Germany’s retail sales rose slightly by 0.2% in September, down from a previous increase of 1.8%. This indicates a slowdown in growth. In European trading, the EUR/USD pair is cautiously holding above 1.1650. This comes as the US Dollar strengthens, fueled by lowered expectations of a dovish approach from the Federal Reserve and better US-China trade relations.

The GBP/USD Pair

The GBP/USD pair is stable around 1.3150, close to its five-month high. The US Dollar’s strength is linked to easing trade tensions with China and reduced chances of a Fed rate cut. Gold prices see a slight recovery during early European trading, but the overall outlook is still negative. The US Dollar’s strength, backed by the Federal Reserve’s assertive stance, continues to impact gold’s attractiveness. Meme cryptocurrencies, such as Dogecoin, Shiba Inu, and Pepe, are under pressure. In a broader market downturn, they are testing their support levels, raising the risk of further declines.

The AI Sector Remains a Key Focus

The AI sector continues to capture attention in global markets. Even with factors like Fed policy and US-China trade dynamics, artificial intelligence plays a crucial role in shaping market trends. The drop in Germany’s retail sales is concerning, with year-over-year growth shrinking from 1.8% to just 0.2%. This signals that European consumers are significantly slowing down as we approach the final quarter. This is the weakest result in over a year, indicating a serious economic slowdown. Due to this downturn, the Euro is likely to face ongoing pressure, especially against a strong U.S. Dollar. The U.S. economy appears robust, as shown by the recent non-farm payrolls data, which revealed an addition of 210,000 jobs last month, keeping the unemployment rate at 3.7%. Therefore, buying put options on the EUR/USD could be a smart strategy for positioning toward a possible drop to the 1.1500 level. This consumer weakness in Germany isn’t just about currency; it’s a direct threat to corporate earnings. This situation could make the German DAX index vulnerable to a pullback from its recent highs. Traders might want to consider buying put options on DAX futures or related ETFs to hedge against a potential downturn in European stocks. The European Central Bank is unlikely to raise rates, with inflation stable at 2.1%, down from over 3% earlier in 2025. This ongoing policy gap with a more hawkish U.S. Federal Reserve echoes the situation from 2014, which initiated a multi-year period of dollar strength. This historical trend suggests that the current dollar favoritism has room to grow. With a strong dollar and the Federal Reserve resisting rate cuts, gold’s attractiveness will likely continue to diminish. The metal has struggled to gain momentum, and current conditions will add more pressure. We expect that selling call spreads on gold futures may be a wise strategy, taking advantage of limited potential for upside. Open your live VT Markets account and start trading today.

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