NZD/USD trades near 0.5810 in Asian hours on Monday, holding gains after four days of declines and staying above 0.5800. The New Zealand Dollar is supported by fresh economic data from China, a major trade partner. China’s National Bureau of Statistics reported Retail Sales up 2.8% year-on-year in February, above the 2.5% forecast and higher than December’s 0.9%. Industrial Production rose 6.3% year-on-year, beating the 5.1% forecast and the prior 5.2% reading.

Rbnz Rate Path In Focus

Markets are assessing the chance of a Reserve Bank of New Zealand rate rise this year as higher oil prices linked to the Middle East conflict feed into petrol costs and airfares. Pricing implies a 25-basis-point rise in September and more than a 70% probability of another increase in December. The US Dollar softens as risk aversion eases after reports the US may form a coalition to escort ships through the Strait of Hormuz. US Energy Secretary Chris Wright said the US-Israel conflict with Iran could end within “the next few weeks”, which could support oil supply and reduce energy prices. Looking back at the end of 2025, we saw the NZD strengthen on the back of surprisingly strong Chinese industrial and retail data. This, combined with high oil prices from the Middle East conflict at the time, pushed traders to price in aggressive rate hikes from the Reserve Bank of New Zealand. That hawkish sentiment helped keep the NZD/USD pair floating above the 0.5800 level. However, the situation has shifted significantly as we stand here in March 2026. The RBNZ’s rate hike in late 2025 has deepened New Zealand’s economic slowdown, which is now confirmed in the latest data. Statistics New Zealand’s figures showed GDP contracted by 0.2% in the final quarter of 2025, forcing the market to completely reverse its view and now anticipate rate cuts later this year.

China Demand And Usd Drivers

The anticipated support from China has also proven to be less robust than we hoped. The most recent Caixin Manufacturing PMI for February came in at just 50.9, indicating only marginal expansion and highlighting ongoing struggles in their economy. This means the NZD can no longer rely on strong demand from its largest trading partner to drive its value higher. On the other side of the equation, the US dollar’s direction is now the main event, with the Federal Reserve signaling potential rate cuts starting mid-year. The CME FedWatch tool is showing over a 65% probability of a rate cut by the July meeting, which is capping any significant USD strength. This tug-of-war between a weak NZD and a potentially weakening USD suggests buying volatility through options like straddles could be a prudent strategy for the coming weeks. Create your live VT Markets account and start trading now.

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Crude oil edged lower after a bullish open, while the US Dollar Index eased early Monday after rising by more than 1.5% last week. Data due include Canada’s February CPI, plus US February Industrial Production and the March NY Empire State Manufacturing Index. Policy meetings later this week include the RBA, BoC, Fed, ECB, BoE and BoJ. Over the weekend, the US military struck targets on Iran’s Kharg Island and warned it could hit oil infrastructure if naval disruption in the Strait of Hormuz continues.

Strait Of Hormuz Developments

Trump called on allies to help secure the Strait of Hormuz, and the Wall Street Journal reported the White House was preparing to announce a coalition to escort ships. EU foreign ministers are debating a naval response, and the UK plans to send minesweeping drones. Japan’s Prime Minister Sanae Takaichi said options to protect Japanese vessels are being explored, with no current plan to dispatch the navy. US Energy Secretary Chris Wright said he expects the conflict to end within the next few weeks, with a rebound in oil supplies and then lower prices. WTI tested $100 and retreated towards $98. The USD Index traded near 100.30 after topping 100.50 on Friday, its highest since May. Gold fell nearly 3% last week, dipped below $4,970, then moved back above $5,000. EUR/USD recovered towards 1.1450, GBP/USD held near 1.3250, and AUD/USD rose more than 0.5% above 0.7000, with a 25 bp RBA rise to 4.1% expected.

