The Canadian dollar weakened after Canadian employment data came in much weaker than expected, alongside concern about developments in the Middle East. US data also softened, but USD/CAD held above 1.37 as the pair continued range trading. Short-term US–Canada yield spreads widened after the jobs release, which could lift the estimated equilibrium for USD/CAD on Monday. Despite the move, the rate remains far from Scotiabank’s fair value estimate, and correlations between the CAD and common drivers are described as weak. Equity market volatility has been offset by higher crude prices, leaving mixed near-term influences on the currency. USD/CAD is still consolidating between 1.3525 and 1.3760, with resistance near 1.3750/60 and support at 1.3525/30. Policy decisions from the Bank of Canada and the Federal Reserve are due on Wednesday. No change in policy rates is expected from either central bank, but the meetings may affect market activity as traders look for guidance. Technically, USD/CAD moved above the 40-day moving average at 1.3658. A bearish outside-range weekly signal from last week remains in place, and longer-run trend oscillators are negative for the US dollar. The Canadian dollar is weakening as we head into mid-March. The recent jobs report from Statistics Canada was a major disappointment, showing a surprising loss of 15,000 jobs in February when we were all expecting a gain. This, combined with renewed geopolitical anxiety in the Middle East, is putting pressure on the loonie. We see the pair continuing to trade within a well-defined range, capped by resistance around 1.3760 with strong support near 1.3525. This consolidation has held firm, similar to what we observed for much of the second half of 2025. Resilient WTI crude prices, currently holding above $85 a barrel, are providing a floor for the CAD and preventing a more significant slide. With both the Bank of Canada and the Federal Reserve set to meet next week, implied volatility is likely elevated. However, as neither central bank is expected to alter its policy rate, this presents an opportunity for selling options premium. Strategies like short straddles or strangles could be effective if you believe the pair will remain contained after the central bank announcements. The US side of the equation is also showing signs of slowing, which should limit significant dollar upside. The latest ISM Services PMI for February 2026 barely stayed in expansion territory, missing expectations and adding to a series of softer US data points. We recall how USD/CAD failed to sustain a break above 1.38 last fall, even with stronger US data at that time. Therefore, we should be looking to fade moves toward the edges of the range. The technical picture remains mixed in the short term, but longer-term signals still suggest the US dollar is struggling to find direction. For now, the most sensible approach is to trade the established consolidation, respecting the support and resistance levels that have defined the market for months.

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Swedish CPIF inflation and CPIF excluding energy were confirmed at low year-on-year rates. Seasonally adjusted core measures stayed well below the 2% target. Core services inflation rose, but overall price pressure remained subdued. Nordea expects core inflation to fall further in the coming months.

Riksbank Policy Outlook

Nordea expects the Riksbank to keep its policy rate unchanged at 1.75% next week. The bank also expects a wait-and-see approach in the near term. The war in the Middle East and higher energy prices are expected to add around 0.5 percentage points to headline CPIF inflation in the near term. This effect is described as not drastic so far and starting from a low base. The article notes that uncertainty remains high. It also states the piece was produced using an AI tool and reviewed by an editor. Looking back to early 2025, we recall a period when stubbornly low inflation kept the Riksbank on the sidelines with its policy rate at 1.75%. Core inflation was expected to fall further, and the main risk was an energy price shock from geopolitical tensions. The dominant view was that the next move in rates would be a cut.

Market Positioning Implications

The situation has now changed significantly, creating new opportunities. This week’s CPIF data for February 2026 showed a jump to 2.4%, well above the 2.0% target and surprising a market that expected 2.1%. This is a stark contrast to the low inflationary pressures we saw throughout 2025. After cutting the policy rate twice in late 2025 to its current 1.25%, the Riksbank is now in a difficult position. Markets are now pricing in at least one rate hike by summer, a sharp reversal from just a few months ago. This pivot is causing considerable movement in Swedish assets. This has caused the Krona to strengthen, with the EUR/SEK pair dropping from 11.50 to near 11.25 over the past two weeks. We are seeing a significant pickup in demand for SEK call options, pushing one-month implied volatility up from around 7% to over 9% as traders position for more currency strength. This suggests buying options to bet on a stronger Krona could be profitable. In the rates market, the most direct play is to position for higher policy rates. Traders should consider paying fixed on 2-year Swedish interest rate swaps, as the market reprices the forward path for STIBOR higher. This is a bet that the central bank will have to follow through with the hikes the market now expects. The prospect of tighter monetary policy is also creating headwinds for Swedish stocks. We believe buying put options on the OMX Stockholm 30 index provides an effective hedge against a market downturn. This strategy would protect portfolios if the Riksbank signals a more aggressive hiking cycle than anticipated at its next meeting. Create your live VT Markets account and start trading now.

