Indonesia’s core inflation rate increased to 2.38% year-on-year in December from the previous 2.36%. This change reflects a slight rise in inflationary pressures within the region.
In global markets, gold maintains a strong bid above $4,400 amidst increasing safe-haven flows and anticipation of potential Federal Reserve rate cuts. Meanwhile, the USD/INR surged to a two-week high due to threats of increased tariffs on India by the US.
Currency Movements
Various currencies experienced movements, with the Japanese yen slightly recovering from a two-week low against the USD. The Australian dollar also dipped as the US dollar gained strength ahead of the ISM PMI report.
Cryptocurrencies like Bitcoin and Ethereum extended gains, with Bitcoin breaking the $93K mark. Ethereum and Ripple showed strong weekly performance as well, supported by a bullish market sentiment.
Economic projections for 2026-2027 in advanced countries suggest a continuation of solid economic performance, following resilience observed in previous years. This outlook assumes continued support from various economic factors in 2025.
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Geopolitical Tensions
The recent US military action in Venezuela has injected significant uncertainty into the markets, triggering a classic flight to safety. We are seeing this primarily through a stronger US Dollar, which is gaining against most major currencies. This geopolitical tension is now the main factor driving short-term trading decisions for the coming weeks.
We should expect continued pressure on pairs like the EUR/USD, which is threatening to break key technical support levels. The Dollar Index (DXY) has pushed past 108, a level we last saw during the market turbulence in the third quarter of 2025. This momentum suggests that shorting the Euro and Pound against the Dollar could remain a profitable strategy.
Gold is a more complex picture, climbing above $4,400 despite the strong dollar. This shows that safe-haven demand is currently overriding traditional currency correlations. Bets on Federal Reserve rate cuts are also providing support, with derivative markets now pricing in an 85% chance of a cut by March.
With such high uncertainty, we believe long volatility strategies are attractive. Buying options, such as puts on equity indices or calls on gold, allows for defined risk while capturing potential large moves. The VIX index, a measure of expected market volatility, jumped 15% last week, reflecting this nervousness.
The slight rise in Indonesia’s core inflation to 2.38% might normally be insignificant, but it comes at a bad time for emerging markets. A stronger US dollar often strains economies with foreign-denominated debt, making their assets less attractive. This suggests caution is warranted for any long positions in emerging market currencies like the Indonesian Rupiah.
The crypto market is experiencing a speculative surge, with Bitcoin breaking $93,000 on news related to Venezuela. This rally has reportedly liquidated over $500 million in short positions, but it remains highly news-driven and unpredictable. Traders should view this as a high-risk momentum play, separate from the broader macroeconomic trends.
