In October, Mexico’s core inflation for the first half of the month rose by 0.18%. This is slightly lower than the expected 0.19%, suggesting a minor adjustment in inflation predictions. At the same time, various currencies and commodities have shown different changes in value. The USD/CHF fell slightly as the Swiss National Bank announced there will be no negative interest rates. Meanwhile, the GBP/USD pair decreased due to weaker inflation data from the UK.

Cryptocurrency Gains

In the cryptocurrency market, Bitcoin is testing the $110,000 resistance level thanks to growing interest from retail investors. Ethereum is also making strides toward its 100-day EMA hurdle. XRP is on the rise as well, indicating a shift in retail demand. Gold’s price has settled around $4,150 per troy ounce as traders take a cautious approach ahead of the upcoming US CPI data release. Economists are also monitoring the effects of Japan’s new Prime Minister on the Japanese Yen, focusing on the alignment of fiscal and monetary policies. Finally, there’s been an evaluation of market conditions, including regulations and broker spreads expected by 2025, which provides crucial insights for forex traders looking to adapt to changes in the foreign exchange market. The core inflation rate of 0.18% in Mexico, a bit below the anticipated 0.19%, strengthens the belief that a central bank shift is nearing. This slight difference is important, as it puts pressure on Banxico to think about a rate cut from the current 11.00% in its next meeting. We see an opportunity for traders to prepare for a weaker peso, possibly by buying short-dated USD/MXN call options.

Central Banks and Inflation

This trend of lower inflation isn’t just happening in Mexico; the UK is experiencing it too. Last month’s UK inflation rate dropped to 2.1%, which has increased speculation that the Bank of England may cut rates before the year ends. This trend has placed continued pressure on the British Pound, making it sensible to sell GBP/USD futures in this market. Now, all eyes are on the upcoming US Consumer Price Index (CPI) report, which is crucial before the Federal Reserve’s meeting in December. After a disappointing non-farm payrolls report earlier this month, showing a weaker gain of just 95,000 jobs, a soft inflation reading would likely lead to a Fed rate cut. We expect increased volatility in options on US Treasury futures as the market braces for this event. The Japanese Yen stands out as an exception in this global pattern, continuing its long-term decline and weakening past 165 against the dollar this week. The policy gap that started in the early 2020s has widened, even while other central banks are preparing to ease. For derivative traders, staying long on the USD/JPY pair is a direct way to benefit from this ongoing weakness. The general expectation of central bank easing is lifting commodities, which in turn supports currencies like the Australian Dollar. Gold has been stable, hovering near $4,150, but it seems ready to rise if a soft US CPI report weakens the dollar further. We believe that buying call options on gold miners or the AUD/USD pair could provide good upside potential in the coming weeks. Create your live VT Markets account and start trading now.

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