USD/CAD falls for three straight sessions, hitting a five-month low amid rising rate cut expectations
USD/CAD dropped to a five-month low of 1.3675 on Wednesday, as the US Dollar weakened. This change is due to expectations of two Federal Reserve rate cuts in 2026. Meanwhile, Canada’s economy showed improvement, growing 0.1% in November after a 0.3% decline in October.
The USD/CAD decline continued for a third straight session, facing pressure during Asian trading hours. Calls for lower borrowing costs added to the dovish sentiment, despite the rapid US economic growth in the third quarter.
Japan’s Corporate Service Price Index maintains a steady 2.7% year-on-year.
The Japan Corporate Service Price Index held steady at 2.7% year-on-year in November, showing that corporate service costs are stable despite changing economic conditions. This steady figure suggests businesses are managing their pricing well amid market fluctuations.
In other financial news, the silver price forecast predicts that XAG/USD will continue its upward trend, approaching $72.70, supported by ongoing dovish expectations from the FED. The Japanese yen remains strong against a weak USD, due to differing policies between the BOJ and the FED.
Currency Movements
The GBP/JPY stayed near weekly lows in the mid-210.00s, reflecting the overall strength of the yen. The USD/INR saw a slight rise as foreign institutional investors reduced their holdings in the Indian stock market. The Australian dollar reached a new 14-month high as the US dollar’s recovery lost momentum. Meanwhile, AUD/JPY fell to 104.50 after hitting a 17-month high. Gold prices continued to rise near $4,500, driven by demand for safe-haven assets amid geopolitical tensions. Bitcoin, Ethereum, and Ripple struggled as they encountered significant resistance, while Dogecoin also fell, affected by low open interest and funding rates, leading to a cautious sentiment across the cryptocurrency market. The stability of Japan’s Corporate Service Price Index at 2.7% indicates firm underlying inflation. This gives the Bank of Japan (BoJ) the green light to continue its policy adjustments into the new year. This steady inflation, while not too high, offers a clear path for the central bank. In contrast, inflation in the United States has cooled, with November 2025 CPI figures dropping to 2.5% year-over-year. As a result, the Federal Reserve is now expected to start easing policies, with futures pricing in a 75% chance of a rate cut by March 2026. This growing difference in policies is a key factor driving currency markets.Implications for Traders
For traders in derivatives, this suggests ongoing strength for the Japanese Yen against the US Dollar. We should consider buying puts on USD/JPY or setting up bearish put spreads to benefit from a potential drop to the 125.00 level in the first quarter of 2026. Implied volatility for USD/JPY options has already increased by over 15% in the last quarter, and we expect this trend to continue. A similar situation occurred in spring 2024 when the BoJ ended its negative interest rate policy, leading to a significant rally in the yen. Data from that time show sharp declines in currency pairs like AUD/JPY and GBP/JPY as traders unwound speculative positions. The current market feels reminiscent of that period, but with greater momentum. The unwinding of the yen carry trade is likely to accelerate, putting pressure on currency pairs. The recent decline of AUD/JPY from its 17-month high near 104.50 is a warning for those still betting on higher-yielding currencies against the yen. We expect that options strategies that benefit from increased volatility, such as long straddles on these pairs, could be effective. A generally weaker dollar is also boosting commodity prices and other major currencies. Gold’s rise to near $4,500 per ounce is driven by this trend and ongoing geopolitical risks. The strength in EUR/USD above 1.1800 and GBP/USD above 1.3500 indicates that the dollar is likely to keep declining. However, as we enter the holiday period with thinner trading, we must watch for any changes in rhetoric. The BoJ’s first meeting of 2026 in late January will be crucial and could either reinforce this trend or reverse it if policymakers appear more cautious than expected. Any unexpected strength in upcoming US economic data could also temporarily halt the dollar’s decline. Create your live VT Markets account and start trading now.The PBOC sets the USD/CNY central rate at 7.0471, which is lower than expected.
On Wednesday, the People’s Bank of China set the USD/CNY reference rate at 7.0471, down from 7.0523. This rate is also different from the Reuters estimate of 7.0240.
The People’s Bank of China’s main goals are to keep prices stable, boost economic growth, and implement financial reforms. As a state-owned entity, the bank is strongly influenced by the Chinese Communist Party.