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USD/JPY traded near 159.50 on Friday, up 0.10% on the day. It stayed close to recent highs, supported by US Dollar strength and a wide US–Japan interest rate gap. US data were mixed. The PCE Price Index eased slightly in January and Q4 GDP growth was revised down to 0.7%, while inflation pressures remained persistent.

Us Data And Rate Gap

Durable Goods Orders were virtually unchanged in January at $321.2 billion, missing expectations for a 1.2% rise. JOLTS job openings increased to 6.946M in January, above 6.55M and forecasts. US consumer sentiment weakened, with the University of Michigan index falling to 55.5 in March from 56.6. Rising energy prices and geopolitical tensions also supported demand for the US Dollar. In Japan, the Yen remained weak and USD/JPY traded near levels previously linked to Japan’s Ministry of Finance intervention. Finance Minister Satsuki Katayama said officials are monitoring markets and may act against excessive volatility. The Bank of Japan’s policy outlook remained in focus. Markets expected a cautious approach while officials assess wage growth and domestic demand.

Looking Ahead For Usd Jpy

We remember the tension in early 2025 when the dollar was trading near 159.50 against the yen. That situation was driven by a wide interest rate gap, with the Federal Reserve holding firm while the Bank of Japan remained cautious. This created a strong incentive for traders to favor the dollar. As we saw in the second half of 2025, Japanese authorities did intervene, much like they did back in 2022 when the pair first crossed the 150 level. That action successfully pushed the dollar back down from its highs near 160. That intervention showed that the Ministry of Finance has a low tolerance for what it considers excessive yen weakness. Now, in March 2026, the landscape has shifted, with the pair trading closer to 152.00. The Federal Reserve initiated two rate cuts in late 2025 as US inflation, now tracking at 2.4% annually according to the latest CPI report, has cooled significantly. This has narrowed the interest rate differential that was so pronounced a year ago. This history suggests that implied volatility for the yen will likely remain elevated, especially on any moves toward the 155 level. Traders should consider strategies that benefit from this environment, such as selling out-of-the-money call options to collect premium. The risk of another official intervention effectively puts a cap on the pair’s potential upside in the near term. While the interest rate gap has narrowed, a positive carry still exists for holding long dollar positions. To manage the risk of sudden yen strength, traders could pair a long USD/JPY spot position with buying protective put options. This allows participation in the carry trade while hedging against sharp, unexpected downturns. Create your live VT Markets account and start trading now.

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GBP/USD is trading near 1.3350 and has fallen for a third day in a row, as the war in the Middle East continues to escalate. The pair has been losing ground during this period. On Wednesday, the International Energy Agency agreed to release around 400 million barrels of oil from member countries’ strategic reserves. The move is aimed at reducing energy prices.

Implied Volatility Outlook

With GBP/USD losing ground, we expect implied volatility to rise significantly in the coming weeks. Traders should consider buying options to position for larger price swings, as the current geopolitical climate makes sharp, unexpected moves more likely. Looking back at the market reaction during the initial conflicts of 2022, the Cboe Volatility Index (VIX) surged over 30, a level we could see tested again. The drop in the Pound is largely a story of US Dollar strength, as capital seeks safe havens during global turmoil. The Dollar Index (DXY) has already climbed 1.5% this month, pressuring currencies like the GBP. This trend is likely to continue as long as the conflict escalates, making short positions on GBP/USD or buying USD call options a common strategy. From our perspective, the UK economy is particularly vulnerable to the ongoing energy shock, which brings back memories of the inflation spike in 2022 and 2023. Back then, UK CPI surged past 10%, crippling consumer spending and forcing the Bank of England into a difficult position. The market now fears a repeat performance, weighing heavily on the Pound’s value against the dollar. The release of 400 million barrels from strategic reserves is a major intervention, far exceeding the 180 million barrel release we saw coordinated by the US in 2022. While this may temporarily cap oil prices, it signals a high level of panic among policymakers about a prolonged supply disruption. Traders see this not as a solution, but as confirmation of the crisis’s severity.

