The Producer Price Index in Sweden fell from -1.4% to -2.7% in December. This drop shows a decrease in production costs and highlights shifts in supply chain dynamics and price changes by producers. Gold prices are close to historic highs due to demand for safety, fueled by geopolitical concerns and a weaker US Dollar. For seven straight days, the precious metal has attracted interest, showing a positive trend despite market fluctuations.

Euro and Pound Sterling Updates

In the currency market, EUR/USD is trading under 1.1900, though it has a slight upward trend recently. GBP/USD faced resistance near 1.3700 and pulled back from four-month highs because of a stronger US Dollar. In other news, Axie Infinity rose by 3%, adding to a 21% increase from the day before. Demand for this gaming token surged after the announcement of a new app token, bAXS, which will replace the AXS token in the ecosystem. Sweden’s producer prices dropping to -2.7% suggests rising deflationary pressure. This may push the Riksbank to think about cutting rates sooner than others, similar to actions taken in 2024. Investors might consider options to bet on a weaker Krona in the coming weeks. With gold hovering around all-time highs of over $5,100, the market is clearly anticipating geopolitical risks from trade tensions and a weak US Dollar. This situation often leads to higher volatility, reminiscent of the trade disputes in 2025. The CBOE Gold Volatility Index (GVZ) is currently elevated near 20, so traders could use straddles on gold futures to capitalize on expected price swings related to upcoming news.

Upcoming Federal Reserve Decision

The upcoming Federal Reserve decision is a key event, with the US Dollar already showing general weakness. The CME FedWatch Tool shows a 92% chance that rates will remain unchanged, but forward guidance will impact the market. Traders should consider short-dated options on EUR/USD to take advantage of potential volatility, as implied volatility has typically increased around these announcements. The British Pound is having difficulty breaking through the 1.3700 level against the Dollar, a key resistance point. Given the mentioned overbought conditions, this could be a chance for bearish trades. A straightforward put option or a bear put spread on GBP/USD might be a cost-effective way to profit if the pair fails to hold this level after the Fed’s announcement. Create your live VT Markets account and start trading now.

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