Key Market Levels And Moves

USD/JPY rose more than 1% last week, then slipped below 159.50; Japan’s finance minister said officials were ready to take decisive FX steps. Looking back to this time in 2025, we saw oil prices surge towards $100 a barrel on fears of the Strait of Hormuz closing. That conflict did escalate through the spring of 2025, briefly pushing WTI above $115 before a coalition-led naval presence restored supply confidence. With WTI now trading around $85 a barrel and global inventories stable, traders should consider that the peak geopolitical risk has passed, making strategies that profit from range-bound price action, like selling strangles, more attractive. A year ago, we were bracing for a week of coordinated interest rate hikes from nearly every major central bank. Today in March 2026, the story has completely flipped, with the market now pricing in a 60% chance of a Federal Reserve rate cut by the end of the year, according to CME FedWatch data. This policy divergence from the ECB, which is signaling rates will stay higher for longer, suggests that long EUR/USD positions could continue to perform well. The anxiety in 2025 pushed gold to test the $5,000 level, a base which has since proven to be remarkably firm. Even with Middle East tensions lower than last year, persistent global inflation, which saw US CPI for February 2026 come in at 2.8%, continues to support gold. Traders could view any dips towards the $5,000 mark as opportunities to buy call options, anticipating continued demand from both central banks and investors. We remember Japanese officials threatening intervention as USD/JPY pushed towards 160.00 in March 2025, which they later acted upon. That intervention provided only temporary relief, as the massive interest rate differential has driven the pair back towards 158.50. This pattern suggests that while another intervention is possible, selling USD/JPY put options could be a way to collect premium while betting that the fundamental carry trade will limit any significant downside. The Reserve Bank of Australia was still hiking rates a year ago, but is now firmly on hold with Australian inflation falling to 3.4% last quarter. The RBA’s neutral stance contrasts with the ongoing tightening cycle in some emerging markets. This makes the AUD a potential funding currency for carry trades, for instance, by shorting AUD against the Mexican Peso to capture the favorable interest rate spread. Create your live VT Markets account and start trading now.

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The Australian Dollar is supported by hawkish domestic conditions but faces pressure from global risk aversion linked to the Iran War. AUD/USD support is seen around 0.69 to 0.70. After remarks from Reserve Bank of Australia Deputy Governor Andrew Hauser that the economy was running beyond its sustainable capacity, markets have priced in a back-to-back 25-basis-point rise. This would take the RBA cash rate to 4.10% at the 17 March policy meeting.

Key Drivers For Aud Usd

RBA Governor Michele Bullock has referred to the Iran War as a double-edged factor, prompting a high-alert, data-dependent policy approach. The outlook for AUD/USD is tied to whether the Federal Reserve sounds net dovish and whether the Chinese yuan continues to strengthen. The article states it was produced with the help of an artificial intelligence tool and reviewed by an editor. We see the Australian dollar is caught between our own hawkish central bank and a worsening global risk environment due to the Iran war. With markets fully pricing in a rate hike to 4.10% at tomorrow’s RBA meeting on March 17th, the focus will be on their future guidance. This tension suggests playing volatility, rather than direction, may be the prudent approach for the coming weeks. The RBA’s hawkish stance is backed by the latest data showing inflation remains sticky at 3.6%, well above their target band. However, we also saw the unemployment rate tick up to 4.1% last month, giving the board a reason for caution. This uncertainty makes outright directional bets risky, favouring options strategies like straddles that can profit from a sharp move in either direction post-announcement.

Options And Risk Management

We should remember the sharp downturn back in the third quarter of 2025 when global supply chain fears overshadowed a similarly hawkish RBA. During that period, AUD/USD broke below key support levels despite positive domestic rate differentials. This history suggests traders should consider buying downside protection, such as put options below the 0.6900 level, even if the RBA delivers a hawkish hike. Support around the 0.69-0.70 level is highly dependent on a dovish-sounding Federal Reserve and a strong Chinese Yuan. With recent US inflation data cooling to 2.9%, the Fed may have room to soften its tone, which would weaken the US dollar. The Yuan’s recent appreciation provides a tailwind, but this can reverse quickly on any negative geopolitical news. Create your live VT Markets account and start trading now.

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Brown Brothers Harriman said recent market moves were driven by war-related news, with shipping safety in the Strait of Hormuz acting as a key gauge of risk sentiment. Brent crude oil rose back above $100 a barrel and the US dollar strengthened against all major currencies, pushing DXY to its highest level in nearly ten months. The bank said the dollar has tactical support from safe-haven demand linked to shipping risks and short-term US dollar funding needs. It added that demand for short-term USD funding often rises during stress because the dollar is widely used for trade invoicing, cross-border lending, global bond issuance, and FX reserves.

