The ZEW Economic Sentiment in Germany rose to 59.6 in January, exceeding expectations of 50. This shows increasing optimism about the economy. Gold has reached a new record high, trading over $4,700. This surge is fueled by geopolitical tensions and trade conflicts. The pressure on the US Dollar also supports gold’s rise.

The EUR/USD Pair

The EUR/USD pair climbed to a two-week high above 1.1700 due to positive market sentiment. At the same time, the EUR/GBP increased as expectations grew for a Bank of England rate cut. Bitcoin prices fell again, trading under $91,000. This decrease is linked to a shift towards safer assets like gold due to rising geopolitical tensions. President Trump has announced potential tariffs on imports from several European countries, including a proposed 10% tariff starting in February. This could impact trade relations. In the foreign exchange market, NZD/USD reached a four-month high of 0.5850 as the US Dollar weakened. Meanwhile, GBP/USD remained close to 1.3450 despite unemployment rates in the UK staying the same.

The Escalating Trade Dispute

The ongoing trade dispute over Greenland is creating significant uncertainty in the markets, leading to increased volatility. The VIX, a key measure of market fear, has risen more than 35% in the last two weeks from calmer levels in late 2025. Traders might want to consider buying options, such as straddles, on major indices to benefit from the anticipated price swings. Gold’s push above $4,700 signals a flight to safety, influenced by central banks that added over 1,000 tonnes of gold to their reserves throughout 2025. This strong momentum suggests that buying gold futures or call options remains a smart strategy in the coming weeks. The falling dollar is providing strong support for precious metals. The “Sell America” trend is gaining momentum, pushing the US Dollar Index below the critical 100-point level. This broad weakness in the dollar presents opportunities for traders. Buying put options on the dollar or going long on pairs like NZD/USD, which is nearing a four-month high, could be advantageous. In contrast, the Euro is displaying surprising strength, boosted by the strong German ZEW Economic Sentiment survey. The reading of 59.6 marks a turnaround from the negative sentiment that affected the latter half of 2025. Positioning for more gains in the EUR/USD, perhaps through bull call spreads, could be a wise choice. With capital moving out of US assets and into safer options, caution is needed regarding equities. The risk-off environment indicates US stock indices may decline further. We should consider buying put options on the S&P 500 to hedge portfolios or profit from expected downturns. Lastly, Bitcoin’s drop below $91,000 shows it is not acting as the “digital gold” some anticipated. Investors are leaning towards traditional safe havens, as seen in Bitcoin’s decline while gold rises. This trend presents an opportunity to short Bitcoin futures for those expecting continued risk aversion. Create your live VT Markets account and start trading now.

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