In January, the Consumer Price Index (CPI) in Bavaria stayed steady at 0% month-over-month. This stability comes as different regions and markets experience various economic activities. In the Eurozone, early GDP figures for the fourth quarter of 2025 revealed a growth of 0.3% from the previous quarter, slightly above what was expected. In the currency market, the EUR/USD pair fluctuates around 1.1900 due to a stronger US Dollar.

Geopolitical Events Influence

As geopolitical events unfold, the US Dollar rose after a political deal to keep the federal government funded. Gold has been on a downward trend, currently testing the $5,000 mark, as a result of the US Dollar’s strength. Bitcoin, Ethereum, and Ripple all dropped, with weekly losses near 6%, 3%, and 5% respectively. Bitcoin is nearing its November lows at $80,000, indicating a more bearish outlook in the crypto market. Meanwhile, in the stock market, Microsoft shares experienced a major sell-off, leading to a $400 billion drop in market value—the second largest on record.

Market Themes And Impacts

The strong US Dollar has continued since late 2025, fueled by expectations of a stricter approach from the new Fed Chair. This trend makes dollar long positions attractive against other major currencies. The US Dollar Index (DXY) has climbed above 108.50, its highest level in over a year, suggesting this momentum may continue in the following weeks. Even with better-than-expected GDP numbers from the Eurozone in the fourth quarter of 2025, the euro remains weak. Today’s unchanged inflation rate from Bavaria supports our view that the European Central Bank will be slow to tighten policies compared to the Federal Reserve. The ECB’s key rate is at 3.25%, while the Fed’s is at 5.50%, making selling EUR/USD rallies a smart strategy. The significant sell-off in Microsoft last quarter spooked the tech sector. We should brace for more volatility in equity indices, especially the Nasdaq 100. The CBOE Volatility Index (VIX) has stayed above 22, well over its historical average, signaling that traders may want to buy protection with puts or use strategies like straddles. Gold’s recent dip from the $5,000 mark, despite market uncertainty, underscores the strong dollar’s impact. Typically, a rising dollar pressures commodities priced in USD, as seen during the dollar’s major rally in 2022, when gold fell sharply from its peak. If the dollar keeps climbing, shorting gold futures could be a wise trade. Create your live VT Markets account and start trading now.

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