AUD/USD traded near 0.7060 on Monday, up 1.16% on the day. The pair recovered after two days of declines, helped by expectations of tighter policy in Australia. Markets are positioning ahead of the Reserve Bank of Australia decision on Tuesday. A 25-basis-point rise is widely expected, taking the official rate to 4.10%.

Rba Policy Expectations

At its February meeting, the RBA lifted the rate to 3.85% and left scope for further rises to ease inflation pressure. Australian inflation is described at around 3.8% year on year. The global backdrop includes risk aversion linked to tensions in the Middle East. Markets have largely priced in another RBA rise, with attention on whether US policy becomes more restrictive. The US Dollar eased ahead of the Federal Reserve decision on Wednesday. Rates are expected to be held in the 3.50%–3.75% range. The Australian Dollar also found support from Chinese data. China’s Retail Sales rose 2.8% year on year in January–February, while Industrial Production increased 6.3% over the same period.

Market Situation In 2026

We remember the optimism surrounding the Australian dollar in early 2025, when the market was confident the currency would push higher on aggressive rate hikes. Back then, AUD/USD was trading strongly above 0.7000 as the Reserve Bank of Australia prepared to lift its cash rate. The situation today on March 16, 2026, is starkly different, with the pair struggling around 0.6550 as the RBA’s tightening cycle has clearly ended. At that time, the RBA’s move to 4.10% was seen as outpacing a Federal Reserve holding rates below 3.75%. The dynamic has since inverted, as the Fed Funds Rate is now in a 4.75%-5.00% range while the RBA has held its cash rate at 4.35% for the last four months. This negative interest rate differential against the Aussie encourages traders to favor the US dollar. The primary driver for the RBA’s hikes last year was an elevated inflation rate of around 3.8%. Recent quarterly data confirmed that inflation has cooled to 3.1% year-over-year, which is much closer to the RBA’s target band. This gives the central bank little reason to consider further rate hikes, removing the key support that lifted the currency last year. We also recall how strong Chinese economic data provided a significant tailwind for the Aussie in early 2025. Today, that support is less reliable, as the latest data for February 2026 showed a concerning slowdown in Chinese consumer spending, with retail sales rising just 1.9%. This weakness tempers expectations for Australian commodity exports. Given this new environment, the old strategy of buying AUD/USD call options on dips is no longer viable. Traders should now consider strategies that protect against further downside, such as buying put options with strike prices around 0.6450. Selling call spreads above the 0.6650 level could also be an effective way to generate income while betting that the currency’s upside remains capped. Create your live VT Markets account and start trading now.

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LyondellBasell Industries (NYSE: LYB) fell from 2024 highs near $105 and trended lower for about 18 months. It bottomed earlier this year in the low $40s, around $42–$44. Shares then rose to just above the $71.85–$72.30 area in a matter of weeks. This is a gain of more than 60% from the low. The $71.85–$72.30 zone is described as a prior consolidation area on the weekly chart. The stock is trading just above it on a weekly closing basis, but there has not been a confirmed weekly close above $72.30. A confirmed weekly close above $72.30 would set up $84.38 as the next resistance level. That implies a move of roughly 17% from current levels. If the price fails to hold above $72.30, the $57–$60 range is noted as a support area. The multi-year lows in the low $40s are described as the next downside reference. The article also cites multiple analyst upgrades, tightening global polyethylene supply, and raised 2026 guidance after cost cuts. It states that the next weekly close may help decide whether the move continues or reverses. Looking back to late 2025, we were watching LyondellBasell stall at a critical wall around $72. The big question then was whether the 60% run-up from the lows was a genuine reversal or just a bounce. That question has now been answered, as the stock successfully confirmed a weekly close above that zone in January 2026 and has not looked back. The technical breakout was supported by improving market conditions. We’ve seen North American polyethylene contract prices increase by over 4% since the year began, driven by strong export demand and some competitor production issues. This aligns with recent government data showing the Industrial Production Index for chemical manufacturing rose 0.5% in February 2026, its second consecutive monthly gain. With the stock now pushing toward the mid-$80s, traders should view that old $72.30 level as the new floor. Selling out-of-the-money put spreads with strike prices below $75 for April and May expiration could be a way to collect premium, betting that former resistance will hold as strong support. This strategy takes advantage of the clear shift in the stock’s technical posture. However, we must respect that the next major resistance at $84.38 represents the long-term support level that failed back in 2024. For those anticipating a pause here, buying debit put spreads could offer a defined-risk way to play a potential rejection from this significant overhead supply zone. The key is that the primary trend has shifted, and dips are now opportunities rather than signs of collapse.

