Pound Sterling hits a nearly three-month low against the US Dollar during European trading
The Pound Sterling has dropped to its lowest level in almost three months, trading at around 1.3200 against the US Dollar. Investors are eagerly waiting for the Federal Reserve’s decision, which is expected to lower interest rates by 25 basis points to 3.75%-4.00%.
UK Chancellor Rachel Reeves may implement higher taxes on households and reduce spending in the upcoming budget. Reports indicate that the Labour Party is planning a fiscal cut of about £30-35 billion. This may include raising the dividend tax rate and introducing new taxes on sugar and gambling.
ASML, a Dutch firm, is experiencing a five-wave surge towards record market highs.
ASML is a Dutch company that supplies semiconductor equipment and stands out for its advanced photolithography machines, which are vital for making microchips. They are the only manufacturer of extreme ultraviolet lithography systems, key for modern chip production.
ASML’s stock is on the rise, hinting that it may exceed its all-time highs from 2024. Right now, it’s in the middle of wave three, with forecasts reaching up to 1200. There may be some pullbacks, creating good chances to buy in, with initial support anticipated around 934.
The Basic Impulsive Bullish Pattern suggests ASML is currently in wave 5 of III in its upswing. According to Elliott Wave Theory, this five-wave structure is part of a larger upward trend. Waves 1, 3, and 5 rise, while waves 2 and 4 are corrections. Important rules state that: Wave 2 can’t dip below the start of Wave 1, Wave 3 isn’t the shortest, and Wave 4 must stay above Wave 1’s range. Typically, Wave 3 is the strongest due to increasing momentum.
This content is based on information from FXStreet and is not investment advice. The opinions expressed are solely those of the authors.
ASML seems to be on a powerful upward trend, backed by a strong Q3 2025 earnings report released last week. The company upped its full-year forecast due to overwhelming demand for its new High-NA EUV systems. This indicates that the current upward shift has solid fundamentals and is likely to exceed the highs seen in 2024.
With this momentum, we see chances to buy call options that aim for the 1200 price target in the upcoming months. This quarter, global capital spending forecasts for the semiconductor industry in 2026 were increased by 15%, which directly benefits ASML’s order book. The extension of wave three looks highly likely as major chipmakers like TSMC and Samsung ramp up their shift to 2-nanometer production.
Any pullbacks toward the 934 support level should be viewed as opportunities to enter or increase bullish positions. Selling cash-secured puts set to expire in early 2026 might be a good strategy to either buy shares at a lower price or collect premiums. This approach is especially beneficial, considering the sharp but brief downturns the stock faced during sector changes in late 2024.
As the stock nears its previous all-time highs, we should anticipate an increase in implied volatility. This makes longer-dated call options, potentially for March 2026, appealing since they can better handle short-term fluctuations. Historically, implied volatility for ASML surged nearly 30% during the last breakout in 2024, rewarding those who got involved early.
The current price movements support the idea that we’re in a strong third wave of a bigger bullish trend. This is further reinforced by the company’s record order backlog, which has exceeded €50 billion, marking a historic high. The easiest path seems to be upward, with corrections likely to be short-lived.
A further decline below 7.0860 for the US Dollar seems unlikely, while 7.0700 remains stable.
The US Dollar is expected to test the 7.0860 level, but a sustained drop below this point is unlikely. A decline to the next support at 7.0700 is also not anticipated. However, long-term trends hint at a possible fall below 7.0860, with 7.0770 being the next important level to watch, according to analysts at UOB Group.
