US building permits exceeded forecasts in December, reaching 1.448 million vs 1.4 million expected in month-on-month data
US building permits rose to 1.448 million in December (month over month). This was above the forecast of 1.4 million.
The result was 48,000 permits higher than expected. This shows permitting activity beat market estimates for the month.
US durable goods orders fell 1.4% in December, beating forecasts of a 2% decline
US durable goods orders fell 1.4% in December. That was less than the expected 2.0% decline.
This points to a smaller drop than forecast. The report showed -1.4% versus a forecast of -2.0%.
Manufacturing Momentum Into The New Year
The December durable goods report showed a 1.4% decline. That was much better than the -2.0% drop we expected. It suggests manufacturing had more momentum going into the new year than we thought. We view this as a sign the economy remains resilient. This stronger late-2025 reading, along with the January jobs report showing more than 200,000 new jobs, suggests the economy is holding up well. Core inflation is still a little above 3%, which weakens the case for a near-term Federal Reserve rate cut. As a result, we are adjusting our expectations for policy through the second quarter. In response, we are considering buying call options on industrial and technology sector ETFs in the coming weeks. Stronger economic data can support better earnings expectations for companies tied to business spending. Options offer defined risk with upside exposure if markets move higher. We are also reassessing the interest-rate outlook, given how markets reacted to policy changes in 2024 and 2025. This report suggests yields may not fall as quickly as we priced in at the end of last year. Because of that, we are reviewing options on Treasury bond ETFs that could benefit if yields stay steady or rise slightly.Positioning For Lower Volatility
Steady economic data like this often keeps market volatility low. The VIX has been trading in a lower range and recently sat near 14. Based on this report, we see little reason for a sudden spike. In this setup, selling premium with strategies such as put credit spreads on major indices may be attractive. Create your live VT Markets account and start trading now.Societe Generale’s Kit Juckes says crowded dollar shorts are faltering as DXY dips, but modest rebounds could reverse the trend
CFTC data from last weekend showed the largest net speculative long position in EUR futures since 2020. Total USD short positioning is less extreme, but it is still near levels seen in 2023 and after Liberation Day.
The US Administration has said it prefers a weaker dollar and lower interest rates. Lower rates would cut the cost of hedging FX exposure on large foreign-owned US equity and bond holdings.
Positioning Remains Crowded
Even with that backdrop, USD selling has struggled to gain momentum. Short positions remain crowded. DXY fell below its 50-, 100- and 200-day moving averages in mid-January. A rise of a little over 1% would push DXY back above those moving-average levels. That suggests the recent break lower could be reversed with only a modest rebound. Betting against the US dollar has become a crowded trade. Speculative positioning now looks similar to the extremes seen in 2023. Last weekend’s data showed net long euro futures positions at their highest level since 2020. That means many traders are already positioned for dollar weakness, leaving less room for new sellers. Even though the US Administration would like a weaker dollar to ease financial conditions, bears have not been able to push it lower. The US economy still looks resilient. January data showed inflation holding at 2.8% year-on-year, while retail sales surprised with a 0.8% jump. That underlying strength helps support the dollar against other currencies.Options May Offer Better Asymmetry
Technically, DXY did fall below the key 50-, 100- and 200-day moving averages last month, but the move looks fragile. A gain of just over 1% from current levels would put the index back above all three averages, which could trap short-sellers. In that context, aggressive USD selling looks high risk. For derivatives traders, this argues for caution when shorting the dollar outright via futures. A heavy build-up of shorts increases the risk of a sharp rally, or “short squeeze,” in the coming weeks. A more balanced approach may be to use options to define risk—for example, buying DXY call spreads or selling out-of-the-money puts to collect premium. The crowded long-euro trade also stands out. We saw a painful unwind from similar levels in late 2025. Traders could consider EUR/USD put options as either a hedge or a directional bet on a reversal. If the dollar strengthens, the heavily owned euro is likely to face the most pressure. Create your live VT Markets account and start trading now.Japan’s exports grew at their fastest pace since 2022, while the yen’s reaction was muted as USD/JPY edged lower
Japan’s provisional trade data for January 2026 show exports of ¥9.19tn. That is up 16.8% year on year from ¥7.87tn in January 2025. It is the biggest rise since November 2022, when exports rose 20% year on year. Even so, USD/JPY was slightly lower and the yen barely moved.
