AUD/USD rose for a fourth day on Thursday, with the pair near 0.7087 and close to three-week highs. The US Dollar weakened after the US and Iran agreed to a two-week ceasefire.
Market calm faded after Iran said three parts of the agreement had been violated following Israeli strikes on Lebanon. Risk appetite stayed cautious, leaving the Australian Dollar mainly driven by US Dollar moves, alongside support from a hawkish Reserve Bank of Australia outlook.
Us Iran Talks And Market Sensitivity
Focus is on US–Iran talks due this weekend in Pakistan. NBC cited a US official saying President Donald Trump urged Israel to ease strikes on Lebanon, while Benjamin Netanyahu said direct talks with Lebanon will begin soon on disarming Hezbollah and pursuing peace.
US data was mixed, with core PCE inflation at 0.4% MoM in February and the annual rate at 3%, down from 3.1%. Final Q4 GDP growth was revised to 0.5% from 0.7%.
US CPI is due on Friday, with forecasts for 0.9% MoM versus 0.3% in February, and 3.3% YoY versus 2.4%. March Fed Minutes said most saw Middle East conflict risks to jobs that could support rate cuts, while many warned inflation could stay high, especially if oil rises, which could support rate rises.
Looking back at the market environment in early 2025, we saw a classic setup driven by geopolitical tension. The fragile US-Iran ceasefire created a brief period of optimism, pushing risk-sensitive currencies like the AUD up against the USD. This relief, however, was clearly temporary and highly dependent on headlines.
Given the uncertainty, traders should have considered buying volatility through options. A straddle on AUD/USD, for instance, would profit from a large price swing in either direction, which was highly likely. The ceasefire could have either collapsed, sending the pair plummeting, or solidified, causing a further rally.
Historical Volatility And Strategy
We saw a similar dynamic in the real world in October 2023 when the Israel-Hamas conflict began, causing the VIX volatility index to spike over 30% in just two weeks. This historical precedent from 2023 shows how quickly geopolitical events can inject uncertainty into markets, making long-volatility a prudent strategy in the 2025 scenario. The underlying risk was that a breakdown in talks could cause a surge in oil prices, much like the initial price jumps seen during Middle East conflicts of the past.
The Federal Reserve’s conflicted minutes from that time further complicated the picture for interest rate derivatives. We had Fed officials acknowledging that a wider conflict could damage the economy and warrant rate cuts. At the same time, others were worried that rising oil prices would keep inflation high, demanding the opposite policy response.
This inflationary concern was not theoretical; it mirrored the stubborn inflation we saw in early 2024, when US CPI repeatedly came in hotter than expected, staying above 3.4% and forcing markets to delay bets on rate cuts. The 2025 data, with PCE at 3% and Q4 GDP being revised lower, put the Fed in that same difficult position. Traders should have been cautious about taking any strong directional bets on the path of US interest rates.
For AUD/USD specifically, the hawkish RBA provided some support, but the pair was ultimately a passenger to the bigger US dollar and risk sentiment story. The key was to watch for a break of the fragile equilibrium. The upcoming talks in Pakistan and the US CPI data were the obvious potential catalysts that traders would have been positioning around.
Therefore, the main response should have been to protect against sharp moves while waiting for a clearer signal. A high CPI reading, which was expected, would likely have overwhelmed any positive ceasefire news. This would have strengthened the dollar and sent AUD/USD lower as markets priced in a more hawkish Fed.
USD/JPY held firm near 158.90 on 9 April after US data, including the Personal Consumption Expenditures (PCE) report, supported expectations of higher US interest rates for longer.
Headline PCE rose 0.4% month on month and core PCE also rose 0.4%, making a third straight month of strong gains. Core PCE inflation was 3.0% year on year, above the Federal Reserve’s 2% target.
US Inflation Keeps Rates Higher Longer
Consumer spending increased 0.5%, with much of the rise linked to higher prices rather than higher volumes. Initial Jobless Claims edged up to 219K but stayed low by historical standards.
