The United States Consumer Price Index (CPI), excluding food and energy, increased by 2.6% in November, which is lower than the expected 3%. This shows a drop from the previous month when the CPI had a yearly increase of 3.1%. The European Central Bank decided to keep interest rates unchanged while improving its economic growth forecast. Following this, the GBP/USD pair rose to 1.3440 after the Bank of England lowered rates to 3.75%, against market expectations.

Gold And Cryptocurrency Markets

Gold prices neared $4,350, boosted by global central bank announcements and updates on US inflation. In the cryptocurrency world, Bitcoin aimed to break above $87,000, thanks to rising ETF inflows. Meanwhile, Ripple traded between $1.82 and $2.00 with low retail demand. The Bank of England’s decision to cut rates sparked controversy, which kept market rates high and slightly strengthened the currency. Ethereum stayed around $2,800, limited by small ETF outflows. The November core inflation rate of 2.6% is a strong signal for the upcoming weeks. It’s well below the 3.0% target, indicating that the high inflation we faced in 2023 and 2024 is behind us. This gives the Federal Reserve justification to change its policy. We can now expect the Fed to move towards rate cuts in 2026, which the market is already considering. Current data shows a probability of over 70% for a rate cut in the first quarter, a major increase from last month. This means that positioning for lower yields in Treasury notes is a key strategy.

Impact On The US Dollar And Federal Reserve

A dovish Federal Reserve typically leads to a weaker US Dollar. Lower interest rates make the dollar less appealing. Following this news, the Dollar Index (DXY) fell sharply, dropping below 101.5 for the first time this year. Traders should focus on options that benefit from a rising EUR/USD and GBP/USD. This clearer outlook on interest rates is likely to reduce market volatility as we head into the new year. After remaining in the high teens during much of the latter half of 2025, the VIX index is expected to decline closer to its historical average below 15. Traders might consider selling VIX futures or buying call options on stock indices like the S&P 500. Gold is reacting as anticipated, moving toward $4,350 as the dollar weakens and the promise of lower real yields increases. The outlook for gold remains very strong as we approach year-end and the first quarter of 2026. Using futures and options to stay long on the metal is a smart strategy based on these trends. While the US situation is clear, we should remain attentive to other central banks. The Bank of England has just lowered rates, yet the sterling strengthened because the move was seen as “hawkish.” This shows that forward guidance is crucial and hints at potential volatility in cross-currency pairs, even if the dollar appears to be on a downward path. Create your live VT Markets account and start trading now.

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