Italy’s Consumer Price Index (CPI) following the European Union norm rose by 1.2% year-on-year in December, matching prior predictions. This figure is consistent with earlier forecasts made by analysts.
In other economic developments, the US government experienced a record budget deficit of $144.75 billion for December, despite increased tariff revenues, marking a 68% rise from December 2024. Meanwhile, gold and cryptocurrencies revealed notable fluctuations, with gold stabilising around $4,600 and Bitcoin maintaining above $95,400 after a 5% rally over the week.
Foreign Exchange Market Activity
In foreign exchange, GBP/USD reached above 1.3400 as the US dollar weakened due to better market sentiment. The EUR/USD exerted resilience, remaining above the 1.1600 mark amidst fresh US dollar supply and stabilised market conditions.
The new callout feature on the Pump.fun platform led to a 5% rise in its value after a 3% drop the previous day. This feature aims to enhance creator engagement on the Solana-based platform, potentially stimulating trading activities.
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Low Inflation Trend Across Eurozone
Italy’s consumer prices coming in at 1.2% confirms the low inflation trend we are seeing across parts of the Eurozone. Looking back at data from late 2025, Eurostat’s flash estimate for the bloc was closer to 2.4%, showing a clear divergence between member states. This mixed picture makes it unlikely the European Central Bank will signal any rate hikes soon, which should cap the Euro’s upside potential.
We are seeing the US dollar rally lose steam, and the massive government deficit is a key reason why. The record $144.75 billion deficit for December follows a trend from 2025, where the full-year deficit surpassed $2.1 trillion according to the Congressional Budget Office. This fiscal pressure could lead traders to use put options on the dollar index as a way to bet on further weakness.
The EUR/USD pair is currently holding above the 1.1600 level, but volatility remains low as these opposing forces play out. With the Fed’s next move uncertain and the ECB on hold, the pair could remain range-bound in the near term. This environment is ideal for selling options strangles to collect premium, betting that the pair will not have a major breakout in the coming weeks.
Gold is pulling back from its recent record highs near $4,600 as the immediate risk of conflict in Iran appears to be fading. Looking back, we saw a similar spike and retreat during the Red Sea tensions in early 2025, suggesting this “geopolitical premium” can vanish quickly. If the US dollar continues to weaken it may provide some support, but the primary driver for now is the improving risk-on mood.
