Mexico’s Gross Domestic Product (GDP) dropped by 0.3% in the third quarter, matching expectations. This decline follows adjustments made to counter various economic pressures. The US Dollar has gained strength against both the Australian Dollar and the British Pound. Comments from Federal Reserve Chair Jerome Powell and fewer trade barriers between the US and China have contributed to this shift. The European Central Bank (ECB) kept interest rates steady while the EUR/USD experienced fluctuations.

Precious Metals Market

In the commodity markets, gold was trading around $4,000, with improved trade relations helping its rise. Silver stabilized after a 16% drop and remains above its 50-day simple moving average (SMA). Cryptocurrencies like Bitcoin, Ethereum, and XRP saw a nearly 1% increase. Eased trade tensions following the Trump–Xi meeting in South Korea played a role in this positive movement. Zcash continued its climb, trading close to $360, despite ongoing market volatility. The US-China meeting led to a reduction in Fentanyl-related tariffs for China and the resumption of soybean exports to the US. These developments brought some stability to trade discussions, impacting related markets. Reflecting on past market behaviors, we can remember the US-China trade truce during the Trump administration. Today, we see similar volatility as the market adjusts to new trade negotiations focused on technology and resource access instead of tariffs. This suggests that hedging against sudden market swings in equity indices may be wise.

Implications Of Monetary Policy

We recall how the market reacted to Powell’s “hawkish cut,” which indicated the end of an easing cycle and hinted at tightening in the early 2020s. With the latest US core CPI at 3.1% last week, the Federal Reserve is likely to keep rates steady through the first half of 2026. This makes long positions in the dollar appear increasingly risky after years of growth, prompting a look at options strategies that could profit from a stable or declining dollar. Previously, gold struggled to break the $4,000 mark due to temporary easing in trade tensions. Today, that same level is being challenged again, supported by central bank buying and ongoing inflation rather than just political factors. We have seen an 8% rise in open interest for gold futures this month, indicating that traders are preparing for a potential breakout. During the dollar’s strength, the EUR/USD struggled near 1.15 and the GBP/USD hovered around 1.31. Currently, the Euro seems to have found support around 1.10 while the Pound fell below 1.25 after the UK reported a disappointing 0.1% GDP growth for Q3. The trend still favors the dollar. Options pricing shows a growing expectation for the Pound to weaken, especially against the Euro, as the ECB remains more aggressive compared to the Bank of England. Back then, Mexico’s GDP decline served as an early warning for emerging markets’ sensitivity to US policies. This trend is still evident, as the Peso weakened past 19.50 to the dollar last month on renewed fears of a slowdown in US manufacturing. We expect any additional US economic weakness will have a larger impact on peso derivatives, creating opportunities for those ready for volatility. Create your live VT Markets account and start trading now.

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