Russia’s Consumer Price Index (CPI) for December fell to 0.3%, down from 0.42% the previous month. This indicates a slowdown in inflation compared to last month. Gold prices dipped below $4,600 due to profit-taking and uncertainties about potential interest rate cuts by the Federal Reserve. Additionally, the AUD/USD pair dropped after strong US economic data reduced expectations for early Fed rate cuts. The USD/JPY rate fell to 158.00 as the Japanese yen gained strength amid concerns about potential government intervention. In contrast, WTI oil prices slightly increased as tensions with Iran eased, although a supply surplus kept prices from rising significantly.

Pound Sterling Stability

Pound Sterling remained steady, with GBP/USD close to 1.3380, supported by strong US data that lifted the dollar. This week’s focus will be on US personal consumption expenditures and key events in Davos, which are critical for dollar traders. For those looking to trade, forecasts for 2026 highlight top brokers for different needs, including low spreads, high leverage, and access to markets in Europe and Latin America. Traders should weigh each broker’s pros and cons based on their specific requirements. The decline in Russia’s monthly inflation to 0.3% is an important indicator. The Central Bank of Russia has maintained a high key rate of 16% throughout 2025 to combat price pressures. This latest data might encourage them to hint at rate cuts in the first quarter, which could weaken the ruble.

US Economic Strength

Meanwhile, the US shows continued economic strength, which is pushing back our expectations for Fed rate cuts. The Fed funds rate has remained steady at 6.00% since last September, leading the market to reconsider early easing bets. This difference in policy is a key factor in strengthening the US dollar against major currencies like the Euro and Pound Sterling. We see this dollar strength affecting gold prices, which are declining from their peak above $4,600 an ounce. With the prospect of sustained high US interest rates, holding non-yielding gold becomes less appealing. Many traders are taking profits after the significant gains seen over the past year. Now, attention turns to the upcoming US Core PCE data, the Fed’s preferred measure of inflation. The November 2025 reading showed inflation at 3.5% year-over-year, above the Fed’s target. A strong reading could confirm a hawkish stance, potentially driving the dollar even higher, similar to the persistent inflation we observed in 2023. For derivative traders, this situation calls for using options to position for ongoing dollar strength against the Euro and Yen, with pairs like USD/JPY nearing multi-decade highs. We are also considering volatility strategies around the US PCE release, as any unexpected weakness could trigger a swift reversal in crowded trades. The goal is to set up positions that gain from the diverging actions of global central banks. Create your live VT Markets account and start trading now.

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