Australia’s December TD-MI Inflation Gauge rose to 1%, up from a 0.3% increase last month. This suggests that monthly inflation rates are climbing. The EUR/USD pair moved closer to 1.1650 as risk aversion grew, while the GBP/USD pair gained strength, heading towards 1.3400 due to tariff threats. Gold prices surged to an all-time high, surpassing $4,700, driven by ongoing disputes related to Greenland.

The Week Ahead

This week, watch for US PCE data and the Davos events that could influence the dollar’s movement. The Bank of Japan (BoJ) is likely to keep its current policies in place. UK consumer price index (CPI) and retail sales figures may impact speculation about Bank of England (BoE) rates, along with Eurozone PMIs and Australian job statistics. Dash cryptocurrency experienced a rally, reaching an intraday high of $96.85 as the market adjusted. Interest in Dash has risen, with futures Open Interest jumping to $165 million. The FXStreet content is for informational purposes only and does not endorse specific investments. It highlights risks involved and does not guarantee the accuracy or timeliness of the information. The platform and its contributors do not provide personalized financial advice. Due to increasing geopolitical risks over Greenland, market volatility has skyrocketed, with the CBOE Volatility Index (VIX) exceeding 45 for the first time since the 2024 banking crisis. Derivative traders may want to buy protection against further declines in equities using put options on the S&P 500. They can also consider VIX call options as a straightforward way to safeguard portfolios from this uncertainty.

Gold And Market Trends

Gold prices have broken their 2024 highs and are trading near $4,700, causing implied volatility on gold options to reach decade highs. This makes outright call options quite expensive. Traders expecting further gains may opt for call debit spreads to reduce entry costs and manage their risk. Those holding physical gold could consider selling covered calls to earn income from the high premiums. US tariff threats are exerting downward pressure on the dollar, which supports the strength of currency pairs like GBP/USD and EUR/USD. Options strategies that capitalize on continued dollar weakness, such as buying calls on euro or pound futures, can provide leveraged upside if this trend holds. Managing the defined risk of these positions is vital, especially in a market where sentiment can shift dramatically based on news. Australia’s surprising inflation figure of 1% for December will compel the Reserve Bank of Australia (RBA) to take action. After the RBA kept its cash rate target at 4.35% through the latter half of 2025, a rate hike at the next meeting is now almost certain. This divergence in monetary policy is likely to benefit the Australian dollar, making AUD/USD call options an appealing choice against the politically weakened US dollar. This week’s focus will be on the US Personal Consumption Expenditures (PCE) price index. Any indication of easing inflation might give the Federal Reserve reason to relax policies to counteract the economic impact of tariffs. A lower-than-expected number could accelerate the dollar’s decline and boost risk assets and precious metals. Traders should brace for significant market movements around this data release. Create your live VT Markets account and start trading now.

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