The National Bank of Hungary keeps base rate at 6.50%, resisting government pressure to lower it
Hungary’s National Bank (MNB) has kept its base rate at 6.50% for the thirteenth month in a row, which is the highest borrowing cost in the EU alongside Romania. The bank’s governor, Mihály Varga, emphasizes a steady monetary policy and a strong approach to support the forint, helping to control inflation.
Varga noted that without price caps from the government, inflation would potentially be 1.5 percentage points higher. He aims to reach a 3% inflation rate by early 2027. Projections show that inflation will stay close to the upper limit target through 2026, with a new forecast of 3.8% for that year.
The recent data shows a decline in the price of silver (XAG/USD).
Silver prices fell on Wednesday, trading at $48.41 per troy ounce, down 0.65% from Tuesday’s $48.73. However, since the beginning of the year, silver prices have risen by 67.55%.
Gold Silver Ratio Overview
The Gold/Silver ratio is at 84.16, down slightly from 84.64. This ratio shows how many ounces of silver equal the value of one ounce of gold. Silver is a popular precious metal, often used for diversification in investment portfolios or as a hedge against inflation. It can be bought in physical form or through Exchange Traded Funds. Several factors affect silver prices, including geopolitical tensions, interest rates, and the strength of the US Dollar, which prices silver. Demand from industries, especially electronics and solar energy, also significantly impacts prices, as silver has excellent electrical conductivity. Typically, silver prices move in tandem with gold prices. When gold rises, silver often follows, as both are seen as safe investments. The Gold/Silver ratio helps evaluate the metals’ relative worth. A high ratio might mean silver is undervalued compared to gold, while a low ratio suggests the opposite. We are experiencing a slight pullback in silver today, October 22, 2025, after a remarkable 67% increase this year. Such pauses are normal and allow us to assess if the upward trend will maintain itself in the final quarter. The goal is to determine whether this is just a temporary slowdown or the start of a larger correction.Trading And Investment Strategies
The Gold/Silver ratio at 84.16 is crucial for our analysis. Historically, such high ratios indicate that silver may be undervalued compared to gold. For example, the ratio exceeded 100 during the economic uncertainty in 2020, right before silver began to outperform strongly. Strong industrial demand drives the silver market, with no signs of slowing down. Recent reports from the Silver Institute suggested that global industrial use could exceed 630 million ounces by 2025, setting a new record. This demand mainly stems from the ongoing growth in solar panel production and the expansion of 5G and electric vehicle infrastructure. Monetary policy is also giving precious metals a significant boost. After the Federal Reserve’s aggressive rate hikes in 2022 and 2023 to control inflation, the current stable and lower interest rates make holding a non-yielding asset like silver appealing. This environment supports the idea that investment demand will stay strong. Given the recent sharp rise, we should expect increased volatility in the coming weeks. For derivative traders, buying call options can provide an opportunity for further gains while managing risk. Alternatively, selling cash-secured puts below the current price of $48.41 could allow for premium collection or the chance to acquire silver at a lower price if a deeper pullback happens. Create your live VT Markets account and start trading now.The National Bank of Hungary keeps interest rates at 6.50% and makes minor adjustments to forward guidance.
The National Bank of Hungary has kept interest rates steady at 6.50%. Their future guidance remains firm to help lower inflation and support currency stability. This decision contrasts with recent government statements. Currently, the EUR/HUF exchange rate ranges between 389 and 390, which is considered reasonable.
Expectations suggest that rates will hold steady until mid-year, even with risks like falling inflation or other central banks lowering their rates. The bank’s consistent approach is shown by stable rates and exchange rates, with little impact from geopolitical discussions, such as the upcoming Trump-Putin meeting.
