Mexico’s headline inflation came in at 0.5% in February. This was above the 0.43% expectation. The reading indicates inflation rose faster than forecast for the month. No other figures were provided in the statement.

Implications For Banxico Policy

This higher-than-expected inflation print complicates the path for Banxico to begin cutting its policy rate. The market was anticipating a potential easing cycle to start mid-year, but this data point makes that less likely. We are now pricing in a more hawkish stance from the central bank for at least the next quarter. This environment reinforces the “super peso” narrative driven by the wide interest rate differential with the United States. We should look at derivative structures that benefit from a stable-to-stronger MXN, such as selling USD/MXN call options. Overnight interest rate swap markets now show expectations for the policy rate to remain above 10.5% through the third quarter, a notable shift from just last week. We remember how in late 2025, similar sticky core inflation readings caused Banxico to delay rate cuts, which ultimately squeezed shorts on the peso. History suggests that betting against the peso’s carry trade has been a losing proposition in this type of environment. The recent strength has already pushed the currency through its 50-day moving average, a key technical indicator. For the IPC stock index, however, this could signal trouble as higher borrowing costs may pressure corporate profits. This makes buying put options on major Mexican ETFs a reasonable hedge against long equity positions. Sectors sensitive to consumer credit could face the strongest headwinds, a trend we’ve seen in earnings reports over the last two quarters. Overall, the key takeaway is an increase in uncertainty surrounding the timing of any policy pivot from Banxico. We expect implied volatility on the MXN to rise in the coming weeks. This makes long volatility strategies, such as buying strangles on the currency pair, an attractive way to trade the potential for sharp moves around the next central bank meeting.

Trading And Hedging Considerations

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Mexico’s 12-month inflation rate rose to 4.02% in February. This was above the expected 3.94%. The figures point to inflation running higher than forecasts for the month. The report compares the latest annual rate with the market expectation.

Banxico Policy Path

With Mexico’s 12-month inflation for February coming in hot at 4.02%, we need to reconsider the path for Banxico. This surprise reading, above the 3.94% expectation, makes it much harder for the central bank to justify an interest rate cut in its next meeting. The market will now price in a more hawkish stance for the foreseeable future. For our currency desk, this reinforces the “super peso” narrative. The higher interest rate differential makes the carry trade more attractive, likely pushing the USD/MXN exchange rate lower. We should consider buying peso call options or selling out-of-the-money USD calls, as the peso has already shown strength by breaking below 17.00 to the dollar last week. On the rates side, the TIIE swap curve is expected to reprice higher. We saw a similar dynamic back in late 2025 when a single strong data point delayed the start of that easing cycle. Traders should be looking to pay fixed on short-term swaps, anticipating that the overnight rate will now remain elevated above 11.00% for longer than previously thought. This sticky inflation print is a significant shift from the cooling trend we observed for much of 2025. Back then, the core inflation rate was consistently falling, giving Banxico the green light for cautious cuts. This new data suggests underlying price pressures are more persistent, complicating the monetary policy outlook for the rest of the year.

Equity Market Implications

This environment presents a headwind for the Mexican stock market, particularly for rate-sensitive sectors. Higher for longer interest rates can stifle corporate investment and consumer spending, which may put pressure on the IPC index. We could look at buying put options on the index as a hedge against a potential downturn in the coming weeks. Create your live VT Markets account and start trading now.

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USD/INR is set to close near a record high around 92.80 on Monday, as the Indian Rupee remains under pressure amid conflict in the Middle East involving the US, Iran and Israel. The tension has pushed up oil prices and increased demand for the US Dollar in risk-averse markets. WTI futures on NYMEX were up 12% near $100 in European hours, after rising to about $113 in Asia following weekend air strikes on Iranian depots by the US and Israel. Prices later cut much of those gains after reports that G7 members and the International Energy Agency will discuss releasing emergency oil reserves.

