The European Central Bank (ECB) has kept its deposit facility rate at 2%, meeting expectations. This shows that the eurozone’s economy is steady. In the currency markets, the EUR/USD exchange rate hovers around 1.1560. The GBP/USD, however, is facing pressure and is heading towards 1.3100.

Gold Prices and Crypto Recovery

Gold prices have risen above the $4,000 mark, even with a strong US Dollar. In the crypto market, recovery is happening as trade tensions between the US and China lighten after a meeting between Trump and Xi. Zcash continues its upward trend, targeting the $400 level. Since the European Central Bank has kept its deposit rate at 2%, the difference between Europe and the United States remains large. The US Federal Reserve’s rate stands at 4.5%, giving a significant yield advantage to the dollar. This helps explain the ongoing pressure on EUR/USD. Traders might want to consider strategies that profit from a stagnant or weaker euro, such as selling out-of-the-money call options on EUR/USD futures. The easing of trade tensions between the US and China has reduced overall market volatility. This is evident as the VIX index has dropped from over 25 to around 18 in the past month. In this environment, selling volatility could be wise. We are considering strategies like iron condors on major stock indices, which benefit from a lack of large price movements in either direction.

Gold and Sterling Movements

Gold’s rise above $4,000 an ounce marks a historic achievement, almost doubling in price since inflation began increasing in 2023. This surge, along with a recent drop in the US CPI to 3.8%, has weakened the US Dollar Index temporarily, contributing to gold’s rise. We see a chance to buy long-dated call options to take advantage of further price increases while managing our risk. The weakness of the pound is worsened by new UK economic data showing that GDP growth was only 0.1% last quarter, confirming economic stagnation. This makes GBP/USD especially vulnerable as it nears the 1.3100 target. We believe that buying near-term put options on the pound is a straightforward way to prepare for further declines. The rebound in the crypto market signals a return of risk appetite due to positive trade news. This optimism is boosting speculative assets like Zcash, which may see increased volatility with new investments. We think that setting up long straddles could be an effective strategy to profit from significant price movements, no matter the direction. Create your live VT Markets account and start trading now.

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