US GDP was revised lower, but this did not materially change expectations for Federal Reserve policy. The market reaction kept the US Dollar supported against the Japanese Yen.
On the four-hour chart, USD/JPY traded around 158.95, below the 20-period SMA at 159.12 and the 100-period SMA at 159.21. The RSI was near 47, pointing to weaker upward momentum.
Resistance levels were cited at 158.96, 159.10, 159.12, 159.21 and 159.30. Support was noted at 158.83, with a break below that level pointing to further downside.
Options Strategies For A Volatility Break
With core PCE inflation holding at 3.0%, the Federal Reserve has little reason to consider cutting interest rates in the near future. This policy divergence should continue to favor the US dollar over the yen, pushing the pair toward levels that invite official intervention. We remember how the Ministry of Finance stepped in during the spring of 2024 as the rate approached 160, making traders cautious of a sudden reversal.
Traders expecting the uptrend to continue could consider buying call options with strike prices above 160. This strategy offers a way to profit from a potential breakout while capping the maximum loss at the premium paid. It is a defined-risk approach that protects against a sharp, multi-yen drop if Japanese authorities decide to support their currency.
Given the pair is stalling below short-term moving averages and intervention risks are high, buying put options is another viable strategy. A put option with a strike around 158.00 would profit if the pair breaks its immediate support and corrects lower. Speculative short positions on the yen are currently near the highest levels we saw in 2025, suggesting the trade is crowded and vulnerable to a rapid squeeze.
The tension between firm US data and Japanese intervention threats creates a perfect environment for a volatility play. Buying a long straddle, which involves purchasing both a call and a put option with the same strike price, allows a trader to profit from a large move in either direction. This strategy is a direct bet on a significant price swing, which seems increasingly probable.
USD/CAD fell almost 1% this week, moving from about 1.3965 to near 1.3800 by Thursday. The decline sped up on Tuesday evening after the US and Iran agreed to a Pakistan-brokered two-week ceasefire.
Pakistan’s Prime Minister Shehbaz Sharif announced an immediate ceasefire shortly before President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz. Trump later confirmed the deal on Truth Social, describing Iran’s 10-point proposal as a “workable basis on which to negotiate”.
Dollar Weakness Broadens
Following the announcement, the Bloomberg Dollar Spot Index dropped as much as 1.1% on Wednesday, its biggest one-day fall since January. The US Dollar weakened against all 16 major peers as long-Dollar positions were reduced.
WTI crude fell more than 10% intraday on expectations linked to Hormuz, even though lower oil often weighs on the Canadian Dollar. Oil later rebounded above $97, while DXY steadied near 99.
Rate expectations also shifted, with oil back below $100 and futures pricing at least one 2026 cut. FOMC March minutes showed division between those considering a hike and those expecting a cut this year.
On charts, USD/CAD broke below 1.3900 and 1.3850, while hourly RSI dipped under 30 before recovering to the mid-40s. US March CPI is due Friday, and a softer outcome could open 1.3750–1.3700.
The dramatic slide in USD/CAD from above 1.3900 appears to have stalled around the 1.3800 level for now. Friday’s US Consumer Price Index report for March came in slightly hotter than expected, with core inflation rising 0.4%, preventing a further collapse in the dollar. The easy money from shorting the dollar on the ceasefire news has likely been made.
Options Volatility Resets
With the ceasefire’s survival still in question after the weekend talks in Islamabad, implied volatility has fallen sharply, making options cheaper. We see the one-month implied volatility on USD/CAD has dropped from over 10% to near 7.5%, a level not seen since before the conflict escalated in February. This presents an opportunity to buy straddles or strangles, positioning for a large move in either direction without betting on which way it will go.
The market has been quick to pull back on its Federal Reserve rate cut expectations following the inflation data. Fed funds futures, which had briefly priced in an 85% chance of a cut by year-end, now show those odds closer to 50/50. This renewed uncertainty about the Fed’s path puts a solid floor under the US dollar for the time being.
