Bob Savage says rising oil prices now track the dollar less, amid net selling flows
BNY says the long-running positive link between oil prices and the US dollar is weakening. This is happening even as Brent trades above $70 and WTI tests $68, after a strong oil rally since December.
Data from iFlow show mixed US dollar flows, including net dollar selling during the period. The report notes that for most of the past five years, higher oil prices often came with a stronger dollar.
Spain’s three-year bond auction yield falls to 2.273% from 2.341%
Spain’s 3-year bond auction yield fell to 2.273%, down from 2.341% at the previous auction.
This means Spain can now borrow for 3 years at a lower interest rate than before.
Implications For Investor Demand
The lower 3-year yield points to strong investor demand for Spanish government bonds and improved confidence in Spain’s credit risk. For derivative traders, falling yields often go hand in hand with lower credit default swap (CDS) pricing. That could make selling CDS a potential way to benefit from the market’s view of reduced risk. This auction also supports the idea that the European Central Bank (ECB) may be closer to cutting rates than markets previously expected. When government borrowing costs fall, it can signal easier financial conditions and a shift toward looser policy. One way to express this view is through interest rate swaps positioned to profit if the Euribor benchmark rate declines over the next few quarters. Recent inflation data supports this narrative. Eurostat’s January 2026 report showed inflation easing to 1.9%, slightly below the ECB’s target. That gives the ECB more flexibility to consider rate cuts to support growth. In this setting, short-term European interest rate futures may also benefit if rates move lower. In 2025, the ECB stayed hawkish through the summer due to wage pressure. The current decline in bond yields suggests a shift away from that cautious tone. With stability improving, selling put options on ETFs that track European government bonds could be a way to collect premium, assuming bond prices hold up or rise.Potential Euro Dollar Impact
Rate-cut expectations in Europe could weaken the euro against the US dollar. This week, the Federal Reserve appears to be holding rates steady, which could widen the interest-rate gap between the US and the euro area. To hedge against a potential EUR/USD decline, traders may consider buying put options on the EUR/USD pair. Create your live VT Markets account and start trading now.Eurozone construction output (working-day adjusted) fell to -0.9% year on year, from -0.8%
Eurozone construction output, adjusted for working days, fell by 0.9% year on year in December. This was slightly worse than the previous reading, which showed a 0.8% decline.
The latest figures show Eurozone construction output fell 0.9% year on year in December 2025, marking a small increase in the pace of decline from the prior month. This points to ongoing weakness in a key part of the economy as we move into 2026. It also suggests that the high interest rates of the past two years are still weighing on activity.
Construction Data And Macro Signals
This slowdown fits with other recent indicators. For example, the January 2026 S&P Global Construction PMI came in at 41.3, which signals a sharp contraction. At the same time, headline inflation has eased to 2.1%, giving the European Central Bank more room to consider cutting rates. Overall, this backdrop suggests continued pressure on Eurozone growth in the first quarter. Given this outlook, short positions in European equity indices such as the EURO STOXX 50 may perform well. For more focused exposure, traders could consider buying put options on major construction and materials firms like Heidelberg Materials or Saint-Gobain. In 2025, these stocks tended to lag during periods of negative economic surprises. The weak data also supports the case for the ECB to cut interest rates sooner than previously expected, potentially in the second quarter. Traders may want to consider going long German Bund futures, which often rise when markets expect easier monetary policy. This view is also reflected in the EURIBOR futures market, which has shifted toward pricing an earlier rate cut. As a result, the outlook for the euro looks bearish, especially against currencies like the US dollar, where economic data has been stronger. Taking short positions in EUR/USD, either through futures or by buying put options, may be a sensible approach. A wider interest rate gap between a more dovish ECB and a potentially more hawkish Federal Reserve supports this trade.Implications For Rates And Eur
Create your live VT Markets account and start trading now.Eurozone construction output rose 0.9% in December, recovering from a 1.1% fall in November
Eurozone construction output rose 0.9% month on month in December. This followed a 1.1% month on month fall in the previous month.
This update shows construction returned to growth in December. The figures are seasonally adjusted and reported month on month.