Oil Shock And Rupee Pressure

Higher crude prices weigh on the Rupee because India depends heavily on imported oil. The Reserve Bank of India’s reported early-market action to limit sharp, one-way moves did not stop USD/INR from rising, with Reuters saying the RBI likely sold US Dollars. The US Dollar Index was up 0.5% near 99.35. Markets are also watching US and Indian February CPI data due on Wednesday and Thursday. With USD/INR pushing towards a lifetime high of 92.80, we should treat this as a potential trend, not a one-off spike. The move is fueled by the surge in WTI crude oil to near $100 a barrel, directly hitting India’s import-heavy economy. As long as energy supply fears persist due to the Middle East conflict, the path of least resistance for the rupee is weaker. We must pay close attention to implied volatility in the options market, which has likely surged well above the 6-8% range seen in calmer times. This elevated volatility makes buying options, such as straddles, a viable strategy to trade the uncertainty around upcoming inflation data. Selling options will be extremely risky until the geopolitical situation stabilizes.

RBI Intervention And Trading Implications

The Reserve Bank of India’s attempt to support the rupee by selling dollars has clearly not been enough to turn the tide. We saw a similar pattern in early 2025, where central bank intervention could only slow, but not stop, a globally driven currency move. Therefore, we should view any RBI-induced dips in USD/INR as opportunities to enter long positions. This is not just about rupee weakness; it’s a story of broad US dollar strength driven by a flight to safety. The Dollar Index (DXY) climbing to 99.35 confirms that investors are shedding risk across emerging markets, a trend that data from the Institute of International Finance has shown accelerates when geopolitical risks spike. We should expect this capital outflow from markets like India to continue in the near term. Looking ahead this week, the upcoming US and Indian Consumer Price Index (CPI) reports are critical. A higher-than-expected US inflation figure would almost certainly send the dollar higher across the board. For traders, this makes long USD/INR positions compelling, perhaps using call options to limit risk ahead of the data releases. Create your live VT Markets account and start trading now.

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WTI US Oil rose to about $100.70 a barrel on Monday, up 13.70% on the day, after briefly topping $110 in the Asian session. It was the highest level since mid-2022. The move followed reports of US and Israeli strikes on Iranian facilities and Iranian attacks across the region. The situation raised fears of wider conflict and lower crude supply.

Strait Of Hormuz Supply Shock

Shipping through the Strait of Hormuz has been disrupted, and about 20% of global oil flows through it. Security concerns have reduced tanker traffic and led some Gulf producers to curb output as storage fills. The UAE, Kuwait and Iraq have started cutting production because exports are harder. Iran has appointed Mojtaba Khamenei as Supreme Leader, while Israel reported new strikes in central Iran and on Hezbollah infrastructure in Beirut, and drones were reported near energy sites. Prices eased from highs after reports the IEA is discussing a G7 release of emergency reserves, and Japan told storage sites to prepare. Technical levels cited include a 100-week SMA at $68.50, Fibonacci points at $71.99, $82.47 and $111.47, and a weekly RSI of 84.55. We are seeing WTI crude futures surge past $100 a barrel due to the escalating conflict threatening the Strait of Hormuz. This chokepoint handles over 20 million barrels per day, representing about 20% of global consumption, so any prolonged disruption creates a major supply shock. Derivative traders should consider long positions, such as buying call options or going long on futures contracts, to capitalize on this upward momentum. However, we must be cautious as the weekly RSI is above 84, signaling extremely overbought conditions that could lead to a sharp pullback. The G7’s discussion of a coordinated release from emergency reserves is a significant bearish catalyst, reminiscent of the 180 million barrel release we saw from the U.S. Strategic Petroleum Reserve in 2022. This could cap the rally or even reverse it temporarily, making it risky to chase the peak.

