White House Adviser Kevin Hassett reported that core inflation is at 1.6%, with strong growth and stable inflation levels. However, he warned against assuming we have fully conquered inflation, even though recent CPI data shows wages are growing faster than prices. Taxpayers can expect large refunds next year. A big announcement about housing costs is also coming. New regulations may encourage states to simplify the homebuilding process.

Currency Market Changes

Recently, the US Dollar increased in value against the Euro. It performed variably against other currencies, which is shown in a heat map detailing currency strength differences. FXStreet is a news platform that offers insights and updates on market changes, including commodities and major currencies. The information is for educational purposes only and not financial advice. Users should do their own research before making investment choices, as the data involves risks and uncertainties. With the White House indicating that the fight against inflation is nearly over, we should adjust our expectations for interest rates. The 1.6% core inflation rate, along with recent data showing GDP growth of 3.1% in Q3 2025, suggests that the Federal Reserve has done its job. This means the significant rate hikes from 2023 and 2024 are behind us. This changes the outlook for interest rate derivatives. With the Fed Funds Rate steady at 4.50%, futures markets now expect at least two rate cuts for 2026, a notable change from just a few months ago. It may be wise to prepare for a lower-rate environment using tools like interest rate swaps or options on Treasury futures.

Market Outlook and Strategies

Current commentary suggests a “soft landing,” which usually reduces market volatility. The VIX is currently trading near a yearly low of 14, indicating this calmness. This makes selling options attractive, such as using iron condors on the S&P 500 to take advantage of stable market action. For currency traders, potential future Fed rate cuts may weaken the US Dollar, despite its current strength against the Euro. Although the Bank of England recently lowered rates, their mixed decision hints they may pause changes, leading to different policies. We could use call options on GBP/USD to prepare for possible dollar weakness as we move into the new year. Additionally, we need to monitor the upcoming housing announcement. If measures are taken to lower shelter costs, this would further reduce inflation. Together with expected tax refunds increasing consumer spending, this paints a picture of a stable economy. Such conditions are generally favorable for risk assets and suggest we may not need strict monetary policies. Gold is currently consolidating around $4,330 an ounce and seems ready for a breakout. Historically, a weaker dollar and declining real interest rates are beneficial for precious metals. We should consider long-dated call options on gold to profit from a potential increase in the first quarter of 2026. Create your live VT Markets account and start trading now.

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