Consumer confidence in Mexico dropped from 46.5 to 46.1 in October, indicating a change in consumer feelings compared to last month. The Euro has been struggling, with the EUR/USD pair hitting new lows due to the strength of the US Dollar. On the other hand, the Japanese Yen is gaining strength as the Bank of Japan signals possible interest rate hikes, influencing both EUR/JPY and USD/JPY exchange rates.

Gold Prices and Cryptocurrency Market

Gold prices are continuing to decline, closing around $3,950 per troy ounce, mainly due to a strong US Dollar. While the overall cryptocurrency market is correcting, privacy coins like Dash and Zcash are holding strong, with a market cap exceeding $25 billion. The Australian and British currencies are moving in different directions as their central banks prepare for meetings. Additionally, the DeFi platform Balancer suffered a major hack, losing over $120 million, and has faced criticism for not preventing the incident due to the age of the affected pools. The US Dollar remains at the forefront, and it’s likely to stay strong in the coming weeks. The US jobs report from last Friday showed the economy added over 200,000 jobs in October, suggesting the Federal Reserve has no reason to lower rates before the end of the year. This strengthens the dollar’s yield advantage over other major currencies. With the European Central Bank on hold, the gap in policies between it and the Fed is widening. Eurozone inflation for October came in at 2.8%, declining faster than in the US. We foresee the EUR/USD potentially breaking below its recent three-month lows around 1.1480.

The Impact on Major Currencies

The Pound is particularly vulnerable due to domestic fiscal concerns, pushing UK 10-year Gilt yields back to about 5.1%. These challenges, combined with the strong dollar, increase the chances of GBP/USD testing the 1.3000 level. Buying put options on this pair looks like a solid strategy. The Japanese Yen is an exception, gaining strength as the Bank of Japan continues its policy normalization that began in 2024. This hawkish stance makes long positions in USD/JPY risky. We should be alert for any sharp declines if the BoJ suggests a more aggressive rate hike plan. This strength of the dollar is also affecting emerging markets, like Mexico, where consumer confidence slipped to 46.1. With inflation in Mexico still around 4.5%, the central bank cannot afford to ease its policies, indicating that volatility in emerging market currency options is likely to remain high. For commodities, a strong dollar presents a significant challenge for Gold. Despite historically high prices, the drop to $3,950 an ounce makes sense when US 10-year Treasuries yield a competing 4.8%. We expect continued pressure on Gold as long as US interest rates stay high. Create your live VT Markets account and start trading now.

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