MBA mortgage applications in the United States recently rose from -1.4% to 4.8%
In December, US mortgage applications from the MBA rose by 4.8%, recovering from a previous decline of 1.4%. This increase coincides with the Federal Reserve’s expected announcement of a 25 basis point interest rate cut for 2025 on Wednesday.
Bitcoin is currently holding steady above $92,000, boosted by ETF inflows and the anticipation of a Fed rate reduction. Ethereum has moved past the 50-day EMA, showing signs of a bullish trend, while XRP is under pressure, with sellers targeting the $2.00 support level.
Pound rises against US Dollar during European trading session ahead of Fed announcement
The Pound Sterling increased by 0.16% to about 1.3320 against the US Dollar during the European trading hours. This rise was supported by remarks from Bank of England officials who prefer a slow approach to easing monetary policy. The US Dollar fell slightly as traders wait for the Federal Reserve’s policy announcement, where a rate cut of 25 basis points, bringing the rate to a range of 3.50%-3.75%, is widely expected.
According to the CME FedWatch tool, there’s an 87.6% chance of this rate cut. If it happens, this will be the third rate cut in a row due to worries about slow job growth in the US labor market. Fed Chair Jerome Powell mentioned that labor demand is decreasing, but a rate cut in December is not guaranteed. Meanwhile, Bank of England Deputy Governors are still concerned about inflation, favoring a cautious easing approach.
From a technical standpoint, GBP/USD is trading at 1.3318, above its 20-day EMA, which indicates a short-term uptrend. The RSI is over 50, showing potential for further gains. Central banks aim to keep inflation around a 2% target by adjusting interest rates—either raising them to tighten or lowering to ease monetary conditions.
Since the Fed’s 25 basis point rate cut is nearly certain, the market should focus on expected volatility around the policy statement and Jerome Powell’s press conference. The market’s response will likely depend more on forward guidance than on the cut itself. A hint at a pause or a more aggressive approach could quickly reverse the recent weakness of the US Dollar.
The Fed is responding to a softening labor market, a trend we’ve observed since mid-2025. The latest Non-Farm Payrolls report for November 2025 showed only 155,000 jobs added, which was below expectations, confirming this slowdown. However, as US Core CPI inflation remains stubborn at around 3.7%, the Fed finds it challenging to ease policy aggressively.
On the other hand, the Bank of England’s expected cut next week seems more cautious. This is motivated by a desire to proactively address a slowing economy rather than just reacting to new data. UK inflation has remained more consistent than in the US, which is why officials like Lombardelli and Ramsden are advocating for a gradual approach. This relatively hawkish stance from the BoE is a key reason why the Pound Sterling is outperforming the US Dollar, pushing GBP/USD to its current level of 1.3320.
Given this divergence, we should prepare for continued but possibly bumpy strength in the GBP/USD pair. This easing phase in 2025 sharply contrasts with the aggressive rate hikes we saw in 2022 and 2023. Derivative traders might consider buying call options on GBP/USD to benefit from further increases while managing risk, especially if Powell’s comments disturb the market.
The technical outlook supports this positive bias, with the pair comfortably above the 20-day exponential moving average at 1.3249. This level now acts as a crucial support level; as long as we stay above it, the path ahead looks favorable. If this support fails to hold after the Fed’s announcement, it could lead to a significant shift in momentum, with a possible drop back towards the 1.3026 area.
During the European trading session, the USD/JPY pair holds its three-day gains near 157.00.
The USD/JPY remains strong, trading close to a two-week high of 157.00, just before the Federal Reserve’s (Fed) policy announcement. The Fed is expected to lower interest rates by 25 basis points, bringing them to between 3.50% and 3.75%. Revised data shows that Japan’s economy shrank by 0.6% in the third quarter.
Despite general uncertainty around the US Dollar, the USD/JPY pair keeps its gains. The US Dollar Index, which measures the Dollar against other major currencies, has gone down slightly to around 99.10, nearing the recent low of 98.75 from last week.
This week, the Japanese Yen has weakened, particularly against the New Zealand Dollar. Economic challenges in Tokyo are affecting the Bank of Japan’s interest rate expectations. Figures from Monday reveal a larger contraction in Japan’s economy at 0.6%, compared to the earlier estimate of 0.4%.
The Federal Reserve plays a key role in maintaining price stability and full employment through interest rate changes. Lower rates encourage borrowing but may make the Dollar less appealing. The Fed meets eight times a year to review and decide on policy updates. They use methods like Quantitative Easing and Tightening to influence the economy and the Dollar’s value.