Central European Currency Outlook
The chance of a ceasefire between Ukraine and Russia is looking less likely, which reduces the attractiveness of the Hungarian forint, especially in the Central and Eastern European markets. There is a need for a new event if we want to see any significant changes in the current EUR/HUF exchange rate. The National Bank of Hungary’s prior commitment to high rates feels like a thing of the past, especially after the aggressive rate cuts that started in late 2023. Back then, the base rate of 6.50% was the standard, but this has completely changed as inflation decreased. Now, inflation sits at around 4.5% year over year, giving the central bank room to lower borrowing costs. The high-interest advantage that once helped the forint has faded over the past 18 months, making carry trades less appealing. Hungary’s base rate has dropped to 4.00%, reducing the gap over the ECB’s main rate to just 100 basis points, down from 250 points in early 2024. This decline explains the lack of interest from investors and the stability around the 395 level for EUR/HUF.Volatility and Derivative Trading Strategies
In this low-volatility climate, implied volatility in EUR/HUF options has plummeted. One-month volatility is now around 5%, a significant drop from the double-digit rates seen during the geopolitical turmoil of 2023. For traders dealing in derivatives, this suggests that selling options, like short strangles, could be a good strategy to earn premiums in the weeks ahead. The hoped-for major peace summit in Budapest after the 2024 US election not materialized. Continuing disputes with the European Union over funding remain the key political issue impacting the currency. While selling volatility seems wise, purchasing inexpensive, out-of-the-money EUR/HUF call options could provide an affordable safeguard against any sudden political tensions. Create your live VT Markets account and start trading now.The US administration recognizes the importance of third-quarter inflation data for next year’s social security benefits.
The US government understands that third-quarter inflation data is essential for calculating social security benefits for next year. Even with a government shutdown, officials have returned to the Bureau of Labor Statistics to gather this information. The September inflation numbers, originally set for release on October 15, will now be available, giving the Federal Reserve new data for its upcoming decisions.
Impact Of Tariffs On Inflation
This inflation data could highlight how tariffs affect consumer prices. However, the impact is expected to be gradual and moderate. While the data might not significantly change the Federal Reserve’s plans, it does provide some clarity. The US dollar has strengthened slightly in anticipation, but even surprising data is unlikely to alter expectations for rate cuts. The labor market data is more critical for the Fed, which is focused on employment goals. With the labor market showing signs of decline, expectations for a rate cut remain high, regardless of inflation figures. The return of this important monetary policy data may have short-term effects on the dollar. Still, any significant changes in interest rate expectations or the dollar’s value would require a big surprise from the Fed, which experts find unlikely. We will finally receive the September inflation report this Friday, October 24th, after delays due to the government shutdown. While this data is important for social security calculations, it is not expected to change the Federal Reserve’s plans for the upcoming meeting. For traders, this means getting a piece of the information puzzle, but not the complete picture. Analysts expect a slight increase in overall inflation, possibly reaching around 3.0%, partly due to recent tariffs. However, with the Fed’s favored measure, Core PCE, cooling to 2.1% last month, the central bank likely sees any tariff-related price increases as temporary. Thus, even a surprising upward shift in data is probably not enough to prevent the highly anticipated 25-basis-point rate cut next week.Fed’s Focus On Employment
The Fed is primarily focused on its full employment goals, especially as the labor market shows signs of weakness. With non-farm payrolls averaging only 120,000 over the last quarter and the unemployment rate rising to 4.1%, the Fed is leaning toward easing its policies. This situation resembles the mid-cycle adjustments we saw in 2019, when global concerns led to rate cuts despite strong domestic data. For traders using derivatives, this means preparing for a short-term spike in the dollar, but not a long-term trend change. If inflation data comes in higher than expected, we may see a temporary rally in the USD, giving traders the chance to position themselves for the Fed’s likely dovish stance. Strategies that take advantage of increased implied volatility around Friday’s data release, followed by a decrease, may prove beneficial. The main risk to this view is the slim chance that the Fed surprises everyone by pausing rate cuts, which experts find unlikely. Such a move would lead to a significant reassessment of interest rate expectations, likely causing the dollar to rise sharply and putting pressure on risk assets. Therefore, holding some inexpensive out-of-the-money call options on the dollar or put options on equity indices could be a useful hedge leading into next week’s meeting. Create your live VT Markets account and start trading now.ING’s analyst notes that maintaining US Dollar strength is complex.
The US Dollar has gained strength this week, as concerns about US credit markets are no longer impacting foreign exchange. FX analyst Francesco Pesole notes that a significant drop in gold prices may have helped support the dollar.
