In October, India’s HSBC Composite Purchasing Managers’ Index (PMI) rose from 59.9 in September to 60.4. This growth signals increased activity in India’s private sector, showing that the economy is expanding. Gold prices surpassed $4,000, driven by a weaker US Dollar and greater demand for safe assets. The USD/INR stabilized after initial losses, while the EUR/CAD maintained its position above the nine-day EMA at 1.6200 during a consolidation phase.

Central Banks and Market Sentiments

The Bank of England’s upcoming policy announcements are likely to impact the Pound Sterling. Crude oil prices remained strong as the European market opened, with WTI leading the upward trend. Markets face challenges from various factors, including a possible US government shutdown and comments from the Federal Reserve. The release of Eurozone Retail Sales data was expected to influence the direction of EUR/USD, which was slightly over 1.1500. Solana remained stable above $160, indicating strong interest from both institutional and retail investors. This points to potential further growth as part of the broader recovery in the crypto market. The latest HSBC Composite PMI for India shows the economy is thriving at 60.4, continuing the trend of growth since the post-pandemic recovery. For derivative traders, this strengthens the case for long positions on Nifty 50 futures, aiming for new highs. It may be wise to sell out-of-the-money puts to collect premium, as the robust domestic data supports this strategy.

Market Volatility and Strategy

Despite this positive outlook, Foreign Institutional Investors reduced their holdings, pulling out $2.5 billion from Indian equities last month, despite the strong PMI. This suggests that global risk aversion, likely linked to the US situation, is currently outpacing local strengths. This divergence may lead to volatility in the USD/INR pair, making option straddles an attractive strategy to profit from potential sharp movements. The ongoing US government shutdown, now in its fifth week, continues to hurt the dollar, with the DXY index dropping below the 96.00 support level. This signals a favorable environment for short-dollar positions across the board. Call options on EUR/USD and GBP/USD look appealing, as both pairs show technical strength and benefit from the dollar’s political weakness. Gold crossing the $4,000 mark is a significant milestone, supported by a falling US Dollar and strong demand for safe-haven assets. While the inverse relationship with the dollar boosts gold, the demand for safety indicates underlying market fears. We recommend buying long-dated call options on gold futures or gold ETFs for exposure to potential gains while capping risk if the US political situation changes unexpectedly. Although the Euro is gaining against the dollar, the European economy shows weaknesses, as evident in Germany’s recent industrial production figures missing expectations. This lackluster data may keep the European Central Bank cautious, limiting the Euro’s strength. We see an opportunity in trading the EUR/GBP cross, looking to short the Euro against a Pound that could be strengthened by a hawkish Bank of England announcement. Create your live VT Markets account and start trading now.

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