Currency Fluctuations
The US 4-week bill auction yield increased from 3.595% to 3.63%. Various economic indicators are mentioned, including Japan’s national CPI, which rose by 2.1% year-over-year in December. Meanwhile, New Zealand’s CPI inflation increased to 3.1% year-over-year in Q4, compared to the expected 3.0%.
Currency fluctuations are noted, with the NZD/USD pair climbing above 0.5900. The GBP/JPY surged to a weekly high as the pound strengthened, and the EUR/USD focused on reaching 1.1800. Gold prices soared, surpassing $4,900 per troy ounce due to a weaker US Dollar.
Ripple’s cryptocurrency token, XRP, is maintaining support at $1.90 amid ETF inflows despite market caution. Chainlink (LINK) is facing volatility, trading at $12.20 as retail demand diminishes. Significant geopolitical movements included a brief tension over NATO tariffs proposed by Donald Trump, which de-escalated quickly.
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The rise in the 4-week US bill auction to 3.63% indicates the market is bracing for firm short-term rates from the Federal Reserve. While we see this, the US Dollar is paradoxically weakening against other major currencies. This suggests traders are pricing in more aggressive tightening from foreign central banks, making the dollar relatively less attractive.
We are seeing clear signs of persistent inflation abroad, with Japan’s CPI at 2.1% and New Zealand’s unexpectedly high at 3.1%. Looking back at the global inflation we experienced in 2023, it is clear that central banks outside the US are now acting forcefully. This makes long positions on currencies like the New Zealand Dollar, via futures or options, a compelling strategy against the greenback.
The move in gold toward $5,000 an ounce is remarkable and is a direct consequence of the dollar’s decline and deep-seated inflation fears. This trend is not just a reaction to fleeting geopolitical news, as central bank purchases in the final quarter of 2025 were reported to be at a multi-year high. We should therefore consider using call options on gold futures to maintain upside exposure while managing the risk of a sharp pullback.
Despite a calmer mood as trade tensions ease, underlying market volatility remains a key factor to watch. The CBOE Volatility Index (VIX) has settled around 18, which is lower than last week but still above the average we saw for most of 2024. This environment is favorable for option-selling strategies that can profit from time decay, such as writing covered calls on stable, dividend-paying stocks.
