US trade policy uncertainty drives volatility, keeping AUD/USD near 0.7080 after an earlier Asian session climb above 0.7100
AUD/USD trades near 0.7080 on Monday, down 0.05%, after briefly rising above 0.7100 during the Asian session. The pair has turned lower as the Australian Dollar weakens against most major currencies due to renewed trade uncertainty and position adjustments.
The US Dollar Index (DXY) is near 97.60 and is slightly lower on the day. The US Dollar remains under pressure after a Supreme Court ruling limited the scope of some tariff measures. This has raised new questions about the direction of US trade policy.
During European trading, the Dollar Index briefly rebounded toward 97.40 after recovering losses, but the outlook remains uncertain
The US Dollar Index recovered some of its earlier losses and traded near 97.40 during European hours on Monday. At the time of reporting, it was down 0.2% at around 97.60 against a basket of six major currencies.
The earlier sell-off followed a US Supreme Court ruling against President Donald Trump’s tariff policy. The court said the tariffs were illegal because they were based on the International Emergency Economic Powers Act (IEEPA).
Dollar Volatility Outlook
After the ruling, Trump announced a 15% increase in import duties worldwide. He presented the move as a response to the court’s decision on his tariff plan. US data also pressured the dollar, with slower growth and weaker business surveys. Q4 GDP grew 1.4% year-on-year, below forecasts of 3% and down from the prior 4.4%. The S&P Global Composite PMI for February came in at 52.3, down from 53.0 in January. Both manufacturing and services still showed moderate growth. Focus now shifts to speeches from several Federal Reserve officials this week. Their comments may offer clues about the outlook for US interest rates.Options Hedging Strategies
Looking back at the policy whiplash in 2025, the main lesson was the jump in volatility after the Supreme Court’s tariff ruling and the market reaction that followed. This suggests that, in the coming weeks, buying options to protect against sharp moves in the dollar is a sensible approach. With the CBOE Volatility Index (VIX) still relatively low at around 14, options remain fairly priced, making hedges cheaper against unexpected political or economic headlines. Policy uncertainty and the risk of a global trade slowdown pull the dollar in opposite directions. That makes a simple directional bet risky. Last year showed how fast the dollar can flip—from weakness after the court ruling to strength after the tariff threat. Because of this, traders may want to use straddles or strangles on major currency pairs like EUR/USD. These strategies can profit from a large move in either direction without needing to predict the outcome. The weak 2025 data—such as 1.4% GDP growth—was an important warning sign that the economy was slowing. Today’s data should be viewed with that history in mind, especially since the latest January 2026 inflation report showed Core PCE still stuck at 2.8%. Persistent inflation limits the Fed’s ability to cut rates, even if growth weakens. Given this backdrop, the Fed may sound cautious in upcoming speeches, which could keep rate expectations uncertain. This uncertainty is also visible in interest-rate markets, including the volatility skew in SOFR futures. Traders should be careful about taking large, unhedged positions that depend on the Fed’s rate path until the outlook becomes clearer. Create your live VT Markets account and start trading now.HSBC Asset Management says falling 10-year Treasury yields signal stronger data amid risk-asset stress, boosting safe-haven demand
HSBC Asset Management says moves in the US Treasury market have looked unusual. Stronger US economic data has come alongside lower 10-year yields. It says 10-year yields have fallen by about 0.20% this month and are now near the bottom of their 12-month range.
It links the move mainly to stress across risk assets, not to January’s payrolls data, which suggests the labour market may be stabilising. It points to weak US tech trades, declines in crypto, and falls in gold and silver happening at the same time.
