In October, US building permits reached 1.412 million, surpassing the forecast of 1.35 million.
In October, the number of building permits issued in the United States was higher than expected. The total reached 1.412 million, exceeding the forecast of 1.35 million.
The US dollar is performing well against both the Canadian dollar and the Japanese yen. However, the pound sterling has fallen below 1.3450 due to shifts in market expectations regarding Federal Reserve rate changes.
The Labour Force Participation Rate in the United States decreased to 62.4% from 62.5%
In December, the U.S. labor force participation rate dropped to 62.4% from 62.5%. This decline is linked to mixed reports in U.S. Nonfarm Payrolls data.
USD/CAD and GBP/USD Movements
The USD/CAD pair rose as the U.S. dollar gained strength from the labor data, while the Canadian dollar faced pressure from oil prices. The USD/JPY approached one-year highs as investors adjusted their expectations regarding short-term rate cuts by the Federal Reserve. The GBP/USD fell below 1.3450, affected by the nonfarm payrolls data, which influenced predictions about a Federal Reserve cut in January. However, the UoM Consumer Sentiment Index in the U.S. increased slightly to 54 in January, surpassing the forecast of 53.5. The EUR/USD experienced more selling pressure, nearing multi-week lows around 1.1620 because of the stronger U.S. dollar. At the same time, the GBP/USD hovered around 1.3380, challenging the 200-day Simple Moving Average amid a strong performance of the U.S. dollar. Gold showed a positive trend on Friday, approaching yearly highs near $4,500 per troy ounce. In the cryptocurrency world, Bitcoin held steady at $90,000 but stayed below the 50-day EMA. Ethereum remained above $3,000 despite ETF outflows, while XRP continued to see lower retail demand.Market Movements and Investment Strategies
The labor force participation rate’s decline to 62.4% adds complexity, but markets are increasingly betting that the Federal Reserve will postpone rate cuts. This suggests sustained dollar strength, particularly against the Euro and Pound. We recommend buying near-term call options on the U.S. Dollar Index (DXY) as a direct way to take advantage of this shift. As U.S. Treasury yields rise and gold approaches yearly highs near $4,500, we are witnessing classic risk-off signals, which can negatively impact stocks. The current environment is reminiscent of the challenges faced by equities back in 2022 when the Fed raised rates aggressively. It may be wise to position for increased market volatility by buying calls on the VIX index ahead of next week’s inflation data. We expect the EUR/USD to continue its decline towards the 1.1600 target, and the weakness is particularly notable. The British Pound breaking below its 200-day moving average also presents a bearish signal that investors shouldn’t overlook. Selling out-of-the-money call options on both pairs could be an effective strategy to earn premiums while anticipating further declines. The downturn in cryptocurrency, with Bitcoin struggling to maintain $90,000, aligns with a shift away from speculative assets. Reflecting on 2025, we saw how significant institutional investment was, and the current ETF outflows indicate that large players are adopting a defensive stance. Buying puts on major crypto assets could provide a solid hedge against ongoing market fears. Create your live VT Markets account and start trading now.In September, the change in U.S. housing starts improved from -8.5% to -4.6%
In September, housing starts in the United States improved, changing from -8.5% to -4.6%. This shift shows signs of stability in the housing market compared to the previous month.
In related news, the University of Michigan’s consumer sentiment index in the US went up to 54 in January, beating expectations of 53.5. This may reflect a more positive outlook among consumers, hinting at possible changes in the economy.
