Argentina’s year-on-year gross domestic product growth was 2.1% in the fourth quarter. This was below the 2.2% forecast. The result missed expectations by 0.1 percentage points. It compares the fourth quarter with the same period a year earlier.

Growth Momentum And Macro Headwinds

Looking back, the slight miss in Argentina’s fourth-quarter GDP for 2025 was an early signal of a cooling growth story. That data point, combined with recent inflation figures which have remained stubbornly high, suggests the economic recovery is facing headwinds. We believe this warrants a more cautious or defensive stance in the coming weeks. Given this backdrop, we see opportunities in using options on the iShares MSCI Argentina ETF (AGt), which is already down about 8% year-to-date. Traders should consider buying put options to hedge long positions or speculate on further downside through the second quarter. The current market shows a higher demand for puts than calls, indicating a bearish sentiment is building. This economic uncertainty is also creating market choppiness, which is a key factor for derivatives. The 30-day implied volatility on the AGt has climbed to over 40%, reflecting expectations of larger price swings ahead. This environment could be favorable for strategies like long straddles for those anticipating a significant market move but unsure of the direction.

Currency Risk And Hedging Considerations

The pressure on the Argentine Peso (ARS) is also a major concern, as annual inflation, while down from past peaks, is still hovering around 45% according to the latest reports. This makes currency hedging essential for anyone with peso-denominated exposure. We are looking at non-deliverable forwards (NDFs) to bet on further peso weakness against the U.S. dollar. Create your live VT Markets account and start trading now.

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The Swiss Franc traded flat against the US Dollar on Friday, after giving back part of earlier gains. USD/CHF was near 0.7878 after briefly reaching 0.7900. The US Dollar Index was around 99.54 after easing from 99.79. Even so, it was up nearly 0.30% on the day.

Swiss Franc Versus Dollar

The Franc stayed firm against most major currencies, but it lagged the Dollar. Demand for the Dollar increased after the US-Israel war with Iran escalated. The Franc first rose on safe-haven demand as the conflict began. Those gains faded after the Swiss National Bank signalled it could intervene in foreign exchange markets. Middle East tensions remained in focus, with few signs of de-escalation and a higher risk of a longer conflict. The Wall Street Journal reported that the Pentagon is sending three warships and thousands of extra Marines to the region. This followed comments from President Donald Trump that the US would avoid deploying ground troops in Iran. Higher energy prices supported the Dollar because oil is priced in USD.

Central Bank Policy Outlook

Both the Federal Reserve and the Swiss National Bank left rates unchanged. The Fed held 3.50%–3.75%, while the SNB stayed at 0.00%. Higher oil prices may raise US inflation and delay Fed rate cuts. Swiss inflation remains low, and a strong Franc can limit imported inflation. Looking back to late 2025, we remember a period where the US dollar was strong, largely because of the US-Israel conflict with Iran. This tension pushed oil prices higher, and since oil is priced in dollars, it boosted demand for the currency. The dollar was also the preferred safe-haven, leaving the Swiss franc behind after the Swiss National Bank (SNB) hinted it might intervene. The situation has changed significantly as we stand here in March 2026. The de-escalation of military activity in the Middle East in January has removed much of the geopolitical risk premium from the market. As a result, WTI crude oil prices have fallen from over $110 a barrel during the conflict’s peak to a more stable range around $78 a barrel this month. This shift has directly impacted central bank outlooks, especially for the Federal Reserve. With lower energy costs, US inflation has cooled, with the latest Consumer Price Index (CPI) reading for February showing a 2.8% year-over-year increase. This has allowed the Fed to begin its easing cycle, cutting its benchmark rate last month to the current 3.25%-3.50% range. In contrast, the SNB has been dealing with a persistently strong franc, which has kept Swiss inflation very low, last reported at just 1.1%. To combat deflationary pressures and the franc’s strength, the SNB preemptively cut its own policy rate to -0.25% in its December 2025 meeting. This shows that while both central banks are easing, their motivations are fundamentally different. Given these dynamics, the environment that held the USD/CHF pair near 0.7900 last year has completely reversed, with the pair now trading around 0.7550. The shrinking interest rate advantage of the dollar over the franc suggests this downward trend may continue. Derivative traders should consider positioning for further downside in the pair. Buying USD/CHF put options with expirations in the next three to six months could be a prudent strategy to capitalize on this trend. Market volatility has fallen since the war premium vanished, making options pricing more reasonable than it was a few months ago. This allows for a defined-risk way to bet on a weaker dollar against the franc. Create your live VT Markets account and start trading now.

