Australia’s Producer Price Index increased to 3.5% year-on-year for the third quarter, up from 3.4%. The EUR/USD pair is cautious, trading around 1.1570. The US Dollar remains strong due to reduced expectations of a dovish Federal Reserve and better US-China trade relations. Meanwhile, GBP/USD has slightly risen after recent declines, trading at about 1.3160. This comes as the US Dollar faces challenges amid improved forecasts for Federal Reserve rate cuts, which have increased market expectations for a cut in December to 71% from 66%.

Challenges for Gold Amid US Dollar Strength

Gold is struggling to benefit from minor gains due to a mixed economic environment. The strength of the US Dollar, supported by the Fed’s firm stance and optimism in US-China trade, limits growth potential for the XAU/USD pair. Meme coins like Dogecoin, Shiba Inu, and Pepe are experiencing significant losses in the current cryptocurrency market downturn. These coins are testing critical support levels and could decline further if the overall market sentiment does not improve. The recent meeting between Trump and Xi did not bring any surprises after a weekend framework deal was made. China has lowered tariffs on Fentanyl-related products, while Trump secured the resumption of soybean exports and postponed Chinese export controls for a year. We see the US Dollar trading strong as expectations for a dovish pivot from the Federal Reserve are pushed back. The latest US Consumer Price Index data from mid-October 2025 shows inflation stubbornly holding at 3.1%, maintaining pressure on the Fed to keep its current policy rate. This situation suggests that option strategies betting on continued dollar strength, like buying dollar calls, could be advantageous.

EUR/USD and GBP/USD Pressure from the Dollar

This dollar strength keeps the EUR/USD pair near recent lows around 1.1570. The European Central Bank’s policy rate is currently at 3.5%, which provides a significant yield advantage for holding dollars. Traders might consider bearish positions and use put options to limit risk while aiming for further declines. While GBP/USD shows minor stability around 1.3160, any upward movement appears limited by the dollar’s power. Although some traders are pricing in a 71% chance of a Fed rate cut, the strong September 2025 jobs report showing 220,000 new jobs suggests that the economy can handle higher rates for a longer time. This mixed signaling may lead to increased volatility in the pair, making straddles or strangles a potential strategy. In Australia, the latest Producer Price Index for the third quarter of 2025 is at 3.5%, slightly up from the previous quarter. Ongoing inflation may force the Reserve Bank of Australia to maintain its restrictive stance. This could offer some support for the Aussie dollar against currencies with softer central bank policies, although it will likely struggle against the US dollar. Gold is finding it hard to gain direction as the hawkish Fed policy makes the non-yielding metal less appealing. A strong US dollar and US Treasury yields near 4.5% pose a significant challenge for XAU/USD. This indicates that selling call options on gold could be a smart strategy for profiting from sideways or downward price movements. Looking back, we recall the trade deal framework between Trump and Xi years ago, which provided temporary market relief by easing tariff worries. However, current US-China relations still create uncertainty, enhancing the dollar’s appeal as a safe-haven asset. This backdrop limits the potential upside for riskier assets affected by global trade. In the crypto market, the sell-off of speculative assets like Dogecoin and Shiba Inu is speeding up. This trend aligns with a broader risk-off sentiment, as higher interest rates draw capital away from volatile assets toward safer, yield-generating investments. We observed a similar pattern during the sharp market downturns of 2022, where speculative coins suffered the largest losses. Create your live VT Markets account and start trading now.

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