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TD Securities expects the Bank of Canada to hold its overnight rate at 2.25% through 2026, despite markets pricing tightening

TD Securities expects the Bank of Canada to hold the overnight rate at 2.25% throughout 2026. It projects a move back towards neutral policy starting in early 2027, with a hike in 2027 Q1. Markets have repriced near-term expectations, with over 75 bps of tightening priced by the end of 2026. The note frames this as a gap between market pricing and its stable-rate forecast.

Energy Price Shock And Policy Implications

The report points to higher energy prices after US strikes on Iran and threats to global crude supply. It treats this as a headline inflation shock that the Bank can largely look through while assessing geopolitical risks and domestic spillovers. It also refers to an environment of excess supply that could absorb any incremental boost to growth. Based on this, it expects the Bank to stay on the sidelines through 2026. Senior Deputy Governor Rogers is scheduled to speak to the Brandon Chamber of Commerce on Thursday, 26 March. Markets are expected to watch for comments linked to the recent shift in near-term rate expectations. We believe the market has gotten ahead of itself by pricing in over 75 basis points of rate hikes by the end of this year. The Bank of Canada has likely finished its easing cycle and will hold the overnight rate steady at 2.25% through all of 2026. This disconnect between market pricing and central bank policy presents a clear opportunity. We saw this filter into the February inflation report, which came in at 2.9%, but the Bank will likely look through this temporary spike. They will be more focused on the underlying weakness in the domestic economy.

Trades And Near Term Catalysts

Canada’s economy still has excess supply, which will help absorb these higher energy costs without triggering a broader price spiral. The final report for fourth-quarter 2025 GDP showed a slight contraction of 0.2%, and business sentiment has remained cautious into the new year. Hiking rates into this soft environment would be a significant policy error. We have seen this happen before, looking back at how central banks initially treated the inflation of 2022 as transitory before being forced to act. This time, however, the underlying domestic demand is far weaker, giving the Bank justification to remain patient. The key difference is the lack of broad-based price pressures outside of energy. Therefore, derivative traders should consider positioning for Canadian interest rates to be lower than the market currently implies. This involves entering trades that profit as expectations for rate hikes are removed, such as receiving fixed on overnight index swaps dated for the end of 2026. This position gains value as the market reprices to align with the Bank holding rates at 2.25%. This week, we will be watching Senior Deputy Governor Rogers’ speech on Thursday for any validation of this view. We expect her to emphasize a patient approach and downplay the headline inflation figure. Any hint that the Bank is not considering hikes could be the catalyst for the market to begin pricing them out. Create your live VT Markets account and start trading now.

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Following Trump’s delayed Iranian energy strike plans, the weakening US Dollar leaves USD/CAD directionless, with CAD steady

The Canadian Dollar was mixed against the US Dollar on Monday as the US Dollar weakened after President Donald Trump delayed planned strikes on Iranian energy sites. USD/CAD traded near 1.3715, after touching an intraday low of 1.3683. The US Dollar Index (DXY) traded around 99.37 after easing from an intraday high of 100.15. Reuters reported that Trump told the Department of War to postpone strikes on Iranian power plants and energy infrastructure for five days, depending on talks.

Oil Prices React To Iran Delay

Oil prices dropped after the announcement, with West Texas Intermediate (WTI) down nearly 12% at first before narrowing losses to about 7.5%. WTI traded near $90 after hitting an intraday low of $83.99. Iran’s Fars News Agency said there were no direct contacts with the US, including via intermediaries. Mehr News Agency cited Iran’s Foreign Ministry as saying Trump’s comments were intended to lower energy prices and gain time for military plans. Despite the fall, oil stayed relatively high, which reduced pressure on the commodity-linked Canadian Dollar because Canada exports crude. Federal Reserve Governor Stephen Miran said policy should not react to short-term headlines and he saw no need for rate rises. Chicago Fed President Austan Goolsbee said oil shocks are “typically stagflationary”, lifting inflation and unemployment. He said rates could fall by the end of 2026, but more evidence on inflation is needed.

