The Consumer Price Index (CPI) in the United States slightly dropped from 324.122 to 324.054 in December. This small change has affected market movements, including currency pairs and gold prices. GBP/USD stayed steady around 1.3450, as the softer US CPI data sparked new speculation about possible interest rate cuts by the Federal Reserve. Meanwhile, USD/JPY approached 159.00, showing a stronger US Dollar after the inflation numbers came out.

Gold Prices Exceed Expectations

Gold prices have soared past $4,630 per troy ounce, despite higher US Treasury yields, maintaining an upward trend. Privacy coins jumped by 290% in 2025 due to increased demand for on-chain anonymity amid strict regulations. Ripple (XRP) traded above $2.00, but its recovery faced challenges due to decreased on-chain and derivatives market activity. In the brokerage sector, platforms offering low spreads and high leverage were noted as attractive for cost-conscious traders. The mild decline in December’s CPI has reignited hopes for a Federal Reserve rate cut. Even this small dip in inflation is seen as a sign for more relaxed policies. Derivative traders should note that this environment makes call options on interest-rate-sensitive sectors, like technology and growth stocks, more appealing.

Markets React to Inflation Data

Markets are now pricing in over a 70% chance of a Fed rate cut by March, a significant rise from a few weeks ago. This shift echoes the trend we saw in late 2023 when early signs of disinflation triggered a notable rally in equities. Given this pattern, we think it’s wise to buy short-term call options on major indices like the S&P 500, which offers a good risk-reward ratio. However, the situation is complicated by a strengthening US Dollar and gold reaching record highs above $4,630 per ounce. This indicates a notable level of risk aversion, possibly heightened by news of Department of Justice subpoenas aimed at the Federal Reserve. This contradiction suggests potential volatility, making long straddles on currency pairs like EUR/USD a smart way to navigate the uncertainty. The appetite for safe havens is strong, with gold now over 40% higher than its early 2025 lows. Meanwhile, the CBOE Volatility Index (VIX) has risen from its December lows, signaling that traders are anticipating more risk. We see this as a clear indication to hedge long equity positions or buy VIX call options to benefit from a potential spike in market turbulence. In the digital asset sphere, a key trend is the shift towards privacy coins, which significantly outperformed the market with a 290% gain in 2025. This movement is a direct response to increasing regulatory scrutiny, particularly highlighted by the 2025 GENIUS Act. This indicates that holding long positions in perpetual futures for privacy-focused tokens might continue to be profitable, while the sideways action in XRP suggests that range-bound options strategies may be more effective there. Create your live VT Markets account and start trading now.

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