Dollar Tactical Support And Funding Stress

BBH said it remains cyclically neutral on the US dollar and expects DXY to return to a 96.00–100.00 trading range. It also said DXY has moved beyond the level implied by interest rate differentials between the US and other major economies. BBH maintained a longer-term bearish stance on the dollar, citing weaker confidence in US trade and security policy, worsening US fiscal credibility, and the politicisation of the Federal Reserve. The article stated it was produced using an AI tool and reviewed by an editor. Looking back at the events of 2025, we saw the dollar get a strong tactical bid from haven demand. Tensions surrounding shipping in the Strait of Hormuz pushed Brent crude over $100 and the DXY Dollar Index to a ten-month high. This was a classic flight to safety, where dollar funding needs spiked during a period of intense geopolitical stress. That tactical support for the dollar has now faded as we move through the first quarter of 2026. While the situation in the Strait of Hormuz remains tense, shipping insurance war risk premiums have fallen over 20% from their late 2025 peaks, signaling a decrease in the market’s “peak fear.” Consequently, the short-term, fear-driven demand for US dollars has subsided for now.

Dxy Range Trading And Volatility Setup

The cyclical view from last year has proven correct, as the DXY has since retreated into the predicted 96.00-100.00 range. As of today, the index is trading around 98.60, a level more consistent with the narrowing interest rate differentials between the U.S. and other major economies. Markets are now pricing in at least one Fed rate cut by the end of 2026, a sharp contrast to the hawkish stance seen last year. For derivative traders, this suggests that selling dollar volatility could be a prudent strategy in the coming weeks. With the DXY expected to remain range-bound, option-selling strategies like short strangles on major pairs such as EUR/USD or USD/JPY could be effective. These positions would profit from sideways price action and declining implied volatility. However, the long-held structural bearish view on the dollar is becoming more relevant. Worsening US fiscal credibility is a key factor, with the latest Congressional Budget Office report from February 2026 projecting the US debt-to-GDP ratio to hit 109% by year-end. This ongoing concern, combined with the politicization of economic policy ahead of the midterm elections, weighs on the dollar’s long-term appeal. Therefore, traders should also consider establishing longer-term bearish positions on the dollar. Buying long-dated put options on the DXY or dollar-tracking ETFs with expiries of six months or more offers a low-cost way to position for a potential breakdown below the 96.00 support level. This strategy allows one to capitalize on the structural weakness we see building, should it accelerate later in the year. Create your live VT Markets account and start trading now.

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Societe Generale economists expect the European Central Bank (ECB) to leave policy unchanged this week, while using a hawkish tone as it assesses the recent rise in oil prices. They see the current oil shock as smaller than past episodes, but with a risk it could persist if Iran restricts flows through the Strait of Hormuz. At current levels, oil prices are stated to be below historical highs, and even lower once inflation is considered. European economies are described as having reached peak oil use in the 1990s, with consumption now a third lower than it was.

Oil Shock Scale And Structural Cushion

The note says oil prices would need to double to reach the scale of earlier oil shocks. It also points to a declining share of fossil fuels in electricity generation as a factor that may reduce the economic impact. The ECB meeting on Thursday is expected to focus on whether the energy price jump is temporary or lasting, and how it may affect the economy. It is described as too early to conclude whether weaker growth would limit second-round inflation effects, or whether resilience would lead to a tighter stance. The European Central Bank will likely keep policy unchanged this week but maintain a hawkish tone while it assesses the recent oil price surge. With Brent crude having climbed to around $110 per barrel, the key question is whether this energy shock will prove temporary. This uncertainty from the central bank creates an environment where derivative traders should be focused on volatility. We see this directly in the market, with implied volatility on Euro Stoxx 50 options, as measured by the VSTOXX index, rising above 20. Traders should consider using options to position for a significant market move, as the ECB’s ultimate decision could swing sentiment sharply in either direction. This is a classic setup for strategies that profit from a breakout rather than a specific directional bet.