Short Term Expectations
In the short term, when the USD was at 7.1085, it seemed likely to dip below 7.1000 before bouncing back. The drop to 7.0916 suggests it might test 7.0860, but current oversold conditions make a further decline less probable. Resistance levels are at 7.1000 and 7.1055, with breaking the latter indicating stabilization. Over the next 1-3 weeks, market activity supports the potential for the USD to drop below 7.0860, with 7.0770 being crucial. The outlook has been negative for the USD since mid-month, although there is uncertainty about breaking 7.0860. The drop to 7.0916 was unexpected and suggests the possibility of falling below 7.0860. If it breaks 7.1150, it may ease the current pressure. The downward trend in USD/CNH is gaining strength, suggesting a possible test of this year’s low at 7.0860. This movement is supported by recent data, as last week’s US Core PCE price index slowed to 2.1%, leading to expectations that the Federal Reserve might cut rates in early 2026. Given the oversold conditions, a significant decline below this level today seems unlikely. In the coming weeks, a cautious approach to the US dollar against the yuan is recommended. Traders might consider buying put options near the support level of 7.0770, expecting a drop below 7.0860. This strategy allows for profit if the dollar declines while limiting risk in case of an unexpected rebound.Policy Divergence Situations
This outlook is supported by the increasing policy divergence between the US and China. Markets are predicting a 75% chance of a Fed rate cut by March 2026, while China’s recent Q3 2025 GDP growth of 5.1% shows economic strength, allowing the People’s Bank of China to keep its policies stable. This contrasts with 2023, when a strict Fed primarily drove dollar strength. The main risk to this view is if the USD breaks above the 7.1150 resistance level. Selling call spreads with a ceiling around that area may be an effective strategy to earn income while anticipating limited recovery in the dollar. This approach benefits from both a declining price and time decay, especially if the pair remains stuck below resistance. Create your live VT Markets account and start trading now.Italy’s Producer Price Index increased to 1.1% year-on-year, rising from 0.2%
Italy’s Producer Price Index (PPI) rose to 1.1% in September, a significant increase from the previous 0.2%. This change is important for understanding inflation trends and is key for economic evaluation.
Copper And Silver
In the market, copper has hit a new all-time high. Silver prices seem to be influenced more by liquidity factors than by actual demand. We are closely watching central bank actions; gold purchases have slowed down even with rising prices. Uncertainty around US trade policy continues to be a concern. The Federal Reserve is likely to implement a cautious interest rate cut during a period when economic data is not being released. This situation is benefiting the AUD/USD currency pair. Editorial highlights show currency movements. The EUR/USD pair struggles to stay above 1.1650, while GBP/USD is testing the 1.3200 level as focus shifts to the Federal Reserve.Exploring Best Brokers
The article discusses the best brokers for 2025 to help traders make smart decisions. It highlights brokers with low spreads and those suited for specific currency pair trading. In broader market news, Western Union plans to launch USDPT on Solana, driven by the increasing demand for ETFs and network efficiency. Each of these developments occurs against a backdrop of rapid changes in financial markets. Italy’s rise in producer prices to 1.1% is a strong indicator of growing inflation in the Eurozone. This increase from 0.2% last month may force the European Central Bank to rethink its supportive policies, suggesting a possible divergence from the Federal Reserve’s strategies. Meanwhile, the Federal Reserve might cautiously cut interest rates despite inflation signals. The surge in copper, often viewed as a measure of global economic health, adds to market confusion. This difference between commodity trends and central bank actions presents opportunities. We anticipate potential weakness in the US dollar against the euro following the Fed’s decision. With the interest rate gap between the ECB and the Fed shrinking to just 75 basis points last month, a US rate cut could push EUR/USD higher. Buying call options on EUR/USD with a strike price around 1.1750 may offer an efficient way to capitalize on this potential move. Gold’s rally above $4,000 links directly to expectations of lower US rates, which decreases the cost of holding the metal. In the 2019 easing cycle, the first rate cut led to a major rally, and we may see a similar trend now. Given the high prices, using options to create a bullish position allows for controlled risk. Geopolitical risks, particularly due to unpredictable US trade policy and the upcoming Trump-Xi meeting, indicate that volatility may rise. The VIX index has recently approached 24, a level not seen since the late 2010s trade disputes. Traders might benefit from buying volatility through straddles on major indices for potential sharp price moves. The Australian dollar will be especially responsive to the US-China meeting’s outcome. As a reflection of Chinese economic sentiment, any positive developments could cause the AUD/USD to spike. We recommend using short-dated options on this pair to trade this critical event. Create your live VT Markets account and start trading now.UOB Group predicts the New Zealand Dollar may reach 0.5800, but a breakthrough seems unlikely
Investment Information
FXStreet shares insights from commercial and expert analysts. This information is for informational purposes only and should not be considered a recommendation to buy or sell assets. Always do thorough research before making any investment decisions. FXStreet does not guarantee the accuracy or completeness of its content. Investing comes with risks, including the potential for total loss. FXStreet and the author are not liable for any errors or losses that occur. They are not investment advisors, and their information is not meant as investment advice. Given the belief that NZD/USD will struggle to stay above 0.5800, traders might explore strategies that benefit from this resistance. Selling out-of-the-money call options with a strike price at or just above 0.5800 and with expirations in the next two to three weeks could be a sound strategy. This approach assumes the level will hold, allowing the options to expire without value. The upward pressure on the NZD/USD pair is influenced by differing central bank outlooks. New Zealand’s Q3 2025 inflation data showed 3.8%, keeping the Reserve Bank of New Zealand on hold. Meanwhile, the US Federal Reserve may soon implement a “cautious” rate cut. This difference in policy has been a key factor in NZD strength against the USD recently.Historical Context
Looking back to mid-2024, the 0.5800 level was a crucial pivot point, providing both support and resistance. The current test of this level is important; however, with global risk sentiment still fragile, a breakout appears unlikely without a stronger trigger. The key support level at 0.5740 is critical; falling below it would negate the current bullish sentiment. For those expecting a “bull trap,” where the price briefly rises above 0.5800 before dropping, buying short-term put options might be a smart move. This strategy would take advantage of a quick rejection from that resistance. Currently, the implied volatility for NZD/USD options is relatively low, making these strategies more affordable. Create your live VT Markets account and start trading now.US mortgage applications rise by 7.1% while experiencing a 0.3% decline
MBA mortgage applications in the United States went up by 7.1% as of October 24, marking a rebound from a previous decline of 0.3%. This indicates a shift in consumer behavior in the mortgage market.
