The auction for US five-year notes has seen a rise in yield, moving up to 3.823% from 3.747%. This shift highlights changes in the overall market interest rates. The US Dollar Index has dropped to levels not seen since 2022. This decline is fueled by portfolio diversification and concerns about the US economy. There are also rumors of foreign exchange interventions and active selling by carry traders.

Gold Prices Update

Gold prices have dipped slightly from record highs due to economic uncertainties related to presidential decisions. The XAU/USD rate remains favorable for buyers ahead of the Federal Open Market Committee’s upcoming rate decision. Ethereum exchange-traded funds in the US have experienced nearly $117 million in net inflows. Fidelity’s FETH played a major role, contributing $137.2 million and ending a streak of four days of outflows. Ripple (XRP) is trading at around $1.88, down from its previous high of $1.95. Despite consistent demand for ETFs, ongoing pressure exists due to a weak technical setting. Currency pairs like GBP/USD and EUR/USD are showing different trends. While GBP/USD continues to rise, EUR/USD is approaching its previous highs. Economic and policy risks are impacting these movements.

Dominant Market Theme

The broad sell-off of the US Dollar is the main theme shaping the market. Since early December 2025, the US Dollar Index has dropped over 4% and is nearing lows not seen since 2022. This ‘Sell America’ narrative seems to be driven by discussions of White House tariffs and worries about slowing economic growth in the US. We should brace for significant movements around the Federal Reserve’s decision this Wednesday. With EUR/USD breaking a five-year high and GBP/USD hitting a four-year peak, options pricing indicates high implied volatility. Traders might consider buying straddles or strangles on major currency pairs to prepare for a breakout in either direction, though current trends suggest further dollar weakness. The recent auction of 5-year Treasury notes is a warning signal for those betting against the dollar. The yield rising to 3.823% indicates that bond investors seek a higher premium, possibly due to inflation fears, as shown by the Q4 2025 CPI report, which remained sticky at an annualized 3.9%. This situation could make it difficult for the Fed to pivot dovishly and may lead to a sharp reversal if their tone is more hawkish than expected. Gold’s increase above $5,150 an ounce indicates a strong flight to safety. Reflecting on the market chaos of 2022-2023, gold’s performance then foreshadowed major policy changes. Buying long-dated call options on gold seems like a smart strategy to guard against ongoing dollar devaluation and geopolitical risks. At the same time, speculation about possible intervention by the Bank of Japan has increased as the USD/JPY dips below 152.50. Minutes from the BoJ’s meeting reveal that members are open to raising rates, which contrasts sharply with the Fed’s expected dovish approach. This discrepancy makes shorting the USD/JPY pair—through futures or put options—a promising trade. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now