What Traders Watch Next

Looking back from our perspective in 2025, we all remember how the 2022 energy crisis forced the ECB into a rapid rate-hiking cycle that caught many off guard. That historical precedent is precisely why the central bank will be so cautious about underestimating second-round inflation effects this time. This memory is keeping markets on edge for any signs of a repeat policy response. However, the economic shock may be more muted today, as European oil consumption is substantially lower than it was during past crises. With renewables now accounting for over 45% of electricity generation in the bloc, the economy has a much larger cushion. At current levels, oil prices would likely need to double again to truly match the economic impact of previous shocks. Given this tension, traders should be watching derivatives tied to short-term interest rates, such as Euribor futures, for signs of a policy shift. Options on the EUR/USD pair will also be highly sensitive to any change in tone from the ECB relative to the US Federal Reserve. The main play is to position for the resolution of this uncertainty over the next several weeks. Create your live VT Markets account and start trading now.

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AUD/USD rose 0.5% to about 0.7015 in early European trading on Monday. It rebounded after a two-day sell-off as the Australian dollar gained on expectations of an interest rate rise by the Reserve Bank of Australia (RBA) on Tuesday. The RBA is expected to lift the Official Cash Rate by 25 basis points to 4.1%. In February, it raised the rate by 25 basis points to 3.85% and signalled further rises due to inflation risks.

Oil Prices And Inflation Expectations

Oil prices have risen in recent weeks after the closure of the Strait of Hormuz during Middle East conflicts involving the US, Israel, and Iran. Higher oil prices have also pushed up inflation expectations globally. The US dollar eased after a strong rally ahead of the Federal Reserve decision on Wednesday. The Fed is expected to keep rates unchanged at 3.50%–3.75%. AUD/USD is near 0.7015 and sits close to the 20-day exponential moving average at about 0.7053. The 14-day RSI is between 40.00 and 60.00 after dropping from the 60.00–80.00 range. Resistance is near 0.7100, with a cap at 0.7120–0.7150, and a break could target the mid-0.72s. Support levels are 0.6944, then 0.6900, with downside risk towards 0.6770–0.6800 if it falls further.

Market Context Then And Now

We remember the setup in March of last year, when expectations of a hawkish Reserve Bank of Australia had the AUD/USD pushing above 0.7000. The market was betting on rate hikes to combat inflation, which was being fueled by a spike in oil prices. Today, the picture is quite different, with the pair struggling to hold ground near 0.6650 as rate cut speculation grows. The RBA did follow through with hikes in 2025, but with Australia’s latest quarterly inflation figures cooling to 3.1%, we now see the market pricing in at least one rate cut by the end of this year. In contrast, the US Federal Reserve remains cautious with rates holding at 4.00-4.25%, as core services inflation proves stickier than anticipated. This widening interest rate differential in favor of the US dollar creates a significant headwind for any AUD/USD rallies. While the geopolitical oil shock of 2025 was a primary driver for the Aussie then, that pressure has since eased. We are now more focused on key industrial commodity prices, and recent data shows iron ore futures have slipped over 15% this quarter on weaker global demand forecasts. This weighs heavily on Australia’s terms of trade and puts a natural cap on the currency’s strength. Given this backdrop, we should consider positioning for further downside or limited upside in the AUD/USD over the coming weeks. Buying put options with strike prices around 0.6600 could offer a cost-effective way to profit from a break of current support levels. For those less bearish, selling out-of-the-money call options with a strike near 0.6800 allows for collecting premium while defining a clear resistance point we do not expect to be breached. Create your live VT Markets account and start trading now.

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WTI crude traded near $97.85 in early European trading on Monday, rising amid reports that the US administration is weighing military strikes on Iran’s main oil export facilities on Kharg Island. Markets are also awaiting the American Petroleum Institute’s weekly inventory report, due on Tuesday. The move followed US action against Iran’s Kharg Island oil hub and calls for allied naval support to keep the Strait of Hormuz open. The route has been effectively closed since US–Israel operations began on 28 February.