Market Focus
Market focus includes the expected decision from the Federal Reserve on interest rates and how this will affect currency pairs and assets like EUR/USD and gold. The GBP/USD is currently testing the 1.3200 level, drawing attention to currency performance. Additional insights come from Bank of Canada Governor Macklem’s outlook and the stability of the EUR amid developments from the Federal Reserve and the European Central Bank. Gold remains above $4,000, reflecting investor sentiment influenced by federal decisions. Western Union plans to introduce USDPT on Solana in response to rising demand for exchange-traded funds. There are also lists available to help traders find the best brokers for 2025, making it easier to choose platforms for currency and commodity trading. FXStreet offers these insights for informational purposes and encourages individual research when making investment decisions. There are disclaimers about potential risks of significant investment losses and that information accuracy is not guaranteed. FXStreet and the author of this article are not responsible for any investment outcomes based on the provided insights.Federal Reserve Decision
Many expect the Federal Reserve to cut interest rates this week, marking a big change from the aggressive rate hikes of 2022 and 2023. Recent data shows that US GDP growth for the third quarter of 2025 has slowed to just 0.5%, which puts pressure on the Fed to take action. This shift towards easing is currently the biggest factor impacting all markets. The housing market is showing clear signs of anticipation, as mortgage applications rose by 7.1% last week. This surge isn’t necessarily a sign of economic strength; instead, it reflects a rush by borrowers wanting to secure rates before the Fed makes its decision. Derivative traders should interpret this as evidence that the market is fully prepared for a more dovish stance from the central bank. As a result, the US Dollar is under pressure, which explains the EUR/USD challenging the 1.1650 mark and the GBP/USD testing 1.3200. With the Bank of Canada already lowering rates, a global trend toward easing is emerging, but the Fed’s actions will have the most impact. Options traders should expect increased volatility in major currency pairs, especially around the announcement time. Gold remains solidly above $4,000 per ounce, indicating a strong shift towards safety among investors. This price level, a historical high, not only reflects expectations of a weaker dollar and lower yields but also concerns around the upcoming Trump-Xi meeting. It’s likely that gold futures and options will see high trading volumes as speculators position for a potential upward trend if the Fed indicates a series of cuts. With this setup, traders should be ready for significant fluctuations following the Fed’s statement. They might consider using volatility derivatives, like options on the VIX index, to protect against unexpected outcomes or a more aggressive dovish message than anticipated. The focus should not only be on the rate cut itself but also on the Fed’s guidance regarding future policy. Create your live VT Markets account and start trading now.The Euro rises above 177.30 against the Yen, continuing its upward trend despite Monday’s peak
The Euro’s drop against the Japanese Yen stopped at 176.65, allowing it to rise again above 177.30. This increase supports the overall positive trend for the Euro.
The Yen’s earlier gains have faded as markets wait for announcements about monetary policies from the Federal Reserve, the Bank of Japan (BoJ), and the European Central Bank (ECB). The BoJ is expected to keep interest rates at 0.5%, though hikes may come in December or January due to increasing calls for immediate cuts.
