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Mexico’s fiscal balance saw a decrease, with a drop from a previous deficit of 21.031 billion pesos to a larger deficit of 198.11 billion pesos in August. This shift reflects fiscal adjustments within the Mexican economy during the period.
In currency updates, the EUR/USD is maintaining a support level between 1.1550 and 1.1540. Meanwhile, the GBP/USD is experiencing a downturn, testing lows last seen six months ago.
Commodities And Cryptocurrency Market
In the commodities market, gold faced resistance near the $4,050 mark but continues to see safe-haven interest from investors. In cryptocurrency, Zcash is maintaining a bullish trend, currently trading near $360.
The 17th anniversary of Bitcoin’s whitepaper is marked by its evolution into a digital asset worth trillions. Additionally, US-China trade discussions between Xi and Trump focus on regulatory measures and export strategies.
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Mexico’s massive fiscal deficit, jumping to -198.11B pesos, is a major red flag for its economic stability. We see this as a clear signal to consider short positions on the peso, as such a significant fiscal deterioration often precedes currency devaluation. Recent data shows the USD/MXN pair has already climbed to 19.50, and with memories of the peso’s volatility during the 2024 election cycle, options traders should look at buying puts on the MXN.
The Dominance Of The US Dollar
The US Dollar remains the dominant force, bolstered by the Federal Reserve’s hawkish stance which has kept interest rates elevated at 5.75%. This persistent strength is suppressing other major currencies, pinning EUR/USD near 1.1550 and pushing GBP/USD to six-month lows. We believe that using futures to short the Euro or buying call options on the US Dollar Index (DXY) are straightforward ways to trade this ongoing trend.
China’s contracting manufacturing PMI, now at 49.0, continues to cast a shadow over global growth and industrial commodity demand. This directly impacts proxies for Chinese growth, like the Australian dollar, which is struggling to hold the 0.6550 level. Looking at recent drops in iron ore prices to below $100 per tonne only reinforces this bearish outlook for commodity-linked currencies.
Gold is caught in a difficult position, with safe-haven demand pushing it near $4,050 while a strong dollar and elevated US Treasury yields cap the upside. We saw this same dynamic play out in late 2023, where high interest rates limited gold’s appeal even amid global uncertainty. This suggests that selling out-of-the-money call spreads above recent highs could be a better strategy than expecting a major breakout.
