Canada’s Gross Domestic Product (GDP) for November was expected to grow by 0.1%, but it actually showed no growth at all, landing at 0%. This stagnation can affect economic forecasts and various stakeholders. In other updates, the EUR/USD exchange rate dropped below 1.1900, indicating the strength of the US Dollar. This increase came after Kevin Warsh was named the new Federal Reserve head, along with higher-than-expected U.S. Producer Prices in December.

Gold And Cryptocurrency Markets

Gold prices fell, dropping to just above $5,000 due to profit-taking and the influence of a stronger US Dollar. In the cryptocurrency world, Stellar fell to a three-month low below $0.20 amid tough market conditions and reduced momentum. Microsoft suffered significant market losses, with its market value decreasing by $400 billion after its earnings report. Meanwhile, Bitcoin, Ethereum, and Ripple faced major sell-offs, ending the week down nearly 6%, 3%, and 5%, respectively. Given the flat Canadian GDP reading for November 2025, we can expect the Canadian dollar to weaken. The Bank of Canada maintained its key interest rate at 5% in the last quarter of last year, citing a cooling economy, and this data backs that cautious approach. We see potential in shorting the CAD, possibly through options on the USD/CAD pair, betting it will rise above its recent range.

Impact Of Dollar Strength

The strong U.S. dollar is currently our main focus, fueled by a hawkish Fed chair nominee and unexpectedly high producer price inflation in December 2025. This situation resembles the period leading up to the aggressive rate hikes in 2022 when the Dollar Index (DXY) surged past 114. We should prepare for further gains in the dollar against major currencies in the coming weeks. With EUR/USD breaking below the 1.1900 level and GBP/USD testing 1.3700, the technical outlook supports ongoing U.S. dollar strength. The difference in policy between a more aggressive Fed and other central banks creates a clear path for these trends to persist. Strategies like buying put spreads on the Euro or Pound Sterling provide a low-risk approach to benefit from this. Gold’s sharp decline from its highs is mainly due to the stronger dollar and the prospect of higher interest rates, making non-yielding assets less appealing. Historically, a rising dollar has pushed down gold prices. It may be wise to short gold futures or buy puts on gold mining ETFs as the precious metals market weakens. The decline in major stocks like Microsoft indicates that even leading companies can be affected by changing interest rate expectations. The CBOE Volatility Index (VIX) has risen from around 12 late last year to over 15 this month, reflecting growing investor concern. We should consider hedging our equity exposure by buying puts on indices like the S&P 500. Finally, the broad downturn in cryptocurrencies signals a classic risk-off sentiment across markets. The crypto market’s harsh reaction to the Federal Reserve’s tightening cycle in 2022 mirrors the current sell-off in Bitcoin and Ethereum. Negative funding rates in the derivatives market suggest traders are paying more to short these assets, so we should remain skeptical about them. Create your live VT Markets account and start trading now.

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