The Australian dollar rose on Wednesday as rate-rise expectations for the Reserve Bank of Australia increased. AUD/USD traded at 0.7152, up 0.47%. Markets remained focused on Middle East developments, including increased hostilities between Israel and Hezbollah in Lebanon. In an Axios interview, US President Donald Trump said there are no targets left in Iran and that “any time I want it to end, it will end.”

Oil Prices And Inflation Pressure

WTI oil traded at $87.57 a barrel, up nearly 5%, after reversing earlier moves. The International Energy Agency recommended tapping 400 million barrels, and Lloyd’s of London said ships in the Strait of Hormuz will be insured. Bank of America, Goldman Sachs, Westpac and National Australia Bank expect an RBA rate rise next week. RBA Deputy Governor Andrew Hauser said there would be a “genuine” debate at the meeting and that “inflation is too high”. US February inflation matched forecasts, with CPI at 2.4% year on year and core CPI at 2.5% year on year. Upcoming releases include Australian Consumer Inflation Expectations and US jobless claims, housing data and the balance of trade. AUD/USD support levels were noted near 0.7120, 0.7050 and 0.7000, with resistance near 0.7200 and 0.7275. A move below 0.7050 was described as a risk to the upward bias.

Trade Strategy And Risk Management

Based on the strengthening RBA hike bets, we see a clear opportunity in the AUD/USD. The swaps market, as of early March 2025, is now pricing in an over 80% probability of a 25-basis-point hike at next week’s meeting. This strong expectation should continue to support the Australian dollar. Geopolitical tensions in the Middle East are a key catalyst, pushing WTI crude prices up nearly 15% since the beginning of February 2025. This oil shock directly fuels concerns about imported inflation in Australia, adding significant pressure on the RBA to act. We believe the market is correctly interpreting this as a hawkish signal for the central bank. Meanwhile, the US February CPI data appears outdated as it does not capture the recent spike in energy costs. While US inflation held at 2.4%, we anticipate future reports will reflect higher prices, but the immediate narrative favors AUD strength. This divergence in real-time inflation pressures gives the Aussie a temporary advantage. Given this outlook, we are positioning for further upside by buying AUD/USD call options with strike prices near the 0.7200 level. These positions allow us to profit from a continued rally toward the 0.7275 resistance over the next several weeks. The current positive momentum, confirmed by the technicals, supports initiating these bullish trades. To manage risk, we are considering bull call spreads to cap potential losses if the RBA delivers a surprise hold. A daily close below the 0.7120 support would be our first signal to reduce exposure. Any deeper break below 0.7050 would invalidate the immediate bullish thesis and prompt us to exit the position. Create your live VT Markets account and start trading now.

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Tensions involving the US, Israel and Iran drove fresh volatility in oil. Iran kept the Strait of Hormuz closed and attacked three vessels near it on Wednesday, while Iran’s military said oil could reach $200 a barrel. The IEA recommended releasing 400 million barrels to curb rising prices. WTI traded near $87 per barrel after reaching a three-year high just under $120 on Monday.

Oil Volatility And Geopolitical Risk

US February CPI rose 0.3% month on month, matching expectations and up from 0.2% in January. Inflation remained above the Fed’s 2% target, supporting a cautious policy stance. The US Dollar Index traded near 99.20, recovering earlier weekly losses. The dollar’s strongest move was against the Japanese yen. EUR/USD traded near 1.1570 after giving up earlier gains. GBP/USD traded near 1.3410 and was little changed in the US session. USD/JPY traded near 156.90, close to a one-month high, alongside higher US Treasury yields. USD/CAD traded near 1.3590 ahead of Canada’s February jobs data on Friday and February CPI next Monday, before a BoC decision next Wednesday.