Canada’s Labour Market Recovery
In Canada, the labor market recovery is uneven, according to an analysis by RBC Economics. Meanwhile, China’s net gold imports from Hong Kong doubled in November, signaling greater demand for gold in the area. The British Pound (GBP) has weakened slightly against other G10 currencies. Additionally, the EUR/USD exchange rate dipped a bit, as mixed economic data kept it low after the recent US labor-market report. The US dollar is likely to keep gaining strength, driven by geopolitical factors and anticipation of upcoming CPI data. Currencies like the Euro and British Pound are struggling, with the GBP/USD now testing its 200-day moving average. Traders might want to consider positions that take advantage of the dollar’s strength, such as buying call options on dollar index funds. Stubborn inflation is a significant concern, so we should prepare ahead of the next US inflation report. The Consumer Price Index (CPI), which stayed unexpectedly high at 3.8% in the last quarter of 2025, has led the Federal Reserve to pause any rate cuts. This approach supports the dollar while putting pressure on other central banks.Gold and Inflation Hedging
Gold is showing strong performance, nearing yearly highs of about $4,500 per ounce, a level not seen since last year’s inflation surge. China’s increase in gold imports indicates a large player is preparing for uncertainty. We believe maintaining long positions in gold, whether through futures or options, is a smart way to hedge against inflation and market worries. While the US housing market continues to slow, the decrease in housing starts from -8.5% to -4.6% could mean that the worst might be over. This isn’t a reason to fully invest in recovery yet, but it might be a good opportunity to sell put options on homebuilder ETFs, allowing us to earn premium while betting on a market bottom. In foreign exchange, we are noticing the significant weaknesses in EUR/USD and GBP/USD. Recent German manufacturing PMI data from late 2025 showed ongoing contraction, leaving little room for optimism about the Euro. Derivative traders could consider buying puts on these pairs to profit from the downward trend. Unlike gold, riskier assets such as cryptocurrencies face challenges from dwindling demand and ongoing market fears. Bitcoin and Ethereum show signs of decline as funds shift to safer options. We believe shorting crypto futures or purchasing puts on crypto-related stocks may be beneficial in the upcoming weeks. Create your live VT Markets account and start trading now.Average hourly earnings in the United States match forecasts with a 0.3% increase
In December, average hourly earnings in the United States rose by 0.3% compared to the previous month, which was as expected. The GBP/USD pair fell below 1.3400, marking its fourth consecutive decline due to strong performance by the US Dollar, following mixed Nonfarm Payrolls data.
Gold prices approached yearly highs, trading around $4,500 per troy ounce. It benefitted from a risk-off sentiment, even with upward pressure from the US Dollar and rising US Treasury yields. In the cryptocurrency market, Bitcoin hovered around $90,000, while Ethereum remained above $3,000. However, Ethereum faced challenges due to ETF outflows.
XRP Pressures and Market Outlook
The XRP token is under pressure due to declining retail demand, as shown by a drop in futures Open Interest to $4.15 billion. Looking ahead, key events like the US CPI release and possible geopolitical developments could influence market movements, with heightened focus on Fed communications. Mixed economic data has slightly weakened the Euro against the US Dollar, causing currency exchange rates to fluctuate. In November, China saw its net gold imports from Hong Kong double, reflecting dynamic trade trends. The US labor report from December 2025 showed wage growth met expectations, but other indicators pointed to softness, creating uncertainty. In this environment, the US Dollar is viewed as a safe haven, even in a sluggish jobs market. Traders seem more concerned with global risks than domestic growth at this time.Market Volatility and Trading Strategies
With the important US Consumer Price Index (CPI) report coming next week, expect increased market volatility. In December 2025, the CPI reading was steady at 3.1%, and another strong report could force the Federal Reserve to keep its restrictive policies. This makes buying options that benefit from price swings, like straddles on major currency pairs, a wise strategy in the days ahead. The upward trend of the US Dollar is the most straightforward trade, and we should prepare for it to continue. We are exploring put options on EUR/USD, aiming for a drop towards the 1.1600 mark. For GBP/USD, a move below its 200-day moving average near 1.3380 would be a strong indication to increase bearish positions. Gold is nearing yearly highs around $4,500 an ounce, yet this rally contrasts with a strengthening dollar. This scenario is risky, suggesting traders should use call options for potential further upside while clearly defining their risk. The strength of gold is currently more influenced by geopolitical fears than by a weakening dollar, making it an unstable foundation. In the crypto markets, institutional interest that previously boosted prices in 2025 seems to be fading. With Bitcoin struggling to stay above $90,000 and Ethereum facing ongoing ETF outflows, the path ahead looks lower. We believe buying put options on both assets could be an effective strategy to hedge or speculate on further declines. Create your live VT Markets account and start trading now.Japanese yen weakens broadly as Japan-China tensions rise, enabling British pound to gain
The British Pound has strengthened against the Japanese Yen due to rising tensions between Japan and China. The GBP/JPY pair has shifted from a three-day downward trend and is now trading around 211.55, within a long-established trading range.
Increased tensions between Tokyo and Beijing have weakened the Japanese Yen, especially after China imposed stricter export controls on Japan. Restrictions on rare earth materials and an anti-dumping investigation related to semiconductors have worsened this situation.