Trading Approaches And Risk Control

Given the high uncertainty, we see implied volatility in oil options spiking, which is very similar to what happened after the invasion of Ukraine in 2022. This makes strategies like call spreads attractive, as they allow for participation in further upside while defining the maximum risk. Traders holding long positions should also consider buying protective puts to hedge against a sudden price drop from a potential de-escalation or a large reserve release. We should also be watching the structure of the futures curve, which has likely flipped into steep backwardation with this supply shock. This means front-month contracts are trading at a significant premium to later-dated ones, reflecting the market’s immediate fear of a shortage. Trading calendar spreads to profit from this backwardation is a viable strategy for those who believe the disruption will be intense but perhaps not permanent. From a technical standpoint, the $82.47 level is now the critical line in the sand for the current bullish trend. As long as we hold above it on any pullback, the upward bias remains intact and dips can be seen as buying opportunities. However, a failure to break the next resistance at $111.47, combined with a drop below $100, could signal that the emergency reserve news is taking hold and the rally is exhausted. Create your live VT Markets account and start trading now.

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The US dollar did not gain support from risk aversion on Friday, 6 March, even as Brent crude rose above USD90 per barrel during the Israel-US-Iran war. This suggested weaker demand for the dollar’s safe-haven role during geopolitical tension and higher oil prices. US data also weighed on the currency after February nonfarm payrolls fell short of expectations, at -92k versus a +55k consensus. The miss challenged the idea of a resilient labour market that had supported the Federal Reserve’s extended pause.

Shifting Policy Expectations

At the same time, markets removed expectations of two Bank of England rate cuts and priced in two European Central Bank rate hikes this year. This shift increased focus on monetary policy differences between the US, the UK, and the euro area. Political instability in Washington was also cited as a factor, with changes in the executive branch reducing perceptions of steady governance. The dollar may face further pressure if higher US Treasury yields are linked more to fiscal sustainability concerns than to inflation. Looking back to early 2025, the breakdown in the US Dollar’s traditional safe-haven status was a critical turning point for our strategy. We saw the currency fail to rally despite soaring oil prices and geopolitical conflict, a clear signal that the market’s underlying drivers were changing. This divergence from historical patterns meant old assumptions had to be discarded. The negative US nonfarm payrolls report from February 2025, which showed an unexpected loss of 92,000 jobs, was the first major crack in the narrative of a resilient US economy. This trend continued, with the US unemployment rate steadily climbing from 3.9% to 4.5% by the end of 2025. This sustained labor market weakness has kept the Federal Reserve in a defensive posture throughout the past year.

Trading Strategy Implications

The monetary policy divergence we anticipated has materialized and continues to drive currency markets. While the European Central Bank did indeed hike rates twice in 2025 to combat inflation, the weakening US data forced the Federal Reserve to pivot, delivering a rate cut in January 2026. This policy gap has been the primary engine lifting the EUR/USD exchange rate from around 1.08 to its current trading range above 1.15. For the coming weeks, traders should consider buying call options on currency pairs like the AUD/USD and EUR/USD to gain leveraged upside exposure to continued dollar weakness. With currency market volatility remaining elevated, these options allow for participation in the trend while clearly defining risk. The strategy is to position for a dollar that no longer benefits from global risk aversion. The focus has now firmly shifted from simple inflation metrics to the much larger issue of US fiscal sustainability. With the US debt-to-GDP ratio having now surpassed 135%, a stark increase from a year ago, higher Treasury yields are increasingly being interpreted as a credit risk premium rather than a sign of economic strength. This structural problem suggests the dollar’s path of least resistance is lower. Using futures contracts to hedge or maintain short positions against the US Dollar Index (DXY) remains a core strategy. The index’s decline from over 104 in early 2025 to its current level near 98 validates this bearish thesis. We expect any short-term dollar rallies to be met with selling pressure as the weight of weak economic data and fiscal concerns cap any significant upside. Create your live VT Markets account and start trading now.

