The S&P Global Services Purchasing Managers’ Index (PMI) in the United States for January was 52.5. This is lower than the expected 52.8, signaling slower growth in the services sector than predicted. Gold prices rose to $4,988 due to speculation about yen intervention. At the same time, the US dollar weakened, hitting a four-month low as the market awaited the Federal Reserve’s decision.

Currency Changes and Gold Prices

The USD/JPY currency pair dropped to multi-week lows after the Ministry of Finance suspected a rate check. The GBP/USD pair increased to 1.3600, reaching a four-month high because of stronger selling of the dollar. Gold is nearing $5,000, driven by demand for safe assets and a weaker US dollar. The EUR/USD stayed steady around 1.1750, as mixed US economic data failed to support the dollar significantly. Notable trends include the EUR/USD approaching yearly highs at 1.1770 and the GBP/USD reaching four-month highs near 1.3600. Additionally, Gold is climbing toward $5,000, while Swiss bank UBS Group is looking into offering Bitcoin and Ethereum to select private clients. The disappointing services PMI data highlights the cooling trend we saw in late 2025. Although the miss was slight, it boosts our confidence that the Federal Reserve might ease monetary policy sooner. For options trading, this enhances the attractiveness of bets on lower interest rates, like buying Fed Funds futures or Eurodollar calls.

Dollar Index and Market Implications

The US Dollar Index (DXY) has fallen below the crucial 100.00 level, a key support point last year. In 2023, a similar decline in the dollar preceded a significant rise in stocks and commodities, hinting at a possible repeat. Traders are aggressively selling dollar calls and buying puts, with implied volatility pointing to further dollar weakness ahead of the Fed’s decision next week. Gold’s rise toward $5,000 is a direct reaction to the dollar’s decline and rising inflation, which unexpectedly increased to 3.5% in the December 2025 CPI report. This situation makes long gold call options or call spreads an appealing way to gain leveraged exposure to any further gains. The surge is also supported by massive inflows into gold ETFs, which attracted a net $50 billion in investments in the second half of 2025. In the currency markets, heavy selling of the dollar has pushed major pairs to multi-month highs, creating notable volatility. The suspected “rate check” from Japan’s Ministry of Finance indicates their concern about USD/JPY weakness, making short positions in that pair risky. We are focusing on increases in GBP and EUR against the dollar, using options to manage risks in case of sudden reversals. On the other hand, riskier assets like Bitcoin are struggling due to tariff uncertainties and significant ETF outflows, which have now reached over $3 billion since the start of the year. This mirrors the “sell the news” reaction after the initial spot ETF approvals in 2024. This trend suggests that traders should consider using protective puts on crypto-related stocks or shorting Bitcoin futures as a hedge against broader market concerns. Create your live VT Markets account and start trading now.

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