In currency markets, the US Dollar stayed weak, especially against the Australian Dollar this month. The USD/JPY faced bearish pressure, trading below 156.50 after the Bank of Japan discussed ongoing rate hikes in its policy meeting.

Euro and Pound Trends

The EUR/USD continued to drop towards 1.1750, following a negative close last week. Meanwhile, the GBP/USD, which rose nearly 1% last week, traded below 1.3500 in a tight range. The summary also offers insights on Silver investments. Silver can serve as a hedge during high inflation and often follows Gold’s movements because of its safe-haven status. Factors impacting Silver prices include geopolitical uncertainties, industrial demand—especially in electronics and solar energy—and the performance of the US Dollar. The Gold/Silver ratio indicates their relative values. A high ratio suggests Silver may be undervalued, while a low ratio can imply Gold is undervalued. With Gold and Silver pulling back from all-time highs, this presents a chance for trades on both sides. The current correction seems driven by profit-taking in light holiday markets. However, recent data from the Bureau of Labor Statistics showed that Core PCE inflation for November 2025 eased to 2.9%, which may reduce expectations for aggressive rate cuts. Derivative traders should consider buying puts on gold futures to protect against a deeper correction near the $4,400 level.

Implications of Federal Reserve Decisions

The US Dollar has remained weak throughout the month, but the upcoming Federal Reserve minutes on Tuesday could change things. The Fed has been raising rates aggressively in 2023, yet the market is now pricing in a 75% chance of a rate cut by the March 2026 meeting, according to CME Group’s tracking tools. If the minutes show a less dovish tone than expected, we could see a significant rise in the dollar. Geopolitical factors are a major source of volatility that traders need to monitor. Progress in Ukraine peace talks could spark a strong risk-on trend, pushing safe-haven assets like gold and the dollar lower while boosting equities. Options could be useful for betting on increased volatility, as a breakdown in these talks might quickly direct markets back to safe havens. This month, the Australian Dollar has been the strongest major currency, bolstered by a risk-on sentiment and rising commodity prices. Australia’s Q3 2025 GDP growth surprised positively at 0.8%, reinforcing the upward trend seen earlier this year. While long AUD/USD has been profitable, buying call options is a smart way to remain exposed to further gains while managing risk. There is a noticeable policy divergence between the Bank of Japan and the Federal Reserve. The BoJ’s Summary of Opinions reflects a growing support for more rate hikes to tackle inflation, which has remained stubbornly high for much of 2025. This contrasts with the Fed’s expected shift towards rate cuts, creating a favorable scenario for shorting the USD/JPY pair as we enter the new year. Create your live VT Markets account and start trading now.

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