Total net Treasury International Capital (TIC) flows in the United States dropped significantly in October. The figure fell from $190.1 billion to a negative $37.3 billion, signaling a reversal in capital inflows. In other economic news, the Japanese Yen declined during intraday trading after the Bank of Japan raised interest rates. Meanwhile, gold prices continued to decrease despite expectations of a Federal Reserve rate cut due to decreasing US inflation.

Interest Rate Impacts on Currency Pairs

The EUR/JPY rose in value as the Bank of Japan lifted interest rates to 0.75%. The GBP/JPY also went up, surpassing the mid-208.00s after the Bank of Japan’s 25 basis points rate increase. The price of WTI crude oil fell, struggling to stay above $56.00. This drop came amid talk of a possible peace agreement between Russia and Ukraine. The Australian Dollar held steady, backed by a strong Reserve Bank of Australia policy outlook. On the cryptocurrency front, Ripple maintained a support level at $1.82, although there were concerns about low retail demand. Top losers in the crypto market included Pump.fun, Pudgy Penguins, and Hyperliquid, all experiencing double-digit declines as the November US Consumer Price Index unexpectedly dropped to 2.7%.

Economic Indicators and Investment Strategies

The drastic shift in U.S. capital flows for October 2025—from a $190.1 billion inflow to a $37.3 billion outflow—serves as an important warning. This trend could mean foreign investors are offloading U.S. assets, leading to potential pressure on the dollar if it continues into November and December. Derivative traders might consider positions that profit from a weaker dollar, such as buying puts on the dollar index or calls on pairs like EUR/USD. With U.S. inflation cooling to 2.7% in November, below market expectations, the argument for Federal Reserve rate cuts in early 2026 is gaining strength. Historically, markets often react well in advance of the Fed’s decisions, a trend observed in late 2023 and early 2024. Thus, positioning in interest rate futures that bet on a lower federal funds rate by the second quarter of 2026 may be a wise strategy. The Bank of Japan’s rate hike seems to have been fully anticipated, resulting in a “buy the rumor, sell the fact” response reflected in the yen’s weakness. This outcome makes yen-funded carry trades attractive again, where investments are made in higher-yielding currencies while borrowing in a lower-interest currency. Selling yen futures or buying call options on pairs like GBP/JPY, which is currently performing well, seems like a sensible approach for the upcoming weeks. Gold’s decline below $4,350 is puzzling, especially with decreasing inflation data. However, it highlights significant profit-taking and liquidation by short-term traders, which might present a buying opportunity for those with a longer-term outlook. The environment of expected rate cuts remains beneficial for non-yielding assets, suggesting this is a temporary dip. Long-dated call options on gold could be an intriguing bet on a future rebound. In the energy sector, crude oil’s struggle below $56 per barrel is largely tied to geopolitical factors rather than supply and demand basics. A potential peace agreement in Ukraine could remove the substantial risk premium built into oil prices since the conflict intensified in the early 2020s. Traders should brace for further price drops, as a formal agreement could lead to a quick sell-off toward the $50 mark, making puts on WTI futures a relevant hedge. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now