The oil market is also adding to the confusion, as the initial 10% price drop was a knee-jerk reaction. WTI crude has since stabilized above $97 a barrel, supported by the latest EIA report showing a surprise drawdown in US inventories and the reality that the Strait of Hormuz remains closed. This price resilience is a double-edged sword, supporting the Loonie but also feeding the global inflation fears that benefit the Greenback.
Looking back at the positioning data from late 2025, we know the long US dollar trade was extremely crowded, which explains the severity of the sell-off this past week. While much of that speculative length has been cleared out, the market is now waiting for a fresh catalyst. The key is to watch whether the ceasefire holds through the next week.
For now, the pair seems trapped between the fragile peace dividend and stubborn inflation. We are watching the 1.3750 level as key support, while any renewed geopolitical tension or hawkish Fed talk could easily send the pair back toward 1.3900. Using option spreads to define risk seems like the most prudent strategy until a clearer direction emerges.
GBP/USD rose past 1.3400 on Thursday and traded at 1.3441, up 0.36%, as risk appetite weakened amid fresh tensions in the Middle East. Israel struck Lebanon during its conflict with Hezbollah, and the ceasefire was described as fragile.
US equities were little changed, while the US Dollar Index (DXY) edged up 0.01% to 99.01 after a 1% fall over the prior two days. Iran did not indicate it would open the Strait of Hormuz, and Israel’s renewed attacks were reported to have killed more than 250 people.
Inflation And Rates Backdrop
US inflation data showed the February PCE Price Index rose 0.4% month-on-month versus 0.3% previously, and held at 2.8% year-on-year. Core PCE was 0.4% month-on-month, and eased to 3% year-on-year from 3.1%.
Money markets priced about six basis points of Federal Reserve easing by year-end, per CME FedWatch. Initial Jobless Claims rose from 203K to 219K versus 210K forecast, while Continuing Claims fell 38K to 1.794K, the lowest since May 2024.
UK pricing showed a 21% chance of a Bank of England rise on 30 April and expectations of a June 18 move, with 39 basis points of tightening for the year. March US CPI is forecast at 3.3% headline (from 2.4%) and 2.7% core (from 2.5%).
Technically, GBP/USD was near 1.3437, with resistance around 1.3439; support levels referenced 1.3137 and 1.3785.
Looking back to this time in 2025, we saw the pound rally past 1.3400, fueled by expectations of Bank of England rate hikes and Middle East tensions that weakened the dollar. The market was then pricing in nearly 40 basis points of tightening from the BoE for the remainder of that year. That entire narrative has since inverted over the last twelve months.
Today, the BoE is on an extended pause as UK inflation, while down from its peaks, has remained stubbornly above target and economic growth has stalled, with the latest Q1 2026 GDP figures showing a meager 0.1% expansion. In contrast, the US Federal Reserve has maintained a hawkish stance as core PCE has struggled to get below 2.8%, a figure that has been persistent for several quarters. This policy divergence is now the market’s primary focus.
Trade Ideas And Positioning
This shift has pushed GBP/USD down significantly from its 2025 highs, with the pair now consolidating around the 1.2550 mark. The key support level around 1.3137, which we watched last year, was broken decisively and now acts as a distant memory of prior strength. The path of least resistance for the currency pair currently appears to be lower.
Given this sustained downtrend, we should consider buying GBP/USD put options with expiries in the next 4 to 8 weeks. This provides a clear directional bet on further sterling weakness while capping our maximum potential loss to the premium paid. It also positions us to benefit from any sudden increase in market volatility.
For a more conservative approach, we can look at selling out-of-the-money call spreads with strike prices well above current levels, such as around the 1.2800 handle. This strategy allows us to collect premium income from the view that the pound is unlikely to stage a significant recovery in the near term. The trade profits from both a falling price and time decay.
The interest rate differential now strongly favors holding US dollars over pounds, a complete reversal from the sentiment in early 2025. We can use forward contracts to short GBP/USD, which allows us to benefit from this positive carry. This means we are effectively paid to hold the short position, adding a small but steady tailwind to the trade.