Exports to Asia rose 25.8% year on year. China led with +32.0%, followed by Taiwan at +35.3%. Exports to Western Europe rose 25.5% year on year. Exports to the United States fell 5% year on year.
Yen Drivers In Early 2026
Japan plans to invest up to $36bn in US oil, gas, and critical mineral projects. This is described as the first tranche of a $550bn commitment under a trade agreement with President Trump. Separately, a Japanese accounting group is proposing changes to how life insurers record unrealised losses on government bonds. Under the proposal, some bonds that match long-term policies could be treated as held to maturity. If conditions are met, this would avoid impairment accounting. As of February 18, 2026, the yen outlook is mixed. January export growth was the strongest since November 2022, but the yen did not strengthen much. That suggests other forces are outweighing the positive trade data. The main force holding back the yen is the interest rate gap. The U.S. Federal Reserve funds rate is around 3.25%, while the Bank of Japan policy rate is 0.10%. This makes it attractive to borrow in yen and invest in dollar assets. That carry trade keeps steady demand for dollars over yen. Large capital outflows also matter. The newly announced $36bn investment into U.S. energy and mineral projects is a structural headwind for the yen. Converting yen into dollars for these projects could offset the support normally provided by stronger exports.Implications For Yen Derivatives
The potential rule change for Japanese life insurers could offer some support for the yen. If accounting rules are eased, insurers may face less pressure to react to bond losses by shifting funds overseas in search of higher yields. This is a smaller factor, but it could reduce some of the yen selling seen through 2025. For derivatives traders, this backdrop suggests limited yen upside even with strong fundamentals. One possible strategy is selling out-of-the-money yen call options (or USD/JPY puts) to collect premium. This trades the view that the wide rate differential and investment outflows will limit any major yen rally, keeping USD/JPY range-bound or drifting higher. Create your live VT Markets account and start trading now.Despite cooler UK inflation, EUR/GBP falls as the euro weakens amid reports Lagarde may leave the ECB early
EUR/GBP fell on Wednesday. The Euro weakened after reports that ECB President Christine Lagarde may leave before her term ends in October 2027. The pair traded near 0.8723, down about 0.17% on the day.
The report added uncertainty around Eurozone policy. An ECB spokesperson told Euronews the claim is false and said Lagarde has not decided to end her term early.
Euro Policy Uncertainty
The report followed news that Bank of France Governor François Villeroy de Galhau will step down in June, before his term ends. On Wednesday, he said the ECB has won the fight against inflation. He added that inflation in France is not too low, and said his decision to step down is personal. Sterling held firm after mixed UK inflation data and weaker labour market figures released on Tuesday. Together, these releases have strengthened the case for more Bank of England rate cuts. UK CPI fell 0.5% month on month in January after a 0.4% rise in December. Annual CPI slowed to 3.0% from 3.4%, while core CPI eased to 3.1% from 3.2%. Output PPI was flat (0.0%) on the month versus 0.2% expected, and slowed to 2.5% year on year from 3.1%. RPI fell 0.5% month on month after a 0.7% rise. It eased to 3.8% year on year from 4.2% (3.9% forecast). Markets expect a BoE cut in March and almost two more this year. By contrast, the ECB is expected to hold rates through 2026.Upcoming Data Watch
