Susan Collins, the President of the Federal Reserve Bank of Boston, shared her thoughts on the economy at the Greater Boston Chamber of Commerce. She explained that the Federal Reserve’s policy remains flexible and could keep interest rates steady. Collins anticipates economic growth, a slight rise in unemployment, and ongoing inflation, which will positively affect households. She highlighted that risks to the job market are increasing, but expects inflation to ease as the impact of tariffs decreases. While tariffs have created some inflation pressures, they are now more manageable, and the Fed’s policies will remain tight. Collins predicts that interest rates will gradually return to normal, considering potential cuts due to job market forecasts, and expects a modest increase in unemployment with improved hiring over time.

Currency Movements

The US Dollar experienced mixed changes against major currencies. It fell by 0.26% against the Euro, dropped 0.29% against the Pound, but gained 0.51% against the Yen. You can refer to the provided currency heat map for insights on currency valuations and daily fluctuations in the forex market. The Federal Reserve suggests that more rate cuts are likely. Collins indicated that another 25 basis point cut may be needed due to increasing job market risks. This supports the idea that the peak of the interest rate hikes is behind us. Recent data backs this view. The September 2025 jobs report showed payrolls increased by just 65,000, significantly lower than last year’s averages. Core inflation has also dropped to 2.8% year-over-year, giving the Fed more flexibility to ease its policies. The market now anticipates a strong likelihood of a rate cut at the December meeting. For derivative traders, this means preparing for lower short-term interest rates. Consider long positions in Secured Overnight Financing Rate (SOFR) futures or Fed Funds futures, which will rise if the Fed cuts rates as expected. Options strategies that benefit from falling yields, like buying calls on Treasury note futures, also appear promising.

Dollar and Interest Rate Impact

The possibility of further easing makes long positions in the US dollar less attractive. Today, the dollar is weakening against the Euro and Yen, and this trend may persist. Traders might consider options that bet on the dollar declining further, such as buying puts on the Dollar Index (DXY) or calls on pairs like EUR/USD. A weaker dollar and lower real interest rates are favorable for precious metals. Gold is currently priced over $4,150 an ounce, and the Fed’s shift in policy could drive prices to new highs. Long call options on gold futures or related ETFs might be smart ways to profit from this expected rise. This change in policy could also boost the equity markets, which have faced challenges due to high rates since the aggressive hikes of 2023-2024. We might see implied volatility, as indicated by the VIX, continue to decrease from recent peaks. Call options on major indices like the S&P 500 could do well if the Fed manages a smooth transition. Create your live VT Markets account and start trading now.

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