In November, Canada’s year-on-year Consumer Price Index was 2.2%, falling short of expectations.
In November, Canada’s Consumer Price Index (CPI) rose by 2.2% compared to last year. This was lower than the expected increase of 2.4%. This difference can influence how economists evaluate the economy and make policies.
Market activity remains strong. The GBP/USD is close to 1.3400 as traders await news from the Bank of England. Gold stays above $4,300 but has lost some momentum during trading, partly due to predictions of a softer policy from the Federal Reserve.
The Empire State Manufacturing Index in the US was -3.9, below expectations
The Empire State Manufacturing Index in New York recorded a reading of -3.9 in December, which is lower than the expected 10.6. This unexpected drop could change how people view the future economy in the area.
At the same time, the GBP/USD pair is approaching 1.3400 as traders await possible policy changes from the Bank of England. Meanwhile, the US Dollar is struggling as investors anticipate upcoming Nonfarm Payrolls data.
Gold Price Movement
Gold prices have pulled back from earlier highs but remain above $4,300. This is happening because the US Dollar is weak amid expectations of a more cautious Federal Reserve policy in the near future. Solana’s price is still above $131, supported by strong institutional demand. Assets under management in spot ETFs are nearing $1 billion, showing ongoing interest in blockchain investments. The unexpected drop in the NY Empire State Manufacturing Index to -3.9 highlights a troubling trend of slowing economic activity. This isn’t a one-time occurrence; similar patterns are seen in broader indicators like the national ISM Manufacturing PMI, which has remained below the 50-point contraction mark for over 15 months in 2023-2024. This ongoing weakness strengthens the case for a cautious Federal Reserve.Interest Rate Expectations
Markets are likely to respond by pricing in Fed rate cuts more aggressively for the first half of 2026. In late 2023, markets priced in over 150 basis points of cuts for the following year as economic data weakened, and a similar trend is happening again. Traders might consider using options on federal funds futures or taking long positions on 2-Year Treasury note futures to prepare for this expected decline in short-term rates. This outlook will likely keep pressure on the US Dollar. The Dollar Index (DXY) is already weak, and this new data will add more stress, similar to when it dropped from 107 to below 102 in the last quarter of 2023 due to rate-cut speculation. Thus, buying call options on currency pairs like the EUR/USD, which is already trading near multi-week highs, could be beneficial as the dollar weakens. In the current environment, bad economic news is seen as good news for equity indices, as it raises the chances of lower borrowing costs. The S&P 500 benefits from this sentiment, especially in non-tech sectors sensitive to interest rates. We should maintain a positive outlook on equity index derivatives, like S&P 500 E-mini futures, anticipating the index will trend higher as long as the market believes the Fed will take action. Under these conditions, implied volatility is likely to stay low as long as the narrative of a Fed-supported soft landing holds. The CBOE Volatility Index (VIX) is currently around its historical lows, sitting at approximately 12.9 as of last week’s close. Selling short-dated VIX call options or out-of-the-money put options on the SPX might be a smart way to earn premium, but this strategy requires careful risk management if recession fears rise sharply. Create your live VT Markets account and start trading now.AIZ stocks attract buyers who initiate long positions from the blue box, aiming for $250-$260 amid bullish trends.
Buyers of Assurant Inc. (AIZ) stocks have started new positions from an area known as the blue box, targeting prices between $250 and $260 during a bullish trend. Assurant, based in Atlanta, offers risk management and insurance services for global housing and lifestyle markets. They operate in over 20 countries and partner with major financial institutions and retailers.
The bullish trend for AIZ began in November 2008 at $12.52 and peaked in February 2020 at $146.21, before experiencing a correction. The upcoming wave (III) could reach between $287 and $417, with recent price movements indicating that wave ((1)) of III is complete, leading to a target range of $330–$380 for wave ((3)).
Since April 2025, the bullish activity has continued, with prices maintaining strong structures and completing waves (1) and (2) of ((3)). The buying interest from the blue box has led to a potential price move toward $250–$285, with possibilities of even higher prices. Early signs suggest a broader wave extension toward the $300–$330 range.
On December 14, 2025, renewed buying interest was evident, initiating wave ((i)) of 3 of (3). Buyers from the blue box may want to think about taking profits while looking for new buying opportunities on dips, especially as the target nears $250. New positions could be pursued after a break above the wave 1 high.
