TD Securities said global copper deficits may increasingly be met by drawing down exchange warehouse stocks. It said off-exchange inventories have been used in past years to smooth supply and demand gaps. It reported that at the end of 2023, exchange inventories were about 5% of global above-ground copper. It said this share is now roughly 33% of the above-ground stockpile. It said the remaining 67% of above-ground copper is largely not freely available. It listed three constraints: China’s Strategic Reserve Bureau holdings, minimum working inventory needs, and US inventories that are landlocked. It said these conditions could push more demand towards visible exchange stocks. It reported the piece was produced with help from an AI tool and reviewed by an editor. For years, we could rely on abundant off-exchange copper inventories to absorb any supply shocks. That buffer is now gone, meaning any global deficit will pull metal directly from exchange warehouses like the LME and COMEX. This is a fundamental shift in the market’s structure. We are already seeing this happen, as combined exchange inventories have been steadily draining since the start of the year, recently dipping below 150,000 tonnes globally. This is a critically low level, especially when we remember the supply disruptions at several major South American mines that plagued the market throughout 2025. The safety net we once had has worn thin. A significant portion of the remaining copper stockpile is not actually available for the market, as it is held by China’s strategic reserves or is the minimum required for industrial operations. This means the pool of readily tradable copper is far smaller than headline figures suggest. The market is therefore much tighter than it appears on the surface. This situation strongly suggests a bullish stance on copper derivatives in the weeks ahead, with a high probability of increased price volatility. Long call options or bull call spreads could be effective strategies to position for a potential price squeeze. Any unexpected increase in demand or supply hiccup will now have a much more immediate and dramatic effect on prices. The continued push for electrification, which saw global EV sales in 2025 again exceed expectations, provides a powerful and consistent demand driver. This structural demand hitting a market with historically low *available* inventories creates a recipe for a sharp move upward. We need to be positioned for this crunch.

Start trading now – Click here to create your real VT Markets account

Euro area industrial production fell 1.5% month on month in January, despite stronger manufacturing PMIs and improved German new orders. The decline was mainly due to pharmaceuticals and energy-intensive industries. Pharmaceutical output dropped 16% month on month, reaching its lowest level since mid-2024. This accounted for about two-thirds of the overall fall, after earlier support from higher exports to the US around “Liberation Day”, and while demand for weight-loss drugs stayed strong.

Industrial Production Drivers

Energy-intensive industries fell 3.4% month on month to a record low since 2009. Output is about 13% below pre-Ukraine-war levels, with added pressure from oil and LNG price swings linked to the conflict in Iran. German fiscal stimulus, AI-related capital spending, a housing upturn and steady consumption are expected to support a wider recovery. US tariff effects are described as largely absorbed, with output expected to move back in line with rising domestic demand over time. The sharp drop in January’s industrial production was a surprise, especially after the modest recovery we saw in the second half of 2025. This backward step is at odds with improving sentiment, like the latest February 2026 flash manufacturing PMI which just came in at 50.8, its third month of expansion. This creates uncertainty, suggesting that volatility, as measured by indices like the VSTOXX, may rise, making options strategies attractive. We need to look at the details, as two sectors are responsible for most of the weakness. The massive 16% monthly fall in pharmaceuticals seems like a one-off correction after its strong export performance in 2025, and a rebound is very likely. This temporary dip could present an opportunity for buying short-dated call options on major European pharmaceutical stocks or healthcare-focused ETFs.

Sector Divergence Trades

On the other hand, energy-intensive industries continue to suffer, hitting their lowest production levels since the 2009 crisis. With Brent crude prices hovering around $95 a barrel due to persistent geopolitical tensions, this sector will probably continue to underperform in the medium term. This makes the sector a candidate for bearish positions, perhaps through put options or by shorting industrial metals futures. Despite these pockets of weakness, the broader outlook for a cyclical recovery remains intact. We see support from the German fiscal stimulus that started to take effect late last year, rising investment in AI infrastructure, and resilient consumer spending. Therefore, using the weak headline industrial number to place large bearish bets on broad indices like the Euro Stoxx 50 seems premature. The best approach in the coming weeks is to trade the divergence between sectors instead of making a single bet on the market’s direction. We expect industrial output to eventually align with the healthier domestic demand that has been building since last year. This environment favors pair trades, such as going long on technology and consumer discretionary sectors while taking a short position against the energy-intensive materials sector. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

US industrial production rose by 0.2% month on month in February. This was above the forecast of 0.1%. The release compares the latest monthly change with market expectations. It shows output increased slightly more than predicted.