Trading Strategy In High Volatility

We see the US dollar’s dip as a brief reaction to the temporary postponement of strikes on Iran, not a fundamental shift. This five-day delay creates a window of intense uncertainty, with the market on edge for the next development. The knee-jerk drop in oil from its recent highs above $100 shows just how headline-driven this market is. This environment is ideal for traders looking to capitalize on volatility, especially in the energy market. With the CBOE Crude Oil Volatility Index (OVX) having recently hit a 12-month high of 48, options pricing reflects the risk of a sharp move in either direction. We believe traders should consider strategies like buying straddles on WTI futures to position for a large price swing around the upcoming deadline. For the Canadian dollar, elevated oil prices are providing a safety net, which we saw when USD/CAD failed to hold below 1.3700. However, our own domestic inflation, which Statistics Canada reported at 3.2% for February, complicates the outlook for the Bank of Canada. This policy similarity with the Fed, which is also fighting inflation, is likely to keep the currency pair range-bound. The currency options market shows traders are bracing for a move, as one-month implied volatility for USD/CAD has pushed above 11%, a level we haven’t consistently seen since the market turmoil of 2025. This elevated premium makes strategies that bet on the pair remaining within a certain channel, like selling an iron condor, potentially profitable. This is a direct bet that the competing forces of high oil prices and hawkish central banks will keep the pair contained. We must also respect the Federal Reserve’s messaging that they will not react to short-term headlines. Officials are signaling a clear concern about the stagflationary risks from this oil shock, which provides underlying support for the US dollar on any significant dips. This makes aggressively betting against the greenback a high-risk strategy until the geopolitical situation clarifies. Create your live VT Markets account and start trading now.

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BNP Paribas expects 2026 US GDP 2.9% and inflation 3.0%, keeping Fed rate range 3.5–3.75%

BNP Paribas forecasts US GDP growth of 2.9% in 2026, up from 2.1% in 2025. Inflation is projected at 3.0% in 2026, with tariffs and higher oil prices cited as factors. The bank reports that the Federal Open Market Committee made three rate cuts in 2025, totalling -75 bps. It expects the Fed Funds target range to remain at 3.5%–3.75% throughout 2026.

Dollar Weakness Versus Euro

In this setting, BNP Paribas projects the US dollar will keep weakening against the euro. The article notes it was produced using an artificial intelligence tool and checked by an editor. The Federal Reserve appears firmly on hold, following the three rate cuts we saw throughout 2025. This has established the current target range of 3.5%-3.75%, where we expect it to remain for the rest of the year. This stability removes a key variable for traders and shifts the market’s focus toward underlying economic trends. February’s Consumer Price Index just came in at 3.1%, confirming that inflation is stubbornly staying above the central bank’s goal. However, with the latest jobs report showing a healthy addition of 210,000 positions, the Fed is clearly prioritizing its employment mandate. They appear willing to tolerate this higher inflation to ensure the labor market remains strong. This combination of steady rates and persistent inflation is weighing on the dollar’s real yield, making it less attractive. We have already seen the EUR/USD pair strengthen from 1.08 in January to its current level around 1.1150. This gradual appreciation is expected to be the dominant theme moving forward.

Trading Implications For Eurusd

For the coming weeks, positioning for a continued, steady rise in the EUR/USD seems prudent. Buying near-term call options on the euro could be an effective strategy to capture this expected upside. Because the Fed is signaling an extended pause, implied volatility may remain relatively low, making such options more affordably priced. Looking back, this market action is reminiscent of patterns we observed in the mid-2000s. During that time, even a stable Fed couldn’t prop up the dollar in the face of strong European growth and shifting capital flows. We could be seeing a similar dynamic play out now as the US economy’s outperformance relative to the rest of the world begins to narrow. Create your live VT Markets account and start trading now.

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Pesole at ING says risk-off conditions cap sterling gains, keeping EUR/GBP slightly above fair value estimate

EUR/GBP is trading a little above ING’s short-term fair value estimate. ING puts the pair at around 0.5% above that level. Comments from European Central Bank officials are due, including Piero Cipollone and Chief Economist Philip Lane. Christine Lagarde is scheduled to speak on Wednesday, alongside other ECB speakers.

Central Bank Speakers And Near Term Data

In the UK, Bank of England speakers include Chief Economist Huw Pill tomorrow. Megan Greene, Sarah Breeden and Alan Taylor are also due to speak later this week. UK February inflation is published on Wednesday. ING expects it to matter less, while tomorrow’s PMIs may have more impact. ING says shifting global risk sentiment may limit further falls in EUR/GBP. This may also reduce the scope for sustained Pound strength versus the euro.

