In September, housing starts in the United States improved, changing from -8.5% to -4.6%. This shift shows signs of stability in the housing market compared to the previous month. In related news, the University of Michigan’s consumer sentiment index in the US went up to 54 in January, beating expectations of 53.5. This may reflect a more positive outlook among consumers, hinting at possible changes in the economy.

Canada’s Labour Market Recovery

In Canada, the labor market recovery is uneven, according to an analysis by RBC Economics. Meanwhile, China’s net gold imports from Hong Kong doubled in November, signaling greater demand for gold in the area. The British Pound (GBP) has weakened slightly against other G10 currencies. Additionally, the EUR/USD exchange rate dipped a bit, as mixed economic data kept it low after the recent US labor-market report. The US dollar is likely to keep gaining strength, driven by geopolitical factors and anticipation of upcoming CPI data. Currencies like the Euro and British Pound are struggling, with the GBP/USD now testing its 200-day moving average. Traders might want to consider positions that take advantage of the dollar’s strength, such as buying call options on dollar index funds. Stubborn inflation is a significant concern, so we should prepare ahead of the next US inflation report. The Consumer Price Index (CPI), which stayed unexpectedly high at 3.8% in the last quarter of 2025, has led the Federal Reserve to pause any rate cuts. This approach supports the dollar while putting pressure on other central banks.

Gold and Inflation Hedging

Gold is showing strong performance, nearing yearly highs of about $4,500 per ounce, a level not seen since last year’s inflation surge. China’s increase in gold imports indicates a large player is preparing for uncertainty. We believe maintaining long positions in gold, whether through futures or options, is a smart way to hedge against inflation and market worries. While the US housing market continues to slow, the decrease in housing starts from -8.5% to -4.6% could mean that the worst might be over. This isn’t a reason to fully invest in recovery yet, but it might be a good opportunity to sell put options on homebuilder ETFs, allowing us to earn premium while betting on a market bottom. In foreign exchange, we are noticing the significant weaknesses in EUR/USD and GBP/USD. Recent German manufacturing PMI data from late 2025 showed ongoing contraction, leaving little room for optimism about the Euro. Derivative traders could consider buying puts on these pairs to profit from the downward trend. Unlike gold, riskier assets such as cryptocurrencies face challenges from dwindling demand and ongoing market fears. Bitcoin and Ethereum show signs of decline as funds shift to safer options. We believe shorting crypto futures or purchasing puts on crypto-related stocks may be beneficial in the upcoming weeks. Create your live VT Markets account and start trading now.

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