Derivative Strategy Considerations

Given these factors, derivative traders may favor buying GBP/USD put options to bet on further downside while limiting risk. The key data to watch will be weekly energy inventory reports and any shifts in tone from the Federal Reserve versus the Bank of England. A divergence in central bank policy, with the Fed remaining more aggressive on inflation, would accelerate the Pound’s decline. Create your live VT Markets account and start trading now.

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USD/CAD rose for a third day on Friday, trading near 1.3728 and reaching its highest level in more than a week. The move followed broad Canadian Dollar weakness after Canada’s latest jobs data fell short, while demand for the US Dollar increased amid the US-Iran war. Statistics Canada reported Net Change in Employment fell by 83.9K in February, versus expectations for a 10K rise, after a 24.8K drop in January. The Unemployment Rate increased to 6.7% from 6.5%, above the 6.6% forecast.

Canada Jobs Shock

The data suggests softer labour market conditions and may affect expectations for Bank of Canada policy, even as markets mostly anticipate rates staying on hold through 2026. The BoC meets next week and is widely expected to leave rates unchanged, after stating in January that policy aims to keep inflation near the 2% target and that the current rate “remains appropriate”. Oil prices may lend some support to the Canadian Dollar, as Canada is a net crude exporter, though higher energy prices can also add inflation pressure. In the US, markets paid limited attention to recent data, with focus on Middle East tensions. The US Dollar Index traded near 100.30, its highest since November 2025. Expectations for Federal Reserve cuts shifted from over 50 bps to around 20 bps by December, based on Bloomberg swaps data. Given the sharp downturn in Canada’s employment figures, we should anticipate further Canadian Dollar weakness in the coming weeks. The unexpected loss of 83,900 jobs in February creates a compelling case for a more dovish Bank of Canada, widening the policy gap with the United States. This is reflected in the bond market, where the yield on the US 2-year Treasury note is now trading at a 75-basis-point premium to its Canadian equivalent, the widest spread seen since the third quarter of 2025.

Options And Volatility

Traders should consider buying call options on USD/CAD to position for a move higher, especially ahead of next week’s Bank of Canada meeting. This strategy allows for participation in potential upside while limiting downside risk to the premium paid on the options. We could look at strike prices targeting the 1.3850 level, which has not been tested since late last year. While elevated oil prices should theoretically support the Loonie, this effect is being overwhelmed by the flight to safety into the US Dollar. With WTI crude oil prices trading consistently above $95 per barrel for the past month due to the US-Iran war, the geopolitical risk premium is boosting the Greenback more than the commodity-linked CAD. The dollar’s role as the ultimate safe haven is the dominant factor in this environment. The strength of the US Dollar is further supported by a significant shift in expectations for Federal Reserve policy. Looking back just a few months to late 2025, markets were anticipating several rate cuts, but persistent inflation risks fueled by the conflict have reduced this to only about 20 basis points of easing priced in for the entire year. This hawkish repricing keeps US interest rates higher for longer, attracting capital inflows. This weak employment data is not an isolated incident but rather a confirmation of a cooling trend we observed toward the end of last year. We saw Canadian GDP growth in the final quarter of 2025 slow to just 0.5% on an annualized basis. This pattern of weakening growth suggests the Canadian economy is more fragile than previously believed, justifying a bearish stance on its currency. Beyond a simple directional bet, the current environment of geopolitical tension and central bank uncertainty makes a case for buying volatility. The CBOE’s Canadian Dollar volatility index has risen to a six-month high, yet it may still be undervalued given the binary risks on the horizon. A long straddle or strangle could profit from a large price move in either direction following new developments. Create your live VT Markets account and start trading now.