Dollar Strength And Rate Differentials

Gold traded at $5,167 and was down on the day. Key releases include UK January industrial production, US housing data and jobless claims on 12 March, and UK January GDP plus US PCE, GDP and Michigan data on 13 March. Looking back at the Iran conflict in March 2025, we saw oil volatility drive markets as WTI crude approached $90. One year later, tensions in the Strait of Hormuz remain a key risk, and any escalation could trigger a similar flight to safety. Derivative traders should consider using options to hedge against sudden spikes in oil, as OPEC+ has already shown a willingness to manage supply tightly, with their January 2026 production cut of 1 million barrels per day keeping WTI firm above $82. The US inflation data from February 2025 reinforced the Federal Reserve’s cautious stance, a theme that has dominated the past year. We have seen inflation cool, with the latest February 2026 Consumer Price Index reading at 2.9%, but this is still well above the 2% target. Consequently, the Fed has only delivered two small rate cuts, holding the policy rate at 4.75% and supporting long-term US dollar strength. This environment means the US Dollar Index, which rallied to 99.20 during the 2025 crisis, continues to find support at higher levels, currently trading around 104.50. The dollar’s strength is now less about a pure safe-haven dash and more about its yield advantage over other major currencies. We should anticipate that any sign of global economic weakness will likely funnel more capital into the dollar, making long positions attractive. The surge in USD/JPY to nearly 157.00 last March highlighted the extreme sensitivity of the yen to US Treasury yields. That dynamic is still in play, as the interest rate gap between the US and Japan remains historically wide, even with minor policy shifts from the Bank of Japan. This makes selling yen volatility or maintaining carry trade positions a viable strategy, though we must remain vigilant for intervention. Last year’s events saw the EUR/USD drop back toward 1.15 as traders sought the dollar’s safety. Today, the euro’s weakness is more tied to sluggish Eurozone industrial production figures, which contracted by 0.5% in the last quarter of 2025. Meanwhile, USD/CAD continues to be heavily influenced by oil prices and Bank of Canada policy, which is expected to diverge further from the Fed in the coming months. Create your live VT Markets account and start trading now.

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China relies on imported energy and may face disruptions to oil and LNG supply from the Middle East, including risks linked to Iran. China imports 73% of its oil, with about 40% of those imports coming from the Middle East, mainly Saudi Arabia and Iraq, and about 10% coming from Iran. Around one-third of oil and around one-quarter of LNG passing through the Strait of Hormuz is destined for China. Chinese officials have called on ‘all sides’ of the Iran war to reduce military operations, avoid escalation, and ensure safe passage for ships through the strait.

Energy Supply Buffers And Diversification

China has built buffers by stockpiling energy when prices were lower, with total oil reserves estimated at about 80 days of consumption. Its import mix is also spread across suppliers, and it may be able to raise oil imports from Russia. China also uses more non-fossil power, with renewable electricity rising to almost 40% in 2025. In response to the Middle East conflict, the government told large refiners to suspend exports of diesel and petrol. Higher oil and gas prices could raise inflation, though China’s starting point is lower than the US or Europe. A firmer inflation path could lead the People’s Bank of China to be more cautious about further piecemeal monetary easing. Given the persistent Middle East tensions from last year, we see energy costs directly constraining the People’s Bank of China. With Brent crude holding stubbornly above $95 a barrel this month, the risk of imported inflation is very real. China’s February CPI data confirmed this trend, coming in at 1.8% and marking the third straight monthly rise.

Market Implications For Policy And Assets

This sustained price pressure suggests the PBoC will be very cautious about further monetary easing in the coming weeks. Unlike the broad-based easing we saw after the 2022 energy crisis, the current environment seems to be tying the bank’s hands. We should therefore adjust expectations for rate cuts, which will be reflected in yuan-denominated interest rate swaps. For currency traders, this limited scope for easing provides a floor for the yuan, making bets on its significant weakness a risky proposition. The interest rate differential with the US dollar is unlikely to widen substantially from here. This may lead us to consider strategies that profit from a stable or slightly strengthening yuan against the dollar. This scenario is also a headwind for Chinese equities, which often rely on policy support to move higher. The ongoing uncertainty is reflected in the market, with implied volatility on Hang Seng Index options climbing 15% since the start of the year. We are likely to see traders hedge their stock portfolios by purchasing put options on key Chinese indices. Create your live VT Markets account and start trading now.

