In December, the United Kingdom experienced mortgage approvals of 61,013, falling short of the expected 64,800. This indicates a slower housing market than anticipated. The FXStreet team provided various forecasts and insights into market trends. Notably, the EUR/USD climbed to 1.1950 after the Federal Reserve announced new nominations.

Impact On Currency Markets

The GBP/USD approached 1.3800 as the US Dollar weakened. At the same time, gold prices surged past $5,100 due to positive sentiment around possible government funding agreements. Stellar dropped to a three-month low, influenced by negative trading sentiment. Microsoft saw a significant market value decline after its earnings announcement, losing $400 billion. Cryptocurrencies faced challenges, with Bitcoin, Ethereum, and Ripple dropping by 6%, 3%, and 5%, respectively. Bitcoin neared its November low of $80,000, while Ethereum fell below $2,800 due to increased selling.

Outlook For Investors

The new Federal Reserve Chair’s nomination has weakened the US Dollar, and this trend is expected to persist. The latest US inflation data for December 2025 was 2.9%, slightly below expectations, allowing the central bank to pursue a less aggressive stance. Derivative traders might consider buying call options on major currencies against the dollar, including the EUR and JPY, to benefit from the dollar’s weakness. Although the British Pound has strengthened against the dollar, the UK economy shows signs of underlying weakness. December’s mortgage approvals were below expectations, indicating a cooling housing market. Additionally, the Bank of England maintained rates during its January 27th meeting, expressing concerns about growth. This suggests that any gains in the GBP/USD pair are more about the dollar’s movement. Traders could think about put options on the pound against the euro (EUR/GBP). Gold’s rise above $5,100 is directly tied to the dollar’s decline and increasing market uncertainty. Data indicates that gold-backed ETFs attracted more than $3 billion in net inflows last week, showing that institutional investors are seeking safety in gold. Traders might use call spreads on gold futures to prepare for a possible move toward all-time highs while managing premium costs. Microsoft’s significant sell-off has caused considerable anxiety in the tech sector and the broader stock market. The VIX, a measure of market volatility, increased over 30% this week to trade above 24, reaching its highest level in three months. Traders should consider buying protective put options on the Nasdaq 100 index to guard against a potential market correction. The crypto markets are also feeling a risk-off sentiment, with Bitcoin, Ethereum, and others undergoing a sharp correction. Data from the derivatives market shows a negative shift in demand for Bitcoin options, indicating a higher preference for puts over calls. Traders should remain cautious, as negative funding rates suggest bearish sentiment, and further declines toward the November 2025 lows could occur. Create your live VT Markets account and start trading now.

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