Israeli Prime Minister Benjamin Netanyahu said on Thursday that he has ordered the start of direct negotiations with Lebanon “as soon as possible”. He said the talks are expected to focus on disarming Hezbollah and setting up formal peaceful relations between Israel and Lebanon.
The report was first published by Axios correspondent Barak Ravid on X. Direct talks would move away from past approaches that relied on indirect contacts and mediators.
Hezbollah Disarmament And Political Constraints
Hezbollah is backed by Iran and has an armed wing and a role in Lebanon’s politics. A plan that puts disarmament at the centre is expected to face resistance from Hezbollah and from Iran, which supports the group.
Lebanon’s political system is divided, which could slow or block progress. Hezbollah’s role as both a militia and a political party, along with Iran’s interests, may also affect what can be agreed.
This announcement of direct negotiations introduces significant uncertainty, creating an ideal environment for volatility-based trades. While the headline might initially soothe markets and lower the geopolitical risk premium, we see this as a temporary calm before the inevitable challenges surface. We should anticipate sharp market swings based on headlines over the next few weeks, making long volatility positions through options attractive.
We remember how sensitive oil prices were to regional tensions throughout 2024 and 2025, and this news could cause a knee-jerk drop in Brent crude prices. However, given that any real disarmament of Hezbollah is a monumental task, this dip presents a buying opportunity for call options. A breakdown in talks could quickly send oil back towards last year’s highs, especially with global inventories remaining tight.
Market Implications And Trading Positioning
The core of the skepticism lies in the deep-seated realities on the ground, which have not changed. Hezbollah’s political power and arsenal, estimated to include well over 100,000 projectiles, make the goal of disarmament seem more aspirational than practical. Lebanon’s own political paralysis, which saw its inflation rate exceed 190% in 2023, means there is no single entity that can credibly enforce such a deal.
For traders, this means we should also watch safe-haven assets like gold and the U.S. dollar closely. Any sign of faltering negotiations would likely trigger a flight to safety, benefiting these assets while putting downward pressure on equity markets. A paired trade, such as going long VIX futures while selling short-dated puts on defense sector stocks, could be a prudent way to position for the likely turbulence ahead.
The United States held an auction for 4-week Treasury bills. The auction yield fell to 3.56% from 3.62% at the previous sale.
A 4-week Treasury bill is a short-term government security that matures in about one month. The reported change shows a 0.06 percentage point drop in the auction yield.
Signals Of A Flight To Safety
The recent dip in the 4-week bill auction signals a clear flight to safety among investors. This move suggests that big money is becoming more nervous about the near-term economic outlook and is willing to accept lower returns for the security of government debt. Last week’s Non-Farm Payrolls report, which showed job growth of only 95,000 against an expected 180,000, is likely fueling this defensive positioning.
We believe this is the market starting to aggressively price in a Federal Reserve rate cut sooner than previously expected. This contrasts sharply with the mood back in mid-2025, when the focus was still on rates staying higher for longer to combat stubborn services inflation. With the latest core CPI now down to 2.8%, the argument for the Fed to ease policy is growing stronger.
For us, this means it is time to look at buying volatility. The VIX has been hovering near multi-year lows, but this kind of uncertainty in the bond market often precedes a spike in equity volatility. We should consider buying call options on the VIX or VIX-related ETFs to position for a potential market downturn in the coming weeks.
This is also a clear signal to position for lower short-term interest rates. We should be evaluating trades like buying SOFR futures, which will profit if the Fed does indeed cut its target rate by summer. This is a far cry from the environment in 2025, when we were more concerned with hedging against further rate hikes.
What Similar Episodes Have Signaled
Historically, we’ve seen similar patterns where the short end of the yield curve leads the Fed’s actions, such as during the summer of 2019 before the Fed began its cutting cycle. The bond market is often ahead of the curve, and ignoring these early warnings can be a costly mistake. It indicates that the smart money is already making its move.
