S&P Global reports Australia’s preliminary February manufacturing PMI fell to 51.5 from 52.3
Australia’s preliminary S&P Global Manufacturing PMI came in at 51.5 in February, down from 52.3, according to data released Friday.
The S&P Global Services PMI fell to 52.2 in February from 56.3. The Composite PMI eased to 52.0 from 55.7.
New Zealand’s monthly trade deficit narrowed to NZ$519m in January, beating expectations of NZ$745m
New Zealand’s monthly trade balance in January showed a deficit of NZD 519 million. This was smaller than the forecast deficit of NZD 745 million.
This means the goods trade shortfall was NZD 226 million smaller than expected. The figures are reported in New Zealand dollars on a month-on-month basis.
Implications For The New Zealand Dollar
A smaller-than-expected trade deficit is a clear positive for the New Zealand dollar. It suggests exports are holding up better than the market had assumed, and this is a trend worth monitoring closely. It may also be an early sign that the NZD is undervalued at current levels. The picture is supported by recent external data. China’s Caixin Manufacturing PMI for January 2026 stayed in expansion at 50.8. Meanwhile, the Global Dairy Trade price index is up a modest 2.1% across auctions held so far this month. Together, these factors support New Zealand’s key export sectors. This strength gives the Reserve Bank of New Zealand more scope to keep policy restrictive. The Official Cash Rate remains at 5.5%, and the latest quarterly inflation reading from late 2025 was 3.8%. With inflation still elevated, there is limited reason for the RBNZ to hint at a dovish shift. The resulting interest rate gap continues to support NZD carry trades. For derivatives traders, this improves the case for buying near-term NZD call options, especially against currencies backed by more dovish central banks. Positioning for a gradual rise in pairs like NZD/USD over the next few weeks may make sense. Selling out-of-the-money NZD puts could also work as a way to collect premium while keeping a bullish bias.Risk Factors And What To Watch
After the commodity price volatility seen through much of 2025, the current stability and run of supportive data is a welcome change. Even so, the main downside risk is a sudden deterioration in global risk sentiment. The next local inflation release will be important for confirming whether this resilience can continue. Create your live VT Markets account and start trading now.New Zealand’s annual trade balance slipped to a $2.3B deficit in January, from a $2.2B deficit
New Zealand’s year-on-year trade balance was NZD -2.3bn in January, down from NZD -2.2bn previously.
A wider trade deficit of NZD -2.3bn points to downside pressure on the New Zealand dollar. It means the value of goods New Zealand imports is still higher than the value of what it exports. This kind of imbalance is a fundamental headwind for the NZD and can support a bearish view.
Trade Deficit Signals Nz Dollar Headwinds
This release supports a trend that has been building since late 2025, linked to softer demand from major trading partners. China is a key example. Its manufacturing PMI has struggled to stay above the 50 level (the expansion threshold) over the past two quarters, which can weigh on demand for New Zealand exports such as dairy and meat. This slowdown showed up in pricing late last year, when Global Dairy Trade prices fell by an average of 3.5% in the final auctions of 2025. With exports weakening, markets may increase the odds of Reserve Bank of New Zealand Official Cash Rate cuts in Q2 to support growth. That matters even more when compared with the U.S. Federal Reserve, which has signaled it may stay on hold. If U.S. rates remain higher for longer, the U.S. dollar can look more attractive, which can add to bearish pressure on NZD/USD. For traders, this can shift the focus toward setups that benefit from a weaker Kiwi over the coming weeks. One way to express that view is through NZD/USD put options, which can help limit downside risk to the premium paid. Another approach is to look at NZD weakness against the Australian dollar, since Australia’s exposure to hard commodities such as iron ore can offer a relative support compared with New Zealand’s export mix.Potential Trading Approaches For A Weaker Kiwi
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Australia’s S&P Global Manufacturing PMI fell to 51.5 in February, down from 52.3 previously.
A reading above 50 shows expansion, while below 50 shows contraction.