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UK interest rate expectations have shifted from cuts to a possible rise, as higher energy prices raise inflation risks. This has supported recent Pound Sterling strength against other European currencies. Markets have reduced expectations for Bank of England rate cuts and now price the next move as a rise. Around 13bps of tightening is priced in by year end, compared with two full rate cuts priced before the Middle East conflict.

Market Repricing And Inflation Risks

The Bank of England is expected to keep rates unchanged while signalling concern about persistent inflation pressures linked to the energy shock. Uncertainty over the inflation outlook may lead more policymakers to vote for holding rates until there is clearer data. BoE communication may leave scope for tighter policy if needed to limit further inflation risks. The policy outlook is expected to remain dependent on how long energy prices stay elevated. In foreign exchange, the repricing of UK rates has coincided with GBP gains against European peers. EUR/GBP has moved back towards about 0.8600, near the lows seen since mid-last year. The article notes it used an AI tool and was reviewed by an editor. It also describes the FXStreet Insights Team’s role in selecting market observations and adding analysis.

Trading Implications For Sterling

We are now seeing the consequences of the sharp shift in UK rate expectations that occurred back in 2025. The energy shock from the Middle East conflict forced markets to abandon bets on rate cuts and price in tightening, a sentiment that has largely persisted into this year. With UK inflation for February 2026 coming in at a sticky 3.1%, well above the Bank of England’s target, the hawkish stance remains justified. This environment continues to support Sterling, especially against the Euro, where rate-cut expectations are more pronounced. The EUR/GBP cross has indeed broken below the 0.8600 level we saw it testing last year and is now hovering around 0.8520. For the coming weeks, traders should consider positioning for further downside through put options on EUR/GBP, using key technical levels as strike prices. The Bank of England’s decision to hike the Bank Rate to 5.50% in January 2026 cemented this hawkish policy, and derivatives pricing now reflects a “higher for longer” scenario. Trading SONIA futures can provide a direct play on this, as the market is not pricing in any cuts until late 2026 at the earliest. Any data suggesting persistent wage growth, which is still running hot at 5.2%, will likely push those expectations even further out. Volatility remains a key factor, particularly around upcoming Bank of England meetings and inflation data releases. Options strategies like straddles on GBP/USD could be effective for capitalizing on the price swings that follow these events without betting on a specific direction. The defined-risk nature of these positions is advantageous given the lingering uncertainty from last year’s energy price movements. Create your live VT Markets account and start trading now.

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Nordea economists expect Sweden’s Riksbank to keep the policy rate unchanged at 1.75% at its 19 March meeting. They also expect the rate path from the December report to remain, implying a steady policy rate through most of 2026. Inflation forecasts are described as only modestly revised, while uncertainty around energy prices remains high. The war in the Middle East is cited as a factor increasing uncertainty and encouraging a wait-and-see approach.

Inflation Forecasts Shift Higher

In response to the conflict, Nordea has raised its forecast for CPIF inflation by around 0.5 percentage points. This adjustment is said to bring its CPIF path into line with the Riksbank’s December assessment. The balance of risks for the policy rate is described as moving from a clear likelihood of a rate cut to a more neutral profile. A longer-lasting conflict is linked to a higher probability of a rate hike. A year ago, we saw the Riksbank adopting a wait-and-see approach, expecting the policy rate to hold at 1.75% through 2026. The uncertainty from the conflict in the Middle East had shifted the balance away from rate cuts. That cautious stance now appears to have been an underestimation of inflationary pressures. With the latest CPIF inflation data for February 2026 coming in at 2.4%, we are now seeing inflation remain stubbornly above the 2% target. This persistent pressure is why the Riksbank already moved its policy rate to 2.00% late last year, defying earlier expectations of a prolonged hold. The market is now pricing in the possibility of another hike to cool demand.