In the equity options market, this environment suggests a more defensive posture. We should consider buying put options on cyclical indices like the Nasdaq 100 to hedge against a slowdown that would hit growth stocks hardest. Simultaneously, it might be wise to look at call options on traditionally defensive sectors like utilities and consumer staples.
European rate markets lowered late-2026 policy rate expectations after a temporary US–Iran ceasefire and a sharp fall in energy prices. The move was seen in December 2026 futures for the ECB, BoE and SNB as European markets opened.
Even after the adjustment, futures pricing stayed well above the start-of-year levels. The gap was up to 80bp for the BoE and over 50bp for the ECB.
European Rate Markets Mispricing
Swiss pricing still implied rates moving above zero by year-end. Rate expectations were described as being out of line with stated policy aims.
Within the ECB, members remain divided, with some warning action may be needed before second-round effects appear. Despite different policy positions, BoE and ECB pricing fell by almost the same amount as the ceasefire news reached markets.
The item was produced using an AI tool and reviewed by an editor.
Trade Ideas For The Weeks Ahead
Following the U.S.–Iran ceasefire, we see a major disconnect in European rate markets that presents an opportunity. Futures markets are still pricing in far too many interest rate hikes for the ECB, BoE, and SNB, ignoring signs of slowing economic activity. This hawkishness seems to be a hangover from the aggressive tightening we saw through much of 2025.
For the Bank of England, the market is factoring in almost 80 basis points of hikes, which seems excessive. Recent data showed UK Q1 2026 GDP growth was a sluggish 0.1%, and March retail sales unexpectedly fell, suggesting the consumer is weakening. We believe traders should consider positions that bet against this aggressive hiking path.
The European Central Bank is in a similar situation, with over 50 basis points of tightening priced in. This seems to ignore the latest Eurozone HICP inflation figure for March, which fell to 2.1%, and a composite PMI that dipped to 49.8, indicating a slight economic contraction. The split within the ECB suggests the more dovish members will gain influence as this weak data continues to surface.
The Swiss National Bank provides the clearest mispricing, with markets still expecting rates to move above zero this year. Given the slowing growth in the neighboring Eurozone and the franc’s recent strength, the SNB has little reason to hike and may even be forced to consider cuts. We see excellent risk-reward in positioning for Swiss rates to remain flat or move lower.
In the coming weeks, traders could look to enter interest rate swaps where they receive the fixed rate, betting that floating rates will not rise as much as the market expects. This is particularly relevant for longer-dated BoE and ECB contracts. Additionally, buying options that would profit from SNB rate cuts later in the year could be an effective strategy.
The acceptance of BTC in Wall Street is clear. The economics are getting tougher.
Morgan Stanley’s MSBT launch shows BTC moving deeper into mainstream asset management
Biggest pressure is likely to fall on rival spot bitcoin ETFs and nearby substitutes
Lower fees may benefit investors, but could make the issuer’s business less competitive and reduce margins
What happens next is based on fee cuts, flow durability, and market concentration
Morgan Stanley’s launch of the Morgan Stanley Bitcoin Trust, or MSBT, is a strong signal that bitcoin has moved further into the core of Wall Street.
The fund began trading on NYSE Arca on April 8, 2026. It is designed to track bitcoin using the CoinDesk Bitcoin Benchmark 4PM NY Settlement Rate, and Morgan Stanley set the sponsor fee at 0.14%, which the firm said was the lowest bitcoin ETP sponsor fee at launch.
Morgan Stanley did not just enter the market. It undercut it. A simple fee comparison shows why the launch landed so quickly with the market:
ETF
Issuer
Fee
MSBT
Morgan Stanley
0.14%
Grayscale Bitcoin Mini Trust (BTC)
Grayscale
0.15%
EZBC
Franklin Templeton
0.19%
BITB
Bitwise
0.20%
ARKB
ARK 21Shares
0.21%
IBIT
BlackRock
0.25%
Morgan Stanley’s 0.14% fee sits below the range already set by several major U.S. spot bitcoin ETFs. That may not look dramatic at first glance, but in a category where many products are trying to do the same thing, price becomes one of the clearest ways to compete.