European Central Bank Policy
The European Central Bank is likely to maintain its main interest rate. The key question is whether the bank has finished easing or if more reductions could happen. Under Prime Minister Takaichi, Japan’s wide-ranging monetary policy has been noted, but the independence of the Bank of Japan is emphasized, leading to pressure for policy normalization. Since 2013, the BoJ’s policy of Quantitative and Qualitative Easing tried to boost inflation. The Yen weakened significantly due to differing policies with other banks until the BoJ began moving out of its ultra-loose approach in 2024, spurred by inflation rising above the 2% target.Interest Rate and Market Reactions
With EUR/JPY staying above 177.00, we’re closely watching the expected volatility around the Bank of Japan’s announcement. The implied volatility for one-week JPY options has jumped, making it costly to buy new positions like straddles before the announcement. Right now, caution is key, so it’s not an ideal time to make big new bets ahead of Governor Ueda’s statement. The market expects rates to stay at 0.5%, but we’re keen on the forward guidance and the number of dissenters. Japan’s core inflation has remained sticky at about 2.8% in the last quarter, giving hawkish board members more support. If dissenters calling for a hike increase from one to three, it could signal a move by year-end and spark a strong rally for the Yen. The interest rate gap between the ECB and Fed, which are still much higher than Japan’s, makes shorting the Yen appealing for carry trades. However, we must remember the late 2024 volatility, when similar hike expectations fizzled out, causing a sudden sell-off in the Yen after a brief rise. This history suggests that any dovish comments from Ueda could lead to sharp market reactions. Given the high cost of options, we find strategies like call spreads on pairs such as EUR/JPY or USD/JPY to be more valuable. This way, you can position for more Yen weakness if the BoJ disappoints, limiting upfront costs while still capturing upside if the bullish trend continues. On the other hand, traders expecting a hawkish surprise could use put spreads to lower their entry costs for a long-Yen position. We should also pay attention to the ECB’s decision, which comes after the BoJ’s announcement. Any indication that the ECB has finished its easing cycle could give the Euro an extra boost. This scenario could lead to a dovish BoJ and a steady or hawkish ECB, potentially driving EUR/JPY much higher in the weeks to come. Create your live VT Markets account and start trading now.The euro strengthens against the pound, reaching 0.8805 amid UK fiscal and inflation concerns
The Euro has gained value as the European Central Bank (ECB) is likely to keep interest rates steady, which is affecting the EUR/GBP exchange rate. The Pound Sterling is under pressure as UK shop inflation decreases, alongside worries about potential tax hikes and possible interest rate cuts from the Bank of England.
On Wednesday, the EUR/GBP rose by 0.30%, reaching its highest point since May 2024, trading around 0.8805. Demand for the Euro has increased with the anticipation of the ECB’s decision. While interest rates are expected to remain stable, there’s an 80% chance that rates could be cut by 2026, marking a change from earlier forecasts.
Eurozone Influences
Political uncertainty in France, highlighted by Standard & Poor’s downgrading its credit rating, is affecting the Euro. Mixed data from the Eurozone shows Spain’s GDP growth slowed to 0.6% in the third quarter, and retail spending fell to 4.2% year over year. In the UK, the Pound Sterling is struggling due to lower inflation figures and expected tax increases in the upcoming Autumn Budget. Predictions indicate that the Bank of England might reduce rates by 25 basis points in November, though most economists believe rates will remain stable until early 2026. Concerns about low productivity and public finances are also weighing on the Pound. In the coming weeks, the main driver for the EUR/GBP exchange rate will likely be the widening gap between the policies of the central banks. The ECB is expected to keep interest rates steady, while the Bank of England might cut rates as soon as next month. This divergence has caused the currency pair to rise above the important 0.8800 level.UK Fiscal Anxiety
The Pound’s weakness is reinforced by new data showing UK inflation is decreasing quickly. For example, recent figures from the British Retail Consortium revealed that shop price inflation has dropped to a three-year low of 1.5%, providing a strong reason for the Bank of England to consider easing its policy. Financial markets are now pricing in more than a 70% chance of a rate cut in November. With this positive outlook for EUR/GBP, we recommend purchasing call options for EUR/GBP with expirations in December 2025 or January 2026. This strategy allows us to take advantage of a potential rise in the exchange rate while keeping our risk limited to the premium paid. Our initial target is near the 0.8900 level, a price we haven’t seen consistently since early 2023. The current concerns about UK finances remind us of the market’s reaction during the “mini-budget” crisis in autumn 2022, which briefly pushed the exchange rate above 0.9200. While we don’t expect such a dramatic shift, it shows how sensitive the Pound is to fears about government spending. Significant tax increases in the upcoming Autumn Budget could easily lead to another upward move. Conversely, the Euro is finding support from signs of economic stabilization. The latest HCOB Eurozone Composite PMI rose to 50.9, indicating modest growth and supporting the ECB’s steady approach. While political uncertainty in France remains a risk, the more pressing issue is the Pound’s weakness. Create your live VT Markets account and start trading now.Germany’s 10-year bond auction falls to 2.62%, down from 2.72%
Germany’s 10-year bond auction saw yields drop to 2.62%, down from 2.72%. This change shows shifts in market conditions and overall economic attitudes.
