Insights 
VT 
Consumer confidence in Mexico experienced a decline, falling from 46.5 to 46.1 in October. This decrease marks a shift in the consumer sentiment compared to the previous measure.
The Euro has faced a losing streak, with EUR/USD reaching new lows due to pressure from a robust US Dollar. Meanwhile, the Japanese Yen has strengthened as the Bank of Japan hinted at rate increases, affecting both EUR/JPY and USD/JPY exchange rates.
Gold Prices And Cryptocurrency Market
Gold prices have continued their downward trajectory, closing near $3,950 per troy ounce, influenced by a strong US Dollar. Despite the broader cryptocurrency market facing a correction, privacy coins like Dash and Zcash have shown resilience, reaching a market capitalisation above $25 billion.
The Australian and British currencies are on divergent paths as respective central banks prepare for upcoming meetings. Lastly, the DeFi platform Balancer experienced a significant hack, losing over $120 million and prompting scrutiny after its inability to halt the incident due to the age of affected pools.
The US Dollar continues to be the main story, and we should position for its strength to persist in the coming weeks. The US jobs report from last Friday showed the economy added over 200,000 jobs in October, confirming the Federal Reserve has no reason to cut rates before year-end. This solidifies the dollar’s yield advantage over other major currencies.
With the European Central Bank remaining on pause, the policy gap between it and the Fed is widening. Eurozone inflation for October came in at 2.8%, which is cooling faster than in the US. We see a clear path for EUR/USD to break below its recent three-month lows near 1.1480.
The Impact On Major Currencies
The Pound is even more vulnerable due to internal fiscal worries, which we have seen push UK 10-year Gilt yields back toward 5.1%. These domestic headwinds, amplified by the strong dollar, make a test of the 1.3000 level for GBP/USD a high probability event. Buying put options on the pair is an attractive strategy.
The Japanese Yen is the main exception, strengthening on hints that the Bank of Japan will continue the policy normalization it began back in 2024. This hawkish tone makes being long USD/JPY a risky trade. We should watch for any sharp downturns if the BoJ signals a more aggressive rate hike schedule.
This dollar strength is also impacting emerging markets, as seen with the slight dip in Mexican consumer confidence to 46.1. With Mexican inflation still sticky around 4.5%, their central bank cannot afford to ease policy. This environment suggests volatility will remain high for emerging market currency options.
For commodities, the firm dollar is a significant headwind for Gold. Even with prices historically high, the metal’s slide to $3,950 an ounce is logical when the US 10-year Treasury offers a competing 4.8% yield. We anticipate further pressure on Gold as long as US rates remain elevated.