Manufacturing Momentum Slows
This morning’s Australian manufacturing PMI shows slower growth, with the index falling to 51.5. Manufacturing is still expanding, but the drop points to weaker momentum and a cooler economy. We should adjust our positions to reflect higher downside risk in the coming weeks. After the strong ASX 200 rally in the final quarter of 2025, this data supports taking some profits. We should consider buying put options on the index to hedge against a pullback in industrial and materials stocks. Selling out-of-the-money call spreads may also work well if upside looks limited. The Australian dollar also looks more exposed, especially versus the US dollar. The Reserve Bank of Australia kept the cash rate at 4.35% earlier this month, but softer data increases the chance of a more dovish message or a future rate cut. It may make sense to position for a weaker AUD using futures or options, as the rate advantage that supported the currency could fade. Weaker manufacturing at home can also weigh on commodity prices, especially iron ore. This matters more because China’s official manufacturing PMI was recently 49.2, which signals contraction in our largest export market. Derivative trades that benefit from falling key industrial commodity prices now look more attractive. Overall, this PMI result adds uncertainty, so volatility may rise. Options strategies such as straddles can help trade a move higher in market swings. We also expect interest rate futures to price in a higher chance of an RBA pause. We can position for that by buying Australian government bond futures.Portfolio Hedging Considerations
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Australia’s S&P Global Composite PMI fell to 52 in February, down from 55.7 in the previous month.
A reading above 50 shows growth, while a reading below 50 shows contraction.
Implications For Growth And Monetary Policy
The composite PMI has dropped to 52. It still points to growth, but the pace has slowed sharply from January. This is an early sign that the strong momentum seen at the start of the year may already be fading. It also raises doubts about the market view that the Reserve Bank of Australia (RBA) can keep a firm, hawkish stance on interest rates. In response, we plan to buy put options on the S&P/ASX 200 index to prepare for a possible market pullback. The data suggests company earnings could come under pressure sooner than expected, especially in cyclical sectors that depend on strong economic activity. If you already hold long positions, this is a clear signal to start hedging. This slowdown may push markets to re-price expectations for future RBA rate hikes, increasing the chance of a pause or even a pivot. We see an opportunity in buying Australian government bond futures, since prices tend to rise if the central bank turns more cautious. The current cash rate of 4.85%, which was kept unchanged at the last meeting, now looks closer to a peak.Volatility Pricing And Tactical Positioning
A less aggressive RBA could mean a weaker Australian dollar, which has been supported by interest rate differences. We should consider trades that benefit from a falling AUD/USD, such as buying put options on the pair or shorting AUD futures. The currency’s recent strength now looks more exposed to weaker domestic data. This report matters even more because Q4 2025 inflation stayed high at 4.1%, keeping the RBA focused on price pressures. But slower growth makes policy choices harder and adds uncertainty. Just last week, January employment data showed the unemployment rate edging up to 4.2%, another sign that the labour market may be losing strength. A similar pattern played out in 2024, when signs of weaker growth came before a jump in market volatility. Traders should expect option prices to rise in the coming weeks as uncertainty gets priced in. In this setting, strategies that benefit from higher volatility, such as long straddles on the index, may work well. Create your live VT Markets account and start trading now.Australia’s S&P Global Services PMI eased from 56.3 to 52.2, signalling slower services expansion in February
Australia’s S&P Global Services PMI fell to 52.2 in February, down from 56.3 the month before.
A reading above 50 shows expansion, while a reading below 50 shows contraction.
Services Momentum Slows
Australia’s latest services PMI fell to 52.2 from 56.3. Activity is still growing, but the sharp slowdown suggests the economy is cooling faster than expected. We should update our plans to reflect higher downside risk in the Australian market. With growth slowing, further interest rate hikes from the Reserve Bank of Australia look unlikely in the near term. After the RBA held the cash rate at 4.35% through the end of 2025 to fight persistent inflation, attention may now shift to possible rate cuts later this year. Traders may want to watch interest rate futures for signs of a more dovish outlook. A less aggressive RBA, together with slowing growth, is generally negative for the Australian dollar. AUD/USD, which struggled to hold above 0.67 late last year, now looks more exposed to a meaningful pullback. This may create an opportunity to buy AUD put options or take short positions using currency futures. Slower growth can also weigh on corporate earnings, especially in services, which make up nearly 70% of Australia’s GDP. To hedge existing long positions, we should consider protective put options on the ASX 200 index (XJO) or on individual bank and consumer-focused stocks. This may be sensible given that the strong market performance in the final quarter of 2025 now looks harder to maintain. A sudden shift in the outlook often increases market anxiety and volatility. Implied volatility in equity options may rise from the calm levels seen at the start of the year. If that happens, strategies that benefit from larger price moves, such as long straddles on the index, could become more appealing.Volatility May Increase
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New Zealand’s exports fell to $6.21B in January, down from $7.65B in the previous period.