Resilient Economy Narrative

This slightly stronger-than-expected industrial production figure for February adds to the narrative of a resilient US economy. Combined with last week’s jobs report, which showed a solid 210,000 payrolls added, it suggests underlying demand remains firm. We are seeing this data reinforce the view that the economy is weathering the higher interest rate environment better than many projected back in 2025. For interest rate markets, this pushes the timeline for a first Federal Reserve rate cut further out, likely past the summer months. We should see traders pricing out the probability of a June cut, which government data showed was already down to a 40% chance last week, and looking at SOFR futures to reflect a ‘higher for longer’ stance. This environment makes buying puts on Treasury bond futures an attractive hedge against the Fed maintaining its current policy. In the equity options market, this creates a tricky situation, as good economic news could be viewed as bad for stocks due to rate implications. Implied volatility on S&P 500 options, measured by the VIX index, has already crept up to 15.2 from its low of 14 last month as traders weigh strong corporate fundamentals against delayed rate relief. This suggests considering strategies that favor industrial and materials sectors, which benefit directly from this activity, over rate-sensitive growth stocks. The direct read-through for commodities is bullish, particularly for industrial metals and energy. With copper prices already testing the $4.50/lb resistance level we last saw in mid-2025, this production data provides fundamental support for a potential breakout. Traders will likely add to long positions in crude oil futures, anticipating increased demand, as recent government statistics showed US refinery inputs have ticked up for three consecutive weeks. Overall, the immediate response should be to reduce exposure to assets that are highly sensitive to imminent rate cuts. We need to watch the upcoming CPI inflation data for February very closely, as another hot print above the recent 3.1% trend would cement the Fed’s hawkish pause. Therefore, positioning for continued economic strength through industrial sector calls or commodity futures, while hedging against stubborn interest rates, appears to be the prudent path.

Positioning And Key Watchpoints

Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

US capacity utilisation was expected to be 76.2% in February. It came in at 76.3%. The reading was 0.1 percentage points above the forecast. The report states capacity utilisation was above expectations in February.

Implications For Fed Policy

The February capacity utilization figure, coming in slightly hotter than expected, suggests the US economy has more underlying strength than previously priced in. This immediately puts the Federal Reserve’s policy path under a microscope for the coming weeks. We must consider that this reduces the probability of near-term interest rate cuts. This data point echoes the situation we saw through much of 2025, where resilient economic activity kept the Fed from easing policy as soon as markets had hoped. A busier industrial sector can create upstream price pressures, a key concern for central bankers. Therefore, traders should anticipate a more hawkish tone in upcoming Fed communications. This report adds to other recent data, like the February ISM Manufacturing PMI which registered 51.2, and a core CPI that remains stubbornly above 3%. These figures collectively challenge the disinflation narrative that was building early in the year. We should now consider trades that benefit from higher-for-longer rates, such as selling short-term interest rate futures. For equity derivative traders, this points to potential strength in the industrial and materials sectors. The increased factory output is a direct positive, meaning call options on ETFs like XLI (Industrial Select Sector SPDR Fund) could see increased interest. This is a direct play on continued operational strength in the manufacturing economy. Conversely, the threat of sustained higher interest rates will likely weigh on growth-oriented sectors like technology. We should be cautious about over-exposure to rate-sensitive assets. Hedging long portfolios with put options on the Nasdaq 100 index may be a prudent strategy against a market correction driven by renewed rate fears.