With Assurant (AIZ) showing recent price action, we should see a bounce from the early December support zone as confirmation of the consistent bullish trend. Buyers defended the $221.70–$216.26 area last week, as expected. This rebound keeps the immediate price target of $250 in sight.
For traders who took long positions at that support zone, it’s wise to manage risk and secure some gains. Consider taking partial profits as the price approaches $245, and adjust the stop-loss on the remaining position to the breakeven point to eliminate risk.
Those seeking new entries should be patient and wait for a clear sign of strength. The goal now is to wait for the price to break above the recent high from early December. After that breakout, look to buy on the next small pullback or consolidation, as this often provides a lower-risk entry point.
This positive outlook is backed by the wider economic context. Last week’s November Consumer Price Index (CPI) report showed a decline to 2.8% year-over-year, suggesting the Federal Reserve may be done with its tightening measures. A stable or declining interest rate environment typically eases pressure on financial services firms and supports stock valuations.
Market sentiment is also improving, with the CBOE Volatility Index (VIX) dropping below 15 for the first time since late 2024. This shows reduced fear among investors and a stronger appetite for risk assets. Historically, periods of low volatility after a market correction, like the one in 2023, often lead to significant upward trends in stocks.
If the price moves to the $250-$260 range in the coming weeks, it would confirm the larger wave structure. It would indicate that the next major uptrend, targeting the $330–$380 area, is beginning. Options traders might consider buying call spreads to take advantage of this anticipated upward movement while managing risk.
Housing starts in Canada for the year reach 254.1K, surpassing the expected 248K
Canada’s housing starts in November were seasonally adjusted to 254,100. This number is higher than the expected 248,000.
This stronger housing start figure indicates that the Canadian economy is performing better than many had thought. With 254,100 new units, it seems that demand for housing remains strong, even with the higher interest rates we’ve faced in recent years. This makes it difficult for the Bank of Canada to justify lowering interest rates anytime soon.
Inflation And Housing Starts
It’s important to look at this data alongside the inflation report from October 2025, which showed the Consumer Price Index (CPI) at 2.8%. This is significantly higher than the Bank’s target of 2%. Increased construction activity could drive up wages and the costs of materials, raising inflation concerns for the Bank of Canada. As a result, markets might start to reduce the chances of a rate cut in the first quarter of 2026. For those trading interest rate swaps and CORRA futures, the best approach now is to prepare for a “higher for longer” interest rate scenario. We observed a similar pattern in 2023, where strong economic reports delayed expectations for changes from the central bank. This could mean selling futures contracts that bet on a rate cut in March 2026 or buying options that profit if rates stay the same through the winter. This economic strength is positive for the Canadian dollar, as a more aggressive Bank of Canada typically attracts foreign investment. Recently, the Canadian dollar (loonie) has struggled against the US dollar, sitting around 1.37, but this data gives a solid reason for improvement. We might consider buying CAD call options or selling USD/CAD call options in anticipation of a drop to around 1.35 in the upcoming weeks.Impact On Equity And Currency Markets
In the equity market, this news is beneficial for sectors like homebuilders, material suppliers, and major banks, making call options on related ETFs more appealing. However, the potential for continued high interest rates could negatively impact the broader TSX index, especially in growth and technology sectors. This suggests a smart strategy could be to invest in financials while hedging with put options on the overall market. Create your live VT Markets account and start trading now.EUR/USD rises above 1.1750 as US manufacturing data and Federal Reserve speakers draw focus
**EUR/USD Rally**
The EUR/USD is rising, trading above 1.1750 thanks to strong industrial production data from the Eurozone. This analysis comes just before the release of US manufacturing data and speeches from Federal Reserve officials later.
Eurostat reported that factory output growth hit 0.8% in November, up from 0.2% in October, exceeding expectations. On a year-on-year basis, this marks a 2% increase, showing improved manufacturing performance in the region.
The EUR/USD has risen nearly 2% over the past three weeks as the market anticipates potential rate cuts by the US Federal Reserve. Speculation about Jerome Powell being replaced as Chair with a more dovish candidate is also limiting the dollar’s gains.
Traders remain cautious, waiting for the US Nonfarm Payrolls and Consumer Price Index data due this week, coinciding with the ECB’s monetary policy decision.