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Baker Hughes reported 414 active oil rigs in the United States. The previous count was 412. This is an increase of 2 oil rigs compared with the prior report. The figures refer to the US oil rig count tracked by Baker Hughes.

Market Implications Of The Latest Rig Count

We see the U.S. oil rig count has ticked up by two, which on its own is not a major market mover. However, this slight increase signals that producers are cautiously optimistic about prices and are willing to slowly expand operations. This incremental supply growth is a key factor we are watching for future pricing pressure. Looking back, we can see this is part of a slow, grinding recovery in drilling from the levels we saw in early 2025, which were closer to 390 rigs. This gradual increase is happening while OPEC+ has maintained its production discipline, keeping the global market tight. This creates a tension between modest U.S. growth and constrained international supply. Recent data shows that demand remains robust, with the latest EIA report showing an unexpected draw of 2.1 million barrels from U.S. crude inventories last week. This indicates that current consumption is outpacing production, supporting a firm price environment for now. With WTI crude futures trading near $85, the market appears to be prioritizing strong demand signals over the minor rig count addition. For traders, this environment of tight supply and strong demand suggests that upside price risk remains significant. The small rise in drilling is not enough to change the immediate bullish narrative, meaning volatility may be underpriced. We believe buying options is preferable to selling them in the near term. Specifically, we are looking at out-of-the-money call options on May and June WTI contracts. For example, the $90 strike calls offer a way to capitalize on any further supply disruptions or stronger-than-expected economic data. This strategy provides exposure to a potential price spike while strictly defining our maximum risk.

Positioning And Risk Management

Conversely, any sign of weakening demand could cause this delicate balance to shift quickly. Therefore, we are also considering bull call spreads or purchasing downside protection via puts if prices fail to break above recent highs. This allows us to maintain a bullish bias while hedging against a sudden reversal. Create your live VT Markets account and start trading now.

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Gold fell on Friday after a two-day slide, dropping to its lowest level since early February near $4,500. XAU/USD traded around $4,580 after an intraday high near $4,735, and remained set for a third straight weekly loss. This followed central bank decisions that reinforced expectations for higher rates for longer. The Fed, BoJ, SNB, BoE, BoC and ECB kept rates unchanged, while the RBA raised rates amid inflation risks linked to higher oil and energy prices during the Middle East war.

Higher Rates Longer Pressure

Gold was down more than 10% since the US-Israel war with Iran began, alongside repricing of rate paths. Markets now expect the Fed to hold through 2026; the ECB is priced for a July hike and another by year-end; the BoE is priced for about two hikes this year. A stronger US dollar and higher US Treasury yields also weighed on gold. Fed Governor Christopher Waller said oil price rises could have a lasting inflation effect, noted inflation near 2%, and said tariffs keep pressures elevated; he would support cuts later this year if the labour market stays weak. Technically, gold tried to hold above the 100-day SMA near $4,605 after breaking below the 50-day SMA around $4,979; RSI was near 33 and ADX rose towards 20. Support levels were $4,502, $4,402 and the 200-day SMA at $4,091, with resistance at $4,979, $5,000 and $5,200. We remember well the sharp decline in gold during late 2025, when prices were pushed down toward the $4,500 mark. This was driven by a united hawkish stance from major central banks, which were all determined to fight the inflation sparked by rising energy prices. That “higher-for-longer” interest rate environment has largely persisted into the first quarter of 2026, keeping gold prices suppressed.