China’s Monetary Tools
China’s central bank uses various monetary tools, including a seven-day Reverse Repo Rate and a Medium-term Lending Facility. The Loan Prime Rate affects loan and mortgage rates and also has an impact on the exchange rates of the Chinese Renminbi. In China’s financial sector, there are 19 private banks, though it remains mainly state-controlled. Major digital lenders like WeBank and MYbank, backed by tech companies Tencent and Ant Group, have been part of this sector since 2014, when private lenders were allowed to operate. The People’s Bank of China has recently guided the yuan to be stronger against the dollar through its reference rate. This suggests a desire for currency stability or even appreciation as the new year approaches. Policymakers are clearly signaling their preferences. Recent economic data supports this move. For example, China’s industrial output for November 2025 increased by 4.8% compared to the previous year, which was better than expected. Additionally, the trade surplus rose to over $85 billion. These factors support a stronger currency.Trading and Economic Strategies
We’ve seen similar strategies in the past, but the current situation is different from the yuan’s previous weakness in 2023 when the USD/CNY exceeded 7.30. Instead of a defensive approach, today’s stronger fix indicates a confident stance aimed at managing market sentiment, suggesting the central bank is not worried about export competitiveness right now. For traders in derivatives, betting on a weaker yuan could be risky in the coming weeks. Considering the potential for further strength in the yuan, buying put options on USD/CNY with early 2026 expirations could be a smart move. This strategy lets you take on limited risk while benefiting from potential decreases in the currency pair. The firm guidance from the central bank is likely to reduce market volatility, making it less likely for the USD/CNY to rise significantly. Thus, selling out-of-the-money call options on USD/CNY could be a smart way to earn premiums. This is also a good time for businesses to protect themselves against dollar-denominated liabilities for the first quarter. Create your live VT Markets account and start trading now.White metal continues its upward trend, approaching $72.00 after four record-high days
Silver keeps rising, marking new highs for the fourth day in a row. It’s currently trading just below $72.00, up 0.50% today. The breakout from an upward trend suggests more gains ahead, buoyed by moving averages and a positive MACD.
However, the RSI is at 82, showing it’s overbought. This could slow down short-term gains. It might be smart to wait for a price drop or a pause in trading before making new bullish moves with XAG/USD. Moving averages suggest a “buy-the-dip” strategy, keeping the bullish trend as long as the breakout holds.
Historically, silver serves as a reliable store of value and a hedge against inflation, traded physically or through ETFs. Its price is affected by global events, interest rates, and the strength of the US Dollar. Industrial demand, especially from electronics and solar sectors, significantly influences its price. Key economies, including the US, China, and India, are also major players.
Silver’s price movement often follows that of gold due to their safe-haven status. The Gold/Silver ratio helps investors gauge silver’s relative value, influencing strategies based on whether it’s seen as under or overvalued compared to gold.
As silver pushes higher, we see its strong uptrend break out of its recent channel. However, with the RSI over 80, the market is extremely overbought. While momentum is high, caution is needed at the $72 level.
For those wanting to trade this bullish trend, waiting for a drop or consolidation is wise. A pullback to the previous resistance turned support around $71.24 could provide a better entry point. This buy-the-dip approach aligns with the strength of rising moving averages.
This rally benefits from a positive economic backdrop, as the Federal Reserve cut interest rates for the first time in November 2025. This move has helped reduce the U.S. Dollar Index (DXY) to 98.5, a level not seen since early 2023. A weaker dollar typically supports higher silver prices.
Strong industrial demand has supported prices throughout the year. Global solar panel installations for 2025 are on track to surpass 600 gigawatts, almost a 20% increase from 2024. This boom in green technology is consuming a lot of physical silver.
In the second half of 2025, silver has outperformed gold. The gold-to-silver ratio has dropped from over 85 in spring to below 65 today, indicating that traders believe silver has more potential.
If a correction occurs, we should watch if prices can hold above the $71.24 breakout level. If it dips below that, we may see a deeper pullback, with significant support near $67.43. This scenario could create new short-term opportunities for traders.
WTI crude oil nears $58.50 amid ongoing geopolitical tensions during early European trading
WTI is currently trading positively for the fourth consecutive day, hovering around $58.50 in early Asian trading. Geopolitical concerns, particularly the US targeting Venezuelan oil operations, are influencing WTI prices.
The US is intercepting Venezuelan oil tankers, which affects oil flow and leads to price increases. President Trump has proposed selling the seized Venezuelan oil to benefit the US.
