Construction output in the Eurozone dropped significantly year-on-year, decreasing from 3.2% in July to just 0.1% in August. This sharp decline highlights a tough period for the Eurozone’s construction sector. In the foreign exchange market, the EUR/USD pair stabilized around 1.1650, buoyed by a positive atmosphere, even after France’s credit rating was downgraded by S&P Global Ratings. Meanwhile, GBP/USD traded cautiously near 1.3400, influenced by a strong US Dollar and anticipation of upcoming UK inflation data.

Commodity Market Trends

In commodity markets, Gold made a recovery, rising above $4,300 after falling to about $4,200 earlier. The precious metal gained appeal due to uncertainties in US-China trade relations and expectations of a dovish approach from the Federal Reserve. Cardano (ADA) saw a correction, losing nearly 7% over the past week. This decline suggests traders’ confidence has weakened, as shown by the drop in Open Interest to a yearly low and an increase in short positions. The drastic fall in Eurozone construction growth, from 3.2% to just 0.1% year-on-year, indicates a sharp economic slowdown across the continent. This raises concerns about weakening demand, prompting us to rethink long positions on European assets. We are now exploring options strategies that could benefit from increased volatility or a continued decrease in European equity indices like the DAX and CAC 40. The weakness is widespread, as recent data from Destatis indicated a surprising 1.8% decline in German industrial production in September 2025. This confirms the slowdown in the Eurozone’s key economy, putting more pressure on the euro. Thus, we view the current EUR/USD stability around 1.1650 as a potential opportunity to establish short positions.

Credit Rating Impacts on Currency

S&P’s recent downgrade of France’s credit rating to A+ continues to affect the euro. This downgrade has raised borrowing costs for Paris, widening the gap between French and German 10-year bonds by 15 basis points since the announcement. Any rise in EUR/USD is likely to encounter selling pressure due to these weakening fundamentals. We also expect volatility in the British Pound ahead of the upcoming UK inflation data. With the September 2025 Consumer Price Index showing core inflation holding steady at 3.1%, another high reading could prompt action from the Bank of England. Traders might want to consider straddles or strangles on GBP/USD to take advantage of any significant market movement, regardless of direction. In light of the uncertainty in Europe and ongoing US-China trade tensions, gold is once again proving itself as a safe-haven asset. Its rise above $4,300 reflects growing expectations that the Federal Reserve will adopt a dovish stance. The CME FedWatch tool currently indicates a 70% chance that the Fed will keep interest rates steady at its November 2025 meeting. This risk-averse sentiment is spilling into more speculative markets like cryptocurrencies. The recent 7% drop in Cardano suggests that capital is moving away from high-risk assets, as data shows open interest has fallen to a yearly low while short positions are increasing. We expect this trend could lead to further declines in the broader crypto market in the coming weeks. Create your live VT Markets account and start trading now.

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