**Upcoming Market Influences** The US Dollar is getting stronger as market expectations for Federal Reserve rate cuts fade. A slightly improved consumer sentiment score of 54 supports the idea that the economy is stable, which gives the Fed little reason to act quickly. We should be careful about trying to go against the dollar’s rise in the coming weeks. Recent data explains this trend. The chance of a rate cut in March, based on fed funds futures, has dropped to under 40% this week. This is a significant decline from over 75% just a few weeks ago at the end of 2025. This shift away from aggressive cuts makes dollar-denominated assets more appealing, creating challenges for other currencies. Even with a strong dollar, gold is trading near yearly highs around $4,500. This is unusual and reflects widespread fear in the market. It suggests that traders are looking at both the dollar and gold as safe investments, driven by geopolitical issues or concerns about market declines. Derivative traders might think about using options on the VIX index to protect against this growing risk aversion. **Currency and Commodity Dynamics** As long as the dollar stays strong, downward pressure on EUR/USD and GBP/USD is likely to persist. We forecast EUR/USD aiming for the 1.1600 level, making put options or bear put spreads a smart strategy for the upcoming weeks. Similarly, GBP/USD is currently testing its important 200-day moving average; if it drops below that, we may see more selling pressure. A key event to watch is the US Consumer Price Index (CPI) report scheduled for next Tuesday. If inflation numbers are higher than expected, it will likely strengthen the idea of ‘higher for longer’ interest rates, pushing the dollar even higher. We can expect increased volatility, so strategies like straddles on major currency pairs or indices might be useful to capitalize on potential price swings. This cautious attitude is also affecting cryptocurrencies, with institutional interest in Bitcoin slowing down and Ethereum ETF outflows rising. This indicates that money is shifting away from speculative assets toward safer options. This trend of risk aversion seems set to continue until we gain more insight from the Fed or upcoming inflation data. A similar pattern occurred in 2023 when the market continually speculated about the Fed’s moves, leading to sharp price fluctuations around significant data releases. Traders who prepared for volatility around jobs and inflation reports were better positioned then. It seems wise to adopt this approach again, focusing on strategies that can benefit from large price changes. Create your live VT Markets account and start trading now.

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