US Crude Inventories
US crude inventories unexpectedly increased by 2.4 million barrels, indicating a possible drop in demand. The previous week saw a significant decrease of 9.3 million barrels, according to API data. The upcoming EIA report could impact WTI prices based on inventory levels. Larger-than-expected inventory draws may signal stronger demand, pushing prices higher, while increased supply may have the opposite effect. WTI Oil is a well-known crude oil type, recognized for being light and sweet, and it comes from the US. It serves as a key benchmark in the oil market, with prices frequently reported in the media. WTI Oil prices shift based on supply and demand dynamics, geopolitical stability, and OPEC’s production decisions. The value of the US Dollar also affects oil prices globally, as oil trades mainly in USD.Weekly Inventory Data and OPEC Influences
Weekly inventory data from API and EIA directly influences WTI prices by showing changes in supply and demand. API reports on Tuesdays, while EIA releases data on Wednesdays, with EIA being regarded as more reliable. OPEC’s production decisions during biannual meetings significantly impact oil prices, especially as OPEC+ includes other countries like Russia. Currently, WTI crude prices are steady at around $82 a barrel this Christmas Eve. This stability is mainly due to renewed geopolitical tensions in the Strait of Hormuz, which is adding a risk premium to prices. This scenario is similar to the disputes between the US and Venezuela that we observed in the early 2020s. The CBOE Crude Oil Volatility Index (OVX) has risen to 35.8, reflecting market anxiety. However, there are signs of weakening demand that could pressure current prices. The latest Energy Information Administration (EIA) report indicated an unexpected increase in US crude inventories of 3.1 million barrels, suggesting that consumption might be lower than expected as we approach the new year. Adding complexity, OPEC+ decided in their early December meeting to keep production quotas the same. They appear willing to let geopolitical risks support prices for now but are also ready to act if demand declines significantly. This creates a safety net for the market, making sharp downturns less likely in the immediate future. In the upcoming weeks, this creates a favorable setting for using options strategies to handle uncertainty. Given the high implied volatility, a cautious approach may involve straddles or strangles, which could profit from significant price swings as the market assesses whether supply fears or demand weakness will prevail. Selling covered calls against existing long positions could also earn income while providing some downside protection. We will closely monitor weekly inventory reports during the holiday season for insights into demand. Any changes in maritime activity in the Middle East will be the main short-term trigger. Traders should stay alert, as news can easily overshadow fundamental data in this climate. Create your live VT Markets account and start trading now.The NZD/USD pair continues to show strong weekly gains, recently hovering near the mid-0.5800s.
The NZD/USD pair is holding near its highest point since early October, remaining stable during the Asian session. A weak US Dollar (USD) and a positive market outlook are boosting bullish expectations, despite strong growth figures from the US.
Economic Growth and Policy
The US economy grew by 4.3% annually from July to September, exceeding expectations. Still, many anticipate further easing of Federal Reserve policies due to low consumer inflation and hints of a slowing job market. US President Trump has emphasized that the new Fed Chair should lower interest rates, putting additional pressure on the USD, which benefits the NZD/USD pair. The New Zealand Dollar (Kiwi) is also supported by the Reserve Bank of New Zealand’s firm approach to policy. Positive risk sentiment is weakening the USD’s appeal as a safe-haven asset, allowing the NZD to thrive. Traders are keeping an eye on upcoming US jobless claims data and Fed leadership decisions for more clues on currency direction. The NZD is influenced by the local economy, dairy prices, and its main trading partner, China. Decisions made by the Reserve Bank of New Zealand regarding interest rates directly affect the value of the NZD. Typically, strong economic data will lift the NZD, while overall risk sentiment also affects its worth.Market Dynamics and Strategies
With the NZD/USD staying strong near the 0.5850 mark, there is a clear difference in central bank policies that will guide trading strategies. The US Federal Reserve is leaning dovish, while the Reserve Bank of New Zealand is hawkish. This key difference supports a potential upward trend for the currency pair as we move into the new year. The USD’s weakness is highlighted by recent data that overshadows the robust Q3 2025 GDP report. The November 2025 US Consumer Price Index dropped to 2.8%, and the latest Non-Farm Payrolls report showed a job growth of just 155,000. Both of these factors strengthen the argument for Fed rate cuts in 2026, keeping pressure on the dollar. In contrast, the NZD has various strengths beyond its central bank’s stance. The recent Global Dairy Trade auction in December 2025 showed prices rising for the fourth time in a row, boosting an important export sector. Additionally, a rebound in China’s industrial production offers a positive outlook for New Zealand’s largest trading partner. For traders dealing in derivatives, this environment suggests preparing for further NZD/USD strength in the upcoming weeks. Buying call options with expiration dates in late January or February 2026 can capture potential gains. Selling out-of-the-money put options is another strategy to express this bullish outlook while earning premiums. However, it is important to note that we are currently in the holiday period, which can lead to lower liquidity. Historically, the time between Christmas and New Year can result in larger price swings due to reduced trading volume. Therefore, traders should manage their position sizes carefully and consider option spreads to mitigate risks from any sudden volatility. Create your live VT Markets account and start trading now.Members discussed the monetary policy outlook and agreed to raise rates if economic forecasts are met.
