A story was corrected on December 1 at 13:30 GMT as it was based on outdated information. It was mistakenly published by the FXStreet Insights Team, who curate market observations.

Recent issues discussed include fluctuating currency pairs and commodity prices. EUR/USD is holding firm, supported by a weaker US Dollar amid rate cut expectations. GBP/USD faces slight setbacks, and Gold starts the week strong due to Fed cut prospects.

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Federal Reserve Rate Cut Expectations

The market is now overwhelmingly positioned for a Federal Reserve rate cut later this month. We see the CME FedWatch Tool pricing in an 85% chance of a cut following last week’s disappointing jobs report, which showed only 95,000 new payrolls added in November. This expectation of looser policy is driving all our major trading theses for December.

Consequently, shorting the US Dollar remains the primary play, with options markets showing a growing skew towards puts on the dollar index (DXY). We are looking at derivatives that profit from a move in the DXY below the 102.00 level, a key support throughout the latter half of 2025. Given that a rate cut is almost fully priced in, buying out-of-the-money puts could be a cost-effective way to position for a deeper slide if the Fed signals a full-blown easing cycle.

This dollar weakness makes long EUR/USD positions particularly attractive, especially as the pair holds above the 1.1600 handle. The European Central Bank has signaled a steady policy path, creating a clear monetary divergence that should continue to support the Euro. We anticipate continued momentum towards the 1.1750 resistance level we last saw in late 2024.

While GBP/USD has also benefited, its climb above 1.3200 seems less certain and is showing signs of stalling. We see this as a reflection of domestic concerns, as recent UK inflation data came in hotter than expected at 3.5%, complicating the Bank of England’s next move. This makes trading Cable more suited for range-bound strategies unless a clear breakout occurs.

Gold remains one of our strongest convictions, with prices holding firmly above $4,200 an ounce. This situation is reminiscent of the early 2020s when low real interest rates fueled a massive rally, and with the 10-year Treasury yield now at 3.2%, that environment is returning. We believe call options on gold miners or gold ETFs offer leveraged exposure to further upside driven by both the Fed’s dovish shift and ongoing geopolitical risks.

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