The United States Core Personal Consumption Expenditures Price Index stayed at 0.2% month-over-month in October. This shows no change from the previous report, influencing how the market views the economy. Gold prices have surpassed $4,900 per troy ounce as the US Dollar declines. Increased global risk appetite also supports gold’s rise.

Currency Trends and Trade Tensions

The EUR/USD is trading near two-day highs of about 1.1750, benefiting from eased trade tensions between the US and EU. The GBP/USD is approaching 1.3500, driven by strong selling of the US Dollar. In the cryptocurrency market, Chainlink (LINK) is under pressure at $12.20 due to lower retail demand and staking outflows. Meanwhile, Ripple (XRP) remains steady above $1.90, gaining from ETF inflows even with overall market volatility. Donald Trump’s withdrawal of NATO tariff proposals has reduced perceived market risks, which has brought some stability and changed market behavior. Please remember that the information provided is for informational purposes only and carries market risks. It is vital to do thorough personal research before making investment decisions. FXStreet and its authors are not responsible for any actions or decisions made based on this information.

Monetary Policy and Inflation Impact

Looking back at data from late 2025, we saw core inflation remain steady, with the PCE price index at 0.2% in October. However, by December 2025, the headline CPI remained stubbornly high at 3.4%, complicating the Federal Reserve’s plans for rate cuts. This situation suggests that predicting a quick policy change might be premature. This inflation scenario raises questions about the consistent weakness of the US Dollar we noticed last year. Although markets were expecting several rate cuts for 2026, the Fed may need to keep rates higher longer to control inflation. This creates a chance for the dollar to strengthen again soon. Gold’s remarkable surge to over $4,900 an ounce late last year was driven by dollar weakness and geopolitical concerns. With the dollar possibly at a turning point, this record rally could be at risk. It would be wise to consider using options to hedge long gold positions since a stronger dollar would pose challenges for gold. The easing of trade tensions in 2025 helped support equity markets, but now the focus has shifted back to monetary policy. The VIX, which measures expected market volatility, is near a historically low level of 13. This feels too complacent given the uncertainties surrounding inflation, making long volatility strategies via options on the SPX appealing. The Euro and Pound Sterling have greatly benefited from the dollar’s decline, pushing EUR/USD towards 1.1800 and GBP/USD near 1.3500 as we closed out 2025. However, the latest flash PMI data from the Eurozone indicates ongoing weakness in manufacturing. Thus, these currency pairs may be at risk of correction. Considering derivative strategies to profit from a decline in these pairs could be prudent if the dollar starts to rebound. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now