In January, the United States announced that one-year consumer inflation expectations were lower than expected. The actual rate was 4%, while the forecast was 4.2%. The EUR/USD pair performed strongly, rising above 1.1800 amid rumors of Japanese Yen intervention. Similarly, the GBP/USD reached a four-month high of 1.3600 as the Dollar’s value fell.

Gold Prices Near Important Milestone

Gold prices neared $5,000 per troy ounce as investors looked for safe-haven options due to a weaker US Dollar. At the same time, Swiss bank UBS Group AG considered providing Bitcoin and Ethereum services to selected private clients in Switzerland. Next week, key meetings from the Fed and BoC—along with ongoing geopolitical events—are expected to influence the market. Bitcoin faced difficulties, dropping below $90,000, impacted by market fluctuations and Trump’s speech about tariffs. Brokerage guides for 2026 highlighted the best brokers worldwide for various trading needs, including forex brokers, those offering Islamic and swap-free accounts, and ones providing high leverage and the MetaTrader 4 platform. FXStreet notes that the information given is purely informational and not an investment recommendation. It emphasizes the need for thorough research due to the risks involved with open market investments.

How Inflation Expectations Affect the Fed

The recent consumer inflation expectation of 4% is a noteworthy change, as it falls below forecasts and supports a trend of disinflation. This allows the Federal Reserve to pause its tightening cycle or suggest future rate cuts. We should prepare for a potentially more dovish stance from the central bank in the coming weeks. As a result, there is significant selling pressure on the US Dollar, likely to persist. The CME’s FedWatch tool indicates a greater than 70% chance of a rate cut by March, contributing to the decline of the Dollar. Options strategies, such as purchasing EUR/USD calls or USD/JPY puts, may effectively capitalize on this ongoing weakness. Additionally, strong rumors of Japan’s Ministry of Finance intervening to support the Yen are putting further pressure on the Dollar. Similar warnings occurred in 2025 when the USD/JPY approached 165, which led to direct market actions. This threat of intervention sets a clear ceiling for USD/JPY and a floor for the Yen. Gold stands to benefit significantly from this situation, nearing the $5,000 per ounce mark. A weaker Dollar makes gold less expensive for international buyers, and the possibility of lower interest rates reduces the opportunity cost of holding gold, which does not yield interest. Long positions in gold futures could be a good strategy to take advantage of this trend. Additionally, the Dollar’s sell-off may be intensified by market positions. The Commitment of Traders data from late 2025 revealed a heavily crowded long Dollar trade. As those positions get unwound, the selling pressure could increase. Traders in derivatives should prepare for ongoing Dollar weakness and rising currency volatility. Create your live VT Markets account and start trading now.

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