Trade Tensions Between Japan And China
These trade disputes are also fueled by Japan’s worries about the security of Taiwan. The reaction of the currency pair is closely tied to any news about Japan-China relations, especially since there hasn’t been much new economic data. While the interest rate difference favors the Pound, potential changes from the Bank of Japan (BoJ) and the Bank of England (BoE) impact market feelings. The Yen has had a varied performance against other major currencies but has remained strong against the New Zealand Dollar. The shifts in currency percentages reflect market activity and varying strengths among currencies. Movements of the Yen continue to be important in the forex market, influenced by geopolitical and economic events. The ongoing tensions between Japan and China are the key reason for the Yen’s decline, and this trend is likely to persist. China’s recent export limits on rare earth materials are a significant move that directly affects Japan’s vital manufacturing sectors. Therefore, we should look at strategies for profiting from a weakening Yen, like buying call options on GBP/JPY.Impact Of Rare Earth Restrictions
This situation is similar to the 2010 conflict over the Senkaku islands, which led China to limit rare earth exports. That incident caused major disruptions and a sharp drop in the Yen due to supply chain worries. The current political environment suggests that the impact could last longer this time. Japan sources over 60% of its rare earth minerals from China, making its tech industries very sensitive to disruptions. Any impact on the automotive and electronics supply chains will significantly affect Japan’s economy. A weaker economy typically leads to a weaker currency. Despite geopolitical issues, the interest rate difference between the UK and Japan supports investing in GBP/JPY. In 2024 and 2025, the appeal of the carry trade, supported by the BoE’s 5.25% rate against the BoJ’s negative rate, has been a major trend. This ongoing gap continues to make holding Pounds more appealing than holding Yen. With GBP/JPY at about 211.55 and approaching the highest point of its recent range, a breakout appears likely. We can use bull call spreads to aim for a move towards the 213.00 level in the upcoming weeks. This strategy allows us to benefit from the expected rise while managing our costs and limiting our risk. Create your live VT Markets account and start trading now.The USD/CNH stays below 7.0000 as China’s inflation data shows ongoing deflationary trends
The USD/CNH is currently below 7.0000 after China’s inflation data for December. The Consumer Price Index (CPI) increased by 0.8% year-on-year, marking its highest level since February 2023 due to rising food prices. Meanwhile, the core CPI held steady at 1.2% for the third month in a row. The Producer Price Index (PPI) saw a decrease of -1.9% year-on-year, indicating ongoing deflationary pressures.
Possible Boost to Consumer Spending
The stable USD/CNH could lead to increased consumer spending in China due to currency appreciation. A stronger yuan could give consumers more disposable income by making imports cheaper. However, deflation indicates that consumption is still weak in China. A continued decline in USD/CNH could help shift China’s economic focus towards consumer-driven growth. In summary, China’s inflation data presents mixed economic signals. While headline inflation has risen, the core inflation rate remains unchanged, and deflationary forces continue. Insights from the FXStreet Team suggest that these economic indicators may affect future currency trends and economic policies in China. With the USD/CNH staying below 7.0000, December 2025’s data is noteworthy. The headline inflation increase to 0.8% year-over-year, the highest since February 2024, is overshadowed by ongoing deflation in the producer price index, indicating weak domestic demand. This perspective is supported by the latest Caixin Manufacturing PMI for December 2025, which is at 49.8, indicating a return to contraction. This shows the factory sector is struggling, highlighting the issues with internal consumption. The mix of weak factory output and negative producer prices confirms a softer economic outlook.Trading Strategies and Market Outlook
For traders, this strengthens the case for a continued decline in USD/CNH. Strategies that benefit from this downtrend may be favorable in the upcoming weeks. Buying put options on USD/CNH could provide exposure to potential declines while limiting risk. Expectations for U.S. monetary policy also shape this outlook. Markets now anticipate at least two interest rate cuts by the Federal Reserve by the end of 2026. This divergence, with the Fed likely easing while China remains steady, is expected to pressure the U.S. dollar. A weaker dollar supports the outlook for a stronger yuan. Comparing to much of 2024, when the USD/CNH was often above 7.20, the drop below the 7.0000 level is significant. The next major support level appears to be around 6.9000, which traders should monitor as a near-term target. It seems Chinese authorities are okay with gradual currency appreciation, aligning with their strategic goals. A stronger yuan can enhance the purchasing power for Chinese households by making imports cheaper, aiding the transition from an investment-led growth model to one focused on domestic consumption. Create your live VT Markets account and start trading now.Trump announces plan to buy Venezuelan oil, leading to drop in prices.