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US consumer confidence fell in early March, based on preliminary University of Michigan data. The Consumer Sentiment Index slipped to 55.5 from 56.6, versus an economist forecast of 55. The Current Conditions index rose to 57.8 from 56.6. The Expectations gauge dropped to 54.1 from 56.6.

Inflation Expectations Mixed

Inflation expectations were mixed. The one-year figure stayed at 3.4%, while the five-year view eased to 3.2% from 3.3%. In markets, the US Dollar stayed firm. The US Dollar Index (DXY) moved back above 100.00 and reached multi-month highs. Inflation is the rise in prices for a basket of goods and services, shown as month-on-month and year-on-year percentage changes. Core inflation removes food and fuel, and central banks often aim for about 2%. The Consumer Price Index (CPI) tracks changes in prices over time; Core CPI excludes food and fuel. Higher inflation can lead to higher interest rates, which can support a currency.

Rates And Gold Dynamics

Higher interest rates can reduce demand for gold by raising the cost of holding a non-interest asset. Lower inflation can have the opposite effect by easing interest rates. The drop in consumer expectations, especially the forward-looking part, signals potential weakness in spending ahead. We should consider buying put options on consumer discretionary ETFs, as households may pull back on non-essential purchases. This aligns with the latest retail sales data from February 2026, which already showed an unexpected 0.4% contraction. The US Dollar Index breaking firmly above the 100 mark is a significant technical signal, a level it struggled to hold in late 2025. This strength suggests opportunities in long dollar positions through futures contracts or call options on currency ETFs. This move puts pressure on foreign currencies, making short positions on the Euro or Yen more attractive. With one-year inflation expectations stuck at 3.4%, the Federal Reserve has little reason to consider cutting interest rates. The latest core CPI report confirmed this stickiness, holding at 3.5% year-over-year, well above the 2% target. This environment supports trades that bet on interest rates remaining elevated, such as buying puts on long-duration Treasury bond ETFs. A strong dollar and firm interest rates are a difficult combination for commodities like gold. We saw this exact dynamic play out during the rate hiking cycle that began back in 2022, where gold struggled despite high inflation. This historical precedent suggests traders should be cautious with gold and could explore shorting futures or buying puts on gold miners. Create your live VT Markets account and start trading now.

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The war in Iran has caused oil supply outages described as the largest on record. The IEA puts March production losses at an average of at least 8 million barrels per day, taking global daily supply to just under 99 million barrels, the lowest since the first quarter of 2022. IEA member countries have announced a record release of 400 million barrels from emergency reserves to ease market conditions. This volume would cover a complete loss of supplies through the Strait of Hormuz for about one month; if released over two months, a gap of around 7 million barrels per day would still remain if the strait stayed fully closed.

Ongoing Conflict Supports Oil Prices

The reserve release is presented as a short-term measure and does not remove the underlying impact of the outages. With the conflict ongoing, Brent and wider oil prices are expected to remain supported. The US EIA forecasts that higher prices may lift US output after a delay of several months. It expects US crude production to average 13.6 million barrels per day this year and 13.8 million barrels per day next year. Given the largest oil supply outage ever recorded, with 8 million barrels per day currently offline, we are in a fundamentally bullish environment. With Brent crude holding firm around $115 per barrel, the path of least resistance is upward. The announced 400 million barrel strategic reserve release is significant, but it only papers over a massive structural deficit for a month or two. For the coming weeks, we should consider maintaining long positions in front-month futures contracts, such as May and June 2026 Brent or WTI. Buying call options is also a direct way to bet on further price increases, though high volatility makes them expensive. This sustained disruption keeps the pressure on prices, as the market is clearly undersupplied.

