The GBP/USD pair dropped to 1.3433, down 0.03%, after President Trump’s comments about a softer approach to Greenland. Despite UK inflation rising more than expected, the Pound struggled against other currencies on Wednesday. Employment data helped GBP/USD stay positive at 1.3430. Employment figures showed an increase of 82,000 jobs after a previous drop of 17,000. Meanwhile, the US Dollar gained strength, impacting EUR/USD, which fell below 1.1700 due to renewed selling pressure and upcoming data expectations.

Gold Hits Record High

Gold reached a record high close to $4,900 before pulling back a bit. Market assets generally rose after Trump’s speech at the World Economic Forum. In contrast, Monero saw a 38% drop from a recent high of $800, trading now below $500 as market trends weakened. Australia’s employment report for December is expected to show a rise in the unemployment rate, with the release set for Thursday. After recent volatility, market assets stabilized, with stocks, bonds, and cryptocurrencies finding their footing, while the US Dollar grew stronger. Yesterday’s softer comments about Greenland eased tensions, leading to a broad market rally. The CBOE Volatility Index (VIX) fell sharply, dropping almost 15% to settle under 20 points for the first time this month. This indicates that traders expect less short-term turbulence, allowing riskier assets to perform better.

US Dollar Strength

The US Dollar gained, with the Dollar Index (DXY) breaking above the 105.50 resistance level. This strength comes from reduced trade threats against Europe, making the dollar a safe haven from global instability. The upcoming US PCE inflation data could further support a hawkish Fed and boost the dollar’s rise. For Pound Sterling, strong domestic data like high inflation is being overshadowed by the dollar’s rally. Unlike 2025, when Bank of England policies were influential, GBP/USD is now more affected by wider geopolitical issues. This means that buying puts on GBP/USD might be a good hedge against further dollar strength, even with positive UK economic indicators. Gold’s sudden drop from nearly $4,900 marks a crucial point for traders. The recent risk-on sentiment has caused this pullback, but the tensions that pushed gold to its record haven’t disappeared. Speculative net-long positions, as shown in last week’s CFTC data, remain near multi-year highs, suggesting that many big players still expect prices to rise. The USD/JPY rise above 158.00 is due to both dollar strength and ongoing Yen weakness. Japan’s economic situation and the Bank of Japan’s commitment to its yield curve control policy make the Yen a popular choice for carry trades. Derivative traders might consider call options on USD/JPY to take advantage of this central bank policy divergence. Create your live VT Markets account and start trading now.

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