As the Federal Reserve is expected to cut interest rates today, December 10th, 2025, we are paying close attention to how this will affect the market. The anticipated cut of 25 basis points reflects a cooling US economy this year. This situation makes the US Dollar less attractive, yet it remains strong against the Japanese Yen.
The reasoning for this rate cut is evident in recent data. The November 2025 jobs report showed that the US economy added only 115,000 jobs, continuing a downward trend over the last two quarters. The unemployment rate is steady at 4.1%, giving the Fed ample reason to begin easing measures.
On the flip side, the Japanese Yen remains weak. The confirmation that Japan’s economy contracted by 0.6% in the third quarter reduces the pressure on the Bank of Japan to raise interest rates. This keeps Japanese monetary policy very loose compared to other countries.
This situation resembles the trends of 2022 and 2023 when a wide interest rate gap supported a strong carry trade. Even with today’s expected Fed cut, the US interest rate at 3.50% will still be significantly higher than Japan’s, which is near zero. This difference should continue to weigh down the value of the Yen.
In the weeks ahead, traders are expected to use options to manage the risk of a bigger-than-expected decline in the dollar. Buying put options on the USD/JPY pair can act as a safeguard if the Fed indicates more aggressive future cuts than expected. This strategy allows traders to protect their positions while remaining open to potential gains if the Yen remains weak.
The focus will be on the Fed’s forward guidance and dot plot expected later today. If policymakers signal a steady approach to rate cuts into 2026, the USD/JPY pair could stay close to the 157.00 mark. Any declines are likely to be seen as buying opportunities until Japan’s economic data shows a significant improvement.
The pound remains strong due to yen weakness, staying above 208.20 near multi-year highs.
GBP/JPY remains strong, facing resistance near 209.00 but staying above 208.20. This stability is partly due to Japan’s weak GDP numbers and fiscal issues affecting the Yen.
The Pound is taking advantage of the Yen’s weakness and is close to multi-year highs around 208.90, with support lying above 208.20. The Yen is under pressure from economic growth concerns and a plan for a USD 137 billion stimulus package.
Technical Analysis
In technical terms, GBP/JPY is stabilizing after a 1.7% rise over two weeks. The RSI shows that momentum is slowing from overbought levels, while the MACD indicates ongoing positive momentum. Immediate support is found at 208.24, with additional support at 207.35 and trendline support around 206.30. On the upside, if the pair exceeds Tuesday’s high of 208.95 and breaks the 209.15 Fibonacci extension, the 210.00 level could come into play. The pair is targeting 210.30 based on triangle measurements. This week, the Yen is performing best against the Swiss Franc. Overall, the currency has shown significant drops against most peers, highlighting its weakened status. A currency heat map displays percentage changes among major currencies, providing a thorough weekly overview.Investment Strategies
The fundamental softness of the Japanese Yen is the main story, making long GBP/JPY positions appealing. The Bank of Japan shows no signs of changing its ultra-loose monetary policy, especially after last week’s disappointing national Core CPI for November, which was only 0.5% year-over-year. This contrasts sharply with the Bank of England, which is maintaining rates to combat inflation. In this context, we see value in buying call options with strike prices targeting the psychological 210.00 level in the coming weeks. The technical setup supports this, as the pair is holding above the 208.20 support level. This suggests that any downturns present buying opportunities rather than a trend reversal. For those interested in generating income, selling out-of-the-money put options with a strike below the 207.35 support level could work well. This strategy takes advantage of the expectation that the pair will remain stable and not drop significantly anytime soon. The main risk is a sudden policy change, but that seems unlikely before the new year. We recall the classic Yen carry trade dynamics that propelled the pair to extreme highs leading up to 2008. The interest rate gap between the UK and Japan is now wider than it’s been in over a decade, supporting this upward movement. Maintaining a break above 210.00 would be significant, as those levels haven’t held since mid-2015. The overall weakness of the Yen against all major currencies last week strengthens our conviction. The Yen has lost nearly 1% against the US Dollar and over 1% against the New Zealand Dollar, making this story uniquely about Japan. Thus, even if the Pound weakens independently, the Yen’s drop should cushion the GBP/JPY pair. Create your live VT Markets account and start trading now.India’s M3 money supply rises to 9.9% in November from 9.8% previously
India’s M3 money supply rose to 9.9% in November, up from 9.8% before. This increase aligns with positive economic signs in the region.
In the global currency markets, the EUR/USD pair gained value, hitting 1.1630 due to expectations about the Federal Reserve. It is likely that the Federal Reserve will announce a 25 basis point interest rate cut, which reflects ongoing changes in fiscal policy.