Volatility And Positioning

The overall conflict between strong economic data and hawkish monetary policy is a recipe for increased market choppiness. This uncertainty suggests a potential rise in the VIX from its current levels. We could see opportunities in buying VIX call options to hedge against or speculate on a spike in volatility leading into the next FOMC meeting. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Oil markets have been repriced for a longer disruption to flows through the Strait of Hormuz. The International Energy Agency puts current shut-ins at about 8m barrels a day (b/d) of crude output. A prolonged disruption could lead producers to cut upstream supply further to manage storage limits. Further shut-ins could delay a return to normal even if the strait reopens, because output would take time to ramp up.

Implications For Upstream Supply

Any extra supply response from the US is expected to be delayed and limited. It could take at least six months for additional US supply to come online, and volumes would be a fraction of current losses. OPEC spare capacity is described as having limited practical use if oil cannot move through the strait. Most spare capacity is located in the Persian Gulf. One scenario assumes energy flows remain close to a full standstill until the end of May. It then assumes a gradual recovery between June and August, with prices rising to record highs and staying elevated to balance the market through demand destruction. With Brent crude trading this morning near $145 a barrel, we must accept that the disruption to flows in the Strait of Hormuz will be prolonged. The failure of the Geneva talks last week signals that a quick resolution is unlikely, forcing markets to reprice for a sustained supply shock. This is not a short-term event, and trading strategies should reflect a new, higher-priced reality for oil.

Market Balance And Demand

The physical market is incredibly tight, with around 8 million barrels per day of production remaining shut-in. Most of OPEC’s spare capacity is located inside the Persian Gulf, making it useless until the strait reopens. This is a far more severe situation than the supply shock we saw back in 2022, as the tools to mitigate it are severely limited. A supply response from the United States will not arrive in time to make a difference in the coming months. Baker Hughes data from last Friday showed a gain of only 5 oil rigs, a tepid response given that prices have been in the triple digits for weeks. Unlike the rapid shale growth we witnessed after 2011, capital discipline and supply chain constraints are preventing a quick ramp-up this time. The futures market is pricing in this extreme scarcity, with the front-month contract trading at a steep $5 premium to the six-month contract. This backwardation indicates traders are paying anything to secure immediate barrels, a situation reinforced by last week’s smaller-than-expected 15-million-barrel release from the Strategic Petroleum Reserve. It shows that governments are now trying to conserve their emergency stockpiles. Ultimately, the market will have to be balanced by destroying demand, which requires prices to remain elevated. The latest IEA report showed a preliminary 1.5 million barrel per day drop in global demand for February, but this is a fraction of the ongoing supply loss. Therefore, any dip in prices should be viewed as a buying opportunity, as the fundamental supply deficit is nowhere near being resolved. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Chinese demand for silver has kept the Shanghai import arbitrage window open, supporting international buying linked to profitable import trades. The window has remained open since the period just before the war in Iran. Recent price gaps on SHFE have drawn inventories back into exchange vaults. This has eased concerns about domestic scarcity as off-exchange stocks move into SHFE warehouses. CME warehouse stocks have fallen, but inventories still total 345mn oz. Dealer short futures positions are 125mn oz, which could be fully covered by physical metal in the correct jurisdiction, while leaving 220mn oz remaining in CME warehouses. The market narrative is described as moving towards higher inventory coverage. This is linked to shrinking deficits and a rising global free float. We continue to see the Shanghai arbitrage window remain open, which has supported silver prices by drawing metal to China. This was a powerful driver last year following the conflict in Iran, and recent data from early March 2026 shows the Shanghai premium holding around 5-7%. However, inventories are now flowing back into SHFE warehouses, suggesting that acute domestic scarcity concerns are easing. The draws on CME warehouses have been notable, but we must not overstate their impact on the broader market. As of this week, CME registered vaults still hold approximately 320 million ounces, providing more than enough coverage for dealer short positions. This ample supply reinforces the view that a physical squeeze, like the one attempted back in 2021, is highly unlikely in the current environment. This situation suggests that a cap may be forming on silver’s upside potential in the near term. With plenty of physical metal available to meet contractual obligations, explosive price rallies will be difficult to sustain. Derivative traders should therefore be cautious about chasing upward momentum and consider that price spikes may be opportunities to sell into strength. Looking back, the market narrative has clearly shifted from what we saw in 2025. Instead of focusing on tight supply, the story is now about rising inventory coverage thanks to smaller deficits and more freely available metal. We see this reflected in recent industrial production data from China, which showed a solid but not spectacular 5.5% year-over-year growth for February, indicating steady rather than runaway demand. For the coming weeks, strategies that profit from range-bound price action or limited upside appear most prudent. Selling out-of-the-money call options to collect premium could be an effective strategy for those anticipating sideways movement. Alternatively, traders looking for downside protection or speculation might consider buying put spreads, which offer a defined-risk way to position for a potential pullback toward established support levels.