Market Strategy And Krona Impact

Traders in interest rate swaps should be positioning for a ‘higher-for-longer’ scenario, as the forward curve reflects a hawkish Riksbank. The view from early 2025 that rates would stay flat is no longer valid. Paying fixed on short-term swaps could be a viable strategy to speculate on further rate increases. This has directly impacted the krona, which has strengthened against the euro, with the EUR/SEK pair falling from over 11.50 to near 11.20 in recent months. Options traders should look at elevated implied volatility around upcoming central bank meetings. Buying SEK calls could be a way to position for a continued hawkish stance. However, the situation is complicated by recent signs of economic slowing, with GDP contracting by 0.1% in the final quarter of 2025. This puts the Riksbank in a difficult position of having to fight inflation while trying to avoid a deep recession. This conflict will likely increase volatility in both rates and the krona in the coming weeks. Create your live VT Markets account and start trading now.

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Disruptions around the Strait of Hormuz and Bab El-Mandeb are changing risk levels for Saudi crude exports and the ability to reroute cargoes. Up to 16–17m b/d of crude flow through Hormuz has been halted, and about 7m b/d of that can bypass the strait. Saudi Arabia has about 5–5.5m b/d of spare bypass capacity versus pre-war levels on the East-West pipeline, allowing exports via the Red Sea. The East-West pipeline appears to be running at full capacity, while Yanbu ports show 13m b/d of scheduled crude loadings for export this week and over 5m b/d next week.

Yanbu Export Exposure To Red Sea Risk

Based on schedules, around 70–75% of Yanbu exports could face disruption if Houthi activity affects the Red Sea. Of Yanbu exports, 90% are set to load on VLCCs, and at least 80% of that is expected to go to Asian markets or the Saudi Jazan refinery. Fully laden VLCCs cannot use the Suez Canal, which points to Bab El-Mandeb transit for many cargoes. Up to 2–2.5m b/d of scheduled VLCC flows could instead go north to Ain Sukhna and use the 2.5–2.8m b/d SUMED pipeline to Sidi Kerir, with just over 2m b/d seen as the upper limit for this route. Given the massive disruption in the Strait of Hormuz, the market is facing a severe supply shock that rerouting cannot fully solve. With the Saudi East-West pipeline to the Red Sea now operating at its limit, we see a clear bullish case for crude oil in the immediate future. This situation is a significant escalation from the shipping delays we observed through 2024 and 2025. The risk to this rerouted oil is not theoretical, as it now must pass through the Bab el-Mandeb strait. We saw Brent crude prices jump over $115 per barrel after the reported missile near-miss of a VLCC in that waterway last month. The CBOE Crude Oil Volatility Index (OVX) remains elevated near 55, reflecting the market’s anxiety over a potential direct hit on a tanker.

Trading And Market Implications

A huge portion of these exports, up to 75% of the flow from Yanbu, is loaded onto VLCCs that are too large to transit the Suez Canal. This forces them south through the high-risk zone to reach Asian markets. The alternative path using Egypt’s SUMED pipeline is already strained and can only handle a maximum of about 2.5 million barrels per day, leaving a significant bottleneck. For traders, this implies a strategy of buying call options on front-month Brent futures to capitalize on price spikes while defining risk. The spread between Brent and WTI crude has already widened to nearly $9, the largest gap since late 2024, as the disruption is most acute for Middle Eastern barrels. We believe this spread is likely to widen further in the coming weeks. The market structure strongly supports this view, with the futures curve in a steep backwardation, signaling an immediate and severe shortage of supply. This premium on near-term contracts suggests that holding long positions in May or June 2026 contracts is the most direct way to trade this tightness. This is reminiscent of, but more sustained than, the price action we witnessed after the Saudi facility attacks back in 2019. Create your live VT Markets account and start trading now.