This matters most for fund economics. While ETFs are known for their comparatively low costs, understanding exactly how their fees work is crucial for any investor looking to maximise returns. ETF fees are recurring revenue. If the average fee in the category drifts lower, issuers need more assets to earn the same amount of money. That tends to favour firms with the broadest advisory networks, the deepest market-making support, and the strongest distribution channels. In other words, mainstream acceptance can also make the category more ruthless.
A more competitive BTC ETF market
For much of the earlier cycle, large banks mostly stayed in the role of gatekeeper, distributor, or service provider. Morgan Stanley has now moved beyond distribution and access to directly offering a product.
Beyond the introduction of a single ticker on the list of Bitcoin ETFs, the launch suggests that spot Bitcoin exposure is being absorbed into the mainstream business of asset management, where brand, advisor access, custody, liquidity, and fees all shape who wins.
Morgan Stanley’s entry reinforces the view that bitcoin is no longer seen only as a specialist crypto product. A major U.S. bank-affiliated asset manager is now packaging it as a mainstream investment vehicle. That helps with legitimacy.
It also changes the competitive structure around it. Once multiple funds offer near-identical exposure to the same asset, the pressure shifts from novelty to scale and price.
Bitcoin gains legitimacy as ETF issuers face growing fee pressure
While Bitcoin’s place on Wall Street looks firmer, the business of selling BTC exposure may now become less forgiving. Lower fees are beneficial for investors. They are harder on issuers, especially those without distribution reach or balance-sheet strength to defend thinner margins.
Cheaper access enables money flow
A lower fee gives advisors and institutions a clear reason to consider a new allocation. That does not mean investors will automatically move away from established incumbents. Liquidity, familiarity, tax considerations, and operational comfort are still key factors. But when products are close substitutes, even a small fee gap becomes increasingly difficult to justify.
Morgan Stanley’s launch increases the likelihood that rivals respond by cutting fees, waiving them for a period, or leaning harder on distribution to protect flows. For investors, that can mean cheaper access to bitcoin. For issuers, it means more pressure on margins and a tougher fight for scale.
The competitive pressure will not land evenly across the market. It is likely to show up first in products that offer the closest substitute for spot bitcoin exposure, then filter outward to broader crypto-linked funds.
The spillover for other spot bitcoin ETFs is likely more obvious, and the price competition may also affect the appeal of futures-based products such as BITO, since some allocators may prefer lower-cost spot exposure when both are readily accessible.
Effects on crypto-equity and blockchain funds such as BITQ, BLOK, or BKCH are less direct because those products are not simple bitcoin trackers. They offer different exposures and will need to be supported by the view that crypto infrastructure, miners, exchanges, and blockchain enablers deserve a higher valuation or broader investor attention to justify that difference more clearly as spot access becomes easier and cheaper.
MSBT matters most for rival spot-BTC ETFs, differently for BITO as a futures-based alternative, and more indirectly for crypto-equity and ARK-style innovation funds through the institutional-adoption channel.
Note: Not every crypto-adjacent product should be treated as a direct read-through from MSBT. Funds with only limited overlap in exposure, structure, or investor use case may see little immediate impact
Monitor real-time CFD price action of these ETFS on VT Markets APP.
What to watch next
The next phase of crypto-linked funds will likely be shaped by three things:
Fee responses from rivals: Morgan Stanley’s 0.14% fee may force competitors to cut prices, waive fees for a period, or spend more on distribution to defend flows. If that happens, the category moves closer to a scale-driven business where size matters more than novelty.
Flow durability: A strong launch gets attention, but lasting inflows matter more than a good first day. If MSBT continues to attract advisor and institutional money, it would suggest that pricing is becoming a more powerful driver of market share.
