unlikely for the Federal Reserve to cut rates soon, although the dollar’s safe-haven status is fading for now. The Euro is gaining against the dollar, but caution is needed due to its shaky fundamentals. The unexpected 0.2% drop in Eurozone industrial production continues a troubling trend of manufacturing weakness seen since 2024. This suggests that the EUR/USD rally is mainly due to dollar weakness and might be fragile, making options strategies like buying puts a wise hedge. A better opportunity is with the Japanese Yen, which remains weak as the Bank of Japan is far behind other central banks in rate hikes. With the BoJ’s policy rate at just 0.5%, the gap in interest rates with other major economies is the largest in years, encouraging carry trades. It’s worth considering long positions in currency pairs like EUR/JPY that are reaching multi-year highs. Gold surpassing $4,200 an ounce shows ongoing fears about inflation that began with price shocks in 2022 and 2023. The current fall in the dollar makes precious metals a good hedge against stubborn inflation, providing a chance to add to long gold positions through futures contracts. The British Pound is rising due to overall dollar selling, but this overlooks weaknesses in the UK economy. Recent Q3 GDP figures showed minimal growth of only 0.1%. This makes the pound’s rally look unsustainable and vulnerable compared to currencies with stronger fundamentals. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now