Impact of Geopolitical Factors on Market Trends

Geopolitical factors, market expectations, and decisions by central banks greatly influence market trends. For example, easing tensions with Iran allowed WTI oil prices to rise. In the cryptocurrency market, Bitcoin held steady above $95,000, even with lower retail demand. Ethereum traded steadily, while XRP dropped for the third consecutive day due to a struggling derivatives market. Upcoming economic events like the US PCE and the Davos summit could affect global economic forecasts. These events, along with other important indicators such as BoJ meetings and UK CPI data, will be closely watched for insights on future trends. In November 2025, Canadian investors made a significant move of C$16.49 billion into foreign securities, indicating a notable capital outflow. This suggests a weakening Canadian dollar, as investors need to sell CAD to buy foreign assets. This trend is a bearish signal for the CAD against major currencies, particularly since Statistics Canada reported it was the largest net purchase of foreign securities in over a year. This sentiment supports the ongoing strength of the US dollar, which is affecting currency pairs such as EUR/USD and GBP/USD. A recent report from December 2025 revealed that the US added a strong 195,000 jobs, further supporting the idea of a healthy American economy. As a result, considering call options or futures for further gains in USD/CAD seems like a top strategy.

Caution Regarding the US Labor Market

Despite this, we should be cautious because Fed officials have raised concerns about the US labor market’s fragility. The upcoming Personal Consumption Expenditures (PCE) inflation data will be crucial for the next move of the US dollar. After core PCE remained at 3.4% in November 2025, another high reading could boost USD, while a low reading might reverse its gains quickly. With this risk on the horizon, a direct bet might be too risky. Instead, we should consider volatility strategies. Using options to buy straddles or strangles on USD/CAD before the PCE release could take advantage of significant price movements in either direction. We witnessed similar uncertainty regarding Fed policy in late 2024, which led to sharp moves benefiting volatility traders. Additionally, we are paying close attention to the Japanese yen as USD/JPY nears the 158.00 level, raising concerns about potential intervention from Tokyo. This could increase safe-haven flows and affect various currency pairs. Any official action might lead to a sudden spike in overall market volatility. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now