Escalation And Market Focus

Donald Trump said the US is discussing patrols with other countries and that Israel is working with the US on security in the area. He also warned that attacks could extend to energy infrastructure if Iran disrupts transit through Hormuz. The International Energy Agency announced a record release of 400 million barrels from strategic reserves to ease supply concerns. The IEA said the coordinated release can add short-term supply and limit sharp rises in oil prices. With WTI oil nearing $98 a barrel, we are facing a classic conflict between geopolitical supply shocks and coordinated market intervention. The military strikes on Iranian facilities are a significant escalation, creating a high-risk environment for oil supply. This uncertainty means volatility is the only guarantee in the coming weeks. Implied volatility in crude oil options will likely surge to levels we have not seen since the outbreak of the Ukraine war in 2022. Back then, the CBOE Crude Oil Volatility Index (OVX) spiked dramatically as prices shot past $120 per barrel. We should prepare for similar market behavior, meaning options strategies that profit from large price swings, regardless of direction, could be advantageous. For those anticipating further escalation, buying call options is a direct way to bet on higher prices. We only have to look back to the initial months of the 2022 conflict to see how a major military event can overwhelm initial economic countermeasures. A prolonged closure of the Strait of Hormuz, through which about 21% of global oil passes, would make the IEA’s reserve release seem small in comparison.

Key Catalysts And Positioning

Conversely, the IEA’s planned release of 400 million barrels is a historically massive figure, much larger than the 240 million barrels released by members throughout 2022. That previous release did help cool prices from their peaks, showing that such measures can be effective over time. Traders who believe this supply injection will successfully cap prices may see this as an opportunity to buy put options, positioning for a price drop if the conflict de-escalates. In the immediate term, this week’s American Petroleum Institute (API) report will be a critical data point. Any unexpected build in crude inventories could provide a temporary ceiling on prices and give bears confidence. A significant draw, however, would amplify supply fears and could easily push WTI crude over the $100 psychological barrier. Create your live VT Markets account and start trading now.

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The Japanese yen has weakened only modestly against the US dollar despite higher energy prices, while it has edged up against the euro. USD/JPY is nearing 160, but the yen is down just over 2% versus the dollar since the start of the month. Oil and gas imports account for almost 3% of Japan’s GDP, based on last year when energy prices were low. In 2022, these imports were around 4% of GDP, and a prolonged conflict could add further pressure to the yen.

Market Focus On The Bank Of Japan

Markets are also watching the Bank of Japan meeting on Thursday, its second policy meeting of the year. Rates are widely expected to stay unchanged, while markets price about a 70% chance of a hike in April. A clear statement from the BoJ could support expectations for an April move and strengthen the yen. If policymakers remain cautious, markets may reduce those expectations next week, which could weaken the yen. USD/JPY may test 160 this week, with attention on the chance of government action if that happens. The article also notes near-term swings in the exchange rate. The Japanese yen has been under pressure, but not as much as one might think given the recent surge in energy costs. With WTI crude oil prices climbing back above $95 a barrel, a 15% increase since the start of the year, the yen’s relative stability is noteworthy. We are now watching USD/JPY rapidly approach the 170 level, a major psychological barrier.

Intervention Risks And Volatility Outlook

This market tension is fueled by conflicting domestic data. The latest figures from the Statistics Bureau of Japan show that core inflation for February remained sticky at 2.2%, keeping pressure on the Bank of Japan to continue its policy normalization. However, this is set against a backdrop of a sluggish economy, which contracted by 0.2% in the final quarter of 2025, making the central bank cautious about hiking rates too quickly. Therefore, all eyes are on the Bank of Japan’s meeting later this week. While we agree with the consensus that rates will remain unchanged, the market is pricing in roughly a 40% chance of a further rate hike in the second quarter. Any dovish language from the BoJ could be seen as a green light for traders to push the dollar higher against the yen. This setup makes it very possible that the market will test the 170 level on USD/JPY in the coming weeks. Derivative traders should recall the Ministry of Finance’s direct intervention in the currency market during the autumn of 2024 when the rate broke above 160. A similar response is possible, which could cause a sharp and sudden reversal. In the medium term, we still expect a stronger yen as the BoJ is likely to raise rates further this year while the US Federal Reserve looks to ease. For the time being, however, heightened volatility is the main theme. Options strategies that benefit from large price swings could prove effective in this uncertain environment. Create your live VT Markets account and start trading now.

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India’s wholesale price index (WPI) inflation rose to 2.13% in February. This was above expectations of 2%. The wholesale inflation data for February coming in at 2.13% is a clear signal that price pressures are building faster than anticipated. This is the fourth consecutive month of rising WPI, a sharp reversal from the trend we saw for most of 2025. This uptick will almost certainly force the Reserve Bank of India to adopt a more hawkish tone in its upcoming policy meeting.