Unusual Treasury Correlations
It adds that Treasuries have recently worked as a shock absorber in mixed portfolios. However, it warns this diversifying benefit may not last. It highlights tariffs that keep goods prices high, and heavy AI-related capital spending that could increase inflation risk. It also warns about “fiscal dominance” risks tied to high debt levels and the large amount of Treasury issuance expected this year. The article says it was created with help from an artificial intelligence tool and reviewed by an editor. In early 2025, markets were hard to read. Treasuries acted as a safe haven even while economic data stayed strong. That negative link between stocks and bonds gave portfolios temporary protection. Now, in February 2026, that link has broken down. This forces investors to rethink their approach.Portfolio Hedging Adjustments
The main issue is inflation that is still not easing. Last week’s Core PCE came in at a stubborn 2.8%. This keeps pressure on the Federal Reserve to stay hawkish and makes the path of rates more uncertain. Traders may want to use options on SOFR futures to position for continued rate swings in the months ahead. Equities, especially tech, are also showing signs of fresh stress. The Nasdaq Volatility Index (VXN) has moved back above 25, a level not seen since last autumn’s correction. For the weeks ahead, it may be sensible to hedge long equity positions with put options on QQQ or SPY. Fiscal risk is also still a major concern, as it was in 2025. Last week’s 10-year Treasury auction was weak, with a bid-to-cover ratio of only 2.3. This shows the market is struggling to absorb the large amount of supply. That points to an upward bias in yields, which makes options on Treasury futures useful for traders who want to position for price declines. Because bonds may no longer be a dependable shock absorber, it is safer to assume that risk-off episodes could push both stocks and bonds lower at the same time. One possible approach for the coming weeks is to buy protection against a jump in equity volatility using VIX call options. This can be a more direct hedge than relying on Treasuries. Create your live VT Markets account and start trading now.This week, traders will watch major firms’ earnings reports for new insight into global economic health
Several big companies report earnings this week. They span AI infrastructure, cloud services, home improvement retail, and enterprise software. The market will focus on guidance, capital spending, and demand.
Alibaba reported fiscal Q2 (ended 30/09/2025) revenue up 5% to 247.8 billion yuan ($34.8 billion). Cloud revenue jumped 34% to 39.8 billion yuan, above the 37.9 billion yuan expected, after 26% growth in the prior quarter.
Alibaba Earnings Setup
Alibaba has spent 120 billion yuan on capex over the past four quarters, as part of a 380 billion yuan multi-year infrastructure plan. Cloud EBITA rose 35% to 3.6 billion yuan. Quick commerce revenue surged 60% (after 12% growth last quarter). China e-commerce revenue rose 16% to 132.6 billion yuan. Alibaba reports 24/02/2026 pre-market. Estimates: EPS $1.58 and revenue $41.90; shares are up about 5% in 2026. Home Depot reports 24/02/2026 pre-market. Estimates: EPS $2.53, revenue $38.03B, and shares are up about 10% in 2026. Home Depot’s Q3 adjusted EPS was $3.74 vs $3.84 expected. Revenue was $41.35 billion vs $41.10 billion expected. Full-year guidance is for sales up about 3%, comparable sales slightly positive, and adjusted EPS down about 5%. Online sales grew 11%, and big-ticket projects rose 2.3%. Nvidia’s fiscal Q3 revenue was $57.01 billion vs $54.92 billion expected. Adjusted EPS was $1.30 vs $1.25 expected. Net income rose 65% to $31.91 billion. Data centre revenue was $51.2 billion, including $43 billion from GPU compute. Nvidia reports 25/02/2026 post-market. Estimates: EPS $1.53 and revenue $65.69B; shares are up about 2% in 2026. Salesforce reports 25/02/2026 post-market. Estimates: EPS $3.05 and revenue $11.18B; shares are down about 30% in 2026.Salesforce And Nvidia Watch
Salesforce posted adjusted EPS of $3.25 vs $2.86 expected. Revenue was $10.26 billion vs $10.27 billion expected, and revenue rose 8.6% year-on-year. Net income increased to $2.09 billion from $1.53 billion, helped by a $263 million investment gain. Agentforce generated over $500 million, and Informatica is expected to add about three percentage points to fiscal Q4 revenue growth. With Alibaba reporting tomorrow, investors face a push and pull. Cloud growth is strong, but quick commerce is pressuring margins. That mix raises uncertainty and could lead to a sharp post-earnings move. Options pricing already implies a large swing, reflecting both AI optimism and profit concerns. In 2025, Chinese tech stocks often moved sharply on changes in capex plans and cloud revenue. Alibaba also averaged about +/- 7% moves on earnings days last year. That history supports today’s high implied volatility, and suggests traders are preparing for a move that could break the stock out of its recent range. If you expect a big move but do not have a strong view on direction, a long straddle (at-the-money options expiring this week) is one possible approach. It can profit from a large move either up or down, and is a direct bet on earnings-driven volatility. Home Depot also reports