Attention now turns to Friday’s preliminary PMI data for the Eurozone and the UK, along with UK Retail Sales. We see the recent drop in EUR/GBP as a short-term response to uncertainty around the European Central Bank. Markets are adding a risk premium after the headlines about President Lagarde, and that appears to be outweighing the more important economic backdrop. This near-term weakness could create an opportunity in the weeks ahead. For us, the main driver is the widening policy gap between the Bank of England and the ECB. Today’s data confirms UK annual inflation has cooled to 3.0%, well below the 4.2% rate seen in late 2025. That keeps the door open for BoE rate cuts. In contrast, Eurostat’s January flash estimate showed Eurozone inflation holding firmer at 3.3%. This supports the view that the ECB will keep its deposit facility rate at 4.00% for the foreseeable future. Because of this gap, we see dips toward 0.8700 as chances to build long positions. Options may be a good way to express this view. For example, buying EUR/GBP call options with April or May 2026 expiries could position for a rebound while limiting downside risk if ECB political noise increases. Looking back at 2025 price action, the pair found strong support near 0.8650. That suggests the current downside may be limited. We are therefore looking for a move back toward 0.8800, the level seen in Q4 last year. Friday’s PMI releases and UK retail sales will be key to confirming whether the divergence story remains intact. Create your live VT Markets account and start trading now.TD Securities says the US yield curve flattened on profit-taking as investors awaited data, FOMC minutes and a cautious Fed
US Treasury yields moved toward a flatter curve on Tuesday. Traders took profits after a rally in rates. Federal Reserve officials repeated a cautious view on inflation and said they want to wait for more data before changing policy. They also noted that AI is unlikely to change the short-term neutral rate.
Markets now look to Wednesday’s US data, including durable goods orders and industrial production. TD Securities expects durable goods orders to fall 2.8% month over month, which is weaker than the consensus forecast. TD also expects industrial production to come in broadly in line with consensus.
Focus Shifts To Key Us Data
The FOMC minutes are also due Wednesday afternoon. They may offer more detail on disagreements within the committee. But the minutes may be less useful because newer inflation and jobs data have been released since that meeting. A similar pattern played out in February last year. The yield curve flattened as investors took profits. Fed officials also urged patience then, while markets had rallied strongly on expectations of rate cuts. It was a reminder that monetary policy rarely follows a straight line. We are seeing the same caution today. January 2026 CPI came in at 3.1%, a bit above forecasts. At the same time, the jobs report was very strong, adding 353,000 positions. Together, these numbers give the Fed little reason to ease policy soon. The latest data supports the Fed’s patient approach. The 2s/10s Treasury spread is still inverted at about -25 basis points. This points to uncertainty around when cuts might begin. In this kind of market, some traders may prefer defined-risk strategies that benefit from time decay, such as selling short-dated credit spreads on interest-rate ETFs. This approach can work when markets are waiting for a clear catalyst.Positioning For A Flatter Curve
With this backdrop, curve-steepening trades may struggle in the near term. One alternative is to use calendar spreads on SOFR futures. This reflects a view that near-term rate expectations stay anchored, while longer-dated contracts can still move. It offers exposure to volatility without making a direct bet on the overall direction of the yield curve. Create your live VT Markets account and start trading now.EUR/USD hovers near lows as reports suggest ECB’s Lagarde may step down early, weighing on the euro
The Euro stayed weak against the US Dollar this week. A rebound from 1.1805 ran out of steam below 1.1850. EUR/USD then slipped toward 1.1835 after reports that ECB President Christine Lagarde may leave before her term ends in October 2027.
A Financial Times report on Wednesday said Lagarde is considering stepping down ahead of the French elections in April 2027. The report said this would allow Emmanuel Macron and Friedrich Merz to choose a successor.
