**Federal Reserve Policy Approach** The Federal Reserve (Fed) manages monetary policy in the US. Its main goals are to maintain price stability and full employment by changing interest rates. The Fed holds meetings eight times a year. Twelve officials attend these meetings to discuss economic conditions and make decisions on monetary policy. The Fed uses two extreme measures: Quantitative Easing (QE) and Quantitative Tightening (QT). QE increases the flow of credit during financial crises, which can weaken the US Dollar. In contrast, QT strengthens the Dollar. FXStreet published this article and noted that it may have issues with data accuracy and timeliness. Readers should research carefully before making investment decisions due to the potential risks involved. Neither the author nor FXStreet provides personalized financial advice. **Fed’s Focus on the Job Market** The Federal Reserve has shifted its focus to the job market, implying that interest rates may go lower. This change suggests that traders should prepare for a continued supportive stance leading up to the January FOMC meeting. If employment numbers keep declining, we may see more “insurance” rate cuts. The job market is showing signs of weakening, as noted in the latest reports. The November 2025 jobs report revealed Non-Farm Payrolls at only 155,000, which is much lower than the 200,000+ average seen in late 2024. The unemployment rate has risen to 4.2%, its highest in two years. If this trend continues, the Fed may have to act. Meanwhile, inflation is decreasing, which is what officials wanted. The November 2025 Consumer Price Index (CPI) showed an annual rate of 3.0%, down from a peak of 3.8% earlier in the year due to trade tariffs. This decline allows the Fed to focus on jobs rather than fighting inflation for now. For those trading interest rates, this situation suggests a limit on short-term rates. There is potential in options strategies that profit from stable or falling yields, such as selling out-of-the-money calls on Secured Overnight Financing Rate (SOFR) futures. The market expects at least two more rate cuts in 2026, supported by the Fed’s dovish statements. This environment is favorable for equity markets, acting as a boost for major indices. Traders might consider buying call options on the S&P 500 since the Fed’s supportive policy reduces downside risk. Implied volatility may decrease, making strategies like selling put credit spreads on stable, large-cap stocks an appealing way to earn income. The possibility of further easing continues to put pressure on the US Dollar. The U.S. Dollar Index (DXY) has dropped from its 2025 peak of 106.50 to about 101.75, and we expect this trend to continue. Thus, buying call options on currency pairs such as EUR/USD or AUD/USD provides a direct way to bet on a weaker Dollar in the coming weeks. Create your live VT Markets account and start trading now.

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