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Political uncertainty in Poland is rising, with reports of possible vetoes affecting EU defence funding legislation. The government has indicated it may need an alternative “plan B” if a veto blocks the bill. The opposition party Law and Justice (PiS) has chosen former education minister Przemyslaw Czarnek as its prime ministerial candidate for the autumn 2027 general election. The bank noted PiS did not select a more moderate figure from the party wing linked to former prime minister Mateusz Morawiecki. Commerzbank forecasts the Polish zloty will lag behind its regional peers over the coming year due to domestic political risks. The article says it was produced with an AI tool and reviewed by an editor. Growing political friction in Poland suggests the zloty will continue to lag behind other regional currencies. The selection of a hard-right candidate for the 2027 election by the opposition party signals a strategy of confrontation, not compromise. This deepens the political instability we have been monitoring for months. This outlook holds even as the National Bank of Poland has kept interest rates elevated at 5.75% for over a year. While inflation has cooled from its 2025 peaks, it remains stubbornly above the central bank’s target, creating a difficult environment. The zloty’s failure to gain ground despite this high yield highlights how much political risk is weighing on the currency. Considering these factors, shorting the zloty against its peers, like the Czech koruna, appears to be a sound strategy. We saw the zloty underperform the koruna through the final months of 2025, and this trend is likely to continue. This relative value trade isolates the specific political risk in Poland from broader regional sentiment. The rising uncertainty also suggests an increase in currency volatility. Three-month implied volatility for the euro-zloty pair has already crept up from around 6% to nearly 8% since the start of the year. Buying zloty put options could be an effective way to position for a sharp move weaker in the coming weeks. A key near-term catalyst to watch is the potential veto of EU funding legislation. We recall similar disputes over rule-of-law issues throughout 2025, and another blockage would almost certainly trigger a negative reaction in the currency. This makes holding bearish positions particularly relevant right now. The political maneuvering ahead of the 2027 election is not a short-term issue and will create a persistent headwind for the currency. Any periods of zloty strength in the coming weeks should be viewed as opportunities to sell. The long-term political picture appears to be deteriorating, not improving.

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Gold fell on Wednesday as the US Dollar strengthened and US Treasury yields rose. XAU/USD traded at $5,170, down 0.37%, after US inflation data matched expectations and little changed in policy pricing. Fighting between the US, Israel and Iran continued for a twelfth day, adding to concerns about higher Oil prices and inflation. WTI rose 4.76% to $87.36, while the US Dollar Index increased 0.32% to 99.22.

Inflation Data And Policy Expectations

US consumer inflation was steady, with headline CPI at 2.4% year on year in February and core CPI at 2.5%. Money markets priced 30 basis points of easing by year end, according to Prime Market Terminal data. The US 10-year Treasury yield rose by over 6 basis points to 4.218%, weighing on Gold. The International Energy Agency agreed to release over 400 million barrels to reduce price pressures linked to the closure of the Strait of Hormuz, while Iran said Oil could reach $200 a barrel. Gold remained below $5,419, the cycle high set on 2 March. Resistance levels were cited at $5,238, $5,300, $5,350 and $5,419, with support at $5,100, $5,014 and the 50-day SMA at $4,896. Looking back to March 2025, we saw gold struggling against a strong US dollar and rising Treasury yields. Those moves were fueled by fears that conflict in the Strait of Hormuz would send oil prices soaring and keep inflation stubbornly high. This situation created a difficult environment, as gold’s usual safe-haven appeal was being overpowered by the appeal of the dollar.

Outlook For Gold In 2026

The geopolitical situation has since cooled from its boiling point, although underlying tensions remain a factor. West Texas Intermediate crude, which briefly spiked towards $90 a barrel during that period, has stabilized and is currently trading around $82 a barrel as of early March 2026. This easing of energy prices has lessened the immediate threat of a major inflation shock. That pullback in oil prices gave the Federal Reserve the room it needed to act on its long-awaited dovish pivot. We saw them finally deliver a 25 basis point rate cut in December 2025 after the yearly inflation rate showed a consistent downtrend. The most recent Consumer Price Index report for February 2026 confirmed this trend, with the annual rate holding at 2.1%. As a result, the dynamics that held gold back a year ago have now reversed. The US Dollar Index has softened from its highs above 99 and now sits near 97.50, while the 10-year Treasury yield has fallen from over 4.2% to its current level of approximately 3.95%. This shift has been a significant tailwind for gold, helping it break through the key resistance levels we watched in 2025, including the $5,419 peak. With the Fed now in an easing cycle, the path of least resistance for gold appears to be upwards. We are now seeing gold consolidate around the $5,550 level. For derivative traders, this means any significant dips should be viewed as buying opportunities. Given that the fundamental backdrop of lower rates and a softer dollar is now in place, strategies like buying call options or establishing bull call spreads could be effective. These can offer upside exposure while managing risk in case of any short-term volatility. Underpinning this bullish view is the continued demand from institutional players. Data from the World Gold Council confirmed that central banks continued their strong purchasing trend through the end of 2025, adding a net 290 tonnes in the fourth quarter. This consistent buying provides a strong underlying support level for the market. Create your live VT Markets account and start trading now.