Start trading now – Click here to create your real VT Markets account

US index futures steadied after early-session gains in Asia and London. Dow and S&P 500 futures moved back above their central pivots, while Nasdaq futures stayed below its pivot, leaving its recovery less complete. Into New York, the focus is on whether price holds above resistance or rotates back into the value area. VIX is near its central pivot at 26.38, so short-term volatility direction may affect how far equities can extend. Dow futures trade at 46,799, with TPO POC 46,760 and VPOC 46,792, inside VAH/VAL 46,820/46,670. Key levels are CP 46,600, UG 46,764–46,866, UR 47,297, LG 46,415–46,301, and LR 45,818. S&P 500 futures trade at 6,667, with TPO POC 6,667 and CP/VPOC 6,627, inside VAH/VAL 6,680/6,655, and up about 0.52% in London. Levels include UG 6,659–6,679, UR 6,764, LG 6,597–6,578, and LR 6,500. Nasdaq futures trade at 24,532, up about 0.54% in London, with TPO POC 24,500 and VPOC 24,526, below CP 24,579, inside VAH/VAL 24,550/24,475. Levels include UG 24,690–24,759, LG 24,475–24,412, UR 25,051, and LR 24,142. VIX trades at 26.25, with CP 26.38, UG 27.80–28.68, and LG 24.80–23.54. The market is trying to repair itself, but we need to watch the Volatility Index (VIX) very closely. The Dow and S&P 500 are in a better spot, but the Nasdaq is lagging behind. This divergence tells us that conviction is low, and the next move depends entirely on whether fear, measured by the VIX, subsides. Our main signal for the coming weeks will be the VIX pivot at 26.38. If volatility stays above this level, we should consider buying protection, like put options on the Nasdaq-100 (via QQQ), which is showing the most weakness. If the VIX breaks down below 25 and heads toward the lower gate near 23.54, that would be a clear signal to reduce defensive positions and look for upside. This elevated volatility didn’t come from nowhere, as we are still dealing with the persistent inflation we saw through late 2025. Last week’s jobs report showed wage growth holding at a stubborn 4.1%, and the latest CPI data for February 2026 came in at 3.5%, higher than expected. This data keeps pressure on the Federal Reserve and justifies why the VIX is holding well above its long-term average of around 19.5. The current environment feels very similar to the choppy markets we navigated back in 2022, where every rally was questioned due to the Fed’s aggressive stance. With the VIX staying above 25, history shows that sharp downward moves can happen with little warning. We should therefore treat any strength in the market with skepticism until volatility truly breaks down. For the stronger Dow and S&P 500, we need to see them hold above their key pivots at 46,600 and 6,627, respectively. If the VIX starts to fall while these levels hold, it would give us confidence to initiate cautious bullish positions, such as call spreads, to play for a move toward their upper ranges. This strategy allows for upside participation while clearly defining our risk if the market suddenly reverses. The Nasdaq remains our primary concern and the best hedge if things turn sour. Until it can reclaim its central pivot at 24,579, it is the most vulnerable to a spike in the VIX. If volatility rises and the Nasdaq fails to take that level, it would confirm a risk-off signal and make puts on the index an effective defensive trade. Over the next few weeks, our strategy should be reactive, not predictive. We must watch if the VIX accepts or rejects its 26.38 pivot, as this will dictate market direction. Trading the edges of the defined ranges—like the pivots and gates—will offer better opportunities than chasing moves in the middle of this uncertain structure.

