The M4 money supply in the United Kingdom rose to 4.7% year-on-year in December, up from 4.3%. This shows an increase in the total money circulating in the economy. Gold faced significant corrections due to profit-taking and a stronger US Dollar. In addition, the USD/JPY pair dropped below 154.00 after news about Trump’s Fed Chair selection.

Eurozone Economic Data Impact

The EUR/USD pair increased to 1.1950 following better-than-expected economic data from Germany and the Eurozone. GBP/USD moved closer to 1.3800 as the US Dollar weakened, anticipating upcoming US Producer Price Index data. Gold traded above $5,100 after President Donald Trump nominated his Fed Chair. Stellar fell to a three-month low, dropping below $0.20 due to a cautious market attitude. Microsoft’s market value declined by $400 billion, the second-largest sell-off in history. Bitcoin, Ethereum, and Ripple saw weekly losses of about 6%, 3%, and 5%, respectively, with Bitcoin nearing its November lows. The confirmation of Kevin Warsh as the new Fed Chair is changing our market outlook. The US Dollar weakened immediately because Warsh is expected to be more dovish, suggesting slower interest rate hikes or even possible cuts. This dollar weakness will be a key factor in trading strategies over the coming weeks.

Trading Opportunities and Strategies

We should aim to build long positions in EUR/USD, which is now targeting the 1.1950 level. This move is backed by strong fundamentals, as recent data revealed the Eurozone economy grew by 0.5% in the fourth quarter of last year, beating forecasts and indicating the European Central Bank can maintain a stable policy. We can use call options to aim for the 1.2000 psychological barrier. In the UK, the M4 money supply grew by 4.7% in December 2025, reaching a level not seen since the post-pandemic recovery period in 2022. This signals significant inflationary pressures, making long GBP/USD trades appealing towards the 1.3800 mark. However, we must monitor any signs that this inflation could harm UK growth prospects. Gold’s rise above $5,100 is a direct result of the Fed news and is likely to continue. A dovish Fed lowers the opportunity cost of holding non-yielding assets like gold, and a weaker dollar makes it cheaper for foreign buyers. We expect this trend to last, and buying gold futures or call options on gold ETFs is a clear strategy. We need to proceed with caution in the tech sector, as Microsoft’s record loss of $400 billion in a single day shows extreme vulnerability in large-cap stocks. To put this into perspective, that loss exceeds the entire 2024 GDP of Portugal or New Zealand. This suggests a potential shift away from big tech, and we should consider hedging with puts on the Nasdaq 100 index. The crypto market is detached from the broader economic narrative and is continuing to decline. Bitcoin is nearing its November 2025 lows around $80,000, with negative funding rates in the derivatives market indicating traders are notably bearish. We should avoid trying to catch falling prices and instead align with the bearish momentum through short positions. Create your live VT Markets account and start trading now.

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