The latest data from the UK’s CFTC shows a shift in sentiment regarding the British pound, with net positions decreasing from £-25.3K to £-22K. The US dollar is weakening, which is affecting several currency pairs. The GBP/USD has risen to 1.3600, reaching a four-month high because of the weaker dollar.

Gold Expected to Rise

Gold is on track to hit $5,000 due to higher demand and a softer dollar. Market trends are showing mixed US Treasury yields. UBS Group AG is looking into offering crypto investment services for some clients, allowing transactions with Bitcoin and Ethereum through Switzerland’s private banking sector. Next week, both the Federal Reserve (Fed) and Bank of Canada (BoC) will meet amid geopolitical tensions. Both banks are likely to keep their current policies, with the Fed expected to pause following recent rate cuts. Despite market ups and downs, Bitcoin prices remain below $90,000. This dip comes after Trump’s recent tariff announcements, which have influenced market sentiment and encouraged risk-taking.

Dollar Weakness Persists

Due to significant selling of the US dollar, we should brace for ongoing weakness in the coming weeks. The Dollar Index (DXY) dropped over 5% in the last quarter of 2025, and rumors of Japanese intervention suggest this trend will continue. This situation favors buying call options on major currencies against the dollar. The British Pound is gaining strength, breaking through 1.3600 for the first time in months. The decrease in net short positions from -£25.3K to -£22K indicates that bearish traders are stepping back, boosting the rally. With UK inflation at 3.5% in December 2025, which is higher than in the US, it might be wise to consider long GBP futures contracts. The Euro has reached yearly highs near 1.1800, supported by the same weakness in the dollar. The European Central Bank is showing more caution about cutting rates compared to the US Federal Reserve, creating a difference in policy that strengthens the EUR/USD. Bull call spreads on the Euro could be a smart way to take advantage of further gains while managing costs. Gold’s approach towards $5,000 is driven by the weak dollar and ongoing demand for safe-haven assets. Central banks increased their gold reserves significantly in 2022 and 2023, and this trend seems to have continued into 2025, providing a solid price floor. It’s advisable to hold long positions in gold futures or options. With the Federal Reserve meeting next week and ongoing geopolitical uncertainty, market volatility is likely to rise. The Cboe Volatility Index (VIX) has already climbed above 20, indicating increased nervousness. This makes buying options more pricey, so we should consider strategies that minimize premium decay. Create your live VT Markets account and start trading now.

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