In November, the United States Consumer Price Index (CPI) increased by 2.7% year-over-year. This figure falls below the anticipated 3.1% and is a reduction from the 3.1% recorded in October.
Following this, the GBP/USD pair surged to approximately 1.3440, supported by the Bank of England’s rate cut and the softer US CPI figures. Concurrently, the EUR/USD was stable around 1.1750 after the European Central Bank decided to maintain interest rates as expected.
Gold And Cryptocurrencies
Gold prices approached the $4,350 mark after the inflation data release in the US and updates from central banks in Europe. Among cryptocurrencies, Bitcoin is close to a short-term breakout above $87,000, while Ethereum is holding at around $2,800. XRP is trading at $1.82, with low retail demand impacting the token’s performance.
The Bank of England made a hawkish rate cut to 3.75%, resulting in a stronger sterling. The decision has left financial markets divided on whether another cut will occur in the coming months. Ripple (XRP) continues to trade between a support level of $1.82 and resistance at $2.00.
The November CPI data showing a 2.7% increase, well below the 3.1% forecast, has reshaped our expectations for the new year. We are now pricing in a higher probability of a Federal Reserve rate cut in the first quarter of 2026. This means positioning for lower rates through derivatives on the Secured Overnight Financing Rate (SOFR) is becoming a primary strategy.
The US dollar is weakening on the back of this inflation surprise, a trend we expect to continue into January. Recent data from the University of Michigan survey, showing consumer inflation expectations for the year ahead dropping to 2.5% in early December, supports this view. We are therefore looking at buying call options on currency pairs like EUR/USD and GBP/USD to capitalize on further dollar downside.
Gold And Equities
Gold’s rally toward $4,350 is a direct response to the potential for lower real yields. As we saw during the monetary easing cycles of the early 2020s, a less aggressive Federal Reserve is typically a powerful tailwind for precious metals. We are considering long gold futures contracts or call options on gold ETFs to ride this momentum.
This inflation data is also bullish for equities, as it lowers the discount rate on future earnings. The CBOE Volatility Index (VIX) has already fallen to a yearly low of 11.5 this past week, indicating reduced market fear. We believe buying call options on the S&P 500 or Nasdaq 100 indices offers a good risk-reward profile for the coming weeks.
However, we must remain cautious as one soft inflation report does not confirm a trend. The White House has been quick to manage expectations, and we recall the false signals in inflation data back in 2022 and 2023. The next CPI report in mid-January will be critical, so using options to define risk is more prudent than holding naked futures positions.