Market concentration: If assets cluster around a small group of very large issuers, smaller players may find it harder to defend economics. Lower fees favour firms with the strongest distribution, the deepest trading infrastructure, and the broadest balance-sheet support.
Morgan Stanley’s launch does not change bitcoin itself. It changes who is now willing to package, distribute, and compete around bitcoin exposure. The asset is becoming more established in traditional portfolios, but the business built around that access is starting to look more crowded, more price-sensitive, and less forgiving. That may be a positive shift for investors, who stand to benefit from cheaper and more familiar access. For issuers, it points to a tougher market where scale, distribution, and staying power will matter more than ever.
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Click for Quick Recap!
What is Morgan Stanley’s Bitcoin ETF? Morgan Stanley’s Bitcoin ETF is the Morgan Stanley Bitcoin Trust, or MSBT. It is a spot bitcoin ETF that began trading on NYSE Arca on April 8, 2026, and is designed to track bitcoin’s price.
Why is Morgan Stanley’s MSBT launch important? It shows a major US bank-affiliated asset manager moving beyond access and distribution into directly offering spot bitcoin exposure. That adds to bitcoin’s mainstream acceptance, while also increasing competitive pressure across the bitcoin ETF market.
How does MSBT affect other bitcoin ETFs? The biggest pressure is likely to fall on other spot bitcoin ETFs because they are the closest substitutes. A lower-fee product from a large issuer can make it harder for rivals to justify charging more unless they offer stronger liquidity, distribution, or another clear advantage.
Could MSBT affect BITO and other crypto-linked funds? Yes, but not in the same way. BITO may feel some pressure if investors prefer lower-cost spot bitcoin exposure. Crypto-equity and blockchain funds such as BITQ, BLOK, or BKCH are less directly affected because they offer different exposures rather than simply tracking bitcoin itself.
What should investors watch after the MSBT launch? Focus on three areas: whether rival issuers cut fees, whether MSBT continues attracting inflows after launch, and whether assets keep concentrating among the largest providers. Those signals will show whether the category is becoming more scale-driven and more competitive.
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Gold (XAU/USD) traded near $4,750 on Thursday, after rising above $4,800 to a three-week high the day before. Price action stayed range-bound as markets tracked strain around the US-Iran ceasefire.
Iran’s Parliament Speaker Mohammad Bagher Ghalibaf said three parts of the ceasefire had been violated after Israeli strikes on Lebanon. Iran says Lebanon is covered by the ceasefire, while the US and Israel say it is not, and Tehran warned it could leave the deal if attacks continue.
Ceasefire Tensions And Market Focus
The first round of US-Iran talks is scheduled for Saturday in Pakistan, aimed at a permanent ceasefire and reopening the Strait of Hormuz. Donald Trump said US forces would remain “in place, and around, Iran” until compliance with a “REAL AGREEMENT”.
Oil prices rebounded, keeping inflation worries in view and complicating the Federal Reserve’s rate outlook. March meeting minutes said “most participants” saw conflict risks weakening labour markets and supporting more cuts, while “many” warned higher oil could keep inflation elevated and support hikes.
Core PCE rose 0.4% MoM in February, with the annual rate at 3.0% versus 3.1%, while Q4 GDP was revised to 0.5% from 0.7%. Friday’s CPI is forecast at 0.9% MoM versus 0.3%, with annual inflation seen at 3.3% versus 2.4%.
Technically, XAU/USD sat above the 100-day SMA at $4,673.84 and below the 50-day SMA at $4,914.57, with RSI at 49.33 and ADX at 29.46. A close above $4,914.57 points higher, while a drop below $4,673.84 points lower.
Options Strategy For Volatility
The current standoff over the US-Iran ceasefire places us in a period of high alert, with gold trading in a tight range ahead of crucial negotiations this Saturday. We see the market coiling for a significant move, as a breakdown in talks could easily send gold surging, while a durable peace agreement would likely see prices fall. This binary outcome makes directional bets risky in the immediate term.