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The Euro slipped against the US Dollar on Wednesday, as cautious sentiment linked to the US-Iran war supported the Greenback. US inflation data matched forecasts, supporting expectations that the Federal Reserve will keep a cautious approach while inflation stays above its 2% target. EUR/USD traded near 1.1569, just above a near four-month low set earlier in the week, and was down about 0.36% on the day. The pair has trended lower since peaking at 1.2082 on 27 January, its highest since June 2021.

Technical Indicators Overview

Price remains below the 100-day Simple Moving Average near 1.1696. The 14-day RSI fell towards 33, near oversold levels, while the MACD stayed below its signal line and below zero with a negative histogram. The ADX was near 29, pointing to firmer trend conditions. Support levels sit near 1.1500, then 1.1450 and 1.1400, while resistance is near 1.1650 and the 100-day SMA around 1.17. A daily close above 1.1700 would shift focus to 1.1800-1.1825. The Euro is used by 20 EU countries and in 2022 accounted for 31% of FX activity, with over $2.2 trillion average daily turnover. With the US Dollar strengthened by the ongoing US-Iran war and a cautious Federal Reserve, we see the downward trend in EUR/USD continuing. The latest US inflation report, which showed the Consumer Price Index at a persistent 2.9% year-over-year, gives the Fed little reason to consider cutting rates. This backdrop solidifies the dollar’s strength against the euro.

Policy Divergence And Market Bias

The European Central Bank, on the other hand, faces a weaker economic picture, creating a clear policy divergence. Recent data showed German industrial production contracted by 0.5% last month, highlighting the ongoing stagnation we’ve seen since last year. This pressure could force the ECB to consider easing its policy sooner than the Fed, further weighing on the EUR/USD pair. This pattern is not new, as we recall similar economic weakness in the Eurozone throughout much of 2025, which capped any significant rallies for the euro. The current technical setup, with the pair trading well below its 100-day moving average, confirms that sellers remain in firm control. Given this momentum, we expect further downside in the weeks ahead. For those looking to position for this move, buying put options with strike prices at or below the 1.1500 psychological level seems appropriate. A decisive break of this support could accelerate the decline, making these options profitable as we head towards the 1.1450 target. This is a direct way to capitalize on the strengthening bearish trend indicated by the ADX. Alternatively, selling call options or implementing a bear call spread with an upper strike around the 1.1700 resistance level could be an effective strategy. This approach profits from both a falling price and the passage of time, as long as the pair fails to mount a significant recovery above that key technical barrier. It offers a way to generate income while maintaining a bearish bias. Create your live VT Markets account and start trading now.

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ABN AMRO economists say the Dutch economy would broadly follow eurozone patterns under scenarios linked to the Iran conflict. They expect the main channel to be higher inflation rather than a sharp near-term hit to growth. In a negative scenario, they estimate Dutch GDP growth would slow versus their baseline, with a negative quarter in 2026 plausible. They say a prolonged recession like the four consecutive quarters of contraction in 2022–23 is unlikely, and other scenarios imply a milder growth shock.

Dutch Inflation Risk Outlook

They expect a larger effect on prices, with inflation in the middle and positive scenarios rising above 3% again, in line with the eurozone. In the negative scenario, they expect Dutch inflation to be stronger than in the euro area, partly because Dutch inflation was 2.4% in February while eurozone inflation was below the ECB’s 2% target. They also point to timing, with the Netherlands still seeing CLA-wage growth above 4% after the last energy shock. They add that recent growth has been robust, and household savings and private debt ratios have improved. The article notes it was produced using an AI tool and reviewed by an editor. Given the current tensions surrounding Iran, we see the primary transmission to the Dutch economy coming through higher inflation rather than a severe growth shock. The main concern for traders should be persistent price pressures, which could diverge from the broader Eurozone trend. This outlook is shaped by our economy’s unique starting point and labor market conditions.

