BNY iFlow data indicate greater risk aversion, with the iFlow Mood moving further into negative territory at -0.088. Bond buying increased, while equity demand levelled off. Bond flows were concentrated in G10 and Eurozone debt, while emerging market sovereign debt saw selling. This points to a more defensive positioning in fixed income.

Fx Positioning Signals Divergence

FX flows showed outflows from INR and EUR, alongside demand for CNY and ZAR. Outflows also stood out in TRY and SGD, while demand was also noted in PLN and COP. Many surplus economies faced FX selling linked to concerns about energy import pressure and near-term fiscal measures to reduce energy costs. In Asia-Pacific, KRW and JPY were the only currencies described as overheld, and purchases were reported as light. Given the heightened risk aversion, derivative strategies should prioritize capital protection and target specific pockets of weakness and strength. The iFlow mood indicator has accelerated its decline, a sentiment shift we have seen building since late 2025. This defensive positioning is a direct response to renewed fears over energy costs, especially after Brent crude futures climbed back above $95 a barrel last month. We should consider strategies that benefit from a flight to safety in sovereign debt. This involves going long on G10 and Eurozone bond futures, such as German Bunds, while simultaneously hedging by buying put options on emerging market bond ETFs. The recent commentary from the Federal Reserve’s February 2026 meeting, which signaled a pause in rate hikes but a commitment to watch inflation, supports the appeal of holding safer government debt. With equity demand flattening, volatility is likely to increase, making option-based strategies attractive. We should look at selling call option spreads on major indices like the S&P 500, as this profits from range-bound or slightly falling markets. The VIX index has already crept up from 14 to 19 over the last four weeks, reflecting this growing uncertainty and making option premiums more expensive to sell.

Targeted Derivatives For Defensive Markets

The clear outflows from the Euro and Indian Rupee suggest direct bearish plays are warranted. Shorting EUR/USD futures or buying puts on the currency is logical, especially as the latest Eurozone manufacturing PMI came in at a contractionary 48.5. For the INR, persistent energy import stress continues to weigh on the currency, a trend confirmed by India’s trade deficit widening by 15% in the last reported quarter. Conversely, strong demand for the Chinese Yuan and South African Rand points to relative strength trades. We can structure positions that are long CNY against the weaker EUR, or long ZAR against other EM currencies facing outflows. China’s surprising 4% year-over-year increase in exports reported for early 2026 provides a solid fundamental reason to favor the yuan for now. The overheld status of the Japanese Yen and Korean Won serves as a caution against chasing established trends. While these have been safe holdings, the lack of new buying suggests momentum is fading and positions could be crowded. It would be prudent to hedge any existing long JPY or KRW positions with cheap, out-of-the-money put options to protect against a sharp reversal. Create your live VT Markets account and start trading now.

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The National Institute of Economic and Social Research (NIESR) estimated that UK GDP rose by 0.3% over the three months to February. This 0.3% rate was unchanged from the previous three-month period.

Uk Growth Lacks Momentum

The UK’s three-month GDP growth estimate was unchanged at a sluggish 0.3% in February. This points to an economy that is expanding but has failed to gather any real momentum. For us, this suggests a market that may continue to lack a clear direction in the very near term. This stagnant growth figure is supported by recent data showing inflation cooled to 2.2%, easing pressure on the Bank of England to act. However, last week’s GfK Consumer Confidence index fell to -19, indicating households remain pessimistic about the economic outlook. This mix of data reinforces the view that interest rates are likely to remain on hold for the foreseeable future. Given this, we are seeing low realised volatility in indices like the FTSE 100, making significant price swings less likely in the coming weeks. We believe this makes selling volatility an attractive strategy, such as using covered calls or short strangles to collect premium while the market drifts sideways. The VIX on the FTSE 100 has recently hovered around a low of 13.5, a level historically associated with range-bound markets. The UK’s performance is notably weaker when compared to the United States, where last week’s non-farm payroll number beat expectations and added 215,000 jobs. This economic divergence continues to put downward pressure on the British pound against the dollar. We should therefore consider buying puts on the GBP/USD pair to hedge against, or profit from, a further slide towards the 1.2200 level. Looking back at the similar period of slow growth we saw through the second half of 2025, defensive sectors significantly outperformed cyclical ones. This historical pattern suggests a pair trade could be effective now. We see an opportunity in buying call options on utility and consumer staple ETFs while simultaneously buying puts on more economically sensitive sectors like housebuilders.