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Canada’s February CPI came in at 1.8%, down from 2.3% in January and below forecasts. Excluding indirect taxes, inflation was 1.9%, which was under 2.0% for the first time in 15 months. Shelter inflation eased to 1.5%, below its 1999–2019 average of 2.2%. Bank of Canada core measures averaged 1.0%, pointing to broadly slower price growth across components. The report notes the data predates the latest rise in oil prices linked to conflict in the Middle East. It projects headline inflation could move towards 3.0% in coming months as higher oil prices feed through. Core inflation is expected to be less affected in the short term. The piece also refers to an economy in oversupply and uncertainty linked to tariffs. The item was produced using an AI tool and reviewed by an editor. It is attributed to the FXStreet Insights Team, which compiles market observations from external experts and internal and external analysts. Looking back at the situation in early 2025, we saw inflation was well under control before the Middle East conflict caused oil prices to spike. At that time, headline inflation had dropped to 1.8% and core measures were even lower at an average of 1.0%. The main driver for this softness was moderating shelter costs, which were running below their long-term pre-pandemic averages. This underlying weakness gave us confidence that the Bank of Canada would look through any temporary, oil-driven jump in headline inflation. As we expected, headline CPI did accelerate, touching 2.9% by August 2025 as higher energy costs filtered through the economy. However, the Bank held its policy rate steady through the summer, correctly identifying the shock as transitory and focusing on the weak domestic demand. That patience was justified as the economy showed signs of faltering in the second half of the year, with Q4 2025 GDP growth coming in at a tepid 0.6% annualized. With the effects of the oil shock fading and the economy operating with excess capacity, the Bank of Canada shifted its stance. We saw them deliver two consecutive 25-basis-point rate cuts in the fall of 2025, bringing the overnight rate to its current level. Today, while headline inflation has settled back down to 2.2%, core inflation has proven stickier than anticipated last year and is now hovering around 2.5%. This persistence is limiting the Bank’s appetite for further immediate cuts, creating a state of policy tension. The market, as seen through overnight index swaps, is now pricing in roughly a 40% chance of one more rate cut by the end of this year, a significant shift from the more aggressive cutting cycle priced in during 2025. For derivative traders, this means the straightforward trade of betting on lower rates is now more complex. With the Bank of Canada likely on hold in the immediate future, selling volatility through options strategies like strangles on bond futures could be advantageous. This position would profit from a period of stability as the market waits for a clearer signal on either inflation or economic growth. Given the recent strength in the US dollar, traders should also consider positioning for the USD/CAD exchange rate to remain elevated. The rate differential between the US and Canada continues to favour the US dollar, with the pair trading near 1.3850, up from the 1.35 level seen in early 2025. Buying call options on USD/CAD provides upside exposure if Canadian economic data disappoints further, while limiting downside risk.

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ING’s Warren Patterson revised a base case for global energy markets and removed an earlier assumption of a two-week disruption in the Strait of Hormuz. The updated approach assumes disruption lasting into late March or longer, with gradual normalisation through the second and third quarters. The earlier base case assumed a full two-week stoppage, followed by recovery during March and near-normal flows by April. It has been revised because the conflict entered its third week with no resumption in energy flows.

Updated Base Case Assumptions

In scenario 1, the new base case, flows remain cut off until the end of March while intense combat continues until month-end. Lower-intensity strikes and more diplomatic activity then allow a gradual recovery in the second quarter. Upstream production, refineries and LNG facilities ramp up as storage constraints ease, and some oil continues to bypass Hormuz via available pipeline capacity. Near-normal flows return by the start of the third quarter. Scenario 2 is the most optimistic: flows remain almost fully disrupted until the end of March, then improve in April. Supply returns to near normal by May. Scenario 3 assumes fighting stays intense into April, then shifts to ongoing lower-level confrontation with limited diplomacy. Attacks on vessels keep energy flows disrupted for an extended period.