Pesole cautions that for the dollar to continue rising, markets need to reevaluate the expected three Federal Reserve rate cuts by March. An unexpectedly high Consumer Price Index (CPI) figure could shift market dynamics, but this outcome is not anticipated.
US-China Tensions
Tensions between the US and China could also affect the dollar’s stability. A meeting originally planned between Trump and China’s President Xi is now uncertain, which might impact market sentiment. While not having a meeting doesn’t automatically lead to higher tariffs, it can still influence risk sentiment and the dollar’s value. The strength of the US Dollar may be running out of steam, as the Dollar Index (DXY) struggles to move past the 106.50 resistance level. After a strong performance this quarter, sustaining further gains for the greenback will be challenging. Signs are emerging that the market may be nearing its peak. This situation is closely linked to changing expectations for the Federal Reserve. The September CPI report showed core inflation cooling to 3.5%. Consequently, the market now sees almost no chance of another rate hike before the end of the year, which reduces the dollar’s attractiveness. This shift is a stark contrast to the bullish outlook we observed earlier in the year. We are witnessing a scenario similar to the volatility during the late 2010s trade negotiations between the Trump administration and China. Back then, simple comments or news of a canceled meeting could create significant uncertainty in the currency markets. A similar pattern might be emerging now.US-China Relations
Now, attention is turning back to US-China relations, particularly concerning ongoing debates in Washington over potential new tariffs on Chinese electric vehicles. A negative shift in these discussions could harm risk sentiment and increase vulnerability in the dollar. For derivative traders, this means that holding long positions on the dollar carries notable risks in the coming weeks. It may be wise to consider strategies that could profit from limited gains or potential declines. For instance, selling out-of-the-money call options or buying protective puts on dollar-denominated pairs might be a smart way to hedge against dollar strength without excessive risk. Create your live VT Markets account and start trading now.Traders await Tesla’s results as Dow Jones futures remain steady near 47,100
Dow Jones futures are steady near 47,100 during European trading hours, as traders wait for the US market to open. S&P 500 futures are flat around 6,770, while Nasdaq 100 futures have dipped 0.15% to about 25,250.
In pre-market trading, Netflix has dropped more than 6.5% after its third-quarter earnings missed expectations. Mattel has also fallen over 5.5% due to disappointing results. On a positive note, Intuitive Surgical’s stock has soared over 15% thanks to strong quarterly performance.
US Index Futures Show Mixed Movements
US index futures are mixed as traders look forward to Tesla’s earnings report and upcoming US inflation data. The current US government shutdown is delaying key economic data, adding to market uncertainty. On Tuesday, the Dow Jones rose 0.47% to a record high, driven by strong earnings from major companies. The S&P 500 finished flat, while the Nasdaq 100 declined 0.16% as tech stocks lost some momentum. Coca-Cola shares increased by 4.1% due to strong consumer demand, and 3M jumped 7.7% after offering an optimistic full-year outlook. A Reuters poll shows that 115 out of 117 economists expect a Fed rate cut of 25 basis points on October 29. The Dow Jones Industrial Average (DJIA) includes the 30 most traded US stocks and is price-weighted. The DJIA is influenced by earnings reports, economic data, and Fed interest rates. Traders can engage with the DJIA through Dow Theory and options like ETFs, futures, and mutual funds.Nasdaq Lagging Behind
While the Dow Jones hovers near a record 47,100, the Nasdaq is lagging behind. The Dow has outperformed the Nasdaq 100 by over 3% this month, marking the largest difference since the second quarter. This indicates a shift towards value investing, presenting opportunities for pairs trading, such as going long on Dow futures while shorting Nasdaq futures. Tesla’s upcoming earnings report is highly anticipated, particularly after Netflix’s disappointing results raised worries in the tech sector. Implied volatility for Tesla’s weekly options has surged past 80%, suggesting a significant price move—10% or more—in either direction. Traders might want to consider strategies like straddles or strangles to capitalize on this expected volatility, regardless of the earnings outcome. The uncertainty from the US government shutdown plays a significant role, as it delays important economic data and complicates the Federal Reserve’s decision-making process. During the 2018-2019 shutdown, the VIX remained elevated for weeks due to similar data delays. This historical context suggests that buying protection, like VIX calls or out-of-the-money puts on the S&P 500, may be wise to guard against sudden market shocks. All attention is on the Fed’s meeting next week, with futures pricing in a 92% chance of a 25-basis-point rate cut on October 29. While this expectation supports the market, it also poses a risk if the Fed delivers less than anticipated. Traders should stay alert for any changes in the Fed’s tone, as a hawkish surprise could quickly reverse the recent rally. Create your live VT Markets account and start trading now.Canadian inflation data exceeds expectations, indicating that interest rates should stay the same, says Commerzbank analyst.