Trading Movements
In trading, GBP/USD climbed over the 1.3300 mark, supported by selling pressure on the US Dollar. Gold held steady at around $4,200 as markets prepare for potential actions from the Federal Reserve. Cryptocurrency markets showed mixed results. Bitcoin remained above $92,000, while Ethereum had a positive trend. However, XRP struggled and faced downward pressure. Broker choices for 2025 are gaining attention, highlighting various categories for potential traders. These categories include forex, CFD, and region-specific brokers, each with their own advantages and disadvantages. Investors should perform thorough research before participating in the market, given the associated risks. FXStreet stresses the importance of making informed decisions in changing market conditions.Federal Reserve Impact
The market has already accounted for the expected 25 basis point cut by the Federal Reserve. The real focus now is on the divisive nature of the meeting, which indicates uncertainty about the Fed’s future guidance. This could lead to increased volatility, making options strategies like straddles on the S&P 500 appealing to seize any sharp movements after the announcement. The anticipated rate cut is putting pressure on the US Dollar. This is supporting gains in the EUR/USD and GBP/USD pairs. Notably, the dollar index (DXY) fell over 4% in the last months of 2023 when the market first sensed a policy shift. Those trading derivatives might think about buying call options on currency ETFs like FXE (Euro) to take advantage of a possible further decline in the dollar in the upcoming weeks. With gold stable around $4,200, a dovish Federal Reserve and a weaker dollar create a favorable situation for the metal. This presents an opportunity to utilize gold futures or call options on gold miner ETFs for potential gains. Recent Q3 2025 data shows ongoing central bank buying, which could boost prices as we enter the new year. While lower rates usually benefit stocks, we must understand the reasons behind the cut. The latest November jobs report revealed a slight cool-down in the labor market, with payrolls at 155,000, just below expectations. This suggests being selective, potentially using derivatives to support stable sectors over high-growth tech until the economic outlook becomes clearer. India’s M3 money supply increasing to 9.9% highlights liquidity in a crucial emerging market. A dovish Federal Reserve and a weaker US dollar often help emerging markets by improving financial conditions and attracting capital. We witnessed a similar trend boost emerging market indexes in the first half of 2024, indicating that traders might consider options on ETFs like INDA for investment. Create your live VT Markets account and start trading now.Retail sales in South Africa fell from 3.1% to 2.9% compared to last year.
In October, South Africa’s retail sales decreased from 3.1% to 2.9% compared to the previous year. This drop indicates that consumer spending is slowing down, which could impact economic growth and government policies in the future.
Experts will closely monitor this trend to understand its effects on South Africa’s economy. These findings may influence upcoming economic plans and decisions.
The decline in retail sales to 2.9% confirms the pattern of decreasing consumer spending we’ve been observing. This corresponds with the disappointing GDP report from last week, which showed growth slowing to just 0.2%. It seems that ongoing high interest rates throughout 2024 and early 2025 are starting to strain household finances.
As consumer spending weakens, the chance of another interest rate hike by the South African Reserve Bank in early 2026 is decreasing. We may see the South African rand (ZAR) weaken, especially as the US Federal Reserve indicates it will keep its rates steady into the new year. Traders might consider buying USD/ZAR call options to prepare for a possible rise above the 19.50 level we saw earlier this year.
This slowdown directly affects the outlook for the retail sector on the JSE, raising concerns following lackluster Black Friday sales in November. Major retail stocks, which have struggled since the market decline in September, might continue to underperform. Buying put options on the JSE Top 40 index or on specific retail-focused ETFs could be a way to protect against a downturn in the first quarter of 2026.
Now, all attention is on the November inflation data expected next week, which is projected to show a further decrease to around 4.8%. If inflation falls, it will strengthen the belief that the SARB’s cycle of rate hikes is over. This makes positioning for lower rates through interest rate futures a smart strategy for the upcoming weeks.
China’s November CPI matches forecasts at 0.7%, reflecting weak domestic demand and contributing to USD/CNH decline
China’s Consumer Price Index (CPI) rose by 0.7% in November compared to the previous year, matching expectations. This increase, the largest since February 2024, was mainly due to higher food prices. Core inflation remained steady at 1.2%.
The Producer Price Index (PPI) was recorded at -2.2% year-on-year, indicating ongoing deflation. This suggests that domestic consumption is still weak.
Weak domestic demand is also influencing the USD/CNH currency pair’s downward trend. If China’s currency appreciates, it may encourage consumer spending, as lower import prices would increase disposable income.
Current economic indicators highlight the challenges China faces in boosting domestic consumption. A stronger currency could help shift China’s growth model towards more consumer spending.
