Germany’s IFO Business Climate index dipped slightly to 89.5 in January, down from 89.7. This index measures economic sentiment in Germany and can affect market expectations. On Monday, Germany’s Business Climate remained steady at 87.6, according to IFO. Despite this stability, the EUR/GBP exchange rate increased a bit due to weak sentiment in Germany and a stable outlook in the UK.

Currency Market Performance

In the currency markets, EUR/USD held steady close to 1.1850, continuing the momentum from last week’s rally. GBP/USD climbed to four-month highs of around 1.3680, as the US dollar remains weak. Gold prices soared to record highs over $5,100 per troy ounce, driven by a declining dollar and geopolitical tensions. Bitcoin, Ethereum, and Ripple started to recover slightly after previous price drops, moving closer to key support levels. This week will focus on central bank decisions, inflation data, and corporate earnings, all likely to impact market trends. Cardano’s price forecast suggests increased downside risks, with its price around $0.34 during a sustained correction phase.

Weakness in the Greenback

The US dollar continues to weaken, pushing currency pairs like EUR/USD and GBP/USD to yearly and multi-month highs. The dollar index (DXY) has been declining since the last quarter of 2025, where it fell over 3% due to changing interest rate expectations. Consider buying call options on EUR/USD with a strike price above 1.1900 to take advantage of this upward trend. The small drop in German IFO expectations highlights some weakness in the Eurozone, confirming the slow trends in recent manufacturing data from Destatis. While the Euro remains strong against the dollar, this German weakness may provide opportunity. We suggest buying put options on the DAX index as a hedge against a potential decline in German stocks. Gold is benefiting greatly from the weak dollar and uncertainty in geopolitics, trading above a record $5,100 per ounce. This rise builds on momentum from 2025, a year when central banks added over 800 tons to their reserves, creating a stable price floor. To capitalize on this trend, we recommend purchasing call options on gold futures (XAU/USD) for further gains. After a sharp correction last week, cryptocurrencies are beginning to show signs of recovery. With central bank announcements on the horizon, volatility is likely, making directional bets risky. A more effective strategy might be to use options to trade the volatility itself, such as a long straddle on Ethereum futures, which could profit from significant price movements in either direction. Create your live VT Markets account and start trading now.

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