Implications For Rate Policy

We need to remember the context of the last year, where the RBI held rates steady throughout 2025, waiting for a decisive fall in inflation that never quite materialized. After seeing strong GDP growth numbers of over 7% in the final quarter of 2025, this persistent inflation makes the case for any near-term rate cuts very weak. The market will now have to adjust its expectations away from accommodation. For interest rate traders, this means positioning for higher yields in the coming weeks. We should consider shorting bond futures or buying overnight indexed swaps, as the market will begin to price out the possibility of a rate cut later this year. This upward pressure on rates is likely to accelerate as we approach the next policy announcement. On the equity side, this inflation data serves as a potential headwind for the Nifty 50. The strong market rally we experienced in late 2025 was partly built on the hope of future rate cuts, which now seems unlikely. We should look at buying put options on the Nifty as a hedge or a speculative play on a potential market correction.

Currency Market Considerations

This changing rate outlook could also impact the currency market. A more hawkish RBI stance relative to other central banks could attract capital inflows, putting upward pressure on the Indian Rupee. Therefore, traders could look at selling USD/INR futures, anticipating a move back towards the stronger levels we witnessed in the latter half of 2025. Create your live VT Markets account and start trading now.

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Brent crude prices firmed after US strikes on Iranian military assets near export facilities on Kharg Island, alongside renewed attacks on regional oil assets. The situation increased concern about shipping routes through the Strait of Hormuz and the Red Sea. Kharg Island is the Persian Gulf port where up to 90% of Iranian oil exports are typically loaded onto tankers. Further action involving foreign troops on the ground was discussed as a possible escalation, and Iranian officials said they would respond to attacks on their oil infrastructure.

Risks To Shipping And Supply

Possible disruption in the Red Sea could limit the use of Saudi Arabia’s East–West pipeline, which can redirect 5–7mn bbl/day. That diversion capacity is set against a potential 18–20mn bbl/day supply interruption linked to the Strait of Hormuz. The strikes also raised questions about flows linked to China, with Kharg Island described as the origin point for a large share of China’s oil imports. The report also noted the US is a mostly self-sufficient net energy exporter and is positioned near key maritime chokepoints for Chinese energy imports. The article stated the effects could spread beyond energy into petrochemicals, agriculture, and pharmaceuticals. It also said the piece was produced with an AI tool and reviewed by an editor. Given the US strikes on Iranian military assets near Kharg Island late last year, a significant risk premium is now embedded in oil prices. We have seen Brent crude futures consolidate above $105 per barrel, a sharp increase from the sub-$80 levels seen before the initial attacks in 2025. This elevated price floor reflects the market’s ongoing assessment of a major supply shock.

Trading And Hedging Implications

The current environment is defined by extreme volatility, with the Cboe Crude Oil Volatility Index (OVX) spiking to levels reminiscent of early 2022. Traders should therefore focus on options strategies that benefit from sharp price movements. Buying long-dated call options or vertical call spreads offers a way to capture upside from any further escalation while defining downside risk. The primary concern remains the potential closure of the Strait of Hormuz, a chokepoint for nearly 20% of global oil supply. We know from historical data, such as the 1980s Tanker War, that even minor disruptions in the strait can cause disproportionate price spikes. The inability of the Saudi East-West pipeline to fully compensate for a closure means any direct conflict there would be catastrophic for supply. We are also watching China’s reaction, as the Kharg Island strikes directly threaten a major source of their energy imports. Shipping insurance rates for tankers heading to Asia from the Persian Gulf have reportedly tripled in the past month. This pressure is forcing Chinese buyers to seek more expensive barrels from the Atlantic basin, tightening the entire global market. Opportunities exist in spread trading as well, particularly the Brent-WTI spread, which has widened significantly due to Brent’s direct exposure to Middle East maritime risk. We expect this premium to persist as long as tensions remain high. Traders should also monitor crack spreads, as a sustained crude rally will squeeze margins for refined products like gasoline and diesel, creating separate trading opportunities. Create your live VT Markets account and start trading now.

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