In October, India’s HSBC Composite Purchasing Managers’ Index (PMI) improved, rising from 59.9 in September to 60.4. This increase indicates growing activity in India’s private sector, marking an expansion in the economy.
Gold prices climbed beyond $4,000 due to a weaker US Dollar and increased demand for safe-haven assets. USD/INR stabilised after initial losses, while EUR/CAD held above its nine-day EMA at 1.6200 in a consolidation phase.
Central Banks And Market Sentiments
The Bank of England’s policy announcements are expected to influence the Pound Sterling. Crude oil prices remained bullish at the European market’s opening, with WTI leading the uptrend.
Markets face challenges from varied events such as a possible US government shutdown and Fedspeak. Eurozone Retail Sales data release was anticipated to guide the EUR/USD direction, with the pair slightly above 1.1500.
Solana maintained stability above $160, responding to both institutional and retail demand. This suggests a potential for further gains, as part of the broader crypto market recovery.
The latest HSBC Composite PMI reading for India confirms the economy is running hot at 60.4, extending a multi-year trend of expansion we have seen since the post-pandemic recovery. For derivative traders, this reinforces the appeal of long positions on Nifty 50 futures, targeting new highs. Consider selling out-of-the-money puts to collect premium, as the strong domestic data provides a solid floor.
Market Volatility And Strategy
However, we are seeing a disconnect as Foreign Institutional Investors pared their stakes, pulling a reported $2.5 billion from Indian equities last month despite the strong PMI. This suggests global risk aversion, likely tied to the US situation, is overriding local fundamentals for now. This divergence is a recipe for volatility in the USD/INR pair, making option straddles an interesting play to capture a potential sharp move.
The ongoing US government shutdown, now entering its fifth week, continues to hammer the dollar, with the DXY index breaking below the 96.00 support level. We see this as a clear signal to favor short-dollar positions across the board. Call options on EUR/USD and GBP/USD appear attractive, as both pairs are showing technical strength and benefiting directly from the dollar’s political-induced weakness.
Gold breaking the psychological $4,000 level is a major event, fueled by both the cratering US Dollar and significant safe-haven flows. While the inverse correlation with the dollar provides a tailwind, the “safe-haven” premium suggests underlying market fear. We believe buying long-dated call options on gold futures or gold ETFs is prudent, as it offers upside exposure while capping risk if the US political situation resolves suddenly.
While the Euro is gaining against the dollar, the underlying European economy shows cracks, as seen in the recent German industrial production figures missing expectations. This lackluster data from the Eurozone’s engine may keep the European Central Bank dovish, limiting the Euro’s fundamental strength. We see potential in trading the EUR/GBP cross, looking to short the Euro against a Pound that could be strengthened by a hawkish Bank of England announcement.
