**Potential Peace Talks** The FXStreet Insights Team shares market insights from expert analysts. This includes various aspects of Forex trading and tips for selecting brokers for 2025. There is a reminder that market movements come with risks and uncertainties, highlighting that readers are responsible for their own investment decisions. FXStreet and the authors do not provide personalized investment advice. **US Market Sentiment Dependence** The EUR/USD is currently at 1.1520, largely influenced by US market sentiment. Last week, the S&P 500 rose by 2%, and the VIX fell below 15. If this stability persists, a rise to 1.160 is possible. However, the release of the US CPI this Friday is crucial. If it exceeds the anticipated 2.8%, it could quickly halt any upward trend. Given the unpredictable nature of the CPI data, taking direct long positions carries risk. A safer strategy would be to buy short-term EUR/USD call options with a strike price at or slightly above 1.160. This way, you can benefit from a low inflation number while clearly limiting your maximum loss if the data is worse than expected. Another important yet currently overlooked factor is speculation about a potential truce between Ukraine and Russia. Reports suggest a possible three-way summit in Budapest in early November. If a ceasefire is announced, it could lead to a sharp, positive reaction in the euro, which the market is not currently factoring in. This potential truce creates a binary outcome, making it perfect for volatility trades. We are thinking about buying low-cost, out-of-the-money call and put options (known as a strangle) that expire in late November. This position would allow us to profit from a significant move in either direction, whether that’s a euro rally driven by peace or a dollar surge if talks fail. We are also monitoring the 10-year OAT-Bund spread, which has stabilized at 78 basis points after the S&P downgraded French debt. While this is high, it is far below the crisis levels of over 190 basis points seen in 2012, suggesting that political stability is currently easing fiscal concerns. However, if it rises above 85 basis points, it could indicate renewed stress and pose a challenge for the euro. Recent comments from ECB officials about boosting the euro’s global role are mainly background noise for now. This long-term goal is unlikely to impact spot prices in the near future. For the moment, the ECB seems to allow US data and geopolitical events to dictate the currency’s direction. Create your live VT Markets account and start trading now.

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