Market Volatility Outlook

Given that our initial assumption of a quick two-week disruption has failed, the market’s volatility will likely remain extremely elevated. With Brent crude futures already pushing past $125 per barrel, the CBOE Crude Oil Volatility Index (OVX) has surged to over 75, a level indicating significant market stress. Traders should prepare for this high-volatility environment to persist through the second quarter. The new base case, which sees disruptions lasting until the end of March with a slow recovery, suggests the front-end of the oil futures curve will remain in steep backwardation. This is where near-term delivery contracts trade at a significant premium to longer-dated ones, reflecting the acute, immediate shortage of supply from a strait that handles nearly 20% of global oil consumption. Positioning for this through calendar spreads could be a viable strategy. Buying call options with expirations in June and July now aligns with the updated view that a return to normal flows may not occur until the start of the third quarter. While high implied volatility makes these options expensive, it reflects the genuine risk of further price spikes if the conflict escalates toward the more aggressive scenario. The potential for a sharp move upwards outweighs the high premium costs for many. We learned from the market reaction to the supply shock in 2022 that initial price moves can be dramatic and sustained longer than first anticipated. Back then, front-month prices rallied over 30% in just a couple of weeks, catching many off guard. That historical precedent suggests that in the current situation, assuming a quick resolution is a low-probability, high-risk bet. Recent announcements of a coordinated 60-million-barrel release from strategic petroleum reserves (SPR) by IEA members may place a temporary ceiling on prices. However, this volume is small compared to the disruption and will not solve the underlying physical bottleneck at the Strait of Hormuz. Traders should view SPR releases as creating opportunities to enter long positions at slightly lower prices, not as a sign the crisis is over. If the most aggressive scenario materializes, with conflict continuing into April, the disruption would extend for a prolonged period. This would make even longer-dated call options, such as those for September or December delivery, increasingly attractive. Such a scenario would imply a structural shift in energy supply chains, keeping prices elevated for the remainder of the year. Create your live VT Markets account and start trading now.

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Canadian headline inflation slowed to 1.8% in February. Year-on-year comparisons were affected by last year’s GST/HST holiday, which ran to mid-February, and the removal of the consumer carbon tax in April 2025, which lowered energy CPI. The Bank of Canada’s core trim and median CPI measures eased in February. They averaged 2.3% year-over-year, the slowest pace in almost five years.

Core Inflation Signals Weak Demand

On a three-month annualised basis, these core measures averaged 1% in February. This was below the Bank of Canada’s 2% target. Price pressures linked to supply issues remained for some grocery goods, including beef and coffee. The article links these to production disruption from adverse weather. The article says higher oil prices tied to ongoing Middle East tensions are expected to lift energy inflation in March. It also states an expectation that the Bank of Canada will hold the overnight rate at 2.25% at this week’s meeting. The recent inflation report for February shows a major split that we need to watch carefully. While the main inflation number is low at 1.8%, the core measures, which the Bank of Canada focuses on, have slowed to just 1% on a three-month basis. This weak internal demand is directly at odds with rising external pressures from supply chains and oil prices.

Market Pricing Versus Central Bank Caution

The Bank of Canada will likely hold its overnight rate steady at 2.25% this week, but the swaps market is already pricing in a nearly 60% chance of a rate cut by the June meeting. This creates a disconnect between the central bank’s cautious stance and the market’s dovish expectations. We believe the market may be getting ahead of itself, underestimating the Bank’s concern over new inflation shocks. We must factor in rising energy costs, with WTI crude oil recently trading above $95 a barrel for the first time in over a year. Looking back at the situation in 2022, we remember how persistent energy price shocks forced central banks to stay hawkish even as other parts of the economy cooled. The removal of the consumer carbon tax back in April 2025 is also making year-over-year energy comparisons difficult, giving the Bank another reason to wait. Given this setup, a potential strategy is to position for interest rates remaining higher for longer than the market currently expects. This could involve looking at Bankers’ Acceptance futures (BAX) for later in the year, which seem to be underpricing the risk that sticky, supply-driven inflation will delay any rate cuts. The Bank will likely want to see several more months of clean data before committing to an easing cycle. The clear tension between weak domestic inflation and high commodity prices suggests a period of higher volatility is coming. Traders could use options to profit from this uncertainty, such as buying straddles on interest rate futures. This allows a position to benefit from a significant market move, without having to bet on whether the dovish core data or hawkish oil prices will ultimately dictate the Bank of Canada’s next step. Create your live VT Markets account and start trading now.

