The UK Index of Services for October showed no growth at 0%, which was below the expected 0.1%. This means the sector did not perform as forecasted for the month. In the currency market, GBP/USD is still below 1.3400, even with mixed economic data from the UK. UK GDP dropped by 0.1% in October, while Manufacturing Production rose by 0.5%, missing the predicted 1% increase.

The US Dollar And Gold Market

The US Dollar is close to a two-month low because the Federal Reserve is taking a soft approach, helping gold prices rise above $4,300. The S&P 500 has been climbing after a rate cut by the Federal Reserve, boosting various market sectors. Litecoin sits above $80 but is struggling to gain more, with derivatives data suggesting a potential positional squeeze. Aave, on the other hand, is set for a breakout as its price trades above $204, approaching a bullish pattern. This information is for informational purposes only and should not be considered financial advice. It’s important to do your research before making any investment decisions, given the risks and potential losses involved. FXStreet is not responsible for any inaccuracies or errors in this information. With the UK services sector showing no growth, there is a higher chance of economic stagnation as we move into the new year. The Office for National Statistics recently confirmed this trend, revising the third-quarter 2025 GDP down to -0.1%, reflecting a slowdown similar to that in 2023. This could negatively impact UK-focused assets, suggesting opportunities to profit from a decline in the FTSE 100 index.

Impact Of The Federal Reserve’s Rate Cut

The recent rate cut by the US Federal Reserve is a key factor affecting the markets, weakening the US dollar. The dollar index (DXY) is currently below 102, a sign of significant bearish sentiment and market positioning for further easing. This environment makes it hard to be optimistic about the dollar, so options strategies that profit from a declining or stable dollar should be prioritized. The weak dollar and dovish Fed are benefiting gold, pushing it towards new highs. A similar situation occurred in late 2023 and early 2024 when expectations of a Fed pivot sent gold to record highs. Derivative traders might consider bullish strategies, such as buying call options or futures contracts, to capture this momentum. This dovish policy is also supporting US stocks, with the S&P 500 remaining strong. The CME FedWatch Tool now shows over a 70% chance of another rate cut by the end of the first quarter of 2026, likely keeping stock market sentiment positive. It may be wise to use index futures or options to maintain long positions in the broader market, especially in non-tech sectors that benefit from lower borrowing costs. The situation with Pound Sterling is more complicated due to a weak UK economy and a weak US dollar. This has kept the GBP/USD pair in a narrow range below 1.3400, with neither currency showing clear strength. Using volatility options like straddles on the pair could be a way to prepare for a potential breakout without choosing a specific direction. Create your live VT Markets account and start trading now.

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