In China, industrial production slowed in November, while retail spending dropped to its lowest level in nearly two years. Concerns are resurfacing about the property sector, especially regarding state-backed developer China Vanke’s financial struggles.
The NY Empire State Manufacturing Index is expected to fall to 10.6 in December from 18.7. Fed officials will discuss monetary policy, which could provide further direction for the markets.
**Outlook for the Euro**
The recent rise in EUR/USD above 1.1750 is mainly due to unexpectedly strong industrial output from the Eurozone, which grew 0.8% in November against lower expectations. This strong performance in Europe contrasts sharply with the outlook for the US dollar, which is being affected by expectations of future Federal Reserve rate cuts. We are now consolidating these gains as we approach a busy week.
At the heart of this trade is the growing policy gap between the European Central Bank (ECB) and the Federal Reserve (Fed). The ECB’s main rate remains steady, with officials suggesting a hike might be next. Meanwhile, the Fed faces pressure to ease policy by 2026. This fundamental divergence has pushed the pair up nearly 2% over the last three weeks and continues to be the main theme.
This week’s focus is on US data, which will either support or challenge the market’s dovish Fed narrative. We are particularly watching Tuesday’s delayed Nonfarm Payrolls report, due to a recent government data issue, and Thursday’s Consumer Price Index. After inflation remained around 3% for much of 2025, any sign of cooling would reinforce expectations for a Fed rate cut, likely pushing EUR/USD higher.
With major events from both US data and the ECB meeting on Thursday, we expect increased short-term volatility. This is a good time to consider options strategies, as implied volatility is likely to rise before these announcements. Buying straddles or strangles on EUR/USD could be a way to profit from significant price movements in either direction, no matter the data outcome.
Despite the upward trend, technical indicators suggest the rally may be overextended, with the MACD on the 4-hour chart indicating a possible pullback. Thus, hedging long positions seems wise. We might consider buying out-of-the-money puts with a strike price below the immediate support level around 1.1720 to protect against unexpectedly strong US data.
We’ve seen similar situations before, such as in the mid-2010s. Back then, the policy divergence between an easing ECB and a tightening Fed led to a strong, multi-year trend in favor of the US dollar. The current conditions suggest the potential for a similarly powerful, sustained move, this time favoring the euro.
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The US dollar is declining against major currencies and may be approaching its lower range.
The US Dollar (USD) is currently on the defensive against major currencies and might drift towards the lower end of its range from June to December. Traders are keenly observing Federal Reserve officials Stephen Miran and John Williams for hints about future monetary policy.
Market Observations
Analysts believe the USD could drop towards levels suggested by US-G6 rate differences. Fed speakers Stephen Miran, known for his dovish views, and John Williams, the influential President of the New York Fed, are expected to give insights into monetary policy. John Williams’ speech on November 21 had renewed expectations for a rate cut in December. Market participants are closely watching US monetary policy developments, as they greatly influence global currency markets. The FXStreet Insights Team, made up of journalists, gathers this information from market experts. They include contributions from both commercial sources and various analysts. With the US Dollar showing weakness, traders are bracing for a potential decline. They are using put options on the USD index and call options on pairs like EUR/USD. All eyes are on today’s comments from Fed officials Miran and Williams, which could further drive down the dollar. A dovish tone could lead to a rise in implied volatility. This potential for a dovish shift is supported by recent data showing inflation has eased significantly. The latest Consumer Price Index report for November 2025 reported a year-over-year increase of just 2.5%, comfortably within the Fed’s target range. Williams’ dovish remarks from November 21 now appear to be solid signals rather than just trials.Economic Indicators
The weakening labor market adds to this perspective. The latest employment report revealed Non-Farm Payrolls increased by only 110,000, falling short of expectations. Continuing jobless claims have risen over the past quarter, reinforcing the idea that the economy is slowing down. These conditions give the Federal Reserve room to start discussing rate cuts. Looking back, the Fed kept rates steady for much of 2024 and 2025, making this shift noteworthy. If Williams reiterates his November views, we might see the Dollar Index drop below its recent six-month range. The CME FedWatch tool now indicates a 70% chance of a rate cut in the first quarter of 2026. In contrast, the European Central Bank has taken a more neutral approach in dealing with its inflation issues. This difference in policy is a major factor putting pressure on US-G6 rate differences. For derivatives traders, this creates greater opportunity for strategies that benefit from a weaker dollar against other major currencies. Create your live VT Markets account and start trading now.The USD/CNH encounters downward pressure near recent lows, with resistance at 7.08
The USD/CNH currency pair is currently trading close to its recent lows. This is mainly due to the overall weakness of the US dollar and a notably low USD/CNY fix. The pair was last seen at 7.0427, showing slight bearish momentum as the RSI nears oversold levels. If it breaks below the support level of 7.0380, we could see further declines. Meanwhile, resistance is at 7.08. The latest low fix was 7.0638, marking a 14-month low.
