In November, the change in existing home sales in the United States decreased to 0.5% from the previous 1.2%. This shift indicates a slowdown in the housing market compared to the prior month.
Meanwhile, Gold remained below $4,350 despite upward pressure from the US Dollar. Even as the 10-year US Treasury bond yield increased, Gold is set for modest weekly gains amidst holiday trading.
Forex Market Movements
Forex pairs such as EUR/USD and GBP/USD show mixed movements. EUR/USD trades slightly above 1.1730, buoyed by Wall Street’s performance. GBP/USD remains below 1.3400 as traders evaluate the Bank of England’s recent policy adjustments.
In the cryptocurrency market, Bitcoin rose above $88,000, with Ethereum and Ripple experiencing recovery. This follows a period of volatility, suggesting a stabilising trend.
XRP saw a rebound on Friday, aiming for a breakout over $2.00. The crypto also recorded a notable inflow to its ETFs, with increasing institutional interest noted since December 8.
November’s inflation data indicates cooling price pressures, though not enough to change Federal Reserve policy independently. However, such data can shape market expectations significantly.
Impact of Inflation and Federal Reserve Policy
The slowdown in the housing market, confirmed by the November dip in existing home sales, is a clear signal we need to watch. Recent data for early December shows pending home sales have also softened, falling 0.8%, suggesting this cooling trend will continue into the new year. We see this as a reason to consider protective put options on housing sector ETFs like ITB or XHB for the first quarter of 2026.
This housing weakness aligns with the broader theme of easing inflation, as the latest CPI report for November, released last week on December 12th, 2025, showed an annual rate of 2.8%. This figure likely gave the Federal Reserve cover to hold rates steady at 5.0% in their December 17th meeting, reinforcing the market view that the hiking cycle is over. Traders should position for lower rates ahead by looking at options on SOFR futures, anticipating the first Fed cuts by spring.
A less aggressive Fed is softening the US Dollar, which has retreated from its recent highs. We have already seen EUR/USD climb from the 1.17 area to trade near 1.1850 as markets begin pricing in US rate cuts ahead of those from the European Central Bank. This divergence suggests buying call options on EUR/USD or puts on the Dollar Index (DXY) could be a sensible play through the holiday-thinned trading period.
This environment is highly supportive for precious metals, pushing gold beyond the $4,350 level where it consolidated. The combination of a weaker dollar and falling real yield expectations makes non-yielding assets like gold increasingly attractive. We believe long positions via futures contracts or call options on gold are warranted, as safe-haven flows are likely to increase if economic data continues to soften.