Defensive Sectors May Lead

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Silver fell for a third day, dropping over 2.90% on Friday to $80.16 and heading for nearly 3% weekly losses. The move came as the US Dollar traded near a four-month high and US Treasury yields rose. US equities gained 0.40% to 0.43% while data pointed to weaker growth after a 43-day government shutdown. The second estimate of Q4 2025 GDP slowed from 1.4% YoY to 0.7%.

Dollar Strength Drives Silver Lower

Core PCE inflation held at 3.1% YoY in January, while headline inflation eased from 2.9% to 2.8%. Expected Fed easing priced for 2026 rose from 17 basis points to at least 19.5 basis points. WTI Oil reached a yearly high near $113.00 earlier in the week and later traded at $95.90. Petrol prices rose more than 20% to $3.60 per gallon since the conflict began two weeks ago. The US Dollar Index rose 0.61% to 100.35, and the 10-year Treasury yield increased 2.5 basis points to 4.287%. President Donald Trump announced action against Iran after a partial 30-day waiver for buying sanctioned Russian Oil. Technical levels cited include resistance near $83.00 and $86.00, with support around $78.00 and $74.00, and a further level near $70.00. An RSI reading was described as moving towards 45.

Key Near Term Risk Events

The US Dollar’s strength is currently overwhelming other factors, pushing silver below the key $81 mark. With the Dollar Index hitting a four-month high of 100.35, we see direct pressure on dollar-priced assets like silver. This trend is likely to continue in the immediate short-term as long as US Treasury yields remain elevated near 4.30%. We are now focused on next week’s Federal Reserve meeting on March 17-18, which will be a major catalyst. While the weak GDP data from late 2025 supports the case for rate cuts, sticky inflation at 3.1% gives the Fed reason to pause. We remember how in early 2024, markets priced in aggressive cuts that didn’t materialize until later in the year, causing a sharp repricing in metals, so caution is advised. Geopolitical risks from the Middle East and President Trump’s planned actions against Iran are a significant wildcard for inflation. Oil prices, after briefly touching $113, have settled around $95.90, but any escalation could send them surging again, forcing the Fed’s hand and potentially boosting silver’s safe-haven appeal. From a technical standpoint, the bearish momentum seems poised to test the $80 level. A break below this psychological support could open the door to a slide towards the next support at $78, making put options with strikes in this range an interesting consideration. We would need to see a firm close back above $86 to reconsider a bullish stance. The Gold/Silver ratio is also providing clues, now stretching above 85:1, a level not seen since the economic uncertainty of 2024. This suggests silver is becoming historically cheap compared to gold. For those of us with a longer-term view, this divergence could present an opportunity for pairs trades, betting on silver to outperform gold if market sentiment shifts. Create your live VT Markets account and start trading now.

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GBP/USD traded near 1.3240, falling for a fourth day and reaching its lowest level since 3 December 2025. The move was linked to a firmer US dollar and risk-off conditions. The Iran war pushed oil prices higher, adding inflation risks ahead of policy meetings next week. The Federal Reserve and the Bank of England are due to announce interest-rate decisions, with the Fed also set to release an updated Dot Plot.