Oil prices are under pressure following a statement from US President Trump about buying 30-50 million barrels of Venezuelan oil. The US plans to purchase this oil, which has been sitting in storage due to a blockade, at market rates. The oil will be delivered to US ports for processing on the Gulf Coast.
A meeting at the White House will focus on utilizing Venezuela’s oil reserves, with major figures from the US oil industry in attendance. The US blockade has led to reduced oil purchases from China, who were previously the main buyers of Venezuelan oil, affecting their supply options.
US Oil Market Dynamics
The US oil market might see an oversupply of Venezuelan oil, which could increase US exports and lower WTI prices. China may struggle to find affordable oil suppliers like Iran and Russia due to sanctions, leading to potential conflicts with the US. New tensions with the US could appear, especially after the recent seizure of sanctioned oil tankers. However, the overall impact on the global oil market remains minimal, mainly causing shifts in shipping routes without affecting overall supply. Chinese buyers might turn to Canadian oil as a substitute for Venezuelan oil. We remember the pressure on oil prices in mid-2025 when the Trump administration announced its plan to purchase sanctioned Venezuelan oil. This move has since changed supply chains and has led to a steady flow of heavy crude into the US Gulf Coast. As we enter 2026, this shift continues to affect the market, with WTI currently priced around $78 per barrel.Current Market Impacts
Recent data from the Energy Information Administration (EIA) shows an unexpected rise in US crude inventories of 2.1 million barrels, contrasting predictions of a decrease. Meanwhile, Venezuelan oil production has stabilized near 900,000 barrels per day, a significant rise from below 800,000 bpd before last year’s deal. The continual supply of heavy sour crude keeps US refineries well-supplied and limits price increases. With the US absorbing more Venezuelan oil, it has increased exports of its own light sweet crude. This has narrowed the WTI-Brent spread to just under $5 a barrel, down from over $6 in late 2025. Derivative traders should watch this spread closely, as any interruptions to US export terminals could widen the spread quickly, creating trading opportunities. As we expected, Chinese independent refiners are now seeking alternative discounted suppliers. Recent customs data indicates that China’s imports of Russian Urals crude have surged by nearly 12% in the last quarter. They are also buying more Canadian heavy oil, which has reduced the Western Canadian Select (WCS) price discount relative to WTI. In the upcoming weeks, it may be wise to view strength in WTI futures as a selling chance, especially when approaching the $80-$82 resistance zone. The steady supply from the Venezuelan deal makes significant price increases unlikely without a major geopolitical event. Therefore, options traders may find value in purchasing puts to protect against a potential decline toward the low $70s if US inventories keep rising unexpectedly. Create your live VT Markets account and start trading now.BBH FX analysts predict the Canadian dollar will weaken, pushing USD/CAD towards 1.3900 soon.
The Canadian Dollar is under pressure at the beginning of 2026, with the USD/CAD rate approaching 1.3900. This situation arises as we anticipate the December labor force survey, which may show potential job losses of 2,500 after some surprising gains in earlier months.
In recent months, Canada added jobs: 53,600 in November, 66,600 in October, and 60,400 in September. The Bank of Canada has paused easing, which lowers the chances of further declines for the CAD.