tomorrow. Sentiment remains pressured after three straight earnings misses. The key challenge is still the weak housing backdrop, which likely has not improved much in just one quarter. That keeps many traders cautious to bearish. Mortgage rates stayed high, with 30-year rates averaging above 6.5% through the end of 2025. That tends to reduce demand for large renovation projects. This supports the company’s cautious guidance and leaves room for another soft quarter. The market appears to be braced for modest results at best. A bear put spread can offer downside exposure with defined risk. You buy a higher-strike put and sell a lower-strike put. This can work if the stock drops moderately after earnings, and fits the continuing macro pressure on housing-related spending. Nvidia’s earnings on February 25 may be the most watched, given its role in the AI boom. The stock is priced for near-perfect execution after several major beats. Even a small miss on revenue or guidance could cause a sharp pullback. A key question is whether hyperscaler demand can stay at today’s rapid pace. Industry data shows global AI infrastructure spending rose by more than 40% in 2025, which supports Nvidia’s growth. But valuation already reflects much of that strength, raising the bar. Comments on supply constraints for its most advanced chips will be especially important. Because options are expensive, a bull call spread can be a defined-risk way to target more upside. If you think expectations are too high, selling a far out-of-the-money bear call spread is another approach. It can profit if the post-earnings rally is weaker than expected, and it benefits from implied volatility falling after the report. Salesforce also reports on February 25, with a different setup. With the stock down sharply this year, the main question is whether its AI products can re-accelerate growth while its core software business slows. Skepticism is high, so this report is an important test of its AI story. In the second half of 2025, enterprise software spending slowed as many companies delayed large IT projects. This headwind helps explain Salesforce’s revenue miss and increases pressure on Agentforce to show meaningful traction. Traders will likely want clear metrics on AI adoption before sentiment improves. With the stock depressed and uncertainty high, a long strangle could fit. This involves buying out-of-the-money calls and puts to position for a big move in either direction. It can pay off if earnings deliver a major upside surprise, or if weak guidance pushes the stock much lower. Create your live VT Markets account and start trading now.OCBC’s Sim Moh Siong says sticky inflation and activity support sterling, but a by-election risk is boosting volatility
Sticky UK inflation and stronger activity data have reduced expectations for Bank of England rate cuts and supported the Pound. Softer labour data has not caused a major shift toward a more dovish outlook.
A by-election in Greater Manchester on 26 February is linked to higher near-term GBP volatility. The Pound’s muted response to last week’s stronger data suggests positioning may stay cautious until after the vote.
Outlook For Eur Gbp
EUR/GBP is expected to drift lower once political uncertainty fades. Recent UK growth indicators are improving and may continue to strengthen. The Pound is being supported by stubborn inflation and an economy that has held up better than expected. This is limiting how quickly markets think the Bank of England will cut rates. January inflation was 2.9%, still above the central bank’s target, and that strength is helping to put a floor under the currency for now. Even so, investors appear hesitant, echoing the political uncertainty seen around last year’s by-election in 2025. With the Chancellor’s Spring Budget due on 11 March, short-term GBP volatility is likely to stay elevated. In other words, supportive economic data is being held back by near-term political event risk. For derivative traders, this mix of high uncertainty and a firm underlying trend can create opportunities. The rise in one-month implied volatility suggests options are pricing a sizeable move. Strategies such as buying straddles or strangles may help capture a post-budget breakout, allowing traders to benefit from a large swing without needing to predict direction.Potential Post Budget Positioning
Historically, EUR/GBP drifted lower after political risks eased in late February and early March 2025. If the budget passes without major negative surprises, a similar pattern could emerge, with the Pound’s strength reflecting the improving data more clearly. Positioning for a move lower in EUR/GBP after the budget could therefore be a sensible medium-term approach. Create your live VT Markets account and start trading now.USD/INR rises near 91.00 as the rupee retreats despite a weaker dollar and trade-policy uncertainty
The Indian Rupee weakened against the US Dollar on Monday afternoon in India, giving back earlier gains. USD/INR ticked up toward 91.00, even as the US Dollar stayed under pressure.
The US Dollar Index (DXY) fell 0.21% to around 97.45, after recovering part of its earlier drop. The move followed a US Supreme Court ruling that President Donald Trump exceeded his authority under the International Emergency Economic Powers Act (IEEPA) when imposing broad tariffs.