This situation is helping the RMB appreciate gradually. Analysts have pointed out that the fixing pattern has been on a steady decline since April 2025, indicating a strategy to maintain market stability while allowing the RMB to strengthen. For the past two weeks, both the spot rate and Bloomberg consensus for the daily fix have been lower than the actual fix. This trend may lead to continued downward pressure if policymakers stay on the current course or could result in temporary stabilization if the pace slows. Another lower fix or continuous weakness in the USD could drive further declines.
US Dollar Weakness
The weakness of the US dollar and a focused effort to strengthen the yuan are both pushing the USD/CNH pair lower. The consistently low daily fix serves as a clear sign of a planned approach toward gradual RMB appreciation. This managed descent has been orderly since spring 2025. The broad softness of the dollar isn’t unexpected, as the US Dollar Index (DXY) fell below 100 last week for the first time this year. Markets are now predicting a high chance that the Federal Reserve will keep interest rates steady in its January 2026 meeting, following several lower inflation reports. This stands in contrast to late 2024 when expectations for rate hikes were still strong. On the other hand, China’s Q3 2025 GDP came in at a surprising 5.1%, raising confidence in the domestic economy. Data from November by the State Administration of Foreign Exchange also indicated three consecutive months of net portfolio inflows, suggesting that international capital is returning. A stronger yuan supports the narrative of stability and draws in more investment.Implications for Traders
For derivative traders, this environment suggests preparing for further downside in USD/CNH. Buying put options with strike prices below the 7.0380 support level, perhaps aiming for the psychological 7.00 mark, seems like a sound strategy. The clear policy direction offers strong support for this outlook in the new year. However, it’s important to note that the RSI is nearing oversold territory, which might lead to a temporary pause or bounce. To manage this risk, using bear put spreads could be a wise approach since it lowers upfront costs and defines the risk if the pair stabilizes at current levels. The key will be to monitor whether policymakers adjust the pace of setting the fix lower in the coming weeks. Looking back, this trend represents a significant reversal from the yuan’s weakness experienced throughout much of 2023 and 2024, during which the pair consistently traded above 7.25. The current controlled strengthening marks a significant shift in policy, making the drop below 7.08 feel more like a sustained movement rather than a brief market fluctuation. Create your live VT Markets account and start trading now.Pound Sterling stays steady against major currencies ahead of Bank of England’s decision
The Pound Sterling is trading carefully as important UK data and the Bank of England’s (BoE) monetary policy decision approach. This Thursday, the BoE is expected to lower interest rates by 25 basis points to 3.75%. Key UK unemployment and inflation data will be released before this decision.