Trading Implications For Rates

We believe a single negative growth quarter in 2026 is plausible if the conflict escalates, but a prolonged recession is not our base case. We remember the four consecutive quarters of contraction back in 2022 and 2023, and the economy’s current fundamentals are more resilient. The Dutch economy expanded by a solid 0.4% in the final quarter of 2025, providing a stronger cushion against external shocks. The key divergence for the Netherlands is inflation, which could easily surpass 3% again. While Eurostat’s latest flash estimate put the bloc’s inflation at a more subdued 1.8%, recent data from Statistics Netherlands shows our domestic inflation has ticked up to 2.6%. This is fueled by ongoing wage pressures, with negotiated labor agreements from last quarter still showing an average increase of 4.2% year-on-year. For derivatives positioning, this suggests bets on sustained inflation and a more cautious European Central Bank. We should consider strategies that benefit from interest rates remaining elevated longer than the market currently anticipates, such as paying fixed rates on inflation swaps. Hedging with call options on oil futures is also logical, while put options on the AEX index could serve as a useful, though secondary, hedge against a sudden worsening of the geopolitical situation. Create your live VT Markets account and start trading now.

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USD/CAD rebounded in the US session, briefly moving above 1.3600 and trading near 1.3580. The move followed the IEA agreeing to release 400 million barrels of oil after supply disruption linked to the Iran war. WTI traded near $87 a barrel and stabilised after dropping from a three-year high above $119 on Monday. The decline in oil prices weighed on the commodity-linked Canadian Dollar.

Inflation Data And Market Reaction

US CPI rose 0.3% month-on-month in February, up from 0.2% in January. Headline CPI held at 2.4% year-on-year, while the Fed’s inflation target is 2%. In Canada, Statistics Canada releases February jobs data on Friday and February CPI next Monday. The next Bank of Canada rate decision is due next Wednesday. On the 4-hour chart, USD/CAD sat near the 20-period SMA but below the 100-period SMA, which limited gains around 1.3600. RSI rose from oversold levels but turned down below 50. Resistance is at 1.3630, with 1.3680 above it. Support sits at 1.3542, then 1.3525. Looking back to this time last year, we saw a sharp rebound in USD/CAD towards 1.3600. The catalyst was a major IEA oil release that pushed crude down from its highs, weakening the Canadian dollar. At the same time, US inflation was stubbornly sitting at 2.4%, keeping the Federal Reserve on hold.

Central Bank Divergence And Trading Implications

Fast forward to today, March 12, 2026, and the oil story remains a key factor for the Canadian dollar. While West Texas Intermediate (WTI) isn’t trading at the dramatic highs we saw before the 2025 IEA release, its current price of around $79 a barrel is still weighing on the CAD. This dynamic continues to provide a floor for the USD/CAD pair. The key theme for us now is the growing difference between the US and Canadian central banks. A year ago, US inflation was 2.4%; recent data shows it remains elevated at 3.2%, pushing back expectations for Fed rate cuts. In contrast, Canadian inflation has cooled to 2.9%, fueling speculation that the Bank of Canada could begin cutting rates as early as June. For derivative traders, this suggests a bullish bias on USD/CAD in the coming weeks. We should consider buying call options with strike prices above the current level, perhaps targeting the 1.3680 resistance area mentioned last year. This strategy allows us to profit from a potential upward move while strictly defining our maximum risk. From a technical standpoint, the 1.3630 level remains a critical area to watch, just as it was in 2025. As long as we trade below it, rallies could be sold, but a decisive break above this zone would signal stronger upward momentum. We should view the 1.3540 area as the initial support level to defend. Create your live VT Markets account and start trading now.