Market Pricing And Timeliness
The December 2025 construction output rebound to 0.9% is now fully priced into the market. This was positive news, but it is old news. Newer and more mixed economic signals have taken over. As a result, trading based only on this data point is no longer timely. The main story now is the push and pull between sticky inflation and weaker growth. January 2026 flash inflation for the Eurozone came in a bit hot at 2.4%. In response, the European Central Bank signaled that rate cuts may not come soon. This has reduced the optimism seen at the end of 2025. Forward-looking data is also less clear. The flash manufacturing PMI for February fell to 47.8, which points to contraction. That weakness clashes with the older strength in construction and makes the wider outlook harder to read. With signals moving in different directions, markets may stay choppy in the weeks ahead. For traders, this setup may favor volatility strategies instead of betting on a clear trend. One approach is to buy straddles or strangles on major European indices like the Euro STOXX 50. These positions can profit from a large move up or down. Implied volatility, tracked by the VSTOXX index, has already risen from 14 to 17 over the last two weeks, and it could still move higher.Hedging For Cyclical Downside
With manufacturing PMIs weakening, buying put options on industrial sector ETFs may be a sensible hedge against a deeper slowdown. This can limit downside risk while we wait for clearer first-quarter 2026 data on the Eurozone economy. The construction strength from last year is unlikely to support related stocks if overall sentiment turns negative. Create your live VT Markets account and start trading now.ING’s Warren Patterson and Ewa Manthey say Brent rises amid Iran tensions and Gulf supply risks
Oil prices rose as markets watched the risk of US military action against Iran and a possible disruption to Persian Gulf supply. ICE Brent gained 4.35% and settled above $70 a barrel, with strength continuing in early trading.
Iran exports about 1.5m barrels a day of crude oil. Total oil flows through the Strait of Hormuz are around 20m barrels a day, including refined products. If shipping tightens through the Strait, it could disrupt both crude and product movements.
Brent Curve Signals Tight Supply
The ICE Brent forward curve remains in backwardation through 2026 and 2027, and extends into early 2028. This pricing structure suggests a tighter market than many forecasts imply. A balance-sheet view shows a surplus in the first half of the year, which would normally pressure near-term prices. But sanctions on parts of supply, along with reduced buying of sanctioned barrels (such as Russian oil) by Indian refiners, may be tightening physical supply more than headline balances show. Oil prices are rising as concern grows about possible US action against Iran, keeping the market on high alert. ICE Brent is now testing $75 a barrel, a level last seen in late 2025. Reports of the US 5th Fleet positioning near the region are also adding to trader anxiety. This military build-up makes a quick diplomatic de-escalation look less likely. The biggest risk for oil markets is disruption to the Strait of Hormuz, a chokepoint where roughly 21 million barrels of oil move each day. Any conflict could threaten that flow and Iran’s own crude exports, currently around 1.5 million barrels per day. As a result, headlines about military activity in the Persian Gulf are likely to drive short-term price swings.Geopolitical Risk Concentrates In Hormuz
The Brent forward curve supports the view of a tight market, staying in backwardation through the end of 2027. This means buyers are paying more for oil delivered now than for oil delivered later—often a sign that near-term supply is strained. While front-month prices are reacting to geopolitical news, the backwardation further out suggests the tightness may be more persistent. Our balance sheets may show a surplus, but this can be misleading because they do not fully reflect the impact of sanctions. In late 2025, for example, we saw major buyers such as Indian refiners become more hesitant to buy Russian crude due to sanctions and payment hurdles. That reduces the volume of oil that is truly available to the market, making physical supply tighter than the paper numbers suggest. Create your live VT Markets account and start trading now.Spain’s five-year bond auction yield rose to 2.577% from 2.512% in the previous auction (market update)
Spain’s 5-year government bond auction yield rose to 2.577%, up from 2.512% at the previous auction.
That is an increase of 0.065 percentage points, or 6.5 basis points.
