Insights 
VT 
The RealClearMarkets/TIPP Economic Optimism Index in the US rose to 47.9 in December, surpassing expectations set at 44.1. This figure indicates an improved sentiment compared to previous forecasts.
In other market news, the EUR/USD struggled to advance despite fluctuations in the US Dollar’s price. Meanwhile, GBP/USD fell below the 1.3200 mark amid expectations of an interest rate reduction by the Bank of England.
Gold Prices and Bitcoin Levels
Gold prices saw a retracement, sliding towards $4,160 due to mixed US Treasury yields and a stronger Dollar. Bitcoin maintained levels above $87,000, experiencing pressure from US manufacturing declines and potential interest rate adjustments by the Bank of Japan.
Moreover, the White House is readying measures should the Supreme Court reject tariffs initiated by Trump. Despite discussions of overruling, the administration plans to keep tariffs active, exploring other strategies to support its stance.
The surprise jump in the December Economic Optimism Index to 47.9 suggests we should be prepared for more upside surprises in US data. While the index remains below the 50-point optimistic threshold, this beat echoes the sentiment shifts we saw back in late 2023, which often preceded short-term market rallies. For derivatives traders, this could mean buying near-term call options on the S&P 500 or considering strategies that benefit from a spike in implied volatility.
Monetary Policy Uncertainty
President Trump’s mention of Kevin Hassett as a potential Fed Chair introduces significant monetary policy uncertainty for the coming year. Given Hassett’s historically dovish stance, we could see futures markets begin pricing out future rate hikes, potentially steepening the yield curve. Traders might consider using options on Treasury futures to play the volatility leading into the next official FOMC announcements.
The retreat in gold to below $4,200 appears to be pre-Fed meeting profit-taking rather than a change in the long-term trend. With the latest CPI data for November 2025 still showing inflation holding stubbornly above 3%, similar to the persistent inflation we navigated in 2023, any Fed statement perceived as dovish could trigger a sharp rebound. We believe buying protective put options for the short term while looking for lower entry points on gold futures is a prudent strategy.
We are seeing a major policy divergence in currency markets, creating clear opportunities in foreign exchange derivatives. With markets almost fully pricing in a Bank of England rate cut this month, put options on GBP/USD look attractive. At the same time, the potential for a landmark rate hike from the Bank of Japan suggests buying calls on the Yen as a hedge against a global risk-off event.
Bitcoin’s recent struggle above $87,000 is a warning sign for broader risk assets, as it is reacting negatively to a contracting US manufacturing sector. This economic weakness, coupled with a newly hawkish Bank of Japan, mirrors the conditions that led to the broad market downturn of 2022. We would use this environment to purchase out-of-the-money put options on Bitcoin and tech-heavy indices as a low-cost hedge against a deeper correction.