A new report shows New Zealand’s exports dropped to $6.21 billion in January. That is a sharp 18.8% fall from the prior month. This points to weaker overseas demand for New Zealand goods and could pressure the New Zealand dollar (NZD) in the coming weeks.
Implications For Nzd Usd
We may want to position for a lower NZD/USD exchange rate. One direct approach is to buy NZD/USD put options expiring in the next four to six weeks. This view is also supported by signs of slower growth in China, New Zealand’s largest trading partner. China’s manufacturing PMI has stayed just below 50, which signals contraction. The export drop also affects expectations for the Reserve Bank of New Zealand (RBNZ). Inflation was still a concern at the end of 2025, but weaker growth could push the RBNZ toward a more dovish tone. Because of this, interest rate futures that price in the RBNZ holding rates—or even cutting later this year—may look more attractive. We have seen similar setups before. In Q2 2024, weak export data came before a multi-cent decline in the kiwi. Since Australia’s key commodity exports have been more stable, a long AUD/NZD position could work well as a hedge. This trade would benefit if Australia continues to outperform New Zealand.Alternative Hedge Using Aud Nzd
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New Zealand’s imports fell to $6.73b in January, down from $7.6b in the previous period.
That is a decrease of $0.87b. These figures compare the latest monthly total with the month immediately before it.
Imports Decline Signals Cooling Demand
New Zealand’s imports dropped to $6.73b in January, which points to slower domestic demand. This is the biggest month-to-month fall in more than a year, suggesting the economy is cooling faster than expected. We see this as an early warning sign that first-quarter GDP could be weaker. This data also affects how we view the New Zealand dollar, and it makes short positions more appealing. A softer economy increases the chance the Reserve Bank of New Zealand will cut interest rates. We should consider NZD/USD put options or short futures positions to benefit if the currency weakens. The import numbers also match other recent data. For example, the latest ANZ Business Outlook survey showed confidence falling to -15. In early 2025, a similar mix of weak imports and falling business confidence was followed by a 3% drop in the NZD over the next two months. We expect a similar setup now. We expect markets to price in RBNZ rate cuts sooner than the previously expected third quarter. Because of that, positioning for lower rates may be important in the coming weeks. Traders could also consider interest rate swaps that pay floating and receive fixed, in anticipation of lower future rates.Equity Market Hedging Considerations
This may also be negative for New Zealand equities, since weaker consumer demand can lead to softer corporate earnings. Index derivatives can help hedge risk or position for a possible decline. Buying put options on the NZX 50 index is one simple approach in this environment. Create your live VT Markets account and start trading now.Ahead of the PCE, GDP and PMI releases, the US dollar stayed firm as jobless claims fell to 206K
US initial jobless claims fell to 206K. This was below the 225K estimate and down from the prior week’s revised 229K, according to the US Department of Labor. Focus now turns to Friday’s releases: the Core PCE Price Index, the advance Q4 US GDP estimate, and preliminary February PMI figures.
The US Dollar Index traded near a four-week high of 97.90 after the labor data. Markets also reviewed the latest FOMC Minutes, which showed the Committee was split.
