Insights 
VT 
In October, Mexico’s core inflation for the first half of the month recorded a rise of 0.18%. This figure was just below the expected 0.19%, indicating a slight adjustment in inflation forecasts.
Meanwhile, various currencies and commodities have experienced different shifts in value. The USD/CHF edged lower as there will be no negative interest rates from SNB, and GBP/USD showed decreasing values due to softer UK inflation data.
Cryptocurrency Gains
In the realm of cryptocurrency, Bitcoin tests $110,000 resistance with increased retail interest while Ethereum progresses towards its 100-day EMA hurdle. XRP also rises, marking a change in retail demand dynamics.
Gold’s value settled around the $4,150 mark per troy ounce amidst a cautious approach before the release of US CPI data. Economists also observed the impact on the Japanese Yen following the installation of a new Prime Minister in Japan, examining fiscal and monetary policy alignment.
Lastly, the market conditions including regulations and spreads for brokers by 2025 have been evaluated, offering insights into the forex trading landscape. This information is essential for traders seeking to navigate changes in foreign exchange markets.
The core inflation data from Mexico, coming in at 0.18% versus the 0.19% we expected, reinforces the growing belief that a central bank pivot is near. This small miss is significant, as it adds pressure on Banxico to consider a rate cut from its current 11.00% level in its next meeting. We see value in positioning for a weaker peso, perhaps by purchasing short-dated USD/MXN call options.
Central Banks and Inflation
This theme of softer inflation is not isolated to Mexico; we’ve seen it in the United Kingdom as well. Last month’s UK inflation reading, which fell to 2.1%, has similarly fueled bets that the Bank of England will deliver a rate cut before the year is out. This has put sustained pressure on the British Pound, and selling GBP/USD futures seems like a reasonable strategy in this environment.
Now, all attention is shifting to the upcoming US Consumer Price Index (CPI) report, which is critical ahead of the Federal Reserve’s December meeting. After the non-farm payrolls report earlier this month showed a weaker-than-expected gain of only 95,000 jobs, a soft inflation print would almost certainly lock in a Fed rate cut. We are anticipating a spike in volatility in options on US Treasury futures as the market positions for this outcome.
The Japanese Yen remains the notable exception to this global trend, continuing its multi-year slide as it weakened past 165 against the dollar this week. Looking back, the policy divergence that began in the early 2020s has only widened, even as other central banks prepare to ease. For derivative traders, staying long on the USD/JPY pair continues to be the most direct way to capitalize on this persistent weakness.
This broader expectation of central bank easing is providing a lift to commodities, which in turn is supporting currencies like the Australian Dollar. Gold has been quiet, consolidating near $4,150, but it appears poised for a move higher if a soft US CPI print weakens the dollar further. We think buying call options on gold miners or the AUD/USD pair could offer good upside exposure in the coming weeks.