Start trading now – Click here to create your real VT Markets account

Since 27 February, just before the Middle East conflict began, the Swiss franc has been the seventh best performing G10 currency. It has the same ranking over the past week and on a 1-day view, after the SNB increased warnings about FX intervention. The SNB policy meeting on 19 March is being watched for any change in its messaging on intervention. The ECB policy announcement on the same day is also in focus, as any euro strength after the guidance could ease pressure on EUR/CHF. EUR/CHF has been trading around 0.90 over a 1-to-3-month horizon. It briefly fell below 0.90 during the Asian session and also dipped under 0.90 on 9 March, reaching its lowest level since 15 January 2015. On 15 January 2015, the SNB unexpectedly stopped defending the 1.20 level, which led to a sharp rise in the franc’s value. Market talk links the 0.90 area with potential SNB attention, although the SNB does not state a target level. If the crisis extends or widens, the risk of a move below 0.90 increases. Looking back at the analysis from March 2025, the focus was on the Swiss National Bank (SNB) defending the 0.90 level in EUR/CHF. Today, the situation has evolved significantly, with the pair trading much higher around 0.9450. The core tension is no longer about a floor defense but about the diverging paths of the SNB and the European Central Bank (ECB). The SNB’s stance has become more dovish over the past year, as Swiss inflation fell to just 1.2% in February 2026, well within their target range. This contrasts with the Eurozone, where inflation remains stickier at 2.6%, making the ECB more hesitant to cut interest rates. This policy divergence is a key factor supporting a higher EUR/CHF exchange rate compared to the lows we saw in 2025. For derivative traders, this changes the game from defense to managed offense. With the intense pressure off the 0.90 floor, one-month implied volatility has calmed to around 4.8%, far below the peaks seen during the geopolitical tensions of early 2025. Selling out-of-the-money puts, such as those with a 0.9200 strike, could be a strategy to collect premium while reflecting the view that the SNB will prevent significant franc strengthening. The franc’s classic safe-haven status remains muted, a theme that has continued since last year. During the recent shipping lane disruptions in late 2025, the franc’s rally was notably weaker than that of the US dollar, confirming the market’s belief that the SNB’s tolerance for a stronger currency is extremely low. This institutional pressure effectively caps the franc’s appeal during times of global stress. Given this context, we see opportunities in strategies that profit from either a slow grind higher or range-bound price action in EUR/CHF. A bull call spread, buying a 0.9500 call and selling a 0.9650 call, offers a defined-risk way to position for further modest upside driven by central bank policy. This approach is far different from the nervous selling of puts near the 0.90 “line in the sand” that defined trading a year ago.

Start trading now – Click here to create your real VT Markets account

Silver (XAG/USD) traded near $79.70 on Monday at the time of writing, down 1.12% on the day. Trading was subdued ahead of monetary policy decisions from major central banks, with attention on the US Federal Reserve. Markets expect the Fed to keep its benchmark interest rate unchanged at 3.50%–3.75% at Wednesday’s meeting, according to the CME FedWatch tool. If that happens, it would be the second straight hold after the previous easing cycle. A longer pause in rate cuts can weigh on non-yielding assets such as Silver. Higher expected interest rates raise the opportunity cost of holding precious metals. Inflation worries linked to rising energy prices are also affecting market pricing. Middle East tensions have lifted Oil prices and increased concerns about ongoing inflation pressure. Higher US petrol prices are adding to household costs and may keep inflation expectations elevated. This can support expectations that policy will stay restrictive for longer. Geopolitical events are also influencing sentiment in precious metals. The US targeted Iran’s main Oil export hub on Kharg Island, raising concerns about supply disruption. Washington has said the conflict could end within weeks and has discussed an international coalition to protect shipping in the Strait of Hormuz. Ongoing tensions are still creating uncertainty, which can support demand for safe-haven assets such as Silver. We are watching silver closely as it fluctuates around the $25.50 mark this week. Much like the situation we saw back in 2025, the market is caught between two opposing forces. Traders are weighing the Federal Reserve’s next policy move against a backdrop of lingering global risks. Last year, we were dealing with the Fed pausing its easing cycle with rates around 3.50%-3.75%, which capped silver’s potential. Now in March 2026, even after rates have been cut to the 3.00%-3.25% range, the latest Consumer Price Index reading of 3.4% has traders reducing bets on another cut in May. This renewed prospect of higher-for-longer rates creates a headwind for non-yielding silver. Inflationary pressures, while lower than their peaks, remain a primary concern for policymakers. While WTI crude oil prices have stabilized below the highs seen during the Middle East tensions of 2025, they remain elevated enough to influence household costs. This stickiness in inflation supports the view that the Fed will remain cautious, limiting the upside for precious metals in the near term. However, we cannot ignore the geopolitical floor that continues to support silver prices. Looking back to the tensions surrounding Iran’s oil exports in 2025, we see how safe-haven demand can quickly emerge and cushion declines. While the international coalition has maintained shipping security, the underlying risk in the region persists, providing a reason for traders to maintain some exposure to precious metals. For derivative traders, this environment suggests that buying outright calls could be risky given the pressure from interest rate expectations. Instead, strategies like purchasing protective puts to hedge long positions or considering call spreads could manage risk while allowing for potential gains if prices move higher on unexpected news. The high level of uncertainty also makes volatility plays, like straddles, an option for those anticipating a sharp price move in either direction after the next Fed announcement.