Recent inflation data shows that domestic demand remains weak, supporting the case for a stronger yuan. Retail sales in October 2025 grew only 2.5%, falling short of expectations, which indicates that consumers are reluctant to spend. This situation supports the continued decline of the USD/CNH pair in the coming weeks.
We anticipate that the yuan will continue to strengthen, boosting consumer purchasing power by lowering the cost of imported goods. This expectation is reinforced by the People’s Bank of China’s decision to set a daily yuan reference rate consistently stronger than market predictions over the past month, indicating a preference for a stronger currency.
Conversely, the US Dollar faces pressure as the Federal Reserve is likely to cut interest rates later today. Recent US data revealed that non-farm payrolls added only 95,000 jobs in November 2025, giving the Fed a clear reason to ease its policy. The core PCE, which the Fed uses as its key inflation measure, has dropped to 2.8%, offering officials leeway for a rate cut.
With these factors affecting the USD/CNH pair, we should explore derivative strategies to profit from its continued decline. This could include buying put options on the pair to bet on lower prices or selling out-of-the-money call spreads to earn premiums. These strategies align with the weaker US dollar theme and the specific conditions in China.
From our perspective in late 2025, this scenario resembles the period after the dollar peaked in 2022 when global growth concerns were prominent. We can also consider proxy trades, like buying call options on the Australian dollar, which typically appreciates with the yuan, providing another avenue to express this market view.
The nature of today’s Fed meeting could lead to increased volatility, even though the direction seems clear. We might look into buying short-dated straddles on the EUR/USD or VIX call options to hedge against any sharp, unexpected market reactions to the Fed’s comments or updated economic forecasts.
USD/CAD stays strong above 1.3800 as we await the Fed’s decision and stable Canadian rates
The USD/CAD pair is trading above 1.3800 as traders await the Federal Reserve’s decision. The Bank of Canada is likely to keep its interest rate at 2.25%. This steady rate could help support the Canadian Dollar, while swaps suggest a potential 25 basis point increase next year.
Since there is no Monetary Policy Report or press conference, the Bank of Canada will probably emphasize that the current rate is fitting for keeping inflation around 2%. The swaps market anticipates a 25 basis point hike to 2.50% within the next year, which may favor the CAD. This decision may determine if USD/CAD stays above or falls below the 1.3800 support level.
Fxstreet Insights Team
The FXStreet Insights Team consists of journalists who gather expert market observations to provide valuable insights and analysis. They cover the Bank of Canada’s interest rate outlook alongside other financial updates. Additional reports focus on various currency and commodity price movements based on expected actions from central banks, such as the Federal Reserve’s anticipated 25 basis point rate cut. The market remains cautious as investors watch for possible policy changes from major central banks. Traders closely monitor various currency pairs, commodities, and cryptocurrencies as markets adjust to upcoming rate announcements and economic reports. Today’s Federal Reserve decision is the key focus, with USD/CAD hovering just above the 1.3800 support level. The tension stems from the Fed’s expected rate cuts compared to the Bank of Canada holding steady at 2.25%. This difference could lead to significant market movements in the next few weeks. We expect a 25 basis point rate cut, marking the fourth reduction of 2025 as the Fed addresses slowing economic growth. Recent CPI data from November indicated that core inflation has eased to 2.8%, providing the Fed with a rationale for this final cut of the year. The main concern is a “hawkish cut,” where the statement may signal an end to the easing cycle, potentially causing the dollar to rally sharply.Canadian Economy and Derivative Trading
On the other hand, the Canadian economy seems stronger. The latest jobs report from Statistics Canada revealed an increase of 45,000 jobs in November, keeping the unemployment rate stable at 5.2%. This strength explains why the swaps market is predicting a complete 25 basis point hike from the Bank of Canada next year. This underlying support for the loonie indicates that any weakness in USD/CAD could be intensified if the Fed adopts a particularly dovish stance. For derivative traders, this presents a clear opportunity to prepare for increased volatility. Implied volatility on one-week USD/CAD options has surged above 12%, reflecting uncertainty about the Fed’s future guidance. We see potential in strategies like straddles to capitalize on a breakout or purchasing downside puts on USD/CAD to protect against a dovish Fed that breaks the 1.3800 support level. Create your live VT Markets account and start trading now.DXY remains stable around 99.00 as investors wait for Federal Reserve decisions
The USD Index is above 99.00 as everyone awaits the Federal Reserve meeting. The market is expecting the Fed to cut rates by 25 basis points for the third time in a row, with attention on what the Fed might say about future cuts.
