The US Dollar is gaining strength as investors seek safety amid rising geopolitical risks. Swiss Real Retail Sales improved by 2.3% compared to last year, but this was lower than the expected 2.9% increase. This left the Swiss Franc weak in the currency markets, especially as tensions between Russia and Ukraine continue to rise.

Increased Geopolitical Tensions

Tensions are heightened by the capture of Venezuelan President Nicolas Maduro by the US. This event has boosted the US Dollar, especially with potential US actions if Venezuela does not comply with oil and drug trafficking issues. Comments from Federal Reserve officials, including Neel Kashkari, suggest a cautious approach to monetary easing, which also supports the strength of the US Dollar. Investors are looking forward to the US ISM Manufacturing PMI to see if the economy remains strong. The US Dollar has performed variably against major currencies but is doing best against the Canadian Dollar. The heat map shows these percentage changes, highlighting the dynamics of global currency strength. Upcoming data releases and geopolitical events will be crucial for understanding currency movements. Despite some safe-haven demand, the US Dollar’s strength seems uncertain. Weak US ISM manufacturing data could indicate trouble ahead, so we need to monitor if the Dollar can keep its gains if new data is disappointing. We are looking for signs that the geopolitical momentum is fading against economic realities. Last month’s December 2025 inflation data revealed core CPI still high at 3.4%, reinforcing the Federal Reserve’s cautious policy approach. This supports the Dollar against currencies from more dovish central banks. This week’s Non-Farm Payrolls report will be key to determine if the labor market is cooling, as suggested by Fed officials. For the USD/CHF pair, there is a fierce competition between two safe-haven currencies. Implied volatility is at a three-month high, making straightforward directional bets expensive. We think that buying a straddle, which means purchasing both a call and a put option at the same strike price, is a smart way to trade expected price movements without choosing a side.

Trends in Gold and Energy Markets

Gold prices have surged to over $4,400 an ounce, reflecting strong geopolitical fears in the market. At these levels, we recommend avoiding chasing the rally with leveraged futures contracts. Instead, it may be wiser to use options, like buying call spreads to limit risk or employing collars to protect existing holdings from sudden price drops. In the energy market, WTI crude has shown little movement, staying below $60 despite issues in Venezuela. This indicates concerns about global demand. Last week’s EIA report revealed an unexpected inventory increase of 2.1 million barrels, highlighting this demand weakness. Selling out-of-the-money call options on oil futures could be a good way to generate income. The tumultuous market conditions we’ve seen in 2025 are likely to persist, particularly with a Supreme Court ruling on presidential tariff powers still awaited. The CBOE Volatility Index (VIX), which averaged approximately 22 in late 2025, is expected to remain high. We suggest buying VIX call options as a cost-effective portfolio hedge against sudden escalations in any geopolitical hotspots. Create your live VT Markets account and start trading now.

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