Policy Divergence As The Dominant Driver

Looking back at the analysis from March 2025, we recall the view that unstable global risk sentiment would limit the Pound’s strength, putting a floor under the EUR/GBP exchange rate. That perspective argued against expecting major downward corrections, even if UK data was supportive for Sterling. The core idea was that broader market fear would outweigh domestic factors, preventing sustained Pound outperformance. One year on, that theme has partially held, but the economic data has diverged significantly. Recent figures for February 2026 show UK core inflation remaining unexpectedly high at 3.1%, keeping pressure on the Bank of England to maintain a restrictive stance. In contrast, the latest Eurozone HICP flash estimate dropped to 2.3%, giving the European Central Bank a clearer path toward easing monetary policy later this year. This policy divergence is now the dominant driver, something that was only a possibility in early 2025. Money markets are currently pricing in 75 basis points of cuts from the ECB by year-end, while expectations for the BoE have been scaled back to just one 25 basis point cut in the fourth quarter. This growing rate differential provides a strong fundamental argument for a lower EUR/GBP. However, the risk sentiment warning from last year should not be ignored. Volatility in global equity markets has ticked up, and the VIX index has averaged near 17 over the past month, reflecting ongoing geopolitical uncertainty and concerns about a slowdown in China. This backdrop is providing periodic support for the Euro over the more risk-sensitive Pound, creating frustrating rallies within the broader downtrend for EUR/GBP. Given these conflicting forces, derivative traders should consider strategies that benefit from capped upside in the pair. Selling out-of-the-money EUR/GBP call options with strike prices around the 0.8600 level could be an effective way to generate income. This strategy profits if the pair moves sideways or trends lower, capitalizing on the view that policy divergence will prevent any significant Euro rally. For those wanting to position for a decline but mindful of the risk-off support, a bear put spread offers a defined-risk alternative. One could buy a put option with a strike at 0.8450 and simultaneously sell a put with a lower strike, such as 0.8350, to finance the position. This allows traders to profit from a modest move lower while capping potential losses if a sudden risk-off event causes the pair to spike higher. Create your live VT Markets account and start trading now.

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OCBC says BoE messaging drove market repricing, pricing 85bps tightening by 2026, delaying anticipated third-quarter cuts

Recent Bank of England communication led to sharp market repricing, with almost 85 bps of rate hikes now priced in for 2026. This reduces certainty around a previously expected BoE cut in 3Q26 and makes a longer period on hold more likely. Forecasts still point to GBP/USD staying broadly stable at about 1.33–1.35 over the next year. The BoE message was described as policy being on hold, while keeping open the option of rate rises if required.

Market Repricing And Boe Outlook

There are risks of a more hawkish path for both the BoE and the ECB, but the repricing is set against concerns about slowing growth. If energy prices stay elevated, the subsequent slowdown is expected to weigh on activity. Higher oil prices are framed as both an inflation shock and a drag on growth, creating a stagflation-type mix. March PMIs and other sentiment surveys due this week are expected to provide an early read on the impact, with figures anticipated to soften and to weigh on risk assets. The article notes it was produced using an AI tool and reviewed by an editor. We see the market has gotten ahead of itself, pricing in nearly 85 basis points of Bank of England hikes for 2026. This aggressive stance seems to ignore the growing signs of an economic slowdown, with UK inflation remaining sticky at 3.4% as of February’s data. This disconnect between market pricing and economic reality presents a clear opportunity.

Positioning For A Growth Slowdown

The primary driver is the stagflationary shock from Brent crude prices holding firm above $95 a barrel. This simultaneously fuels inflation and acts as a tax on consumers and businesses, dragging on growth. The Bank of England will be very hesitant to hike aggressively into a slowing economy, a lesson we learned well back in 2023. All eyes are now on this week’s March PMI figures for the first real read on the economic damage. Given that Q4 2025 GDP growth was a meager 0.1%, we expect a soft PMI reading, possibly close to the contractionary 50.0 mark. A weak number would likely force the market to rapidly unwind its aggressive rate hike bets. For those trading interest rates, this suggests looking at strategies that profit from a fall in rate expectations. This could involve receiving fixed rates on short-term interest rate swaps or buying Sterling Overnight Index Average (SONIA) futures for the late 2026 contracts. These positions will gain value if the market dials back its hawkish pricing. We believe the British pound also looks vulnerable if growth fears begin to dominate the inflation narrative. Buying GBP/USD put options with a strike around 1.30 could provide a cost-effective way to position for a downturn. Similarly, put options on the FTSE 250 index offer a direct hedge against the domestic growth slowdown that seems to be unfolding. Create your live VT Markets account and start trading now.

