The latest auction of France’s 10-year bonds showed an increase in yields, which went up from 3.38% to 3.53%. This change comes as the market remains cautious, with several global factors affecting asset prices. In the foreign exchange market, the British pound fell against the US dollar, trading around 1.3450. The US dollar remains strong due to ongoing geopolitical concerns and upcoming employment data.

Market Trends

Gold prices have dropped below $4,450. This decline seems to stem from increased selling pressure, as traders lock in profits ahead of important US economic data. The Pi Network saw a nearly 2% decrease, trading just above $0.2000. The addition of 1.90 million PI tokens to exchanges indicates that traders are becoming more cautious, reflecting a bearish sentiment. The economic outlook for 2026 looks stable, though the impacts from last year’s changes still linger. However, it seems unlikely that the shocks of 2025 will happen again, giving the market a slight sense of calm. The rise in French 10-year bond yields to 3.53% is an important indicator. This follows the Eurozone inflation report for December 2025, which showed a stubborn increase to 2.8%, surpassing expectations. This suggests that the European Central Bank may need to postpone any planned interest rate cuts, leading to caution around European stocks and long-term government bonds.

Cautious Market Environment

The US dollar is benefiting from the cautious atmosphere, with the EUR/USD pair struggling below 1.1700. Much of this is due to positioning ahead of Friday’s important US Nonfarm Payrolls (NFP) report. After the unexpected job growth in November 2025, another strong report would reinforce the dollar’s strength and might lead to further declines in other major currencies. The market’s risk-averse mood is clear, which is why gold is seeing some profit-taking despite ongoing uncertainty. The inflation surprises of 2022-2023 created significant volatility, causing traders to be quick in reducing risk before major data releases. In this environment, buying options to protect against sudden moves, like VIX calls or straddles on major indices, could be a wise strategy. For now, the key theme is a stronger dollar amid worries about European inflation. The “epochal shifts” we experienced in 2025 remind us not to become complacent. Therefore, we should think about reducing long positions in assets like the Euro and Pound Sterling, while we await the NFP data for clearer guidance in the coming weeks. Create your live VT Markets account and start trading now.

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