Shifting Market Signals

As of today, March 20, 2026, the environment remains challenging, but subtle shifts are appearing that traders must watch. While the Federal Reserve has held rates steady, recent inflation data from February showed core CPI at 3.4%, still high but continuing a slow downward trend. Consequently, futures markets, as seen on the CME FedWatch Tool, are now pricing in a 25% chance of a single rate cut by the end of this year, a notable change from the zero-cut expectation we held just a few months ago. For derivative traders, this means implied volatility on gold options has been relatively compressed after months of range-bound price action. This presents an opportunity to purchase long-dated options at a reasonable cost. Buying December 2026 call options with strike prices around $4,800 could be a low-risk way to position for a potential dovish pivot from the Fed later in the year. The strong US Dollar continues to be a major headwind for any significant gold rally, just as it was last year. The Dollar Index (DXY) remains stubbornly high, hovering around the 105 level, as higher US yields attract capital. This dynamic suggests that strategies like selling short-term covered calls against a physical gold position could generate income while we wait for a clearer trend to emerge. However, we must not ignore the immense underlying support from official sector buying. Data from the World Gold Council confirmed that central banks bought a staggering 290 tonnes in the fourth quarter of 2025, continuing the trend of de-dollarization and reserve diversification. This persistent demand is likely what established the strong floor in prices we saw last year and prevents a more dramatic collapse. Therefore, the key technical levels identified in 2025 are still highly relevant today. The 200-day moving average, now sitting near $4,150, represents a significant level of support likely defended by central bank bids. Selling cash-secured puts or put credit spreads below this level could be a viable strategy to collect premium, based on the assumption that a full-scale price collapse is unlikely. Create your live VT Markets account and start trading now.

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US shares fell on Friday, with the Dow down about 257 points (0.6%), the S&P 500 off 0.8%, and the Nasdaq down 1.2%. Markets headed for a fourth straight weekly drop amid Iran–Israel strikes, attacks on Persian Gulf energy sites, reports of thousands more US Marines being sent to the region, and a “quadruple witching” expiry involving trillions of dollars. The Dow peaked near 47,400 before dropping about 1,700 points to around 45,700, its lowest level of the year. For the week, the Dow fell about 1.5%, the S&P 500 about 0.9%, and the Nasdaq about 0.8%, with the Dow 8.6% and the Nasdaq more than 8% below record closes.

Energy And Commodities Surge

Brent crude briefly neared $120 on Thursday, and both WTI and Brent were up more than 40% since the war began in late February. Venture Global and Cheniere Energy had double-digit weekly gains, and European gas prices stayed near four-year highs. The Fed held rates at 3.50%–3.75% and the dot plot pointed to one 25-basis-point cut in 2026. FedWatch put June hold odds at about 89% (from 63%), with roughly 12% pricing in a hike. The Dollar Index rose above 100.50 before trading near 99.60, while gold fell below $5,000 and towards $4,650, and silver dropped over 8% in one session. Newmont fell about 7.5% and Alcoa more than 8%, while FedEx jumped about 9% after reporting $5.25 EPS on $24 billion revenue and lifting guidance to $19.30–$20.10. We remember the sharp Q1 2025 market downturn, which saw the Dow suffer its worst week since 2022 amid geopolitical conflict and a hawkish pivot from the Federal Reserve. That period serves as a crucial reminder of how quickly sentiment can shift based on inflation fears and global instability. The market is now showing similar signs of fatigue after a strong start to the year.