Implications For Eurozone Rate Expectations
Higher borrowing costs in Spain suggest markets are pricing in more interest rate risk across the Eurozone. This does not appear to be a one-off move. Flash Eurozone CPI for January 2026 rose to 2.7%, which may push expectations toward a more hawkish European Central Bank. Derivatives traders should be ready for higher volatility in fixed-income markets. In the coming weeks, we see potential in trades that benefit from falling bond prices (rising yields). One way to express this view is to short German Bund futures or buy put options on them, since Bunds are the key regional benchmark. This is similar to trades that worked well during the sharp bond sell-off in the second half of 2025. Rising yields can also weigh on equity valuations, especially for heavily indebted companies. Protective put options on Spain’s IBEX 35 index may be sensible, as the cost of servicing Spanish corporate debt is already 12% higher than a year ago. This pressure could also spread to broader benchmarks such as the EURO STOXX 50. For FX traders, the signal is mixed, but we lean bullish on the euro. If yields are rising mainly because markets expect ECB rate hikes (rather than concerns about sovereign credit risk), the euro should be supported. EUR/USD call options could be a practical way to target a move toward 1.14, a key resistance level that was tested last quarter. We also need to watch credit spreads, especially the gap between Spanish and German 10-year yields. This spread has widened by 8 basis points this month to 92 bps, pointing to higher risk aversion.Relative Value And Spread Risk
A relative value trade—long German bond futures and short Spanish bond futures—could profit if this stress keeps building. Create your live VT Markets account and start trading now.Spain’s 10-year Obligaciones auction yield falls to 3.167% from 3.223%
Spain held an auction of 10-year *obligaciones*. The yield came in at 3.167%.
The previous auction yield was 3.223%. This is a drop of 0.056 percentage points.
Spanish Yield Decline Signals Strong Demand
The drop in Spain’s 10-year bond yield points to strong demand for its debt. It also suggests investors are more confident in Spain’s economic outlook. This is generally positive for fixed-income assets. It may support long positions in Spanish Bono futures, since bond prices often rise when yields fall. This result also fits the view that European Central Bank rates may have peaked. Eurostat’s January 2026 flash inflation estimate fell to a two-year low of 2.1%. With inflation easing, the need to keep rates high is weakening. Traders may consider euro interest rate swaps positioned to receive the fixed rate, based on the view that floating rates could fall later this year. Confidence in peripheral European debt also appears to be improving. This helps calm concerns seen during the volatility of mid-2025. Credit markets reflect this shift. Spain’s 5-year credit default swap (CDS) spread has tightened by 8 basis points this month to 42 bps. Selling protection via CDS on Spanish sovereign debt is one way to try to benefit from this lower perceived risk.Equity Upside From Lower Borrowing Costs
Lower government borrowing costs can also help Spanish companies. Cheaper funding can support earnings and make equities more attractive. The IBEX 35 is already up more than 3% in February 2026, led by rate-sensitive bank and utility stocks. Buying call options on the IBEX 35 could offer exposure to further upside in the weeks ahead. Create your live VT Markets account and start trading now.Under current rules, Schleich and Currie say the Fed has little room to further shrink its $6.5tn balance sheet
National Bank of Canada’s Taylor Schleich and Ethan Currie say the Federal Reserve has limited room to shrink its balance sheet much further under current rules. The balance sheet is about $6.5 trillion after earlier quantitative tightening (QT).
They say the Fed’s liabilities determine the size of its assets. The main constraints are bank reserves and the Treasury General Account (TGA). Demand for currency also tends to rise as the economy grows, which supports a larger base of liabilities.
Constraints On Further Balance Sheet Reduction
They argue that meaningfully reducing reserve demand would likely require regulatory changes. Those changes could let banks hold more Treasuries and allow a smaller Fed portfolio. They also note a risk: if Treasuries move from a stable holder to less stable holders, market risk could increase. They do not expect QT to restart, aside from small tweaks to how the Fed reinvests maturing securities. Since QT ended, they note that outright Treasury purchases have been mostly limited to Treasury bills, which has shortened (reduced the duration of) the Fed’s holdings. Overall, the Fed appears to have very little room to shrink its balance sheet below the current $6.5 trillion level. Key liabilities—such as bank reserves, which have stabilized around $3.3 trillion, and a persistently high TGA—limit how far the Fed can go. This suggests the period of major QT that ended in 2025 is likely over. Without deregulation that reduces banks’ need to hold reserves, any further asset sales could trigger funding-market stress. The repo market spike in September 2019 showed what can happen when reserves get too scarce. The Fed will likely prefer a large balance sheet over a repeat of that kind of volatility.Implications For Volatility And Curve Positioning
For derivatives traders, this view suggests one major source of system-wide tightening is no longer in play, which could keep long-term volatility lower. The VIX has already drifted down, trading in a narrow 13–15 range through January 2026. That backdrop can favor “calm-market” strategies, such as selling strangles on major indices or shorting VIX futures. We also expect the Fed to keep managing portfolio duration by reinvesting into T-bills, a strategy it used in late 2025. This could add mild, steady steepening pressure on the yield curve. Traders could express that view with SOFR futures by positioning for longer-term rates to rise relative to shorter-term rates. Create your live VT Markets account and start trading now.During European hours, XAG/USD holds above the 50-day EMA near $79.20 after two straight sessions of gains
Silver (XAG/USD) traded near $79.20 per troy ounce during European hours on Thursday, rising for a second straight session. The 14-day RSI was 47 and trending higher, pointing to improving momentum.