Supreme Court Ruling And Tariff Fallout
After the ruling, Trump said he was “ashamed of certain members of the court” and announced 15% global tariffs. The Dollar also weakened after soft US data. Q4 GDP rose at a 1.4% annualised pace, below the 3% estimate and down from the prior 4.4%. The S&P Global Composite PMI also slipped to 52.3 from 53.0. The ruling and the new 15% tariff rate—lower than the 18% discussed in US-India talks—could help Indian exporters. A planned visit by Indian trade negotiators to the US was delayed for an unknown period. Foreign Institutional Investors sold Rs. 2,011.24 crore of Indian equities in February and sold Rs. 934.61 crore on Friday. USD/INR stayed above the 20-day EMA at 90.888, while the 14-day RSI remained in the 40.00–60.00 range. In early 2025, USD/INR moved sideways around 91.00, driven by uncertainty over US trade policy and a weaker Dollar. That period included Supreme Court rulings limiting presidential tariffs and softer economic data. Now, in late February 2026, the backdrop is very different. Over the past year, the Dollar has strengthened sharply as the Federal Reserve kept fighting persistent inflation. The Fed raised its key rate to 5.75% earlier this month, and US Q4 2025 GDP growth came in at a solid 2.8%. As a result, USD/INR is trading closer to 93.50, well above earlier pivot levels.India Inflows And Rbi Volatility Management
India, however, remains resilient. Strong foreign portfolio investor (FPI) inflows contrast with the net selling seen in February 2025. FPIs have invested more than $3 billion into Indian markets this month, helping support the Rupee. The Reserve Bank of India is also managing volatility, aiming to prevent a disorderly fall in the Rupee despite broad Dollar strength. This tug-of-war between a hawkish Fed and strong Indian inflows makes clear one-way bets risky. Traders may prefer strategies that work in mixed conditions. For example, buying USD/INR call options can provide upside exposure with limited downside. Selling out-of-the-money put options may also help collect premium, based on the view that RBI support could limit sharp drops. With USD/INR holding above its key 20- and 50-day moving averages, the technical trend is still upward, but headwinds are likely. Implied volatility has risen, showing higher uncertainty and making options more expensive. This setup favors strategies that either cap risk clearly or take advantage of higher premiums, while keeping in mind the strong but conflicting market forces. Create your live VT Markets account and start trading now.During the European session, EUR/USD trims gains but holds above 1.1800, unfazed by Germany’s February IFO survey
EUR/USD rose for a second day, but it gave back some of its earlier gains. It stayed above 1.1800 during the first half of Monday’s European session.
Germany’s IFO Business Climate Index rose to 88.6 in February from 87.6 in January. The Current Assessment Index increased to 86.7 from 85.7.
Euro Rises Despite Policy And Trade Uncertainty
The data had little impact on the euro. Traders stayed cautious due to questions around ECB President Christine Lagarde’s tenure and new trade tensions. On Friday, US President Donald Trump announced a new global levy of 15% after a Supreme Court ruling against his reciprocal tariffs. The European Parliament’s trade chief said the EU will propose freezing the ratification of the US-EU trade deal. The freeze would remain until the Trump administration provides clearer details on its trade policy. These headlines weighed on the US dollar and helped support EUR/USD. Markets also priced in at least two more 25 bps rate cuts from the Federal Reserve, adding to USD weakness. The US dollar is weakening, which is supporting EUR/USD. This softness is mainly driven by recent data, including the final Q4 2025 US GDP report showing slow growth of 1.2%. That has increased expectations for Fed rate cuts, as markets lean toward a more dovish central bank.Fed Cut Bets Keep Pressure On The Dollar
In the derivatives market, the CME FedWatch Tool shows a more than 70% chance of a 25 basis point cut at the Fed’s March 2026 meeting. This expectation is keeping pressure on the dollar and remains the main reason EUR/USD is holding up. We believe shorting the dollar remains an attractive underlying trade. This backdrop resembles the trade uncertainty seen in 2020, which also pushed the dollar lower. Today, the dispute centers on the EU’s Carbon Border Adjustment Mechanism, reviving “Sell America” talk among some traders. Ongoing trade disputes continue to weigh on the US currency. Still, the euro is not showing strong momentum, which limits how far the pair can rise. The latest German IFO Business Climate index for February 2026 came in at 90.2, slightly below expectations and offering little market support. This suggests recent EUR/USD gains are driven more by dollar weakness than by confidence in the euro. With that in mind, traders may consider buying near-term EUR/USD call options, for example with a strike around 1.1550. This provides exposure to further upside if Fed cut expectations keep building. The premium paid also defines the maximum risk if the euro’s lack of strength limits the rally. For traders who are more cautious about a large move higher, selling out-of-the-money put options with a strike near 1.1300 could be an alternative. This approach earns premium based on the view that euro data may cap gains, but weak dollar sentiment could also reduce the risk of a sharp drop in the weeks ahead. Create your live VT Markets account and start trading now.MUFG’s Derek Halpenny says foreign demand capped super-long JGB yields, easing instability and supporting the yen
Japan’s very long-term government bond yields jumped in January and attracted heavy buying from overseas investors. That demand helped cap yields and eased fears of market turmoil.
Since a recent peak, the 30-year JGB yield has dropped by 54 bps. Flow data still points to strong demand for JGBs at today’s yield levels.