The Bank of Japan (BoJ) board members recently talked about future monetary policy. They plan to keep raising interest rates if economic and price predictions hold true. The chances of these predictions coming true are now higher, but the policy must ensure steady wage-setting behavior.
Board members Tamura and Takata suggested increasing the policy rate from 0.5% to 0.75%. However, this idea was rejected in a 2-7 vote. Some members believe Japan could reach the BoJ’s price target by next spring, expecting wage increases.
Underlying Inflation
Underlying inflation is slowly rising but hasn’t hit the 2% target yet. A weaker yen could cause inflation to overshoot. If the yen falls significantly, import prices could rise, affecting overall inflation. At the time of this report, the USD/JPY was down 0.15% at 156.06. The Bank of Japan started a very loose monetary policy in 2013, which led to a weaker yen, but changed this approach in 2024 as inflation rose. Global factors, like high energy prices and possible wage growth, are increasing inflation and influencing BoJ’s policy changes. These changes have also somewhat reversed the trend of yen depreciation, which was strongly affected by differing policies with other central banks. From the minutes of the late October 2025 meeting, it is clear that the Bank of Japan plans to raise interest rates further. The board generally agrees to take action if economic forecasts, especially related to prices, continue to be positive. This shows a hawkish direction, which should be central in any Yen trading strategy in the weeks ahead.National Core CPI
This view is now more convincing because Japan’s national core CPI for November 2025 was released at 2.8%, slightly above expectations. This data increases the chances that the BoJ may meet its conditions for another rate hike. We think this could lead to bets on a rate increase sooner rather than later, possibly in the first quarter of 2026. However, the 7-2 vote against a bigger rate hike to 0.75% indicates the board is still cautious. They want to ensure that positive wage growth remains unaffected. This suggests that while they aim for higher rates, the increase may be gradual, leading to uncertainty and volatility around important data releases. Traders should pay close attention to any early news about the spring 2026 “Shunto” wage negotiations. One board member highlighted that reaching the price target depends on these wage increases, making this the most essential forward-looking factor. Any positive rumors or announcements could significantly strengthen the Yen. With this outlook, we see opportunities in options on the USD/JPY pair. Since the pair is currently around 156.00, buying put options with strike prices below 155.00 could be a good strategy to profit from a stronger yen. We witnessed a similar situation before the policy change in March 2024, where expectations of tightening led to a stronger currency. We also expect volatility to rise around the upcoming January 2026 BoJ meeting and the release of December’s inflation data. Traders might consider strategies like straddles to benefit from sharp price movements, no matter which way they go. The key is to be ready for a significant move as the BoJ gets closer to its next policy action. Create your live VT Markets account and start trading now.AUD/USD reaches its highest level in 14 months as the US dollar weakens
Factors Influencing The AUD
On Tuesday, the AUD/USD increased by 0.66% as the US Dollar weakened. This pair is reaching 14-month highs due to positive market feelings and expectations of future cuts in US Fed rates. The US Dollar is struggling due to light holiday trading, even with a 4.3% annual rise in GDP for the third quarter. Futures indicate two Fed rate cuts in 2026, adding pressure on the Greenback. Australian markets will be quiet on Wednesday because of holidays. The AUD is affected by interest rates, iron ore prices, China’s economy, trade balance, and overall market mood. Interest rates set by the Reserve Bank of Australia (RBA) affect the AUD, with higher rates generally strengthening it. The health of China’s economy is vital due to its trade ties with Australia. Iron ore exports, worth $118 billion each year, also influence the AUD. A positive trade balance boosts the currency, while a negative one weakens it. When iron ore prices rise, the AUD usually gains value due to increased demand. The RBA’s interest rate policies and other economic measures also impact AUD valuations.The Current Trade Environment
