In December, US MBA mortgage applications increased from a previous decline of 1.4% to a rise of 4.8%. This comes as the Federal Reserve is likely to announce a 25 basis points interest rate cut for 2025 on Wednesday.
Bitcoin retains a price above $92,000, aided by ETF inflows and the anticipation of a potential Fed rate cut. Ethereum has surpassed the 50-day EMA, with indicators pointing to a bullish shift, while XRP faces pressure with sellers focusing on the $2.00 support level.
Hyperliquid Trading Update
Hyperliquid is trading over $28.00 after recovering from a $27.50 support level. The cryptocurrency market experiences intraday losses as the Federal Reserve prepares to release its monetary policy decision.
Gold prices ease slightly even as the US Dollar weakens and US Treasury yields partially reverse their recent gains. Investors in the gold market exercise caution ahead of the anticipated 25 basis point rate cut and updates to the “dots plot” from the Fed.
There is growing discord among Federal Reserve officials concerning the expected interest rate cut.
We are watching the Fed decision closely today, as markets have almost fully priced in a 0.25% interest rate cut. The strong 4.8% jump in mortgage applications reported for December 5th shows that the housing market is already responding positively. This confirms that lower rates are stimulating parts of the economy as intended.
Market Reactions And Projections
Recent data supports the case for this final cut of 2025, as November’s CPI report showed core inflation cooled to 2.9% year-over-year, its lowest reading in over two years. This gives Fed officials the justification they need to ease policy further. We see this as a green light for the expected cut, but the real market-moving information will be in their future guidance.
For equity index traders, the main event will be the updated “dot plot” revealing officials’ rate projections for 2026. A dovish signal suggesting a continued pause or more cuts could fuel a rally, making call options on the S&P 500 attractive. However, any hint of a hawkish turn would introduce significant downside risk.
We remember how the Fed’s pivot to easier policy in late 2018 ignited a major market rally that lasted through 2019. That historical precedent suggests that a confirmed dovish stance today could set a positive tone for risk assets heading into the new year. Traders should be prepared for a sustained move, not just a one-day reaction.
With a rate cut expected, we see continued weakness for the US Dollar, which has already fallen 2% over the last month. This environment is typically bullish for gold, so we are looking at call options on gold ETFs. The metal remains cautious but could break higher if the Fed’s statement is more dovish than anticipated.
In the cryptocurrency space, implied volatility in Bitcoin and Ethereum options is elevated, reflecting the market’s anticipation. While ETF inflows have supported Bitcoin above $92,000, the broader market’s softness shows traders are nervous. We are positioned for a potential rally but are wary of a “sell the news” reaction if the Fed’s guidance doesn’t exceed expectations.
The noted disagreement among Fed officials is the primary source of uncertainty, which is keeping options premiums high. This means implied volatility is likely to fall sharply right after the announcement, a phenomenon known as “vol crush.” For traders who believe the market’s reaction will be muted, selling options premium could be a viable strategy.