Oil Shock And Uk Growth

Some economists estimate that $100-per-barrel oil could lift the UK Consumer Price Index by about 0.6 percentage points through higher fuel costs. In the UK, monthly GDP was 0% month-on-month in January, after 0.1% in December. In the US, JOLTS job openings rose to 6.946 million in January from 6.55 million previously reported for December. Core Personal Consumption Expenditures inflation was 3.1% in January, up from 3.0% in December. On the 4-hour chart, GBP/USD was at 1.3241 and traded below the 20- and 100-period SMAs. Resistance was noted at 1.3289 and 1.3346, support at 1.3230, and the RSI hovered near 30. With Cable breaking down to a three-month low, we see a clear bearish trend driven by fundamental divergence. The weak 0% GDP growth in the UK contrasts sharply with strong US job openings and sticky inflation. We should therefore be positioned for further downside in GBP/USD, especially with key central bank meetings on the horizon.

Policy Divergence Trade Setup

The ongoing Iran conflict is creating an inflation problem that the Bank of England cannot easily fight without damaging an already stagnant economy. This is reminiscent of the energy price shocks we saw back in 2022, which put severe pressure on the UK consumer and limited the BoE’s policy options. This dynamic strongly favors the US Dollar, as the Federal Reserve has more room to remain hawkish. Given the expectation for a dovish hold from the BoE, we believe buying GBP/USD put options is the most effective strategy. Targeting strikes below the 1.3200 psychological level with expirations in late March would allow us to capture any negative reaction to next week’s meeting. This approach offers a clear, risk-defined way to capitalize on the pound’s weakness. Recent market data supports this view, with one-month risk reversals for GBP/USD showing the heaviest bias toward puts since the fourth quarter of 2025. This indicates that institutional traders are actively buying downside protection. We should align with this sentiment, as it signals a strong conviction in the market for a lower exchange rate. On the other side of the pair, US economic data continues to justify dollar strength, with the latest weekly jobless claims figures released yesterday showing the labor market remains exceptionally tight. The firm core PCE reading above 3% gives the Fed little reason to signal any impending rate cuts in its new Dot Plot. This policy divergence between the Fed and BoE is the primary catalyst for our trade. For those anticipating a sharp move but uncertain of the immediate direction following the central bank announcements, a long volatility strategy could be considered. Buying a strangle, which involves purchasing both an out-of-the-money put and call option, would be profitable if the pair moves significantly in either direction. Given the high-impact nature of next week’s events, an explosive move is a distinct possibility. Create your live VT Markets account and start trading now.

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Russia’s consumer price index (CPI) rose by 0.7% month on month in February. The expectation was 0.6%. The February reading was 0.1 percentage points above the forecast. The release reports a higher monthly inflation rate than expected.

Inflation Implications For Monetary Policy

The February inflation number coming in at 0.7% tells us that price pressures remain stubborn. This makes it highly unlikely the Bank of Russia will consider cutting its key rate in the near future. We should now anticipate interest rates staying elevated for longer than previously expected. With the central bank’s key rate holding firm at what is now 14%, the chances of a “higher for longer” policy are solidifying. Last week, the yield on 3-year government bonds (OFZs) ticked up by 15 basis points, reflecting this new reality. Any derivative plays based on a near-term rate cut should be reconsidered immediately. This outlook should provide continued support for the Russian Ruble. A high interest rate differential makes the currency attractive, and we have already seen the USD/RUB pair fall below 95 for the first time this year. Traders could look at options strategies that benefit from the Ruble strengthening further, potentially towards the 92 level in the coming weeks. We saw a similar pattern play out in late 2023 when the central bank acted decisively against rising inflation. From our perspective in 2025, that period taught us not to bet against the bank’s resolve. That historical precedent suggests policymakers will prioritize stability over stimulating growth right now.

Equities Outlook Under Higher Rates

For equities, this environment is a headwind, as high borrowing costs can impact company earnings. The MOEX Russia Index has been flat over the last month, struggling to find direction against the restrictive monetary policy. We should consider protective put options or bearish spreads on broad market indices to hedge against a potential downturn. Create your live VT Markets account and start trading now.

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

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

Riksbank Policy Outlook

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

Market Positioning Implications

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

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

Us Data And Rate Gap

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

Looking Ahead For Usd Jpy

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

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

Implied Volatility Outlook

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

Derivative Strategy Considerations

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

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

Canada Jobs Shock

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

Options And Volatility

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

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