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Posted September 24, 2025 at 12:51 pm
The IBKR ForecastTrader platform places an 86% likelihood of the Bank of Mexico cutting its key rate 25 basis points tomorrow. Meanwhile, there are 7% odds for an unchanged benchmark as well as the same 7% probability for a reduction of 50 or more.
A new instrument in our prediction market features the weekly economic index from the Dallas Fed. The indicator offers participants the opportunity to consistently take positions that benefit from a lack of economic volatility by purchasing contracts on the tails. For example, the four-week moving average of the gauge stands at 2.48 and has generally hovered in the mid 2s all year. So due to an absence of significant recent turbulence in the economy, we’d expect a number in the mid 2s tomorrow. Against this backdrop, folks may consider buying the “Yes” at 1.6% and the “No” at 3.6% and repeat a similar process weekly.
Recent labor market softening suggests that weekly initial unemployment claims will remain above 220k in tomorrow morning’s release. The median estimate reads at 235k, and of the 37 forecasters participating in the monthly Reuters survey, the minimum stands at 225k while the maximum is at 250k. Similarly, I’m maintaining a higher bias and am avoiding the “Nos” here due to a potential spike. I like the risk-reward profile of the “Yes” at 220k, which is going for $0.86.
China’s freight index has been pretty stable and is probably arriving around 1,200 tomorrow. Meanwhile, the “Yes” and “No” contracts at 1,000 and 1,500 are going for $0.96 each and a break above or below those levels are highly unlikely. The trades along the two thresholds offer a favorable risk-reward dynamic in my opinion.
US GDP revisions are typically marginal and a 1.2% downgrade in tomorrow’s final reading is highly unlikely. Consider that the average shift has been 0.3% since 2009, and if this adjustment is similar to history, it should arrive near the 3.3% growth rate reported for the second quarter. For this reason, I like the “Yes” at 2.1% for the corresponding contract which is going for $0.96. Furthermore, coming in below 0% is almost impossible, which means that a technical recession by the end of the third quarter can’t happen since it would require a negative for the second quarter. A technical recession is defined as two consecutive quarters of GDP figures beneath 0. The “No” on third quarter recession is attractive at $0.97 in my view.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of September 24, 2025. Red circles around the thresholds was inserted by J. Torres to highlight his preferred “Yes” and “No” answers throughout different levels.
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This material is from IBKR Macroeconomics, an affiliate of Interactive Brokers LLC, and is being posted with its permission. The views expressed in this material are solely those of the author and/or IBKR Macroeconomics and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Interactive Brokers LLC is a CFTC-registered Futures Commission Merchant and a clearing member and affiliate of ForecastEx LLC (“ForecastEx”). ForecastEx is a CFTC-registered Designated Contract Market and Derivatives Clearing Organization. Interactive Brokers LLC provides access to ForecastEx forecast contracts for eligible customers. Interactive Brokers LLC does not make recommendations with respect to any products available on its platform, including those offered by ForecastEx.
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