Swaps Curve Projections
The swaps curve shows a 70% chance of a 25 basis point rate hike to 2.50% within the next year. As we start 2026, the Canadian dollar is weak, pushing the USD/CAD pair up toward the important 1.3900 resistance level. This comes right before the crucial December 2025 labor force survey results due today. The market is focused on whether this report will indicate a slowing economy or offer an unexpected positive surprise. The general expectation is for a minor job loss of 2,500, which is a stark contrast to the strong hiring seen in the last quarter of 2025. Since Canadian employment data often surprises analysts—like the significant increase of 53,600 jobs in November 2025 compared to an expectation of just 15,000—we should be ready for potential volatility. A big difference from today’s forecast could easily lead to a quick movement of over 100 pips in either direction.Opportunity for Traders
For traders, this situation presents an opportunity to prepare for a spike in short-term volatility around the data release. One strategy could be to buy at-the-money straddles or strangles with expirations within the next week to profit from a large price swing, no matter which direction it takes. Implied volatility is expected to increase as we approach the announcement, so acting early is important. Looking beyond today’s numbers, the overall outlook is influenced by the Bank of Canada’s position. The swaps market indicates a 70% likelihood of a rate hike to 2.50% this year, suggesting a hawkish approach. This is further supported by the fact that core inflation in the last quarter of 2025 remained high, averaging 3.2%, putting pressure on the Bank to take action. This hawkish outlook from the BoC should create a support level for the Canadian dollar in the coming weeks. For any significant economic weakness to change this view, it would need to be substantial. For now, it limits how high USD/CAD can rise. Therefore, we consider the 1.3900 to 1.4000 range as a strong resistance zone that has halted rallies several times over the past two years. A smart strategy for the upcoming weeks could be to sell call options with strike prices at or above 1.3950. This reflects the belief that while short-term news might cause spikes, the Bank of Canada’s policy will prevent a sustained rise to new highs. This approach allows for premium collection while managing risk around a clear technical and fundamental level. Create your live VT Markets account and start trading now.Canadian employment figures are expected soon, with anticipated job losses affecting USD/CAD rates.
The unemployment rate in Canada rose to 6.8% in December, up from 6.5% in November. This was higher than the expected 6.6%, according to Statistics Canada. In December, Canada added a net total of 8,200 jobs, which was a surprise compared to the expected loss of 5,000 jobs.
Average hourly wages increased by 3.7% compared to last year, down from 4% in November. The participation rate also improved, going from 65.1% to 65.4%. Despite these changes, market reactions were minimal, with the USD/CAD holding steady at 1.3868.
Labour Force Expectations
These figures come amid expectations of a shrinking labor force and a potential rise in unemployment to 6.6%. This situation could impact the Canadian Dollar and may influence the Bank of Canada’s interest rate decisions. USD/CAD is currently on an upward trend, nearing a 50% Fibonacci retracement level. The 14-day RSI suggests strong momentum. If it closes above 1.3894, the pair could climb higher. However, failing to surpass this level may result in a pullback. Conditions in the labor market, such as job availability and wage growth, are essential for currency values. They affect consumer spending and inflation, which in turn influence monetary policy decisions by central banks. Impact on Canadian Economy In last month’s Canadian employment report, we saw an unexpected increase in the unemployment rate to 6.8% for December 2025. Although job creation was slightly positive, the rise in unemployment and a slowdown in wage growth to 3.7% indicated a weakening labor market. This initially caused little concern but made investors cautious about the Canadian economy. Recent data shows that Canada’s core CPI for December 2025 dropped to 2.4%, the lowest in over two years. This decrease in inflation, combined with a weaker job market, suggests that the Bank of Canada may need to cut its interest rate from 2.25% sooner than expected. The market now sees more than a 60% chance of a rate cut by the end of the first quarter. For derivatives traders, this situation makes strategies that profit from a weaker Canadian dollar and higher volatility more attractive. The implied volatility on USD/CAD options, set to expire around the next Bank of Canada meetings, seems relatively inexpensive given the increasing chance of a policy change. Historically, the period leading up to the first rate cut in a cycle, like in the U.S. in 2019, often triggers significant currency fluctuations that the options market hasn’t fully accounted for. With USD/CAD moving past the 1.3894 resistance level and closer to 1.3930, speculative buying becomes enticing. Purchasing moderately out-of-the-money USD/CAD call options is a cost-effective way to bet on a continued rise toward 1.4000. This method offers the chance for gains if the Bank of Canada surprise dovishly while clearly defining the maximum potential loss on the trade. Create your live VT Markets account and start trading now.A retest of the 0.6680 level for the Australian dollar is expected before recovery starts.
The Australian Dollar (AUD) is expected to test the 0.6680 level again before it can recover. Analysts believe it will not fall below 0.6655. Currently, the AUD is trading within a range of 0.6655 to 0.6745 over the long term.
In the last 24 hours, the AUD dropped to 0.6682, which was unexpected since a consolidation between 0.6705 and 0.6745 was forecasted. Although the AUD declined, its downward momentum only increased slightly. It’s likely the AUD will retest 0.6680 before making any recovery. Resistance is expected at 0.6715 and 0.6730.
