United States continuing jobless claims dropped to 1.884 million for the week ending January 2, down from 1.914 million. The Forex market has seen the U.S. dollar strengthen amid speculation that the Federal Reserve will keep interest rates steady.

Market Movements

Oil prices are staying below $60 due to weaker bullish momentum. Silver has pulled back from its peak as demand for safe-haven assets declines. The USD/CAD pair is rising due to strong U.S. data and a weaker oil-dependent Canadian dollar. The GBP/USD pair has hit a four-week low near 1.3360 as the dollar gains strength from recent U.S. data. Gold has slightly retreated but remains above $4,600 per troy ounce due to a stronger dollar and rising Treasury yields. In the cryptocurrency market, Bitcoin is above the 100-day EMA, with optimism from ETF inflows, although gains have stalled. Ethereum saw a minor correction after exceeding $3,400. Ripple’s cryptocurrency, XRP, has dropped for two days despite increased licensing activity in Europe. Recent data supports a “higher for longer” interest rate environment. The drop in continuing jobless claims to 1.884 million indicates a tight labor market, reinforcing the Fed’s view that inflation remains too high. The latest CPI reading for December 2025 shows core inflation at 3.1%, suggesting little change is expected from the central bank soon.

US Dollar Trends

The US Dollar is emerging as the clear leader in this scenario, and we expect this trend to continue in the upcoming weeks. This strength is driving down pairs like GBP/USD, which has fallen below 1.3400, and EUR/USD, now testing 1.1600. Long positions on the dollar against multiple currencies appear attractive right now. We believe the market is still undervaluing the Fed’s intention to keep rates elevated around the current 4.75% level. Futures markets now show less than a 20% chance of a rate cut before June, a sharp change from the dovish outlook seen in the fourth quarter of 2025. This presents opportunities in options betting on Treasury yields remaining high. The strengthening dollar is posing challenges for commodities. WTI crude is struggling to stay above $60 a barrel, especially after last week’s EIA report revealed an unexpected increase in U.S. inventories. Similarly, gold’s pullback from recent highs above $4,600 is likely to continue as long as the dollar and Treasury yields rise. This risk-off sentiment is also affecting digital assets, with the recent rallies in Bitcoin and Ethereum losing momentum. Despite strong ETF inflows last quarter, higher interest rates make holding non-yielding assets less attractive. Selling call options or setting up bearish spreads could be a wise strategy in this environment. Create your live VT Markets account and start trading now.

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