In August, Mexico’s retail sales increased by 0.6%, beating the forecast of 0.2%. This growth indicates positive market conditions during the month. The British Pound dropped against the US Dollar due to UK inflation data suggesting the Bank of England may adopt a dovish stance. Meanwhile, AUD/USD thrived on strong commodity performance, while USD/CAD remained stable as oil price changes balanced out the stronger US Dollar.

EUR and USD Market Influence

EUR/USD stayed slightly above 1.1600, as the US Dollar’s momentum slowed, impacting overall market sentiment. In contrast, GBP/USD fell to 1.3320 amid speculation about a rate cut from the Bank of England, along with the strengthening US Dollar. Gold traded around $4,150 per troy ounce, entering a consolidation phase as markets carefully awaited the US Consumer Price Index data. Bitcoin approached a resistance level near $110,000, showing renewed interest from retail traders. Ethereum and XRP also saw upward trends affected by different market factors. Japan’s Yen stabilized after Sanae Takaichi’s appointment as Prime Minister, as discussions about Japan’s fiscal and monetary policies continued. In the crypto market, Aster’s price increased slightly to over $1.00, supported by a positive sentiment following Bitcoin and Ethereum gains. The August retail sales report in Mexico, at 0.6%, showcases a strong consumer base. Recent September data shows core inflation remaining high at 4.4%, indicating that Banxico may keep interest rates high for a longer period. It may be wise to use derivatives to express a bullish outlook on the Mexican Peso, particularly against currencies from dovish central banks like the Japanese Yen.

Monetary Policies and Market Strategies

Expectations are growing for a dovish Federal Reserve, but we should remain cautious. Last week’s US inflation data indicated a stubborn core CPI at 3.8%. This persistence makes it harder to justify rate cuts and suggests that the US Dollar could rise if upcoming employment and inflation figures are strong. Using volatility options on the Dollar Index (DXY) might be an effective way to prepare for surprises. We anticipate further weakness in the British Pound, supported by fundamentals. UK inflation has decreased to 2.5% in the latest report, and money markets are pricing in over a 60% chance of a Bank of England rate cut by March next year. Buying put options on the GBP/USD pair may be a smart move to benefit from this expected decline. Strong commodities are a primary driver, positively impacting the Australian and Canadian dollars. West Texas Intermediate crude oil has risen above $95 per barrel, providing a boost for the Canadian Dollar. Strategies like selling EUR/CAD or buying call options on AUD/USD are appealing to capitalize on this trend. Gold is currently stagnant around $4,150, not surprising given the market’s anticipation of the next US inflation report. A similar consolidation occurred in late 2024 before a sharp break, so we should be ready for increased volatility. Traders might consider straddles to take advantage of significant price changes in either direction once the data is out. The crypto market has a clear risk-on sentiment, with Bitcoin now testing the $110,000 resistance. Open interest in Bitcoin futures has surged by over 20% in the past 30 days, indicating a strong influx of new investment. This trend suggests that buying call options on both Bitcoin and Ethereum could be beneficial as they aim for new highs. Create your live VT Markets account and start trading now.

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