The US Federal Reserve is expected to lower interest rates after its October meeting. With a data blackout affecting economic forecasts, the Fed’s statement and Chair Powell’s comments will be very important.
Currency Markets And USD Rebound
In the currency markets, EUR/USD is struggling to stay above 1.1650 due to a strengthening US Dollar. The GBP/USD is under pressure, testing the 1.3200 level because of weakness in the Pound and the Dollar’s overall recovery. Gold is trading above $4,000 after a rebound, driven by anticipated Federal Reserve policy announcements. Increased geopolitical tensions also help gold’s standing in the market. Cryptocurrencies like Bitcoin and Ethereum are recovering ahead of the Fed’s decision on monetary policy. Bitcoin is climbing back to $113,000, while Ethereum has surpassed $4,000. Solana has formed a partnership with Western Union, enhancing its institutional support. Its ETF recorded a trading volume of $56 million on the first day, indicating strong demand for Solana-based financial products.Investment Risks And Market Volatility
Investing in open markets carries risks. It’s important to do thorough research before making any decisions. This content is for information purposes only and is not a recommendation to buy or sell. As everyone focuses on the Federal Reserve, expect volatility to be the main story. The CME FedWatch Tool shows a strong likelihood of a rate cut, so the decision itself may matter less than the guidance that follows. We are considering options strategies like straddles on major currency pairs to take advantage of the expected volatility during the press conference. The drop in German 10-year bond yields to 2.62% is an important signal. This comes after recent flash PMI data for the Eurozone showed a decline into contraction territory, below 48.0. This means that even if the ECB doesn’t act right away, the market is anticipating future rate cuts, which could limit the Euro’s strength against the Dollar, even if the Fed cuts rates first. The recent strength of the US Dollar might just be temporary. Looking back, when the Fed shifted its policy early in 2024, the dollar saw an initial volatile phase followed by a significant decline as rate cuts were confirmed. We expect a similar trend and will look for opportunities to enter short-dollar positions, especially against currencies whose central banks aren’t considering easing yet. Gold breaking above $4,000 is significant, driven by expectations of lower rates and ongoing geopolitical risks. Central banks have been accumulating gold at a record pace, providing solid support for the market. A dovish stance from the Fed could push gold towards our next target, and buying call options remains a preferred strategy to take advantage of this upside. The Pound is particularly weak as it tests 1.3200 against the Dollar. The market is increasingly betting on a rate cut from the Bank of England before the year ends, especially after third-quarter GDP figures showed a slight contraction in the UK economy. This suggests that any rally in GBP/USD from a Fed-induced Dollar selloff is likely to be limited and could provide a good opportunity to sell. A risk-on attitude is evident in the crypto markets, with Bitcoin rising above $113,000. This is no longer just a retail investment, as demonstrated by the strong trading volumes in the Bitwise Solana Staking ETF last month. We view these assets as a high-risk way to approach the increased liquidity from the Fed and can use derivatives to manage the volatility while staying exposed to the trend. Create your live VT Markets account and start trading now.USD/CAD stays below 200-day moving average as market awaits Bank of Canada’s rate decision
USD/CAD is currently below its 200-day moving average of 1.3952 as the market looks ahead to the Bank of Canada’s decision on interest rates. A 25 basis point cut to 2.25% is expected, but with strong fiscal support and high inflation, further cuts seem unlikely.
The swaps market shows a 90% chance of a 25 basis point cut, and a 50% chance of another cut to 2.00% within the next year. US trade policies are creating uncertainty for Canada’s economy, particularly with President Trump halting trade talks and raising tariffs on Canadian goods.