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Silver (XAG/USD) recovered most early losses and traded near $84.00 in Europe on Monday, around $83.90 at the time of reporting. Pressure continued from higher US yields and a firmer US Dollar. The 10-year US Treasury yield rose almost 2% to about 4.22%. The US Dollar Index (DXY) was up 0.5% near 99.35. CME FedWatch data showed expectations for unchanged rates in the March, April, and June meetings. For July, the probability of rates staying the same rose to 46.7% from 39.3% on Friday. US petrol prices averaged $3.41 per gallon on Saturday, reported by The New York Times. Middle East conflict-related demand for the US Dollar added to downward pressure on silver. Spot trading stayed close to the 20-day EMA near $84.75 after a January reversal from above $110. The 14-day RSI held in the 40.00–60.00 range. Resistance was near $90.00, while support was near $82.00 and then $78.00. A move below $78.00 would point to the mid-$70s. With the Federal Reserve unlikely to cut interest rates anytime soon, we see continued pressure on silver. The most recent Consumer Price Index data from February 2026 showed inflation holding firm at 3.3%, supporting the Fed’s decision to keep rates elevated. This environment, combined with 10-year Treasury yields hovering near 4.25%, makes holding a non-yielding asset like silver costly for the coming weeks. The US Dollar Index remains strong, trading near 99.50 as geopolitical tensions in the Middle East drive demand for safe-haven currencies. A strong dollar makes silver more expensive for buyers using other currencies, which typically dampens demand and price. We expect this headwind to persist as long as the dollar remains firm. Given the technical picture of price being trapped below the $90.00 resistance level, we should consider strategies that profit from sideways or downward movement. Selling call option spreads with strike prices at or above $90.00 could be a prudent way to collect premium while defining our risk. This strategy benefits if silver stays below this key resistance area through the options’ expiration. Looking back from 2025, we saw a similar situation during the aggressive rate-hiking cycle in 2023 where silver prices were suppressed for extended periods by high interest rates. History suggests that until the market can confidently price in Fed rate cuts, significant upward momentum in silver is unlikely. This historical precedent reinforces a cautious and defensive stance for now. We must watch the $82.00 support level closely, as a break below this could trigger a faster move toward the $78.00 region. Traders anticipating such a drop could look at buying put options as a way to profit from the downside. This would serve as a hedge against any long positions or as a direct bearish bet on the white metal. However, we should not ignore silver’s industrial demand component, which could provide underlying support. Recent data from the International Energy Agency for Q4 2025 showed a 15% year-over-year increase in global solar panel manufacturing, a sector that heavily consumes silver. This strong industrial use might prevent a complete price collapse and should be monitored as a potential bullish catalyst.

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Carvana Co (NYSE: CVNA) rose over 13,000% in three years and later saw a 98% fall in 2022 before recovering and reaching new all-time highs. The move from the wave ((II)) low of $3.62 is described as a five-wave advance, with wave (I) ending at $486. The analysis says the stock is now in a corrective phase for the full wave (I) rise. It sets a target pullback zone of $245–$188, based on a 50%–61.8% Fibonacci retracement. The correction is described as likely to form a 3, 7, or 11-swing pattern, depending on the daily chart structure. After a higher low forms in the $245–$188 area, the next advance is labelled as wave (III). The approach outlined is to wait for the 3, 7, or 11-swing sequence to complete before entering positions. It also refers to an “extreme Blue Box” system as a tool for timing entries. We see that after a massive rally, Carvana is now expected to enter a significant corrective phase. This pullback is anticipated to be sharp, creating an opportunity for a bearish position in the short term. For derivatives traders, this suggests buying put options or establishing bear call spreads to capitalize on the expected downside toward the $245 to $188 zone. This view is strengthened by recent macroeconomic data showing a slowdown in consumer spending. The latest Federal Reserve minutes released in February 2026 hinted that interest rates may stay higher for longer, which directly impacts the affordability of auto loans. Furthermore, the Manheim Used Vehicle Value Index has softened, falling 3.5% in the last quarter, pointing to weakening demand in Carvana’s core market. Looking back at the end of 2025, we noted that 90+ day auto loan delinquencies had begun to climb, reaching 2.8% according to the New York Fed, the highest since 2012. That trend appears to be accelerating in the first quarter of this year, adding pressure to companies reliant on consumer credit. This historical data provides context for the potential pullback we anticipate now. Given the potential for a 50% drop, implied volatility on CVNA options is likely to increase significantly. Traders should be mindful that this makes buying puts more expensive but enhances the premium received from selling call spreads. This elevated volatility environment favors strategies that benefit from both price direction and time decay. As the stock approaches the target Fibonacci retracement zone, the strategy should pivot. Once we observe signs of a bottom forming in the $245 – $188 area, traders can shift from bearish to bullish positions. This could involve selling cash-secured puts to collect premium while waiting for the next major advance or buying long-dated call options to prepare for the subsequent wave up.