Key Fx Moves And Central Bank Watch
EUR/USD traded near 1.1770 after reports that ECB President Christine Lagarde may leave before her planned retirement in October 2027. GBP/USD traded around 1.3460 as UK inflation cooled and the job market softened. USD/JPY was near 154.90, rebounding from the prior day’s move. Firmer US data and a hawkish tone in the FOMC Minutes supported the pair. AUD/USD hovered around 0.7050 after losing momentum following last week’s three-year high. USD/CAD held near 1.3700, extending a week-long rise. The Bank of Canada kept a dovish stance, and inflation stayed close to its 2% target. Gold traded at $4,982 with little daily change as geopolitical tensions eased. Planned data included UK January Retail Sales, Germany and Eurozone flash PMIs, UK flash S&P Global PMIs, US December Core PCE, and February US S&P Global PMIs. Central banks bought 1,136 tonnes of gold worth about $70 billion in 2022, the largest annual purchase on record, according to the World Gold Council.One Year Comparison And Market Implications
In February 2025, the US Dollar Index rose to around 97.90 on very strong labor market data. Today, the picture is different. The Dollar is much higher at 104.55 after a year of restrictive policy. With the latest Non-Farm Payrolls report showing job growth slowing to 155,000, we should expect more volatility as markets debate a possible Federal Reserve pivot. A year ago, EUR/USD was near 1.1770. It has since fallen to around 1.0750 as the Eurozone economy stayed weak. Germany’s manufacturing PMI recently came in at 46.1, still in contraction. This increases the risk that the European Central Bank cuts interest rates before the Fed. We should consider strategies that can benefit if the pair continues to fall in the coming weeks. In February 2025, GBP/USD was near 1.3460, pressured by a cooling UK economy. The pair now trades lower at 1.2580. The UK is still dealing with sticky inflation, last reported at 3.2%, well above the Bank of England’s target. This mix of slow growth and high inflation suggests larger and less predictable moves in the Pound. The rate gap has helped push USD/JPY from 154.90 a year ago to 162.30 today. The Bank of Japan has kept an ultra-loose stance, while the Federal Reserve’s key rate stands at 4.75%. As long as this wide gap remains, the pair is more likely to keep rising. A year ago, AUD/USD was pulling back from a three-year high and traded around 0.7050. It now trades at 0.6540 as slowing global growth, especially in China, has weighed on the commodity-linked currency. This sensitivity to risk sentiment may keep the Aussie under pressure. Last year, Gold traded at $1,982 an ounce as geopolitical tensions eased. Today, Gold is much higher at $2,150. It has been supported by economic uncertainty and strong central-bank demand, with central banks adding more than 800 tonnes in 2025. With questions still around the Fed’s next move, Gold remains a useful hedge against a weaker Dollar or a broader market decline. Create your live VT Markets account and start trading now.Commerzbank analysts say USD/INR remains range-bound as India’s trade deficit widens due to soaring gold imports
India’s trade deficit rose to USD 34.7bn in January. This was above the Bloomberg consensus of USD 25.4bn and up from USD 25.0bn in December. The increase was mainly due to a 349% surge in gold imports as global prices climbed.
Commerzbank says the deficit may narrow in the coming months. It points to support from the US-India trade deal and lower gold prices. Despite the larger deficit, the rupee has stayed steady.
The bank expects USD/INR to trade between 90.00 and 91.00 in the near term. It ties this view to slower portfolio outflows as sentiment improves after the US-India trade deal.
In early 2025, the trade deficit widened to $34.7bn in January because gold imports jumped. At the time, USD/INR was expected to settle into a 90.00 to 91.00 range. That range held for a few months, but conditions have changed since then.
As of February 20, 2026, USD/INR is trading near 92.50, well above the old range. India’s latest trade deficit, for January 2026, narrowed to about $28bn. Even so, broad US dollar strength is now the main driver. This follows the US Federal Reserve keeping interest rates higher for longer than many expected.
The optimism from the 2025 US-India trade deal has faded, and portfolio flows have turned negative this year. Foreign Portfolio Investors (FPIs) have withdrawn more than $2bn from Indian markets so far in 2026, putting pressure on the rupee. Policy expectations are also diverging: the Reserve Bank of India is signaling more focus on growth, while the Fed remains focused on inflation.
Given this setup, derivatives traders should expect higher volatility than in mid-2025. Buying straddles or strangles may work well if price swings pick up in the coming weeks. These strategies can profit from a move in either direction, which helps in an uncertain market.
For traders with a directional view, the easier path still looks like rupee weakness. Buying USD/INR call options or using bull call spreads would position for a move toward 93.00. These approaches offer upside exposure while limiting risk if the market reverses.
Still, the RBI has a track record of stepping in to limit sharp currency weakness. This suggests a new, higher trading range could form between 92.00 and 93.50. Selling out-of-the-money USD/INR put options with a strike near 92.00 could be a way to collect premium, based on the view that the central bank will defend that level.
