In November, existing home sales in the United States dropped to 0.5%, down from 1.2% the month before. This change shows a slowdown in the housing market. At the same time, Gold’s price stayed below $4,350, despite the US Dollar putting pressure on it. Even though the yield on the 10-year US Treasury bond rose, Gold is expected to gain slightly this week due to holiday trading.

Forex Market Movements

Forex pairs like EUR/USD and GBP/USD showed mixed results. EUR/USD is trading just above 1.1730, supported by Wall Street’s performance. However, GBP/USD remains below 1.3400 as traders assess the Bank of England’s recent policy changes. In the cryptocurrency market, Bitcoin climbed above $88,000, while Ethereum and Ripple also saw gains. This comes after a period of instability, hinting at a more stable trend. XRP rebounded on Friday, looking to break above $2.00. It also experienced significant ETF inflows, with growing institutional interest noted since December 8. November’s inflation data shows declining price pressures, but it’s not enough to independently shift the Federal Reserve’s policy. Still, it can significantly influence market expectations.

Impact of Inflation and Federal Reserve Policy

The dip in existing home sales in November is a clear indicator to watch. Early December data shows that pending home sales also fell by 0.8%, suggesting this cooling trend may continue into the new year. This signals a potential opportunity for protective put options on housing sector ETFs like ITB or XHB for the first quarter of 2026. This weakness in housing fits the broader trend of easing inflation. The latest Consumer Price Index (CPI) report for November, released on December 12, 2025, shows an annual rate of 2.8%. This likely gave the Federal Reserve the rationale to keep rates steady at 5.0% during their December 17 meeting, supporting the market’s belief that the rate hike cycle is over. Traders should prepare for lower rates by looking into options on SOFR futures, expecting the first Fed cuts by spring. A less aggressive Fed is causing the US Dollar to weaken, pulling it back from recent highs. We’ve seen EUR/USD rise from around 1.17 to nearly 1.1850 as the market anticipates US rate cuts ahead of those from the European Central Bank. This difference suggests it might be wise to buy call options on EUR/USD or put options on the Dollar Index (DXY) during this quieter holiday trading period. This environment is very positive for precious metals, allowing gold to break through the $4,350 level. A weaker dollar and lower real yield expectations make gold, a non-yielding asset, more appealing. We suggest taking long positions through futures contracts or call options on gold, as safe-haven investments may increase if economic data continues to weaken. Create your live VT Markets account and start trading now.

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