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Trump told Fox Business that Iran urgently seeks an agreement, possibly reached within five days or sooner

US President Donald Trump told Fox Business Network on Monday that Iran wants a deal, and said it could be reached within five days or sooner, according to Reuters. He said the latest talks between US envoys Steve Witkoff and Jared Kushner and their counterparts took place on Sunday night. Crude oil prices fell after the report, with West Texas Intermediate (WTI) trading below $90 and down about 9% on the day. US stock index futures rose between 2% and 2.2% on the day.

Risk On Risk Off Basics

“Risk-on” and “risk-off” describe how much risk market participants are willing to take. In risk-on periods, they tend to buy higher-risk assets, while in risk-off periods they prefer safer assets. In risk-on conditions, shares often rise, many commodities (except gold) can gain, commodity-exporter currencies may strengthen, and cryptocurrencies can rise. In risk-off conditions, bonds—especially major government bonds—often rise, gold can rise, and safe-haven currencies such as the US Dollar, Japanese Yen, and Swiss Franc can gain. Currencies that often strengthen in risk-on markets include the Australian Dollar, Canadian Dollar, and New Zealand Dollar, as well as the Ruble and South African Rand. Risk-off strength is often seen in the US Dollar, Japanese Yen, and Swiss Franc. We remember last year when talk of a US-Iran deal immediately sent oil prices tumbling. West Texas Intermediate crude fell nearly 9% in a single day, dropping below $90 a barrel on that news. This event provides a clear template for how markets react to a sudden de-escalation in the Middle East. With WTI crude recently trading over $105 a barrel due to renewed tensions in late 2025, the potential for a sharp reversal is significant. Any hint of diplomacy could trigger a rapid sell-off, much like the one we witnessed before. The Cboe Crude Oil Volatility Index (OVX) has been hovering near 45, showing the market remains nervous about supply disruptions.

Market Implications For Traders

A drop in oil prices would be a powerful catalyst for a “risk-on” move in the stock market. We saw S&P 500 futures rally over 2% on similar news, as lower energy costs are a major boost for corporate earnings and consumer spending. Therefore, call options on major indices could perform well in the event of any diplomatic surprise. This risk-on sentiment would likely spill over into foreign exchange markets, favoring commodity-linked currencies. The Australian and Canadian dollars would be expected to strengthen significantly, as they did during similar risk rallies throughout 2025. We could look at positioning for a rise in pairs like AUD/JPY, which directly pits a risk-on currency against a safe-haven. Create your live VT Markets account and start trading now.

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Stephan Miran told Bloomberg policymakers should ignore headlines, as the outlook still supports prospective rate cuts

Fed Governor Stephan Miran said policy should not be set based on short-term headlines, and said it was premature to judge the current situation. He said there was still not enough clarity to know whether monetary policy should react to current events. He said the traditional central bank view is that oil shocks do not feed into core inflation. He said headline inflation is expected to rise, but it is too soon to say it will affect core inflation, and he said he is watching for broad-based second-round effects.

Oil Shocks And Core Inflation

Miran said higher energy prices can depress demand, which can offset some inflation impact. He said it would be highly unusual for the Fed to react to an oil shock now, and said higher oil could push up inflation but this is not yet being seen. He said the labour market could still use support from monetary policy, and that the job market is continuing a gradual softening trend. He added that the balance of risks has worsened on both sides, while the policy outlook still allows for rate cuts. After the remarks, the US Dollar Index was down 0.38% at 99.12. The Federal Reserve is signaling that its plan for rate cuts is still on track. They are telling us not to overreact to short-term events, specifically the recent spike in WTI crude futures to over $105 a barrel. This suggests they see higher energy prices as something that could slow the economy down, not just cause inflation.

Market Pricing And Trading Implications

It’s premature to think this will change their course. The February 2026 CPI report fits this narrative, with headline inflation rising to 3.5% while core inflation remained more contained at 2.9%. The Fed is watching to see if energy costs bleed into other areas, but isn’t seeing it yet. The job market is also giving them room to consider cuts. We saw the latest report for February 2026 show a gain of only 155,000 jobs, which was below the market expectation of 190,000. This gradual softening supports the view that policy may need to be less restrictive soon. Given this outlook, we are seeing the market price in easing. The CME FedWatch Tool now indicates a greater than 75% chance of a rate cut by the June 2026 meeting. This makes long positions in interest rate futures like SOFR attractive, as their prices will rise if the Fed cuts as expected. For equity traders, this dovish stance is a tailwind for the S&P 500. Call options on major indices could be a way to play the potential upside from lower rates. However, with the Fed acknowledging risks on both sides, buying VIX call options or using collars could be a prudent hedge against unexpected volatility. This isn’t a new playbook for the Federal Reserve. When we look back from 2025 at the 2019 cycle, we saw them deliver “insurance” rate cuts to support the economy amid global uncertainty. The current situation, with a softening labor market, looks very similar to that setup. Create your live VT Markets account and start trading now.