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The Swiss franc fits many safe-haven features, including decent liquidity, a strong budget position, a current account surplus, and established institutions. Its strength has often caused problems for the Swiss National Bank (SNB). Swiss CPI inflation was 0.1% year on year, with an EU-harmonised rate of 0.5% year on year. With the policy rate at zero, the SNB has limited scope to cut rates, and it has said negative rates remain possible. Foreign exchange intervention is another option, but it carries risks and may not work as intended. US scrutiny also limits how far the SNB can go. In US-Swiss trade talks, reciprocal tariffs of 39% were announced by US President Trump and later reduced to 15% in November. Switzerland is on the US Treasury Monitoring List of currency policies, and this status was renewed earlier this year. In September, the US Treasury and Swiss authorities issued a joint statement saying neither side targets the exchange rate for competitive aims. It also said FX intervention is a monetary policy tool for the SNB to support monetary conditions and price stability. SNB Vice-President Martin said on March 4 that the SNB’s readiness to intervene is higher due to a recent political event, after a similar comment on March 2. The Swiss Franc is a classic safe-haven, supported by Switzerland’s strong budget, credible central bank, and rule of law. However, this strength has often been a major headache for the Swiss National Bank (SNB). This is because a strong franc pushes down on already very low inflation, making it hard for the bank to meet its price stability mandate. We remember how this played out around this time last year, in March 2025, during a period of political uncertainty. The SNB signaled a higher readiness to intervene in currency markets to weaken the franc. This was a clear message that even with rates at zero, they had tools they were prepared to use. Fast forward to today, March 16, 2026, and the situation remains delicate, though inflation has slightly improved to 0.7% year-on-year. While this is an uptick from the 0.1% we saw in early 2025, it still lags significantly behind the Eurozone’s 2.1% inflation rate. With the SNB policy rate at a mere 0.25% compared to the ECB’s 2.75%, the fundamental pressure for a stronger franc persists. This interest rate difference makes holding francs less attractive than euros, but any sign of global market stress sends capital rushing into Switzerland, overwhelming that factor. The SNB’s hands are still tied by the risk of being labeled a currency manipulator by the US Treasury, a persistent concern since the trade tensions of 2024. This means their interventions are likely to be tactical and aimed at preventing excessive appreciation rather than driving a sustained move lower. For derivative traders, this suggests that significant upside for the franc is likely to be limited by SNB action. Selling out-of-the-money call options on the CHF, particularly against the euro, could be a viable strategy over the coming weeks. This approach profits from the view that the SNB will effectively place a ceiling on the franc’s strength, causing volatility to dampen and options to expire worthless. Given the recent tensions in global equity markets, any dip in the EUR/CHF exchange rate toward the 0.9600 level will likely be met with verbal intervention or direct action from the central bank. We saw the SNB defend similar levels in the second half of 2025. Therefore, using option structures like bear call spreads on the franc allows traders to define their risk while betting on the SNB’s resolve to cap its currency.

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The NAHB Housing Market Index in the United States was 38 in March. This was above the forecast of 37. The index figure suggests homebuilder sentiment was slightly stronger than expected for the month. No further breakdown details were provided in the update. The March homebuilder sentiment index came in at 38, which was slightly better than the 37 we were forecasting. While any number below 50 shows pessimism, this small beat suggests the deep freeze in housing might be starting to thaw. This is a signal for us to pay close attention to housing-related assets for a potential short-term shift. We see this improvement happening even as the latest February 2026 CPI data showed core inflation remaining stubborn at 3.1%, making the Federal Reserve’s job difficult. However, 30-year mortgage rates have recently eased from their late 2025 peaks, dipping to an average of 6.4% nationally last week. This slight relief in borrowing costs is likely what’s giving builders a marginal boost in confidence. Looking back, we remember how sentiment struggled throughout 2025 to break above the low 40s due to persistent financing costs. The index bottomed out in the low 30s during the sharp downturn of 2023, so the current level of 38, while weak, confirms a slow and fragile recovery is underway. We are still a long way from the optimism we saw years ago, but the direction is no longer straight down. For the coming weeks, we should consider buying near-term call options on homebuilder ETFs like XHB and ITB. This data point, though small, could spark a relief rally in a sector that has been under pressure. It’s a tactical play on the idea that the worst may be over for builder sentiment. This resilient housing data could also delay expectations for the Fed rate cuts we have been pricing in for the end of 2026. If the economy’s most interest-rate-sensitive sector is stabilizing, the Fed will feel less pressure to ease monetary policy. Therefore, we might consider trades that benefit from interest rates staying higher for longer, such as puts on long-duration bond funds.

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