Volatility And Positioning Considerations

The market’s anxiety is reflected in the CBOE Crude Oil Volatility Index (OVX), which has surged to around 55, a level we haven’t seen since the market turmoil of early 2022. This high implied volatility suggests traders should look at strategies like bull call spreads. This approach can lower the cost of entry while still profiting from a rise in oil prices. Looking back, we saw US production reach a strong 13.3 million barrels per day last year in 2025, but the current forecast for 13.6 million shows only a marginal increase is expected this year. Recent Baker Hughes data shows the US rig count has only ticked up by a handful of rigs in the past month. This confirms that a significant American supply response will take many months to materialize and will not solve the immediate crisis. The strategic reserve release has likely prevented an extreme price spike above $130, but we view its effect as temporary. Once the market fully digests that this is a finite solution against an open-ended conflict, the focus will return to the supply gap. Any price dips in the short term, therefore, present potential opportunities to add to bullish positions. Ultimately, all strategies are secondary to the geopolitical situation in Iran and the Strait of Hormuz. We must monitor news related to the conflict for any signs of de-escalation, as that would be the primary catalyst to unwind these positions. As long as the war continues, oil prices will have a powerful tailwind. Create your live VT Markets account and start trading now.

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Standard Chartered analysts expect the Bank of Japan to keep its policy rate unchanged at 0.75% at the 19 March meeting. The cautious stance is linked to uneven Japanese growth and higher oil prices. The analysts state that policymakers want to see wage increases feed through into stronger consumption before further policy normalisation. They keep their base case for a rate rise in Q3, likely at the July meeting.

Policy Outlook And Key Drivers

Their terminal Bank of Japan rate projection remains 1%. They note a risk that rates could rise above this level. They describe USD/JPY as biased higher, with a possible re-test of 162. The pair last reached 162 before foreign exchange intervention by Japan’s Finance Ministry in July 2024. They add that recent verbal intervention from the Finance Ministry has been limited in scale and force. They also point to typically positive USD/JPY seasonality in the latter half of March due to window-dressing flows. Our view is that the Bank of Japan will hold its policy rate at 0.75% at their meeting next week on March 19. They seem focused on seeing solid proof that recent wage hikes are boosting consumer spending before they tighten policy further. With WTI crude oil prices having recently pushed past $95 a barrel for the first time since late 2024, the BoJ has another reason to be cautious about a rate hike. This situation suggests the path of least resistance for USD/JPY is upward in the coming weeks. Early results from the 2025 “Shunto” wage negotiations point to strong average pay increases near 4.5%, but policymakers will wait for hard data on consumption. This delay gives a green light for yen weakness, so derivative traders could consider buying call options with April expiration dates to capitalize on a potential move higher.

Trading Implications For Usd Jpy

We think USD/JPY could re-test the 162 level, which is significant as it was the point that triggered intervention from the Ministry of Finance back in July of last year. Setting up bull call spreads could be a prudent strategy to define risk in case of a sudden policy shift or intervention. However, the ministry’s recent verbal warnings have been noticeably mild compared to the multi-trillion yen interventions we saw throughout 2024. This quiet stance from officials may signal that they are not willing to fight against broad-based US dollar strength at this moment. This gives us more confidence in a continued upward drift for the currency pair. It seems they are willing to tolerate a weaker yen for now, especially with the US Federal Reserve signaling a higher-for-longer rate outlook. Finally, we are entering a seasonally strong period for USD/JPY. The latter half of March often sees dollar buying due to Japanese corporate flows related to the fiscal year-end. This historical pattern provides an additional tailwind for a move higher in the pair over the next few weeks. Create your live VT Markets account and start trading now.

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Rabobank has cut its short-term EUR/USD forecasts due to ongoing disruption risks in the Strait of Hormuz and higher oil and gas prices. It expects the euro to underperform the US dollar over the next 1–3 months. The bank lowered its 1-month EUR/USD forecast to 1.14 from 1.16. It reduced its 3-month forecast to 1.15 from 1.16.

Near Term Forecast Changes

Rabobank kept its medium-term EUR/USD forecasts unchanged for now, but said they remain under review as energy and geopolitical risks develop. It also noted that its earlier EUR/USD forecasts were already below market consensus and near the lower end of market projections. The report said the euro is near the bottom of the currency performance table. It linked this to the market holding long EUR positions for months and to a worsening Eurozone terms of trade, as the region is a net energy importer. The article states it was produced with the help of an AI tool and reviewed by an editor. Given the prolonged disruption in the Strait of Hormuz, we have lowered our near-term EUR/USD forecasts. We now see the pair trading at 1.14 in one month and 1.15 in three months, down from our previous target of 1.16. This adjustment reflects the high energy prices now acting as a significant tax on the Eurozone economy.

