Interest Rate Projections and Market Reactions

The Federal Open Market Committee says interest rates should average 3.4% by the end of 2026. At the same time, traditional investors are looking into Ethereum’s recovery as it bounces back from a support level. Hyperliquid is currently trading above $28.00 after finding support at $27.50. The article reflects the authors’ views and does not represent official policy or investment advice. The Pound Sterling is holding steady near 1.2450 against the US Dollar. There is a slight bearish trend as the market remains cautious ahead of the upcoming Federal Reserve and Bank of England meetings. This stagnation suggests that a significant price movement may be on the horizon. The Bank of England is unlikely to adopt a dovish stance, especially after the UK’s latest Consumer Price Index (CPI) for November 2025 showed inflation at 3.1%, slightly above expectations. This ongoing inflation suggests that the Bank of England will likely keep rates steady, providing some support for the pound. This stability is likely why Sterling hasn’t dropped further. Meanwhile, the US Dollar is feeling pressure after a disappointing jobs report from December 5, 2025, which indicated only 155,000 new jobs were added. This weak data gives the Federal Reserve more reasons to consider easing monetary policy in 2026. The difference in central bank policies is a key focus for us.

Trading Strategies and Lessons from the Past

For traders in derivatives, this situation recommends strategies that can benefit from an increase in volatility. Buying straddles or strangles could effectively capture significant moves in either direction following central bank announcements. A firm drop below the 1.2400 support level could trigger bearish trades. We should remember the lessons from the rapid rate increases of 2022-2023, which showed how quickly markets can react to changes in central bank policies. The market has changed since those days when the Fed was steadily raising rates. Now, the environment is more uncertain, requiring a quicker response. Wider market sentiment is also important, as we’re seeing renewed interest from traditional investors in assets like Ethereum. A “risk-on” attitude, possibly driven by a dovish Fed, might weaken the safe-haven dollar and boost the pound. Monitoring equity indices this week will help gauge overall risk appetite. Create your live VT Markets account and start trading now.

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