Insights 
VT 
Gold and Cryptocurrencies
Elsewhere, EUR/USD hovered around 1.1600, supported by a weaker US Dollar but limited by risk sentiment. GBP/USD remained below 1.3250, with the UK budget relief failing to boost the pair amid cautious trading sentiment.
In the broader economic outlook, the sharp decline in cryptocurrencies has shifted investor sentiment, causing equities in the US and Europe to open in the red. Economic data from the US and Eurozone remain key focus points moving forward.
Risk Sentiment and Market Strategies
We are seeing the risk-on mood from November disappear as December begins. A sharp slide in cryptocurrencies seems to be the trigger, causing a broader shift away from riskier assets. This suggests that strategies which benefit from rising volatility should be considered.
The market is heavily anticipating a US Federal Reserve rate cut this month, with fed funds futures now pricing in a greater than 70% probability. This expectation is fueled by recent data showing core inflation softening to 2.8% in October 2025, its lowest level in over two years. This is putting sustained pressure on the US Dollar against most major currencies.
Given the weak dollar and general uncertainty, gold is acting as a primary safe haven. We are seeing it approach its highest level in six weeks, and this trend is likely to continue. Buying call options on gold futures or related ETFs offers a defined-risk way to profit from further upside.
In India, the situation looks precarious with the manufacturing PMI missing expectations and foreign institutional investors pulling out capital. FIIs were net sellers of over $2.5 billion in Indian equities during November 2025, pushing the USD/INR to a record high. We should look at call options on USD/INR to hedge against or speculate on further Rupee depreciation.
The Japanese Yen is strengthening as a result of the risk-averse sentiment, a classic market reaction we saw during the global uncertainty of early 2020. This makes shorting the USD/JPY pair an attractive trade. Put options on USD/JPY could be a useful tool to position for a further drop.
European currencies appear more range-bound, so we should be more cautious with directional bets on the Euro and Pound. Key data from both the Eurozone and the US is due this week, which could break the current deadlock. Until then, strategies like selling option strangles could capture premium if these pairs remain stuck in a tight channel.
With stock futures turning negative, we expect equity market volatility to increase in the coming weeks. The VIX index has already jumped over 15% to trade above 19, breaking out of its November lows. We believe buying put options on major indices like the S&P 500 is a prudent way to protect portfolios against a potential market downturn.