Price stayed stuck between the nine-day EMA at $78.95–$78.96 and the 50-day EMA at $79.26. This kept silver rangebound around these moving averages.
A break below the nine-day EMA at $78.95 could trigger a drop toward the nine-week low of $64.08, set on February 6. The next support level sits near the lower edge of the descending wedge, around $59.10.
A daily close above the 50-day EMA at $79.26 could keep the move higher intact. The next major upside reference is the record high of $121.66, reached on January 29.
The technical analysis was produced with help from an AI tool.
As of February 19, 2026, silver is consolidating in a very tight range between its 9-day and 50-day moving averages. This “coiling” price action often comes before a breakout, so traders may want to expect higher volatility. The near-neutral RSI suggests the market is building energy for its next move.
If you are positioning for a breakout, the narrow range can make volatility strategies—such as long straddles or strangles—more appealing. These trades can profit from a sharp move in either direction, and a swing looks more likely as pressure builds around the $79.00 area. Silver’s implied options volatility has stayed relatively low this month, which can reduce the cost of these strategies.
On the upside, a firm close above $79.26 could spark a strong rally toward the late-January high of $121.66. This scenario looks more plausible with inflation still elevated: January 2026 CPI came in at 3.4%, supporting silver’s role as an inflation hedge. Traders could look at call options or bull call spreads to target this potential upside.
Fundamentals also lean supportive. Data released in late 2025 showed global solar panel installations rose another 28%, while industrial demand from electronics and electric vehicles keeps growing. This steady consumption can help put a floor under prices and supports the case for a breakout.
Still, a break below $78.95 would be a clear warning sign. It could open the door to a quick slide toward the February 6 low of $64.08. Sentiment turned bearish quickly in late 2025, and another failed push higher could trigger a similar sell-off. In that case, put options or bear put spreads could help hedge risk or position for further downside.
Forecasts were exceeded as the Eurozone’s seasonally adjusted current account hit €14.6B in December
The eurozone seasonally adjusted current account balance was **€14.6bn** in December. This was above the forecast of **€9.2bn**.
The stronger-than-expected current account surplus in December 2025 is a **bullish** signal for the euro. At **€14.6bn** versus a **€9.2bn** forecast, it suggests the eurozone’s export sector was stronger than expected at the end of last year. This strength should be an important input in our currency positioning.
This view is supported by the latest manufacturing PMI data for January 2026. PMI surprised to the upside, rising to **51.2**, above the forecast **49.8** (which implied contraction). That suggests the export strength seen in December is continuing into the new year. With core inflation still elevated at **2.6%**, the case for a stronger euro is growing.
We should consider **buying euro call options**, focused on **EUR/USD**, over the next few weeks. The data points to more resilience than the market expected after the slowdown in Q3 2025. Look at options expiring in **March or April 2026** to capture a potential move higher.
The stronger export backdrop also supports a **bullish view on European equities**, especially German and French companies that depend on global trade. We can express this by buying **Euro Stoxx 50 futures** or **call options**. In past periods of strong exports—such as during the 2021 recovery—export-heavy indices have often rallied.
This data also argues for revisiting expectations for the European Central Bank’s policy path. Market pricing for near-term rate cuts now looks too dovish and may unwind. We should adjust interest-rate derivative positions, since short-term rates such as **Euribor** may be near a floor or could move higher in the near term.