Pound Sterling Stability
Right now, the Pound Sterling is stable against major currencies. However, it might become more volatile with new economic data and the expected rate cut from the BoE. The UK’s core inflation for November is forecasted to stay at 3.4%, while the labor market data indicates rising unemployment. On Monday, the Pound Sterling rose to about 1.3385 against the US Dollar. This increase happened as the US Dollar hit an eight-week low ahead of important US employment data. The Federal Reserve recently lowered rates due to a weak labor market. Investors will also pay attention to US Retail Sales for October and the PMI data for December. There are market expectations for future rate cuts from the Fed, which differ from last week’s forecast. The technical outlook shows GBP/USD trading around 1.3385, and trends remain positive as long as it stays above the 20-day EMA. If resistance breaks, the Pound could gain even more. This week is crucial for the Pound Sterling, with everyone’s focus on the Bank of England’s interest rate decision on Thursday. The general opinion is for a cut of 25 basis points to 3.75%, marking the first reduction in this cycle. Before that, we will see important UK inflation and employment data that could influence the outcome. The push for a rate cut is growing, as core inflation has decreased to 3.4% from the high levels over 10% seen in 2022. The unemployment rate in the UK has also risen to 4.4% in the latest report, indicating a weaker job market. These stats give the Bank of England a reason to ease monetary policy.Market Strategy Considerations
For derivatives traders, the current situation indicates rising implied volatility in the days ahead. Making large directional bets on the Pound before Wednesday’s inflation data is risky due to the uncertain outcome. Strategies like straddles or strangles on GBP pairs could be used to benefit from expected price swings, regardless of the direction. The outlook for GBP/USD is complicated by the weak US Dollar, which is trading near an eight-week low. Tomorrow, we expect the US Nonfarm Payrolls report, following last month’s disappointing addition of 160,000 jobs. This trend is raising market bets that the Federal Reserve will need to cut rates sooner than expected. There is a clear gap between market expectations and official guidance from the US central bank. The CME FedWatch Tool currently indicates a nearly 80% chance of a Fed rate cut by March 2026, even though the Fed suggests only one more cut this year. This aggressive market sentiment is putting pressure on the US Dollar, benefiting GBP/USD in the meantime. Technically, GBP/USD is showing positive signs as it tests the 1.3400 level. A break above 1.3395 could lead to a move towards 1.3488, especially if US data is weak. Traders might consider buying short-dated call options with a strike above 1.3400 to take advantage of a potential breakout. Create your live VT Markets account and start trading now.Yen strengthens as positive Tankan Q4 survey results push USD/JPY close to 155.00
US Dollar Weakness and Fed Policy
The US Dollar is losing strength as people assess the Federal Reserve’s plans for monetary policy through 2026. Current data shows a 64.3% chance that the Fed will cut interest rates at least twice by the end of that year. The Fed’s dot plot suggests that the Federal Fund Rate could drop to 3.4% by 2026, indicating one more cut from the current range of 3.50% to 3.75%. The Tankan Large Manufacturing Index provides a glimpse into Japan’s economy, which relies heavily on manufacturing and exports. A score above 0 suggests positive conditions for the Japanese Yen (JPY), indicating strong manufacturing performance. As USD/JPY nears the 155.00 level, we see a clear sign of JPY strength due to a positive economic outlook. The Tankan survey’s four-year high indicates a solid manufacturing sector, leading us to believe that the Bank of Japan (BoJ) will raise rates this Friday. This change makes shorting the dollar against the yen an attractive option. Additionally, Japan’s national Core CPI for November was recently reported at 2.9%, remaining above the BoJ’s 2% target for over a year. This ongoing inflation gives the central bank a strong reason to tighten its policy. We recall that a similar strong Tankan index back in late 2021 led to significant shifts in global monetary policy.Strategy for USD/JPY
On the other hand, the US Dollar is weakening as we expect the Federal Reserve to start cutting rates in 2026. The market anticipates at least two cuts by then, a prediction that could gain traction if tomorrow’s Nonfarm Payrolls data is disappointing. Analysts expect a modest 150,000 jobs added in November, down from 162,000 in October. Given this situation, derivative traders should think about buying USD/JPY put options to take advantage of a potential decline. Options with strike prices around 154.00 or 152.50 that expire in late January 2026 could provide substantial profits. This strategy allows us to make gains from a falling USD/JPY while clearly limiting our maximum risk. This is a sharp contrast to what we saw in 2022 and 2024, when we were focused on potential intervention from the Ministry of Finance to halt the yen’s decline below the 150 level. Now, the Bank of Japan’s official policies are the main force behind yen strength. The narrative has shifted from defending a weak yen to supporting a strong one. With significant events approaching, such as the US NFP report and the BoJ policy meeting this week, implied volatility is high. Buying put options is a smart way to express a bearish outlook on USD/JPY. It safeguards us against any unexpected changes from the BoJ that could lead to a sharp and unfavorable market shift. Create your live VT Markets account and start trading now.US macro data and Fed communication reveal weak job growth and rising unemployment affecting the dollar
This week, everyone is looking at US economic data and updates from the Federal Reserve. The nonfarm payrolls (NFP) report for November is expected to show a modest gain of 50,000 jobs, with unemployment possibly rising to 4.5%.
These numbers might change expectations for a possible Fed rate cut in March, which currently has a 33% chance. Important speeches from New York Fed President John Williams and insights on the economic outlook from Fed’s Chris Waller are also expected.
