In December, the Core Harmonized Index of Consumer Prices in the Eurozone rose to 0.3% from a previous -0.5%. This change affects currency movements, especially as markets look to upcoming US employment data. The EUR/USD is trading below 1.1700 due to a weak US Dollar and lower inflation in the Eurozone. Similarly, the GBP/USD dropped near 1.3480 after the US ADP employment data was released, reflecting a slight gain in the Greenback.

Gold Market Overview

Gold is currently at a two-day low of about $4,430 after gaining for three days. It faces resistance around $4,500. The slight rise of the US Dollar and falling US Treasury yields may limit further declines in gold prices. Cryptocurrencies like Bitcoin and Ethereum are correcting. Bitcoin has fallen below $93,000. Market sentiment is mixed, with altcoins facing challenges as ETF flows fluctuate. Looking ahead to 2026, the economic outlook appears more stable compared to the disruptions of 2025. In the crypto market, Aave (AAVE) is close to breaking out, trading around $172, offering potential opportunities for investors. The rise in Eurozone core inflation to 0.3% month-over-month marks a big change from -0.5% previously. This shift raises questions about the European Central Bank’s next steps. While one data point doesn’t set a trend, it challenges the disinflation narrative that has influenced markets since late 2025. We should expect more volatility in EUR options as the timing of any ECB rate changes becomes less predictable.

US Employment Report and Economic Outlook

This European data sharply contrasts with the US, where the recent ADP employment report indicated only 41,000 new jobs added. This weak labor data suggests that the Federal Reserve may be closer to easing than the ECB. Currently, Fed funds futures show over a 60% chance of a rate cut by the third quarter of 2026, a significant increase from a month ago. The differing policies of a more aggressive Bank of Japan and a hesitant ECB make shorting the EUR/JPY pair an attractive strategy. In 2024, early signs of normalization from the BoJ led to sustained Yen strength against currencies from central banks that had stopped raising rates. Now, traders are employing put options on EUR/JPY to prepare for a potential revisit of the lows from the fourth quarter of 2025. As the calm of 2025 fades, conflicting signals from major economies suggest we should brace for more volatile markets. The weak US jobs data is keeping US Treasury yields low, which usually supports assets like gold. However, gold is struggling to maintain its gains. This indecision indicates that traders might consider strategies that benefit from rising volatility itself, such as purchasing call options on volatility indexes ahead of the official US employment data release. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now