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MUFG analysts say CHF lags G10 peers since conflict began, as SNB intervention risks curb haven demand

Since the Middle East conflict began on 28 February, the Swiss franc (CHF) has lagged other G10 currencies. It was the third-worst performer after the NZD and SEK, falling by about 3.0% against the USD. USD/CHF moved back towards resistance near 0.7950 from its 200-day moving average. Earlier in the year it had reached a low just above 0.7600.

SNB Pushback Against Franc Strength

The Swiss National Bank (SNB) has signalled that it will resist sharp CHF gains. On 2 March it said its willingness to intervene in foreign exchange markets had increased to counter “a rapid and excessive appreciation”. The SNB repeated this position at its latest policy meeting last week. It said intervention would aim to avoid an appreciation that could threaten price stability in Switzerland. Swiss inflation was low before the conflict, which can increase sensitivity to currency strength. Inflation was 0.1% in February, compared with 2.2% in February 2022 before the Ukraine conflict. The CHF’s recent weakness may not last if the energy-price shock worsens. A more disruptive global outcome could lead to a reversal in the CHF move.

Trading Implications And Risk Scenarios

The Swiss Franc has not behaved as a typical safe-haven currency since the Middle East conflict began in late February. Instead of strengthening, it has weakened by about 3.0% against the US Dollar, pushing the USD/CHF pair up towards the key resistance level of 0.7950. This unusual price action is a direct result of the Swiss National Bank’s (SNB) very public commitment to fight any rapid appreciation. We see the SNB’s stance as a response to uniquely low domestic inflation, which was just 0.1% before the conflict started. The latest figures released by the Swiss Federal Statistical Office on March 5th showed consumer prices are still only up 0.2% year-over-year, giving the central bank a strong incentive to prevent a stronger franc from importing deflation. This contrasts sharply with the situation in early 2022, when inflation was already at 2.2% before that year’s energy shock, giving the SNB room to welcome a stronger currency. Looking back at the period following the conflict in Ukraine in 2022, the franc acted as a classic haven, with the EUR/CHF pair notably breaking below parity for the first time in years. The current environment is different because the SNB is actively working against this instinct, creating a tug-of-war for the currency. This tension is evident in the derivatives market, where one-month implied volatility for USD/CHF has climbed from around 5.5% to over 7.0% in the past three weeks. For the coming weeks, this creates opportunities for traders who believe the SNB will succeed in capping the franc’s strength. Selling out-of-the-money CHF calls or implementing bearish call spreads on the franc could be a viable strategy to collect premium. This view bets that the central bank’s intervention threats will keep a ceiling on any appreciation, especially as USD/CHF tests its 200-day moving average. However, we remain cautious about assuming this franc weakness will last if the global situation deteriorates. Brent crude prices have already surged by 12% to over $92 per barrel since late February, signaling that the energy shock is a credible threat. Traders who anticipate a wider global economic slowdown could consider longer-dated options, such as buying puts on USD/CHF, to position for an eventual flight to safety that could overwhelm the SNB’s efforts. Create your live VT Markets account and start trading now.

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TD Securities’ Daniel Ghali says gold’s bull run reflects sequential investors, echoing carry-trade-like behaviour rather than fundamentals

Gold’s bull market has been linked to successive sources of demand, starting with central banks and later extending to institutional and retail buying. The pattern has been described as mechanically similar to a carry trade, with US dollar surpluses being recycled into gold. Middle Eastern US dollar surpluses are now under pressure from higher energy costs and the Iran conflict. Energy-importing countries may find it harder to keep directing US dollars into gold because more cash is being used to pay for elevated energy prices.

