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Posted August 28, 2025 at 12:48 pm
Monthly PCE inflation results are well telegraphed by Wall Street due to critical inputs from the CPI and PPI being available, since they are released earlier in the month. For this reason, the indicator has a subdued deviation rate from expectations and rarely misses the consensus projection by more than a tenth of a percent in either direction. In consideration of the 2.6% median estimate, I believe the “Nos” at 2.7% and 2.8% are undervalued alongside the “Yeses” at 2.3% and 2.4%. The pricing of the thresholds span from $0.86 to $0.95 and the combination trade would require a published result of 2.4% or 2.8% to lose money.
I consider it highly unlikely that Canadian quarter over quarter GDP will exceed 1% or fall below 0.5%. That range hasn’t been breached since the pandemic recovery in 2021 and in light of my -0.2% expectation and the historical trend, I find the “Yes” answer at -0.6% undervalued at $0.94 as well as the “Nos” at the 1% and 1.4% thresholds, which are going for $0.94 and $0.95.
Singapore’s SORA has experienced volatility lately, but the “No” at 2% appears safe to me as the indicator has been consistently trending south since April. Additionally, it hasn’t exceeded 2% going back to June 3rd, almost 3 months ago. Those expecting a spike may like the “Yes” answer at the 1.3% threshold which costs $0.15, while folks projecting the rate to remain lower may favor the “No” answer at 1.2%, which is priced at $0.45.
The initial sentiment figure of 58.6 for this month was released on August 15 and is scheduled to be revised tomorrow. Meanwhile, revisions are what this forecast contract is based on, and they have been relatively marginal over the years, with the absolute average and median at just 0.96 and 0.75 since October 2015. The “Nos” at 64, 66 and 68 have attractive risk-reward profiles in my opinion since an upgrade of +5.5 has never happened, and that’s what would be required for “Team No” to lose here at 64. The levels are ranging from $0.93 to $0.95 in cost.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of August 28, 2025. Red circles around the thresholds were 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.
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