Mexico’s Gross Domestic Product (GDP) grew by 0.7% in the second quarter, beating expectations of 0.4%. This growth shows that the Mexican economy performed well during this time. In the currency market, the EUR/USD fell below 1.1500 due to positive economic news from the US. The GBP/USD also declined to a two-month low, dropping below 1.3300, thanks to strong US data and investors looking ahead to Federal Reserve decisions.

Gold Prices And Market Expectations

Gold prices reacted to the US economic news, trading close to $3,300 as US Treasury yields increased. Many expect the Federal Reserve to keep interest rates steady for the fifth meeting in a row. The Federal Reserve is facing pressure to adjust rates but has paused due to a strong economy, despite ongoing tariff uncertainties. However, new concerns about the labor market are beginning to arise. With many expecting the Federal Reserve to hold interest rates, we can expect less market volatility in the near term. Current market pricing, shown by tools like the CME FedWatch Tool, indicates over a 90% chance of no rate change, making the Fed’s upcoming statement a key focus. We will look for any changes in their messaging about future policy.

Opportunities In Currency And Commodity Markets

The US dollar’s strength has pushed the Dollar Index (DXY) close to 108.50, providing a clear trend to follow. We see opportunities to buy call options on the dollar or put options on EUR/USD and GBP/USD to take advantage of ongoing dollar strength. This strategy is supported by strong US economic data this year. For gold, trading around $3,300 with rising US Treasury yields creates a tough environment for the metal. Historically, gold struggles when real yields are positive and increasing, like during the Fed’s pause in late 2023. We should consider selling out-of-the-money call options to collect premium, betting that gold won’t see significant gains in the coming weeks. Unlike other major economies, Mexico’s surprising 0.7% GDP growth offers a special opportunity for diversification. We could look into bullish positions on the Mexican Peso or call options on Mexican-focused ETFs like EWW. This positive domestic story could serve as a hedge against weakness in the US economy. Still, we must be careful about recent signs of weakness in the US labor market, with initial jobless claims rising toward 250,000. This presents the biggest risk to the current market consensus and could lead to a quick reversal in the dollar and yields if the situation worsens. We should consider holding protective put options on major US indices to safeguard against this risk. Create your live VT Markets account and start trading now.

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