The Dollar Index is steady after a small dip at 99.30 but remains supported above 99.00. Traders are looking forward to the Fed’s decision on monetary policy and the “dot plot” that indicates possible future rate changes.
Modest Bearish Pressure
The index, which measures the USD against six currencies, is experiencing slight bearish pressure due to adjustments in long USD positions. Nevertheless, strong US Treasury yields are helping a mild recovery that has lasted for a week. Recent data from the US shows a rise in job openings, reaching 7.67 million in October. This, along with solid inflation data, supports a more cautious viewpoint from the Fed and challenges expectations for further rate cuts. The Federal Reserve plays a key role in monetary policy, setting interest rates to manage inflation and employment. Cutting rates can weaken the USD because it often leads to capital moving to investments with higher returns. The Fed’s decision is expected on December 10, 2025. With the Federal Reserve likely to cut rates by 25 basis points to 3.75% today, the market has already anticipated this move. Therefore, our main focus is on the Fed’s guidance from the dot plot and Chairman Powell’s press conference. The crucial point is whether the Fed will confirm the market’s expectations for two to three more cuts in 2026.Potentially Hawkish Tone from the Fed
Recent data may lead to a more aggressive stance from the Fed, even with a rate cut. The core PCE inflation index, which the Fed prefers, has stubbornly stayed above 3.3% year-over-year in the latest November data, far exceeding the 2% target. This combined with strong job openings data gives Chairman Powell a reason to suggest a pause on further cuts. We remember the Fed’s “higher for longer” position throughout 2023, where they resisted calls for early cuts until inflation was under control. This history reminds us not to underestimate their willingness to pause rate cuts if the data doesn’t fully support it. A hawkish surprise today could easily push the DXY back toward the 100.00 level. Given the uncertainty around the dot plot, we expect increased volatility in the US Dollar Index. Traders might explore strategies like straddles on USD-related currency pairs to benefit from significant moves in either direction after the announcement. For those anticipating a hawkish surprise, buying call options on the DXY or selling puts on the EUR/USD might be a good strategy. Create your live VT Markets account and start trading now.A 25 basis point rate cut is highly anticipated, focusing on projections and dissenters.
The Federal Open Market Committee (FOMC) is likely to cut rates by 25 basis points, bringing the target down to 3.50-3.75%. Markets anticipate this change with around a 90% certainty. Important details to watch for include the Summary of Economic Projections (SEP), the number of dissenters, and Chair Powell’s press conference.
There might be up to four dissenters this time, compared to only one in October. The Fed may also indicate just one rate cut for 2026 in the SEP, while markets expect nearly two cuts for that year. Growth and unemployment projections are under close examination, with GDP expected to be 1.8% for 2026, 1.9% for 2027, and 1.8% for 2028. Unemployment is projected at 4.4% for 2026 and 4.3% for 2027.
In October, Powell’s press conference led to a significant rise in the dollar’s value, which might happen again. If the Fed makes a hawkish decision, the DXY could hit 99.60. However, weak job data and seasonal trends in December might mean today’s dollar rise will be short-lived.
Today is the day of the Federal Reserve meeting, and the market has nearly fully accounted for a 25 basis point rate cut. This change would reduce the Fed’s target rate to a range of 3.50-3.75%. The specifics that accompany this cut are what really matter, particularly the economic forecasts and Chair Powell’s remarks.
This cut may come with a hawkish tone, which could catch the market off guard. We should pay attention to the number of officials who disagree with the cut; if there are four dissenters, it would show a divided committee hesitant to ease policies further. The Fed might also suggest only one more rate cut for 2026 in their projections, much lower than what the market expects.
Recent data supports the idea of a cautious Fed. The latest November Consumer Price Index showed core inflation steady at 3.4%, stickier than many anticipated. Plus, third-quarter GDP was revised to a strong 2.2%, indicating the economy is coping better with higher rates than expected.
This robust economic outlook gives the committee’s hawkish members good reason to oppose more cuts. Chair Powell’s press conference in October led to a significant dollar rally due to similar concerns. He will face similar challenges today, as he needs to explain any dissent and justify the third consecutive rate cut.
For traders, this means they should prepare for a possible dollar spike today, potentially pushing the DXY to 99.60. Short-term options can help position for this immediate volatility. However, this strength might not last beyond this week.
Looking ahead, we expect a weak jobs report next week, with payroll forecasts around just 95,000, indicating a slowing labor market. This, along with the dollar’s usual seasonal weakness in December, suggests that any rally today should be viewed as a potential selling opportunity. Historically, the Dollar Index tends to weaken in the last weeks of the year, a trend we’ve seen before.