Canadian inflation for September was higher than expected, rising 2.4% year-on-year. This increase was two-tenths of a percentage point above forecasts. It marked the second-biggest monthly rise since stabilization began, with the trimmed mean—a key measure of core inflation—also showing a slight uptick.
Bank of Canada Considerations
Monthly inflation increases like this are not unusual, as long-term averages align with the 2% target. If this trend continues, the Bank of Canada may need to reevaluate its stance. Recent labor market data suggests that a policy change is more likely in December instead of October. Some economists initially favored cutting interest rates in October. However, the latest inflation numbers have created uncertainty. Now, it seems more reasonable to expect any rate adjustments during the December meeting. In the short term, this situation appears positive for the Canadian dollar. Yesterday’s inflation report for September was hotter than we expected, with the headline rate reaching 2.4% year-on-year. This, along with a slight increase in core inflation, challenges the belief that price pressures are easing. It suggests that inflation may be more persistent than we thought. These numbers significantly affect the Bank of Canada’s upcoming meeting. The market has already adjusted, with overnight index swaps indicating only a 30% chance of a rate cut on October 29th, down from nearly 80% early last week. The odds have shifted firmly in favor of the December 10th meeting.Market Impact
This inflation surprise comes after a strong Labour Force Survey for September, which showed the economy added a solid 45,000 jobs, keeping the unemployment rate steady at 5.5%. This strong labor market gives the central bank the room to wait and see if the inflation increase is temporary. For the Canadian dollar, the delay in rate cuts is a short-term boost. After the data release, USD/CAD dropped from around 1.3750 to below 1.3700. As long as a December cut remains the expected scenario, the CAD should maintain its strength against currencies like the US dollar. Traders in derivatives might consider positioning for continued CAD strength in the near term, or at least a cap on USD/CAD gains. Selling out-of-the-money call options on USD/CAD with late November expirations could be a good strategy to earn premium. This approach anticipates a lower chance of a surprise dovish shift from the Bank of Canada before December. It’s worth recalling lessons from early 2024, when persistent inflation delayed initial market expectations for rate cuts. During that time, the CAD performed well while other central banks seemed more dovish. The current situation resembles that pattern, with the Bank of Canada showing a clear preference for caution. Create your live VT Markets account and start trading now.USD/CHF stabilizes above 0.7980 as investors stay cautious before key US economic data
The US Dollar is holding steady above 0.7900 against the Swiss Franc. A potential trade agreement between the US and China is lowering risk fears, which in turn decreases demand for the Swiss Franc. Switzerland is experiencing deflation, making the Swiss National Bank consider cutting interest rates.