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Silver (XAG/USD) fell on Wednesday and traded near $85.30, down 2.12% on the day. It gave back recent gains as the US Dollar rose and US Treasury yields moved higher, reducing demand for non-yielding assets. US inflation data supported the Dollar. CPI rose 0.3% month-on-month in February, up from 0.2% in January, and was in line with expectations; the annual rate held at 2.4%. Core CPI increased 0.2% month-on-month and stayed at 2.5% year-on-year. Inflation remains above the Federal Reserve’s 2% target, which helps keep policy expectations cautious and supports yields. The Dollar also gained from demand for liquidity amid geopolitical uncertainty. Concerns continued over possible disruption in the Strait of Hormuz, and Iranian officials said oil could rise towards $200 per barrel if conflict worsens, alongside reports of multiple shipping incidents. The International Energy Agency said it would release about 400 million barrels from strategic reserves. Ongoing high energy prices have raised inflation concerns, while the stronger Dollar and higher yields limited Silver’s upside. We remember this time last year when silver was stuck around $85.30, pressured by a strong dollar and stubborn inflation figures that were holding at 2.4%. Now, with the latest February 2026 CPI data showing inflation has cooled to 2.1%, the entire landscape for precious metals has shifted. This moderation in price pressures is fueling speculation that the Federal Reserve’s cycle of restrictive policy is nearing its end. For derivative traders, this environment suggests looking at call options on silver, particularly with strikes above the current $92 level. The implied volatility in the options market still presents an opportunity to position for a potential breakout if the Fed signals a definitive pivot in its upcoming meetings. We saw a similar setup in late 2018 before the Fed’s pivot in 2019, which led to a significant rally in precious metals over the following year. The geopolitical fears from 2025 surrounding the Strait of Hormuz did not lead to $200 oil, but Brent crude has remained elevated, recently trading near $95 per barrel. This persistent energy cost remains the primary risk to the disinflationary trend, potentially forcing the Fed to delay any planned rate cuts. Therefore, traders might consider hedging long silver positions with puts on energy-sensitive equities or using futures to play the range in oil. Looking back, the high US Treasury yields were a major headwind for silver throughout much of 2025, a direct result of the Fed’s cautious stance. Today, the 10-year yield has softened considerably from its peak, reflecting the market’s pricing of at least two rate cuts by the end of this year. This shift makes non-yielding silver a more attractive asset, creating a fundamental tailwind that was absent twelve months ago.

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The United States held an auction of 10-year Treasury notes. The auction yield rose to 4.217% from 4.177% at the previous auction. The increase was 0.040 percentage points, or 4 basis points. This change shows a higher yield than last time.

Rates Staying Higher For Longer

The higher yield at today’s 10-year auction signals the market is demanding more compensation for holding government debt, suggesting that expectations for Federal Reserve rate cuts are fading. This move is reinforced by the latest February 2026 inflation data, which came in slightly hot at 3.1% year-over-year, interrupting the steady decline we saw in late 2025. We should therefore anticipate that the “higher-for-longer” interest rate narrative is regaining control. In the derivatives market, this means we should adjust positions tied to the Fed’s policy path, such as Secured Overnight Financing Rate (SOFR) futures, to reflect fewer rate cuts this year. It is now prudent to consider selling call options on Treasury futures or buying put options, positioning for bond prices to fall further as yields climb. These strategies offer a way to profit from, or hedge against, the view that the Fed will remain cautious. For equity derivatives, this environment puts pressure on growth and tech stocks which are sensitive to higher borrowing costs. We are looking at buying protective puts on the Nasdaq 100 index to hedge our long-term holdings against a potential correction in the coming weeks. At the same time, we see rising implied volatility, making VIX futures an attractive tool to speculate on increased market choppiness. This situation reminds us of the persistent inflation fight of 2024 and 2025, where early calls for a policy pivot were repeatedly proven wrong by resilient economic data. Back then, markets that bet against the Fed’s resolve were caught off guard by sustained high rates. That historical pattern suggests we should take the current rise in yields seriously as a signal that the easy part of the disinflationary journey is over.

Dollar Strength On Hawkish Expectations

Finally, a more hawkish Fed outlook typically strengthens the U.S. dollar, as higher yields attract foreign capital. We can express this view by using options to go long the dollar against currencies with more dovish central banks, such as the euro or the yen. This provides another avenue to position our portfolios for a world where U.S. interest rates remain elevated for longer than anticipated just a few weeks ago. Create your live VT Markets account and start trading now.

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