As the AUD/USD approaches heights last seen in October 2024, the current trend is clearly upward. The primary factor is the weakening US dollar because we’re now expecting significant Federal Reserve rate cuts in 2026. This difference in policies, with the Reserve Bank of Australia likely to keep rates steady or even increase them, supports the AUD. For derivatives traders, this suggests buying call options that expire in the first quarter of 2026 to capitalize on expected gains while managing risk. The market’s movement during low holiday liquidity mirrors patterns observed in late 2023 when the pair also surged at year-end. The AUD’s strength is further backed by important commodity prices, which we must closely monitor. Iron ore prices have been strong, recently exceeding $140 per tonne due to hopes for ongoing demand from Chinese stimulus efforts. This support for Australia’s trade balances boosts confidence that the AUD’s rally isn’t just about a weaker US dollar. However, we should watch the health of the Chinese economy carefully. Recent data, like the Caixin Manufacturing PMI, has struggled to stay above 50, indicating a weak recovery. A sudden drop in Chinese economic activity could quickly change sentiment and limit the AUD’s gains. Since these movements are happening in a period of low holiday liquidity, volatility may be higher than usual. While the trend appears clear, the route might be bumpy. Traders with existing long positions should consider buying near-term protective puts to safeguard against unexpected market reversals when trading picks up in the new year. Create your live VT Markets account and start trading now.Adviser says Federal Reserve is behind in lowering interest rates despite strong economic growth
Kevin Hassett from the White House said the Federal Reserve is not cutting interest rates quickly enough, even though the US economy grew faster than expected in the third quarter. This growth comes from lower prices, higher incomes, and positive expectations for future income growth.
However, consumer sentiment does not match the economic data, and artificial intelligence is changing jobs in various sectors. Hassett anticipates shifts in employment if GDP stays at a 4% growth rate. The US deficit has dropped by $600 billion year-over-year, and a housing plan is expected to be announced next year.
U.S. Dollar Index and the Fed’s Role
The US Dollar Index (DXY) was down 0.37% at 97.90 when this report was written. The US Dollar is crucial for global trade, making up over 88% of foreign exchange transactions. The Federal Reserve affects its value through monetary policies, including interest rate changes and actions like quantitative easing. Quantitative easing means the Fed prints more Dollars to buy US government bonds, which usually weakens the Dollar. On the other hand, quantitative tightening occurs when the Fed stops buying bonds and reinvesting, typically strengthening the Dollar. The White House claims that the Federal Reserve is slow to cut interest rates, despite unexpectedly strong economic growth. The final GDP for the third quarter of 2025 was a robust 4.2%. This indicates that political pressure for lower rates will likely increase in the coming year. Current data shows inflation has eased to 2.1% year-over-year, aligning with the Fed’s target. The labor market has slightly cooled, with job gains stabilizing around 160,000 and unemployment at 4.1%. These figures weaken the main reasons for the Fed to keep its current restrictive policy, which is at a 4.00-4.25% federal funds rate.Market Projections and Economic Stimulus
This situation explains why the US Dollar Index is falling. It is currently near 97.90 as we approach the holiday season. Markets are clearly expecting rate cuts, a growing sentiment since the Fed paused last fall in 2024. We think the Dollar’s path will likely continue downwards in the coming weeks. For those trading interest rate derivatives, the strategy is to prepare for lower rates in the first quarter of 2026. The futures market already indicates over a 90% chance of a 25-basis-point cut at the Fed’s first meeting of the new year. We’re focusing on options on SOFR futures that will benefit as the Fed’s policies align with market expectations. This environment should keep supporting assets that thrive with a weaker Dollar. We expect currency pairs like EUR/USD to strengthen above the 1.1800 level. Gold, trading near a record $4,500, will probably see ongoing demand due to lower real yields. We’re also monitoring the AI boom, which is credited with enhancing productivity and growth without increasing inflation. Additionally, a new housing plan expected to be unveiled next year could further stimulate the economy. These factors support the “soft landing” scenario, giving the Fed room to cut rates without worrying about an economic downturn. Create your live VT Markets account and start trading now.Yen strengthens as intervention concerns rise, with USD/JPY selling at around 156.30
The USD/JPY pair has dropped to about 156.30 during the Asian session because of the Yen’s strength caused by fears of intervention. Although the US economy showed a surprising growth of 4.3% in Q3, worries about these interventions are supporting the Yen.
Japan’s Finance Minister, Satsuki Katayama, is ready to act against excessive movements of the Yen. In addition, Japan’s top FX official, Atsushi Mimura, expressed concerns over recent sharp currency fluctuations and suggested that actions could be taken to address them.