Market Strategy And Hedging

As of March 2026, we are seeing familiar echoes from that period, as the February Consumer Price Index (CPI) came in hotter than expected at 3.4%, reigniting inflation concerns. Geopolitical tensions are also simmering again, this time with naval posturing in the South China Sea, causing jitters in the supply chain outlook. The Dow has pulled back nearly 800 points this week from its recent highs above 49,500, showing that investor confidence is fragile. Given this backdrop of uncertainty and the memory of last year’s rapid decline, buying protective puts on broad market indices like the SPY and QQQ is a prudent strategy. The CBOE Volatility Index (VIX) has already crept up from 13 to over 18 in the past two weeks, a notable increase in expected market turbulence. Purchasing VIX call options could provide an effective hedge if we see a repeat of last year’s volatility spike. The conflict in 2025 drove Brent crude toward $120 a barrel, making energy stocks one of the few places to hide. With Brent now pushing $95 a barrel amid the new tensions and OPEC+ holding firm on production cuts, we believe call options on energy sector ETFs like XLE are attractive. This allows for capitalizing on elevated oil prices, which historically outperform during periods of geopolitical stress. The Fed’s hawkish hold last year was a major catalyst for a stronger dollar and a brutal sell-off in precious metals. Today, the CME FedWatch tool shows that market expectations for a June rate cut have dropped from over 70% just a month ago to below 40%, as persistent inflation forces the Fed’s hand. This repricing could trigger another rally in the US Dollar, creating opportunities to buy puts on precious metals ETFs like GLD, which are highly sensitive to rising yields and dollar strength. Even in a falling market, individual company performance can create openings, as FedEx demonstrated with its earnings beat in 2025. With earnings season approaching, we should prepare to trade the volatility around specific reports for companies with solid fundamentals. Using options strategies like straddles on stocks with high implied volatility can be profitable regardless of which direction the stock moves post-announcement. Create your live VT Markets account and start trading now.

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EUR/USD traded slightly lower on Friday as the US Dollar rebounded, after the pair failed to hold above 1.1600. It was near 1.1542 at the time of writing, down about 0.38% on the day. Despite the daily dip, EUR/USD was set to end the week higher after two straight weekly declines. The US Dollar Index (DXY) was around 99.67, after dropping about 1.10% on Thursday.

Technical Picture And Trend Context

On the daily chart, EUR/USD remained below the 50-day, 100-day, and 200-day Simple Moving Averages. The pair has stayed within a run of lower highs since the corrective move began from the 1.2000 area. Momentum was muted, with the 14-day Relative Strength Index near 43. This followed an earlier move below 30, without a strong acceleration in either direction. Resistance sat at 1.1600, with a broader zone near 1.1670-1.1730. If price breaks above that area, it may move towards 1.1900 and then 1.2000. Support was near 1.1400. A drop below it could lead to 1.1300-1.1200.

Shift In The Macro Backdrop

Looking back at the analysis from last year, we can see the mildly bearish sentiment when EUR/USD was struggling below its key moving averages around the 1.15 level. The focus was on a potential break lower, with the Relative Strength Index suggesting lingering downside pressure. This perspective was common in 2025 as the market digested central bank policies from the previous year. The situation has since evolved, as that broad corrective phase from 1.2000 found a floor, and the pair decisively broke above the 1.1730 resistance zone late last year. We are now trading near 1.1850, a significant shift from the bearish structure observed previously. This move was largely driven by a divergence in central bank outlooks that was not yet priced in at the time. Recent data confirms this shift, with February’s Eurozone Harmonised Index of Consumer Prices coming in at a stubborn 3.1%, pressuring the European Central Bank. In contrast, the latest US Non-Farm Payrolls report showed job creation slowing to 155,000, missing forecasts and prompting markets to price in a more dovish Federal Reserve stance for the second half of the year. The US Dollar Index has reflected this weakness, now trading around 95.50. For the coming weeks, we should consider strategies that benefit from continued upside momentum or range-bound trading at these higher levels. Buying call options with a strike price at the psychological 1.2000 level could capture a potential breakout. This allows traders to capitalize on further Euro strength while defining their maximum risk to the premium paid. Alternatively, for those expecting the rally to consolidate, selling out-of-the-money put options with a strike near the 1.1700 support level presents a viable strategy. This approach allows us to collect premium, taking the view that the pair will not break significantly lower in the near term. The current implied volatility of around 8.5% makes these premium-selling strategies reasonably attractive. To manage risk, we must watch for any sharp reversal in economic data that could alter the narrative. A hedge could involve purchasing far out-of-the-money puts near the 1.1550 level, which would protect a portfolio from an unexpected return to last year’s bearish conditions. This provides a cost-effective insurance policy against a sudden resurgence in the US Dollar. Create your live VT Markets account and start trading now.