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The Global X Silver Miners ETF (SIL) launched in 2010 and tracks the Solactive Global Silver Miners Total Return Index. It provides diversified exposure to silver mining companies through a single ETF. On the monthly Elliott Wave chart, wave ((II)) is marked as ending at $14.94. From there, wave I rose to $54.34, wave II fell to $16, wave ((1)) reached $52.87, and wave ((2)) pulled back to $21.26.

Monthly Wave Structure

Wave ((3)) is labelled as ending at $119.24, with wave ((4)) now in progress. The $16 level is treated as a key pivot for this structure. On the daily chart, the rise to $119.24 is counted as the end of wave ((3)). The current move is a wave ((4)) correction, described as a zigzag. In that zigzag, wave (A) ended at $91.31 and wave (B) ended at $118.85. Wave (C) is projected to move lower towards an inflection zone of $74–$91.10, where wave ((4)) is expected to finish. Based on the long-term wave count, we are in a corrective wave ((4)) pullback for the Silver Miners ETF (SIL). This move is a correction of the strong uptrend that started back in September 2022. The key area we are watching for this correction to end is the support zone between $74 and $91.10. This technical outlook is supported by recent fundamental data. The latest CPI report for February 2026 came in hotter than expected at 3.1%, suggesting inflation remains persistent and supportive of precious metals as a store of value. We believe this underlying inflation will help attract buyers as SIL approaches our target support zone.

Options Positioning Approach

Furthermore, industrial demand for silver continues to accelerate, a trend we saw throughout 2025. A recent report from the International Energy Agency updated its 2026 forecast for solar installations upwards, citing massive new projects coming online which will require significant silver inputs. This provides a strong fundamental floor for silver prices and, by extension, the miners. For derivative traders, this setup suggests positioning for a bullish reversal in the coming weeks. As SIL descends into the $74-$91.10 inflection area, selling out-of-the-money put spreads with expirations in late April or May 2026 could be an effective way to collect premium. This strategy profits from both a price bounce and the passage of time. We can also look to history for a guide, as this type of sharp pullback resembles the consolidation we saw in late 2020 before the next major advance. Therefore, traders could consider buying call options or call spreads once the price action shows signs of stabilization within the support zone. Watch for a bullish divergence on the daily RSI as a potential entry signal. The primary risk to this outlook is a break below the $74 support level. A decisive close below this area would invalidate the current wave ((4)) interpretation and suggest a much deeper correction is underway. Traders should therefore place stops accordingly to manage their risk on any long positions initiated within the zone. Create your live VT Markets account and start trading now.

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UK Prime Minister Keir Starmer said on Monday, during European trading hours, that the government is in continuous talks with international partners on further steps to reduce the economic impact of the ongoing Middle East war involving the US, Iran and Israel. He said the UK has spent the last 18 months working to build resilience in the economy. He added that a longer conflict raises the likelihood of an economic impact.