Medium Term Outlook For Gold

Gold’s long-term outlook is described as healthy, while the medium-term is described as constrained by the conflict. The recent drawdown in gold is described as extreme, but the near-term outlook is still described as vulnerable. A Supreme Court decision on the Lisa Cook trial is cited as a near-term risk event. A large fall over the coming week could lead Commodity Trading Advisors (CTAs) to exit remaining gold long positions, potentially leaving them flat for the first time in more than two years. We have seen how USD surpluses from energy-producing nations, particularly in the Middle East, fueled the gold rally throughout 2025. That capital flow is now reversing as the ongoing conflict with Iran keeps Brent crude trading stubbornly above $125 a barrel, its highest price since the 2022 energy crisis. This dynamic pressures those nations’ budgets, forcing them to spend dollars on domestic needs rather than accumulating gold. The key risk for derivative traders in the coming weeks is a mass exit by Commodity Trading Advisors (CTAs). Our models show these trend-following funds are still holding significant long positions that they first established back in early 2024. A sharp price drop below the critical $2,650 per ounce support level could trigger their automated selling programs and wash out this long-standing support.

Downside Protection Strategy

Given this setup, purchasing short-term downside protection through put options seems like a prudent strategy. Implied volatility on gold options has already ticked up to a six-month high of 18%, reflecting deep market uncertainty ahead of the Supreme Court’s upcoming decision on the Lisa Cook trial. This indicates the market is already bracing for a potentially large price swing. This gold trade has essentially acted like a carry trade, attracting a cascade of capital from central banks to retail buyers who followed the initial momentum. As the original source of funds dries up, the entire structure becomes fragile. The latest data showing a 15% quarter-over-quarter drop in GCC foreign exchange reserves confirms this capital recycling trend is already unwinding. While the long-term outlook for gold remains healthy due to structural demand, the medium-term path is clearly challenged. The immediate focus should be on the risk of this large pool of CTA capital exiting the market. A completely flat position would remove a major pillar of price support that we have become accustomed to for more than two years. Create your live VT Markets account and start trading now.

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Chicago Fed President Austan Goolsbee told CNBC rates might fall by late 2026 amid heightened uncertainty

Austan Goolsbee, President of the Federal Reserve Bank of Chicago, said on CNBC on Monday that the Fed is facing an intense period with a lot at stake. He said inflation has, at best, stalled, and the Fed is waiting for that to ease as a new shock has emerged. He said the period ahead will be tough for the Fed. He added that rates could go down by the end of 2026, but only if there is proof that inflation is improving.

Dollar Outlook Under Higher For Longer

He said petrol prices can strongly affect household expectations, and the Fed hopes this does not have a lasting effect. He noted that the unemployment rate has not risen much, and that job creation may not be a good measure of labour market slack. He said inflation now appears to be the main risk. He also said no one can tell the Fed what will happen in the conflict. After these comments, the US Dollar Index stayed under modest bearish pressure and moved slightly below 99.50. We are in a difficult moment where inflation has stalled at best, and a new external shock is complicating the outlook. The path forward for the Federal Reserve is unclear, making this a tough period for setting policy. We should not expect rate cuts anytime soon, with the end of 2026 being the most optimistic timeline mentioned.

Positioning And Volatility Implications

The latest Consumer Price Index (CPI) report for February 2026 supports this caution, showing inflation ticking up to 3.4% year-over-year, a reversal from the cooling trend we saw last year. With the Fed Funds Rate holding steady in the 5.25%-5.50% range, this sticky inflation is the primary risk. Therefore, positioning in interest rate futures should reflect fewer, if any, rate cuts being priced in for the remainder of this year. This environment is fundamentally supportive of a stronger US dollar, even with the recent dip below 99.50 on the index. That slight weakness should be viewed as a potential entry point, as the interest rate differential will favor the dollar against other major currencies. We remember how the dollar index surged above 110 back in 2022 when the Fed was aggressively hiking, and a similar “higher for longer” stance now could trigger another leg up. The mention of an ongoing conflict and rising gas prices introduces significant uncertainty into the market. This points toward higher expected volatility, suggesting that buying protection is a prudent strategy. Options on the VIX index, which is currently elevated near 22, could be an effective hedge against sudden market dislocations caused by geopolitical events. Looking back, we can see parallels to the situation in 2025, when markets initially anticipated several rate cuts that never materialized because inflation proved more persistent than expected. The labor market remains strong, with unemployment holding below 4%, giving the Fed little reason to ease policy preemptively. Job creation figures are no longer seen as a reliable indicator of economic slack. Create your live VT Markets account and start trading now.

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