Insights 
VT 
Mexico’s fiscal balance in October recorded a deficit of 16.75 billion pesos. This marks a notable improvement compared to the previous deficit of 198.11 billion pesos.
The euro remains steady above 1.1600 due to increased expectations of dovish policies in December. Gold maintains strength above $4,200 amidst a broad recalibration of market expectations for December.
Silver Prices Surge
Silver prices have surged past $56, driven by positive market conditions. WTI crude oil prices rise as peace efforts between Russia and Ukraine continue, with attention shifting to the upcoming OPEC+ meeting.
Gold is heading towards a fourth consecutive monthly gain, influenced by growing expectations of interest rate cuts by the Federal Reserve. Canada’s Q3 economic performance appears strong, yet domestic demand remains weak.
The EUR/USD has seen a positive change, moving above 1.1600. Meanwhile, GBP/USD experiences fluctuations around the 1.3230 level.
Gold has advanced, reaching two-week highs beyond $4,200. Cryptocurrencies like Bitcoin, Ethereum, and XRP show limited recovery, with retail activity low.
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Market Signals and Strategies
The market is giving a clear signal that the US dollar is expected to weaken, with an 87% probability priced in for a Federal Reserve rate cut next month. With Core PCE inflation finally dipping below 3% for the first time since the turmoil of 2023, this dovish stance seems justified. We should consider buying call options on the Euro or other major currencies against the dollar to capitalize on this widely held view.
Gold and silver are showing extreme bullish momentum, driven by the same expectations of lower interest rates. With gold above $4,200 and silver hitting a record $56, using bull call spreads on their respective ETFs could be a smart way to ride the trend while managing the high cost of options. This rally is also supported by continued central bank buying, which has sustained the powerful trend we saw when they purchased over 1,000 tonnes in 2024 for the second year in a row.
We see a compelling fundamental story in the Mexican peso following the news of a much smaller fiscal deficit in October. This fiscal discipline adds strength to a currency already benefiting from high interest rates that have been a feature of Banxico’s policy since 2024. Selling USD/MXN futures or exploring peso call options appears to be a favorable trade based on this positive local data point.
The oil market is facing a period of uncertainty ahead of the OPEC+ meeting, which creates an opportunity in volatility. We remember the sharp price movements after the surprise production cuts announced back in late 2023, so a similar outcome is possible. Using an options strategy like a straddle on WTI futures would allow us to profit from a significant price move, regardless of the direction.
While Canada’s headline growth seems positive, the underlying weak domestic demand is a cause for concern. This mirrors the pattern we saw in 2024 when GDP per capita contracted for several quarters, signaling a fragile consumer base. A pair trade, like buying EUR/CAD futures, could be an effective way to play anticipated Canadian dollar weakness against a firming Euro.