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GBP/USD gave back part of Thursday’s gains and fell 0.84% as risk appetite weakened after an escalation in the Middle East conflict. The pair traded below 1.3350 after reaching a daily high of 1.3442. Market pricing also reflected expectations of no Federal Reserve rate cuts in 2026, which supported the US dollar. The move came as oil prices surged.

Outlook For Sterling

With the GBP/USD pair breaking below the 1.3350 mark, we should anticipate further weakness for the pound in the coming weeks. The surge in oil prices combined with a strong US dollar creates a difficult environment for sterling. This suggests positioning for more downside is the logical path forward. The Federal Reserve’s stance is a primary driver, as markets are now pricing in zero rate cuts for 2026, a significant shift from just a month ago. Recent US inflation data supports this, with the core Consumer Price Index for February coming in at a stubborn 3.4%, reinforcing the Fed’s “higher for longer” narrative. We remember how delayed the Fed’s response was back in 2022, and it seems they are keen not to repeat that policy error. Geopolitical tensions are directly fueling this dollar strength while simultaneously hurting the UK. With Brent crude now holding above $110 a barrel, the UK’s latest Current Account data for Q4 2025 showed a deficit of £21.2 billion, highlighting its vulnerability as a net energy importer. This leaves the Bank of England trapped between fighting inflation and preventing a deeper economic slowdown. Given the increase in market uncertainty, implied volatility on GBP/USD options has climbed to a three-month high of 12.5%. This makes outright buying of put options more expensive. We should instead consider selling call spreads with a strike price around the 1.3450 level to capitalize on our view that the pair has limited upside.

Key Levels And Positioning

Looking back, we saw a similar risk-off dynamic play out in the second half of 2025 when global growth fears surfaced. However, the added element of a direct conflict makes the current flight to the safety of the dollar more aggressive. Therefore, the historical support levels from last year might not hold as firmly this time. For the immediate future, we will be watching the 1.3280 level, which was the low from last month. A clean break below this would open the door for a test of the psychologically important 1.3200 handle. Any attempt by the pound to rally that fails to hold above 1.3350 should be viewed as an opportunity to initiate or add to short positions. Create your live VT Markets account and start trading now.

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GBP/USD fell 0.84% on Friday, with risk appetite weakening as the Middle East war escalated and markets priced in no Federal Reserve rate cuts in 2026. The pair traded below 1.3350 after reaching a daily high of 1.3442. Higher crude oil prices supported the US dollar, while the US Dollar Index (DXY) rose 0.48%. Demand for the dollar increased alongside energy-led inflation concerns.

Central Bank Signals And Market Pricing

The Bank of England held the Bank Rate unchanged, with a 9-0 vote, amid external inflation shocks linked to the US-Israeli war on Iran. Money markets then priced UK rate increases totalling 78 basis points by year-end. The Federal Reserve also kept rates steady, and Jerome Powell said rate cuts would depend on further inflation progress, while warning the Iran war could lift inflation. Christopher Waller said oil staying high for months could feed into core inflation, and Michelle Bowman said she had pencilled in three cuts this year. Markets priced a 13% chance of a Fed rate rise at the next meeting, using Prime Market Terminal data. Next week includes US Flash PMIs, Jobless Claims and Wholesale Inventories, plus UK Flash PMIs, CPI and PPI. Technically, GBP/USD was 1.3313, with resistance near 1.3400, 1.3500 and 1.3650, and support near 1.3313, 1.3250 and 1.3035. A close below 1.3250 points to the low 1.30s, while a move above 1.3500 would refocus on 1.3650. Given the conflicting signals, we should prepare for high volatility in the GBP/USD pair. The escalating war in the Middle East and the resulting jump in energy prices are classic drivers for a stronger, safe-haven US dollar. This risk-averse environment is currently overpowering the Bank of England’s own hawkish stance. With Brent crude surging over 15% this month to trade above $110 a barrel, inflation is the primary concern for the Federal Reserve, justifying the market pricing out any rate cuts for 2026. This is reflected in broader market fear, with the VIX volatility index climbing above 25 this week. These conditions make buying options expensive, so strategies need to be chosen carefully.

