Germany’s Harmonized Index of Consumer Prices (YoY) increased to 2.1% in January, exceeding the expected 2%. This rise indicates growing inflationary pressures in the German economy. EUR/USD has fallen, dropping below the 1.1900 level as the US Dollar gains strength. Similarly, GBP/USD is under selling pressure, nearing the 1.3700 mark due to the Greenback’s rebound.

Gold Recovery

Gold prices have surged over $5,000 after a significant drop. However, these prices are still influenced by profit-taking and a strong US Dollar, with mixed results in US Treasury yields. Stellar is on a downward path, dropping below $0.20, a low not seen since mid-October. This decline is fueled by weaker market sentiment and declining momentum indicators. Microsoft’s stock has recently seen a big drop, negatively affecting broader indices. At the same time, major cryptocurrencies like Bitcoin, Ethereum, and Ripple are also losing value, with Bitcoin nearing $80,000 and Ethereum below $2,800. In 2026, several brokers are featured for offering low spreads, high leverage, and specific trading platforms. These brokers target areas like MENA, Latam, and Indonesia, providing diverse trading conditions and regulatory frameworks.

German Inflation Impact

The unexpected rise in German inflation to 2.1% serves as an important market indicator. It shows that price pressures in the Eurozone’s core are tougher than expected. This puts the European Central Bank in a tough spot regarding its monetary policy for the upcoming months. This German data fits into a broader trend, as the latest Eurostat flash estimate revealed that core inflation across the Eurozone is struggling to drop below 2.5%. For traders, this strengthens the argument against immediate ECB rate cuts. We might see more volatility in Euribor futures options as the market reassesses the easing timeline. While the ECB confronts this inflation challenge, the Federal Reserve’s position is also evolving. The 2025 debates saw officials divided, echoing earlier discussions surrounding the Warsh nomination rumors. The weaker EUR/USD, now below 1.1900, hints that the market believes the Fed has more leeway than the ECB. This dollar strength brings back memories of last year’s sharp moves, such as when GBP/USD hovered near the 1.3700 level due to unexpected US data. These occurrences remind us that currency markets can react quickly to changes in central bank expectations, highlighting the importance of hedging currency exposure, especially for portfolios sensitive to dollar movements. The ongoing inflation narrative is also affecting risk assets, similar to the sell-offs in 2025. Bitcoin is struggling to stay above $80,000, and Gold is pulling back from recent highs above $5,000. This indicates that traders are reducing leverage and bracing for stricter financial conditions. Create your live VT Markets account and start trading now.

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