US Dollar Stabilization
The USD/CHF pair is steady above 0.7980 as markets look for direction. The Dollar is trading in a tight range after rising from 0.7910. Investors are waiting for the US CPI data and the Federal Reserve’s next policy decision. The possible meeting between Donald Trump and Chinese President Xi Jinping to ease trade tensions is calming the markets. This development increases pressure on safe-haven assets like the Swiss Franc. Even with a slight improvement in Switzerland’s trade surplus, the Franc is struggling due to deflation. These conditions could push the Swiss National Bank (SNB) to consider negative interest rates. The value of the Swiss Franc is affected by Switzerland’s economy, actions of the SNB, and global market feelings. It is one of the top ten traded currencies and is closely linked to the Euro because Switzerland relies heavily on the Eurozone. In times of market stress, investors prefer the Swiss Franc for its stability and Switzerland’s neutral stance.Anticipation of a Fed Rate Cut
The USD/CHF pair is stabilizing in a narrow range, waiting on signals from central banks. This situation suggests that options strategies like long straddles—betting on significant price movements—could be effective as we approach next week’s Fed decision. The market is preparing for uncertainty, and we should brace for volatility following the US inflation data release. Speculation of a 25 basis point rate cut from the Fed next week is limiting the US Dollar’s strength. We saw this in earlier 2025 data after disappointing Non-Farm Payrolls, which showed only 155,000 job gains and a cooling labor market. Therefore, purchasing puts on the USD or using bearish spreads could be a good strategy to protect against any dovish comments from the Fed. Conversely, the Swiss Franc is suffering from deflationary pressures, which we think will compel the SNB to act. Switzerland’s recent Consumer Price Index was -0.2% year-over-year, marking the second month of negative inflation and reminding us of the SNB’s significant policy shifts in 2015. This makes call options on USD/CHF appealing, as an unexpected rate cut by the SNB could lead to a sharp rise in the pair. Broader market sentiment is crucial, with positive developments in US-China trade weakening the Swiss Franc’s safe-haven status. This is reflected in the options market, where the 25-delta risk reversal for USD/CHF shows a consistent preference for calls over puts, indicating traders are positioning for an upward move. If a trade deal happens, the resulting positive market atmosphere could further pressure the Franc, making long USD/CHF positions attractive. Create your live VT Markets account and start trading now.Gold prices fell by 5.3% and continued to decline during morning trading in Asia.
Spot Gold prices have dropped sharply, falling 5.3% in one day and continuing to decline in early Asian trading. This drop comes as traders take profits after a period of increased buying.
Since late August, spot Gold has risen dramatically, climbing nearly $1,000 per ounce. However, worries about sustaining this upward trend have emerged, especially after President Trump expressed optimism about a favorable trade deal with China, adding more pressure on prices.
Gold ETF Buying
The recent rise in Gold prices is largely due to significant buying by ETFs. In September, Gold ETF purchases reached record levels in dollar terms, with tonnage buying being the highest since March 2022. Other precious metals have also faced price declines. Silver fell more than 7%, while Platinum and Palladium dropped by 5.2% and 6.1%, respectively. With a notable 5.3% decline in gold yesterday, implied volatility has risen sharply. The Cboe Gold Volatility Index (GVZ) surged over 35%, the highest level since the banking concerns of March 2024. This makes buying options more costly, but it also creates an opportunity for those looking to sell premium. The price drop appears linked to recent strong economic data, which reduces demand for safe-haven assets. The latest Non-Farm Payrolls report showed an unexpected gain of 265,000 jobs, suggesting that fears of an economic slowdown are fading. Traders might consider buying short-dated put options to safeguard against or profit from further sales by ETFs.Major Gold ETF Outflows
Data has shown over $5 billion has flowed out of major gold ETFs in just two trading days, marking a record pace of selling. This pullback resembles the sharp correction seen in Q2 2023, which was followed by range-bound trading. Selling out-of-the-money call spreads could be a good strategy to take advantage of high volatility and a potentially limited upside in the near future. The sell-off has been even more significant for other precious metals, with silver dropping more than 7%. This has pushed the gold-silver ratio to over 92, a level often indicating that silver is undervalued compared to gold. A pairs trade, going long on silver while shorting gold using futures or options, could be a strategy to capitalize on this potential reversion to the mean. Create your live VT Markets account and start trading now.Dovish UK inflation report today suggests Bank of England action, negatively impacting the pound.
The September inflation report in the UK shows a soft outlook for the Bank of England and affects the pound. Headline inflation held at 3.8%, while core inflation dropped from 4.6% to 3.5%. The services Consumer Price Index (CPI) remained stable at 4.75%, which is 0.3 percentage points below the Bank of England’s latest forecast. A key surprise was the drop in food prices, now 0.5 percentage points below the Bank’s predictions from August.
Analysts believe the 3.8% headline inflation is likely the peak for the year, and it may stay at 3.5% for the rest of the year before falling in January. This data might not lead to a rate cut in November, but a cut in December is becoming more probable. The upcoming Autumn Budget could affect this decision.
