Italy’s GDP grew by 0.8% in the fourth quarter compared to last year, beating expectations of 0.5%. In the Eurozone, preliminary GDP rose by 0.3% from the previous quarter, slightly above the expected 0.2%.

Market Activities and US Dollar Movement

Market activities show the EUR/USD pair struggling, even with strong Eurozone GDP data. The US dollar is gaining strength due to political events in the US and upcoming announcements. Gold is correcting downwards, getting close to $5,000, as investors await an important US political announcement. This price change coincides with a stronger US Dollar. Stellar experienced a continued decline, dropping to a three-month low below $0.20, driven by bearish momentum and poor market conditions. Microsoft’s recent performance affected stock indices due to a significant drop after its earnings report. Cryptocurrencies faced a sell-off, with Bitcoin, Ethereum, and Ripple recording weekly losses of 6%, 3%, and 5%, respectively.

Broker Recommendations for 2026

For 2026, various brokers offer recommendations for trading across different currencies and platforms, catering to diverse trader needs. Unexpectedly, Europe is showing strength, with Italy and the Eurozone’s GDP for the fourth quarter of 2025 exceeding forecasts. Normally, this would boost the Euro. In the past, such a significant GDP increase has led the European Central Bank to adopt a more aggressive stance, which is good for the currency. However, the US Dollar is currently dominant in the markets, limiting any Euro strength. Investors are focused on the upcoming announcement of the new Federal Reserve Chair, leading to increased demand for the dollar as a safe haven. We saw similar dollar-preference behavior in late 2021 when there was uncertainty about Jerome Powell’s reappointment, highlighting how political events can overshadow economic data. This creates a distinct opportunity for options traders. One-month implied volatility for the EUR/USD pair has risen to its highest in over a year, making trading strategies that benefit from significant price movement appealing. Traders might consider straddles or strangles to capitalize on this volatility, no matter whether the Euro’s fundamentals or the Dollar’s political sway prevail in the coming weeks. In the equity markets, Microsoft’s recent share price drop suggests potential weakness in large US tech companies, contrasting with the improving economic situation in Europe. A relative value strategy could involve going long on the Euro Stoxx 50 index while shorting the Nasdaq 100 to take advantage of a possible shift away from overvalued US stocks. Finally, the strong dollar negatively impacts other assets. Gold prices are falling, and a hawkish Federal Reserve nominee would likely push them even lower, as higher interest rates make non-yielding assets less appealing. In the cryptocurrency market, bearish signals are emerging, such as falling Open Interest in Bitcoin futures, which often indicates significant price drops during market corrections, similar to what we saw in 2024. Create your live VT Markets account and start trading now.

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