Government Coordination On Energy Risks

Starmer said Finance Minister Rachel Reeves is speaking with the Bank of England every day to stay ahead of any effects on energy prices. He also said he does not expect the energy price cap to change, as it runs to June. He said there is a need to find a way to de-escalate the situation in Iran. We are now seeing the long-term consequences of the conflict that was escalating when those remarks were made in 2025. The concerns about energy prices proved valid, as Brent crude has averaged over $100 a barrel for the last six months due to persistent supply chain fears. Derivative traders should be positioned for continued high oil prices, using long-dated call options to capture upside from any further escalation. That dialogue between the Finance Minister and the Bank of England foreshadowed the difficult policy decisions we’ve seen since. UK inflation has remained stubbornly above 4%, forcing the BoE to hold interest rates at a 17-year high through late 2025 and into this year. We believe interest rate swaps pricing in a “higher for longer” scenario still offer value as cutting rates now seems unlikely.

Sterling Strategy And Market Volatility

The sustained economic pressure has heavily impacted the Pound, which has depreciated nearly 7% against the US Dollar since that period in 2025. The UK’s high energy import bill continues to strain the national budget, suggesting more weakness for Sterling is likely. We recommend using FX options to hedge against a further slide in the GBP/USD pair, potentially towards the 1.19 mark. Volatility in the equity markets has become the new normal, a direct result of the geopolitical instability that the government was trying to de-escalate. The FTSE 100 has been range-bound for months, reflecting investor uncertainty about corporate earnings in a high-cost environment. Traders should use options strategies like collars to protect their UK equity portfolios from sudden downside shocks linked to news from the Middle East. Create your live VT Markets account and start trading now.

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Deutsche Bank sets out three possible responses by the Bank of England and the UK Government to different paths for an energy shock. The scenarios vary mainly by the timing of rate cuts and the scale of fiscal support for households. Scenario 1 assumes the shock fades quickly, with two Bank of England rate cuts taking the policy rate to 3.25%. The next cut is placed in April/June, followed by a late-summer cut in either July or September, with no major fiscal action expected.

Three Scenario Framework

Scenario 2 also keeps two cuts to 3.25%, but with wider spacing. One cut is placed in summer and another around the turn of the year, alongside support via fuel duty, which is scheduled to rise from August. Scenario 3 assumes the energy crisis persists, leading to delayed monetary easing and larger fiscal support. The next rate cut is pushed to Q4-26, while terminal rate expectations rise from 3.25% to 3.5%, and the Government may extend a fuel duty freeze and consider a temporary cut to fuel duty. The recent spike in energy prices is making everyone nervous about the path for UK policy. With Brent crude futures pushing past $92 a barrel last week and the latest ONS data showing inflation unexpectedly ticking up to 3.1%, the pressure is on. This uncertainty creates a branching path for interest rates in the coming months. How this energy situation unfolds will directly impact the Bank of England’s decisions on rate cuts. We are looking at three distinct possibilities, ranging from a quick resolution to a prolonged crisis. Each scenario demands a different strategy for positioning in the rates market.

Rates Market Positioning

If we believe this energy shock will fade quickly, then the baseline for two rate cuts remains in play. Looking back at the policy easing we saw in 2025, a similar path would suggest positioning for a cut in the second quarter, likely June. This implies that current market pricing for a delayed cut is too cautious. However, if the shock lasts longer, the timing of rate cuts will be pushed out, with fiscal help like fuel-duty relief becoming more likely. In this case, we would expect only one cut this summer and another toward the end of the year. This suggests selling front-end rates contracts to bet against the market’s more optimistic easing schedule. Should the energy crisis get worse, the entire outlook changes, making a play on volatility attractive. The Bank of England would likely delay any cut until the final quarter of 2026, and we could see the expected terminal rate climb from 3.25% to 3.5%. This divergence in potential outcomes means options on SONIA futures, which profit from large interest rate moves in either direction, could be a valuable tool. Create your live VT Markets account and start trading now.

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