Insights 
VT 
Mexico’s Gross Domestic Product (GDP) for the third quarter (3Q) met expectations, showing a contraction of 0.2% year-on-year. This aligns with market forecasts and indicates continued economic challenges for the country.
In the currency market, the US Dollar’s strength affected the AUD/USD and GBP/USD pairs. GBP/USD dipped below 1.32 due to the Federal Reserve’s stance, while EUR/USD recovered to 1.1570 post-European Central Bank’s unchanged interest rates.
Gold And Cryptocurrency Overview
Gold maintained near the $4,000 mark amid easing trade tensions between the US and China. The meeting between Donald Trump and Xi Jinping resulted in lowered trade barriers, benefiting cryptocurrencies like Bitcoin, Ethereum, and XRP, each rising nearly 1%.
Zcash, a privacy-focused cryptocurrency, rose to approximately $360, continuing its positive trend despite market volatility. This momentum reflects a broader risk sentiment shift influenced by global financial events.
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US Dollar And Global Economic Trends
The US Dollar’s strength appears set to continue, driven by a hawkish Federal Reserve. With US inflation having remained stubbornly above 3% for much of the past year, we see little reason for the Fed to soften its tone. This suggests that call options on the dollar, or put options on pairs like GBP/USD, could be a primary strategy in the coming weeks.
Gold is facing significant headwinds as it struggles to hold the $4,000 per ounce level. The combination of a strong dollar and reduced US-China trade friction is limiting its appeal as a safe haven. We saw a similar pattern back in the 2013-2015 period, where a strengthening dollar after years of quantitative easing put sustained pressure on precious metals.
Mexico’s Q3 GDP contraction of -0.2% was not a surprise, meaning the market has likely already priced this in. However, with over 80% of Mexico’s exports historically destined for the United States, the real story for the peso will be US economic strength. A robust US economy could support the peso, but a hawkish Fed often weighs on emerging market currencies.
The recent truce in the US-China trade dispute should lead to lower implied volatility across major equity indices. We’ve already seen the CBOE Volatility Index (VIX) fall from its highs earlier in the year, suggesting that selling volatility through strategies like short straddles could be advantageous. Expect this trend to continue as long as geopolitical headlines remain calm.
While the European Central Bank is sounding slightly less concerned about downside risks, the EUR/USD pair is still capped by the dollar’s dominance. The slight rebound to the 1.1570 area looks more like a temporary correction than a change in the underlying trend. We expect any rallies in the euro to be opportunities to position for further dollar gains.