Options Positioning For Elevated Volatility

For a bearish outlook, we can consider using bear put spreads rather than buying puts outright to reduce costs. Targeting a move toward the 1.3250 support level seems reasonable in the short term, as long as geopolitical tensions remain high. This strategy defines our risk while capitalizing on the current downward momentum. However, the upcoming UK inflation data is a major wildcard that could quickly reverse the trend. We saw UK CPI tick up unexpectedly to 3.5% in February, so another hot print would put immense pressure on the Bank of England to act even more aggressively than the 78 basis points of hikes already priced in. This makes holding short positions through the data release a significant risk. To trade the potential explosion in volatility around the UK CPI release, a long strangle could be considered. By buying an out-of-the-money call and an out-of-the-money put, we can profit from a large price swing in either direction. This is a pure volatility play, banking on the data surprising the market significantly. We saw a similar dynamic back in 2022, when geopolitical conflict in Europe caused an energy shock that forced central banks to hike rates aggressively. The Fed’s reaction at that time shows its commitment to fighting commodity-driven inflation, reinforcing the credibility of its current hawkish position. History suggests that in a battle between a hawkish Fed and a hawkish BoE, the dollar often benefits from global instability. From a technical standpoint, the resistance levels around 1.3400 and 1.3500 appear solid for now. For traders who believe the upside is capped, selling call spreads with a short strike above 1.3450 could generate income. This takes advantage of elevated option premiums while maintaining a defined-risk profile. Create your live VT Markets account and start trading now.

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AUD/USD traded near 0.7040 on Friday, down 0.68% on the day. The fall came as demand for the US Dollar increased in a risk-averse market. Earlier in the week, the Reserve Bank of Australia lifted the Official Cash Rate by 25 basis points to 4.10%. This was the second consecutive rise this year, and the Bank said inflation remains too high.

Rba Warns On Inflation Risks

Governor Michele Bullock warned about possible second-round effects from higher energy costs linked to tensions in the Middle East. February labour data showed stronger-than-expected job growth and an unchanged unemployment rate. On Friday, renewed conflict in the Middle East raised concerns about disruption to energy infrastructure. This supported safe-haven demand for the US Dollar and weighed on the Australian Dollar. Rising US bond yields also supported the US Dollar, adding pressure on cyclical currencies such as the AUD. The Federal Reserve signalled only very gradual easing, and markets expect limited rate cuts over the medium term. Looking back at the situation in early 2025, we saw how geopolitical risk completely overshadowed the Reserve Bank of Australia’s rate hikes. That period, when the AUD/USD fell towards 0.7040 despite the RBA’s move to 4.10%, serves as a critical reminder of the US Dollar’s safe-haven power. Now, over a year later, that dynamic of global fear versus local strength continues to influence our strategy.