Start trading now – Click here to create your real VT Markets account

Canada’s Consumer Price Index rose 1.8% year on year in February, down from 2.3% in January and below the 2.1% forecast. Prices increased 0.5% month on month. The Bank of Canada’s core CPI rose 2.3% year on year and 0.4% month on month. Other gauges eased: Common CPI was 2.4% (from 2.7%), Trimmed CPI 2.3% (from 2.4%), and Median CPI 2.3% (from 2.5%). Statistics Canada linked the slower annual rate to a base effect tied to the end of the GST/HST break partway through February 2025. That one-off monthly rise dropped out of the 12-month comparison in February 2026. The CPI release was scheduled for 12:30 GMT, ahead of the Bank of Canada’s 18 March meeting, where the policy rate was expected to stay at 2.25%. Earlier estimates looked for February CPI at 2.1% year on year and core CPI at 2.4% (after 2.6%). After the data, the Canadian dollar strengthened and USD/CAD moved below 1.3700 amid a broader US dollar pullback. Levels cited included 1.3750, 1.3752, 1.3800, 1.3810 and 1.3928 on the upside, and 1.3525, 1.3504 and 1.3481 on the downside, with RSI near 59 and ADX near 14. The February inflation report showing a drop to 1.8% has significantly shifted short-term expectations for the Bank of Canada. While we knew a base-year effect from the 2025 tax changes would play a role, the dip below the 2% target was sharper than anticipated. Consequently, the overnight index swaps market is now pricing in a near-zero chance of a hike this year and has pulled forward the timing of a potential rate cut into the third quarter. With the Canadian dollar strengthening past the 1.3700 level against the US dollar, we should consider strategies that benefit from lower volatility. The surprise in this data point is now known, so implied volatility on one-month USD/CAD options, which spiked to over 7.5% just before the announcement, may begin to decline. This could make selling strangles an attractive strategy for those who believe the currency pair will now consolidate in a new, lower range. However, we must not ignore that core inflation measures, while easing, remain stubbornly above 2.3%, which will keep the Bank of Canada cautious. This stickiness, combined with the latest Labour Force Survey data showing the unemployment rate ticking up slightly to 6.2%, paints a picture of a slowing but not collapsing economy. This suggests the central bank will wait for more data before committing to a rate cut, making aggressive bearish CAD positions risky. Looking back, we saw a similar situation in 2015 when the BoC began cutting rates in response to the oil price shock, even while some core inflation metrics were above target. That history suggests the Bank is willing to act pre-emptively based on its growth outlook, not just the current inflation reading. Therefore, traders should be positioned for a dovish shift in the Bank’s tone this Wednesday, potentially using call options on three-month Canadian Bankers’ Acceptance futures (BAX) to speculate on falling interest rates later this year.

Start trading now – Click here to create your real VT Markets account