The Jibun Bank Manufacturing PMI for Japan in October dropped slightly to 48.2, just below the expected 48.3. This number is under the 50.0 mark, which means that Japan’s manufacturing sector is contracting. In other news, the Reserve Bank of Australia kept interest rates unchanged at 3.6%. Also, the USD/JPY exchange rate hit new multi-month highs, partly due to uncertainty around the Bank of Japan’s policies.

Euro and US Dollar Movement

The EUR/USD fell to about 1.1510 because of a stronger US Dollar and cautious comments from the Federal Reserve. Meanwhile, gold prices dropped below $4,000 after the Fed’s hawkish remarks, reducing hopes for more rate cuts. In the cryptocurrency market, Aster, Cosmos, and Bitget have seen significant losses due to a broader market sell-off. Cardano’s price fell below $0.58, driven by lower on-chain activity and increased negative bets. Next week, all eyes will be on the US Federal Reserve’s decisions, which could affect currencies worldwide. The markets are also waiting for rate announcements from central banks in Australia and the UK, both of which may shape future monetary policies.

Japanese Manufacturing PMI and Economic Outlook

The Japanese manufacturing PMI of 48.2 confirms a contraction and suggests a negative outlook for Japan’s economy. This slight drop increases uncertainty about the Bank of Japan’s policies. Historically, extended periods with PMI below 50, like those in 2023, have led to a weaker Yen. The US dollar’s strength is fueled by a hawkish Federal Reserve. This pressure impacts commodity currencies like the Australian and New Zealand dollars. Recently, China’s manufacturing PMI reported 49.5, indicating weak demand. The dollar’s rise is similar to the tightening cycle of 2022-2023 when the US Dollar Index (DXY) hit 20-year highs. Consider strategies that benefit from a weaker yen and a stronger dollar, like buying USD/JPY call options or selling yen futures. The Bank of Japan has historically been slow to shift away from its ultra-loose monetary policies, which affects the currency’s value. This risk-averse sentiment is also seen in other assets, with gold struggling to maintain its value. A strong dollar makes gold pricier for foreign buyers, reducing its attractiveness compared to US Treasury yields. The ongoing sell-off in the cryptocurrency markets suggests traders are opting for the relative safety of the dollar. The selling pressure on AUD/JPY highlights this risk-averse environment. With Australia’s central bank keeping rates steady and Japan’s economy weakening, buying put options on this pair could be a smart move to profit from potential declines. This trade directly responds to concerns about declining global growth. Create your live VT Markets account and start trading now.

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