In October, the United States Export Price Index increased from 0% to 0.5% compared to the previous month. This means that prices for goods and services exported by the U.S. have gone up. Economic markets are experiencing changes, particularly with different financial instruments. The EUR/USD pair is feeling pressure and is dropping towards the 1.1600 level due to stronger U.S. yields and cautious market sentiment.

Currency and Commodities

The GBP/USD pair has fallen below the 1.3400 support level and reached a new four-week low as the U.S. Dollar gains strength against other currencies. Although gold prices have dipped, they have bounced back above $4,600 per troy ounce with the stronger dollar. In the cryptocurrency world, Bitcoin continues to stay above its 100-day EMA, even after a slight drop from the previous day’s high. On the other hand, Ethereum saw a minor pullback after exceeding $3,400, hinting that some traders might be taking profits. XRP has lagged behind other major cryptocurrencies, declining for a second consecutive day. However, Ripple has received preliminary approval for an Electronic Money Institution license from Luxembourg’s financial regulator. Back in October 2025, the rise in the U.S. Export Price Index indicated increasing inflation pressures. This, along with a strong dollar, created a risk-off sentiment that pressured pairs like EUR/USD and GBP/USD as investors reacted to solid U.S. economic data.

Current Economic Sentiment

Now, as we enter mid-January 2026, the situation is more complex. The latest Consumer Price Index report for December 2025 showed headline inflation easing to 3.1%, but core inflation remains sticky at 3.9%. This indicates that while price pressures are lessening, they are not completely under control. The changing inflation data has directly influenced the bond markets and rate expectations. After hitting near 4.8% in late 2025, the 10-year Treasury yield has come down to around 4.1%. The market now suggests that the Federal Reserve’s interest rate hikes might be finished, and attention is turning to when the first rate cuts may occur later this year. For currency traders, this brings significant changes. The U.S. Dollar Index (DXY) has pulled back from its highs in Q4 2025, suggesting strategies that could benefit from a potentially weaker dollar in the coming weeks. Traders should consider call options on EUR/USD and GBP/USD to capture possible upside as other central banks maintain a hawkish stance. Also, equity market volatility presents another chance. The VIX is currently low at about 13, making options cheaper. It’s a good time to buy protective puts on major indexes like the S&P 500, especially with the earnings season approaching. The trend of “buying breadth” away from large-cap companies that we observed in 2025 is continuing. With lower yields, rate-sensitive sectors may perform better. Traders might want to consider put credit spreads on struggling big tech firms or call options on small-cap index ETFs like the IWM to take advantage of this shift. Create your live VT Markets account and start trading now.

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