Given this uncertainty, we believe the best approach is to trade the expected volatility itself. The CBOE Gold Volatility Index (GVZ) has already climbed to 17.8 from 15.2 over the last week, showing market tension is building, yet options are not prohibitively expensive. Strategies like long straddles or strangles, which profit from a large price move in either direction, seem particularly well-suited for the coming weeks.
We see the risk as being skewed toward a price spike, especially with Friday’s US CPI report expected to show inflation accelerating to 3.3%. This is compounded by the fact that WTI crude has already reclaimed $112 a barrel this week, putting renewed pressure on the Federal Reserve. We have noted a significant increase in open interest for gold call options with strike prices above $4,950, indicating traders are positioning for a bullish breakout.
Conversely, any surprisingly positive news from the negotiations in Pakistan could quickly deflate gold’s geopolitical risk premium. A confirmed reopening of the Strait of Hormuz would be a major catalyst for a move down, targeting the 100-day moving average support near $4,674. Traders could consider buying puts as a hedge or a speculative bet on a lasting peace agreement.
We must remember the price action from early 2022, when geopolitical events caused sudden and dramatic spikes in gold that were difficult to capture without being pre-positioned. That historical precedent suggests that waiting for confirmation after a headline breaks will be too late. Using options now allows us to define our risk while gaining exposure to the potential for a powerful move driven by either the ceasefire status or inflation data.
The US dollar steadied after Iran said a ceasefire had been violated, which helped reverse a small part of earlier losses. The episode points to ongoing uncertainty and the risk of brief flare-ups even if the conflict moves towards wider resolution.
Federal Reserve minutes prompted a mild hawkish shift in market pricing. Swap rates now imply 7bp of easing by year-end, down from 15bp earlier the same day.
Fed Minutes Shift Dollar Narrative
The minutes also referred to two-way risks linked to the war, including the option of faster rate cuts if job losses rise faster than inflation. This leaves room for further changes in expectations towards lower rates.
Market moves remain driven by news headlines. Evidence that shipping traffic through the Strait of Hormuz is increasing could weigh on the dollar.
A more sustained move may depend on whether the ceasefire becomes longer-lasting. If not, market nerves may rise again as the two-week ceasefire approaches expiry.
The article was produced using an artificial intelligence tool and checked by an editor.
Derivatives Traders Reassess Summer Cut Risks
Looking back at the situation in early 2025, we were dealing with significant dollar volatility tied to a ceasefire in the Gulf. This reminds us that geopolitical headlines can create short-term trading opportunities, even when the broader trend is driven by macroeconomics. The market was trying to decipher if the Federal Reserve would pivot dovishly due to a weakening job market.
The dovish repricing mentioned in the report did eventually happen, but not as quickly as some had anticipated. We recall that the Fed held rates at a peak of 5.50% before finally beginning its easing cycle in the second half of 2025. This historical hesitation is important, as it shows the Fed’s reluctance to cut rates prematurely while inflation remains a concern.
Today, with the Fed funds rate sitting lower, derivative traders should be cautious about pricing in aggressive new cuts. Recent data shows US inflation remains persistent, with the latest CPI figure at 2.9%, while the last jobs report added a robust 215,000 positions. This suggests the Fed may pause its easing cycle, creating opportunities to use options to bet against overly dovish market expectations for the summer.
We are also seeing echoes of the geopolitical risks from 2025. Tensions surrounding the Strait of Hormuz are resurfacing, which has already pushed WTI crude prices back above $80 a barrel in recent weeks. The CBOE Crude Oil Volatility Index (OVX) has ticked up nearly 15% in the last month, indicating that the energy market is bracing for potential disruption.
This renewed uncertainty makes long volatility strategies on the US dollar attractive again. Traders should consider using options on currency pairs like USD/JPY, as its sensitivity to both interest rate differentials and risk sentiment is high. Buying straddles or strangles could be an effective way to profit from a significant move, regardless of whether it’s driven by a Fed surprise or a flare-up in the Gulf.