Potential Trading Strategies

The situation is amplified by soaring energy costs, with Brent crude futures surging past $115 a barrel this month, a level not seen since the summer of 2022. This has directly impacted the Eurozone’s trade balance, which recent data shows widened significantly last month due to a jump in the cost of energy imports. The United States, being a net energy exporter, is comparatively insulated from this shock, strengthening the dollar’s appeal. Derivative traders should consider positioning for further euro weakness against the dollar in the coming weeks. Buying EUR/USD put options with strike prices around the 1.14 level could offer a clear way to profit from this expected downturn. Selling out-of-the-money call options is another strategy to consider, capitalizing on the view that a significant rally is unlikely. We are seeing a rush to exit the long euro positions that had built up over the past few months. This crowded trade is now unwinding, which could accelerate the pair’s decline as stop-loss orders are triggered. We saw a similar dynamic back in 2022 when the energy crisis following Russia’s invasion of Ukraine drove EUR/USD below parity. This energy shock creates a policy divergence between the central banks. The European Central Bank will find it difficult to maintain a hawkish stance as the economy slows under the weight of high energy prices. Meanwhile, the Federal Reserve has more flexibility, making the dollar a more attractive currency for yield-seeking investors. Create your live VT Markets account and start trading now.

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TD Securities expects the Bank of Canada to keep the policy rate at 2.25% in March. It projects a cautious statement that reflects softer Canadian growth and moderating core inflation since the January outlook. The outlook also includes upside inflation risks tied to higher oil prices linked to the Iranian conflict. These energy-price moves could affect headline inflation and domestic growth.

Policy Rate Outlook And Key Drivers

The bank’s guidance is expected to keep options open for future rate moves. It expects the Bank to repeat that the current rate remains appropriate during a period of structural adjustment. It also expects the Bank to restate that it is difficult to predict the timing or direction of the next change in the policy rate. The note says rate cuts are harder to justify if global energy prices stay under pressure, but not ruled out. It cites a $38 intraday fall in WTI crude on 9 March as an example of how quickly conditions can change. The article says it was produced with help from an AI tool and reviewed by an editor. We see the Bank of Canada holding its policy rate steady at 2.25% for the time being. The Bank is caught between two opposing forces right now. On one side, domestic growth is slowing down, but on the other, the conflict in Iran is pushing oil prices and inflation risks higher.

Market Volatility And Trading Implications

Looking back at the end of 2025, we saw GDP growth was a sluggish 0.5%, and recent data for early 2026 showed a similar weak trend. Core inflation measures have also cooled, with the latest report showing CPI-trim at 2.8%, moving closer to the Bank’s target. However, with WTI crude currently trading over $95 a barrel, these domestic signals are being overshadowed by global price pressures. Because of this, we expect the Bank’s guidance to stay very cautious and non-committal. They will likely repeat that the current rate is appropriate for now and that the next move is unpredictable. This high level of uncertainty makes taking a strong directional bet on interest rates very risky in the coming weeks. The situation in Iran introduces a one-sided risk to the Bank’s forecast. If oil prices remain high, it will almost certainly push headline inflation up further. This upside pressure on inflation helps to offset some of the economic weakness we’ve been seeing from ongoing trade issues. Given this backdrop, traders should be prepared for significant volatility. The wild $38 intraday price swing in WTI crude on March 9th shows just how quickly market sentiment can shift. This suggests that options strategies designed to profit from large price movements, rather than a specific direction, may be favorable. Rate cuts are a much harder sell in this high-energy-price world, but we don’t think they are off the table entirely. Any sign of de-escalation in the Middle East could cause the market to rapidly price in rate cuts once again. We saw a similar dynamic back in 2022 when markets quickly repriced central bank paths during the initial phases of the conflict in Ukraine. Create your live VT Markets account and start trading now.

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