Rates Divergence And Trading Approach

Currently, the RBA is holding its cash rate steady at 4.35%, where it has been for the last several meetings. The latest quarterly inflation figures from January showed CPI at a stubborn 3.8%, still well above the central bank’s target range, suggesting rates here are not coming down anytime soon. With unemployment holding strong around 3.9%, the domestic economy continues to signal resilience, providing a fundamental floor for the Aussie dollar. This contrasts with the Federal Reserve, which has initiated a slow easing cycle, bringing its funds rate down to 4.75% last month. This policy divergence should theoretically favor the AUD, but concerns over global growth and softer commodity prices are creating headwinds. For example, iron ore prices have fallen over 15% since the start of the year to below $110 per tonne amid uncertainty in China’s property sector. Given these conflicting signals, we should expect continued volatility in the AUD/USD, which is currently trading near 0.6750. Traders should consider using options to play this uncertainty, such as buying straddles ahead of key inflation data or central bank announcements. This strategy profits from a significant price move in either direction without betting on the specific outcome. For those with a directional view, the positive yield differential still makes holding the Aussie attractive. We can express a cautiously bullish AUD stance by selling out-of-the-money puts on AUD/USD, which allows us to collect premium while setting a potential entry point at a lower, more attractive level. This generates income while we wait for a clearer trend to emerge from the global noise. However, we must remain hedged against another global risk-off event similar to the one we saw in 2025. Buying protective puts on AUD/USD can act as cheap insurance against any long positions, especially as geopolitical tensions remain a background risk. This protects our portfolio from a sharp downturn driven by factors outside of Australia’s strong domestic picture. Create your live VT Markets account and start trading now.

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USD/CAD rose from an intraday low near 1.3699 to about 1.3735 on Friday. The move followed weaker-than-expected Canadian Retail Sales data and a rebound in the US Dollar. The US Dollar Index (DXY) was near 99.74 after dropping about 1.10% on Thursday. USD strength added support to the pair.

Canadian Retail Sales Miss Forecast

Statistics Canada said Retail Sales rose 1.1% month on month in January after a 0.4% fall in December. The result missed the 1.5% forecast. Retail Sales excluding Autos increased 0.8%, below the 1.2% estimate. December’s ex-autos reading was revised to 0.0% from 0.1%. The data came before the recent rise in Oil prices linked to the war in the Middle East. It still points to weaker domestic demand at the start of the year. The Bank of Canada left its benchmark rate at 2.25% on Wednesday. Governor Tiff Macklem said it is too early to judge how the conflict will affect growth.

Policy Divergence And Trading Approach

He also said higher energy prices could reduce household spending power. He noted that sustained Oil gains could lift income from energy exports, as Canada is a net Oil exporter. The Federal Reserve held rates at 3.50%–3.75% on Wednesday. Its dot plot still shows one rate cut in 2026, while inflation forecasts were revised higher. Looking back at this time in 2025, we saw the Canadian Dollar struggle with weak retail sales data, suggesting a slowdown in domestic demand. This happened even as geopolitical tensions were pushing oil prices higher. The usual link between a strong loonie and oil was broken by a flight to the safety of the US Dollar. That trend seems to be continuing into the current quarter. Canada’s most recent inflation reading for February 2026 came in at 2.1%, which is below the Bank of Canada’s forecast and fuels speculation about rate cuts. In contrast, the US just posted a strong services PMI of 54.2, suggesting the American economy remains robust. This creates a clear divergence between the Bank of Canada and the Federal Reserve. We are seeing the interest rate spread between the US and Canada widen, now at 150 basis points, its widest since late 2024. This differential makes holding US Dollars more attractive than Canadian Dollars. For the coming weeks, we should consider strategies that benefit from a rising USD/CAD. Buying call options on USD/CAD with expiry dates in late April or May 2026 offers a defined-risk way to capture potential upside. This allows us to profit if the pair continues its upward trend toward the 1.3850 level. We should also be prepared for increased volatility around upcoming economic data releases. With the Bank of Canada’s next interest rate decision on April 10th and the US non-farm payrolls report before that, a long straddle could be effective. This strategy would profit from a large price move in either direction. It is important to remember the lesson from 2025 about the oil price disconnect. Even with WTI crude currently trading firmly above $95 a barrel, the loonie is failing to gain traction. Geopolitical risk and concerns over global demand are still favoring the US Dollar over commodity-linked currencies. Create your live VT Markets account and start trading now.

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