Germany’s retail sales for December saw a small rise of 0.1%, beating expectations of a 0.2% decline. This suggests a slight recovery in consumer spending during that month. In other market news, Bitcoin dropped below $75,000, down 11% from the previous week. Cardano also declined, trading under $0.28, with a correction of over 15%.

Federal Reserve Chair Nomination

Kevin Warsh’s nomination as the Federal Reserve chair raised concerns in European currencies and gold. The EUR/USD remains weak, hovering around 1.1850, and gold has fallen to new monthly lows. In additional market changes, the Pound Sterling weakened, while USD/INR declined due to the Reserve Bank of India’s efforts to support the Indian Rupee. The financial community is closely watching the upcoming US ISM Manufacturing PMI data for further market insights. Looking back at early 2025, when Kevin Warsh was nominated for Fed Chair, we saw a big rally in the US Dollar. During that time, the EUR/USD fell near 1.18, and GBP/USD dropped below 1.37 as traders anticipated a more aggressive central bank. This serves as a useful guide for how markets react to a hawkish Federal Reserve. Announcements like this can lead to sharp price fluctuations. For example, volatility spiked in that week of 2025, with the VIX climbing above 20. We can expect similar movements in the weeks ahead as key central bank speeches occur. Traders might consider using options, like buying straddles or strangles on major currency pairs before significant announcements to capitalize on volatility.

Impact Of US And Eurozone Inflation

At that time, the slight better-than-expected German retail sales did not help the Euro, as the Fed’s policy was the main focus. However, today’s situation is different. Recent Eurostat data for January shows Eurozone inflation steady at 2.8%, keeping pressure on the ECB. In contrast, the latest CPI report from the US indicates inflation has cooled to 3.1%, suggesting the Fed’s aggressive stance from last year might be ending soon. The significant drop in gold during the “Warsh effect” in 2025 was due to a stronger dollar and rising yield expectations, making non-yielding assets less appealing. This inverse relationship is important to monitor in the coming weeks. With the dollar index down nearly 2% since last November, call options on gold could offer upside potential if the Fed adopts a calmer approach. Similarly, the pound faced challenges last year, but the UK’s economic situation has improved. The latest report from the Office for National Statistics reveals that UK inflation remains the highest in the G7 at 4.0%, which compels the Bank of England to maintain a hawkish stance. Unlike in 2025, the pound may now show greater strength against the dollar, making it worthwhile to consider selling put options on GBP/USD to earn premium. Create your live VT Markets account and start trading now.

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