Japan’s retail trade in November saw a decline, with the adjusted month-to-month growth rate falling from 1.6% to 0.6%. This drop highlights a significant shift in the economy as we move into the final quarter of the year. The currency market is experiencing fluctuations, particularly with USD/CAD nearing its five-month low. This movement stems from differing policies of the Bank of Canada and the Federal Reserve, affecting currency valuations.

Gold Prices Retreat

In commodities, gold prices have retreated from their all-time highs. This is mainly due to profit-taking and lower trading activity. The Pound Sterling has slightly declined, especially in the GBP/USD pair. This dip can be attributed to reduced market activity during the holiday season. Looking ahead, the S&P 500 is forecasted to grow in 2026. At the same time, silver has risen for four consecutive days, driven by expectations of the Federal Reserve easing and its status as a safe haven. In cryptocurrency, Bitcoin has fallen below $87,000. This decline comes with increased ETF outflows and decreased activity from large investors.

Japan’s Economic Slowdown

Japan’s retail sales fell to 0.6%, confirming ongoing weak consumer demand. Combined with revised GDP numbers from the third quarter of 2025, which showed a slight contraction, this points to a sluggish economy. This trend could press the Bank of Japan to keep its accommodative approach, possibly leading to further yen weakness. As Japan’s economy slows, we should focus on yen-related options, especially since holiday markets are keeping implied volatility low. Historically, low volatility periods are often followed by sharp market moves once trading resumes in the new year. Buying USD/JPY call options set to expire in late January could be a cost-effective way to prepare for a potential increase. These developments occur as the market anticipates Federal Reserve easing in early 2026. The latest US Core PCE inflation report for November 2025 showed a year-over-year drop to 2.4%, the lowest in over two years. The CME’s FedWatch Tool suggests a greater than 75% chance of a rate cut by the March 2026 meeting. A weaker dollar from Fed cuts benefits precious metals, explaining the pullback in gold prices and the rise in silver. The US dollar index (DXY) has already decreased nearly 4% in the fourth quarter of 2025. We should consider using call options on gold and silver ETFs to capitalize on this trend while managing risk. While lower rates lead to a positive outlook for the S&P 500 in 2026, Japan’s data serves as an early warning for global growth. With the VIX index around a yearly low of 13 during this quieter trading week, buying protective puts on major indices is relatively inexpensive. This could be a smart move against potential negative surprises before market liquidity fully resumes in January. Create your live VT Markets account and start trading now.

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