Imf Calls For Credible Fiscal Plan
The IMF is urging Japan to set out a credible medium-term fiscal plan. It also said any support for vulnerable households and businesses should be “budget-neutral, targeted and temporary”. Market pricing suggests about a 70% chance the Bank of Japan will raise rates on 28 April. Expectations of a near-term hike have supported the Japanese yen and also helped pull down longer-term yields. BoJ board member Takata is scheduled to speak on Thursday. He is seen as one of the more hawkish board members and is expected to support current market expectations. The article says it was produced with help from an AI tool and reviewed by an editor.Late February 2026 Trading Implications
In hindsight, the expected Bank of Japan hike on April 28, 2025, did happen and led to a short period of yen stability. Foreign demand for JGBs helped contain yields, but the strong momentum from early last year has since faded. That first tightening was a classic “buy the rumor, sell the fact” moment for FX markets. By late February 2026, conditions look very different. The key issue is still the wide interest-rate gap. Japan’s latest core inflation reading for January 2026 was a modest 2.2%, and Q4 2025 GDP showed a small contraction. That makes the case for more BoJ hikes weak. This stands in sharp contrast to the United States, where the Fed funds rate is still above 5%, keeping carry trades highly attractive. For derivatives traders, this argues against simple directional bets on a stronger yen. Implied volatility in USD/JPY options has fallen steadily over the last six months as the market prices in a long BoJ pause. This setup favors selling volatility with strategies such as short strangles, aiming to collect premium as the pair trades in a more stable range. It also makes sense to watch the forward market and use the yield gap. Three-month USD/JPY forward points trade at a large premium, showing the strong incentive to borrow yen and invest in dollars. Forward contracts or currency swaps can be used to build positive-carry trades in the coming weeks, so traders can earn carry while waiting for the next macro catalyst. Create your live VT Markets account and start trading now.Germany’s Ifo business climate rises to 88.6 in February, beating forecasts and up from 87.6 in January
Germany’s IFO Business Climate Index rose to 88.6 in February. That was slightly above the 88.4 forecast and up from January’s 87.6. The IFO Current Assessment Index also improved, rising to 86.7. It beat the 86.1 estimate and January’s 85.7.
The Expectations Index increased to 90.5, in line with forecasts, from 89.6 in January (revised up from 89.5). After the release, EUR/USD barely reacted and traded about 0.25% higher near 1.1810.
Before the data, markets expected:
– Business Climate: 88.4
– Current Assessment: 86.1
– Expectations: 90.5
The IFO survey is based on feedback from more than 7,000 firms on current conditions and short-term plans.
In market commentary, EUR/USD was seen around 1.1820, with the 14-day RSI at 51. The pair faced resistance near the nine-day EMA at 1.1825. An upside level was cited at 1.2082, while the 50-day EMA at 1.1776 was flagged as support.
We remember a similar German IFO beat back in February 2025, when the index jumped to 88.6. At the time, markets were focused on uncertainty around US trade policy, and EUR/USD was trading near 1.18. Today looks very different, with the pair now struggling to hold 1.0750.
Today’s IFO Business Climate reading also beat expectations, coming in at 87.2. It marked a second straight month of improvement. That is encouraging, especially after data showed Germany’s economy shrank by 0.3% in the final quarter of 2025. The message is mixed: conditions remain difficult, but the worst may be passing for Europe’s largest economy.
For derivatives traders, this sets up a push-and-pull that could lift euro volatility. Better German data clashes with the market’s view that the European Central Bank will signal rate cuts by mid-year. If the two narratives diverge further, the tight EUR/USD range may break. That makes short-dated options straddles a reasonable way to position for a volatility spike.
If you are bullish, one approach is near-term EUR/USD call options with strikes around 1.0850. If German sentiment keeps improving, markets may push back expectations for ECB cuts, giving the euro room to rally. In the past, a turn higher in German business expectations has often come before a period of euro strength.
Still, this is only one data point, and the recovery remains fragile. Eurozone inflation just eased to 2.6%, which supports the case for eventual rate cuts and could weigh on the currency. Some traders may treat the current strength as a chance to buy puts, expecting the broader weaker-euro trend to return once optimism fades.
A cleaner expression of a bullish Germany view may be EUR/GBP, which reduces the noise from US dollar moves. With the UK facing ongoing inflation and growth issues, Germany’s relative improvement could help lift EUR/GBP. Call options on EUR/GBP may be a more direct way to position for stronger continental European momentum.
In January, Italy’s year-on-year consumer price index matched expectations and held steady at 1%
Italy’s consumer price index rose 1% year on year in January. This matched market expectations.
The data shows the annual inflation rate was unchanged from the forecast. No other details were included in the update.