Fed Minutes And Key Data In Focus
Markets were mostly quiet as traders waited for the minutes from the Federal Reserve’s January meeting, due later on Wednesday. US Q4 GDP and the January PCE Price Index are due on Friday, and could drive near-term moves. EUR/USD support is near 1.1800. The trend remains bearish while price stays below the broken trendline around 1.1880. On the 4-hour chart, MACD is below zero and RSI is 43, still under the midline. Resistance is at 1.1855, then 1.1880–1.1890. That area includes the trendline, the February 12 and 13 highs, and the 38.2% Fibonacci retracement. Support sits at 1.1805, then 1.1765. Earlier in 2025, the Euro also struggled against the Dollar, as rumors about Lagarde’s departure pushed the pair toward 1.1800. Today the picture is very different. EUR/USD trades much lower and is struggling to hold 1.0750. The story has shifted from political uncertainty to a clear focus on diverging central bank policy.Rate Differentials Drive The Trend
The main reason for the weakness is still the large interest rate gap between the US Federal Reserve and the European Central Bank. The Fed funds rate remains at 5.25%–5.50%, while the ECB deposit facility rate is 4.00%. Higher US yields continue to support the Dollar. This gap makes it costly to bet against the USD and keeps steady downward pressure on EUR/USD. Recent data supports this view, so a quick reversal looks unlikely. January 2026 inflation showed Eurozone CPI at 2.6%. It is still above the ECB’s target, but clearly trending lower. In the US, the latest PCE inflation came in at 2.7%, which gives the Fed little reason to cut rates soon. For derivatives traders, this ongoing uncertainty makes buying simple calls or puts a higher-risk approach. Many traders are instead using volatility strategies, such as straddles, ahead of major data releases. One-month implied volatility for EUR/USD options is around 6.5%. That is higher than last year and shows the market is pricing in a larger move. Next, attention turns to preliminary February inflation readings from major Eurozone economies and the next US jobs report. These releases will shape expectations ahead of the March central bank meetings. Any surprise could become the next major catalyst for the pair. Create your live VT Markets account and start trading now.The dollar remains stronger against the yen, trading near 154.00 as markets await the Federal Reserve minutes
USD/JPY traded in the upper 153.00s this week and stayed inside its weekly range. Resistance remains near 154.00. Markets are waiting for the minutes from the latest US Federal Reserve meeting.
The Fed left its benchmark rate unchanged at 3.5–3.75% and signalled a steady policy stance in the near term. The minutes may reveal disagreements within the committee after cooler US inflation and weak US jobs data last week.
Fed Minutes And Market Sensitivity
Chicago Fed President Austan Goolsbee said on Tuesday that if price pressures keep easing, the Fed could cut rates several times this year. In Japan, weak Q4 GDP data released on Monday renewed worries about the outlook. It also supported Prime Minister Sanae Takaichi’s plans for large-scale stimulus and lower taxes. The IMF warned that cutting the consumption tax could hurt public finances. It also called for more Bank of Japan tightening to keep inflation under control. This eased the yen’s upward momentum from last week and supported the US dollar. The Fed aims for stable prices and maximum employment. It uses interest rates to keep inflation near its 2% target. The Fed holds eight policy meetings each year, and the FOMC includes 12 officials. Quantitative easing boosts credit by buying high-quality bonds and usually weakens the dollar. Quantitative tightening slows or stops bond buying and is usually supportive for the dollar.Range Bound Setup And Volatility Risk
With USD/JPY stuck in a tight range below 154.00, the main focus is the upcoming Fed minutes. The lack of direction can mean pressure is building. This makes options strategies such as buying a straddle appealing, since they can profit from a large move in either direction once the Fed’s internal debate becomes clearer. This is a classic volatility setup for the coming days. The case for US dollar weakness is starting to build, especially when looking back at last month’s data. The January 2026 Consumer Price Index (CPI) came in at 2.9%, slightly below forecasts. The jobs report also disappointed, showing only 155,000 new positions. This supports the more dovish view among some Fed officials and suggests futures markets may be underpricing the chance of rate cuts later this year. In Japan, the yen is getting mixed signals, which often leads to choppy trading. Japan’s economy contracted by 0.2% in the final quarter of 2025, making government stimulus more likely. Stimulus is typically negative for the yen. At the same time, international pressure is growing for the Bank of Japan to tighten policy, which would support the currency. Looking ahead, we may be near the start of a major policy split—the opposite of what we saw in 2024 and 2025. If the Fed keeps signalling rate cuts while the Bank of Japan moves toward tighter policy, the long-term trend in USD/JPY could shift lower. Derivative traders may want to watch for any more hawkish language from the Bank of Japan as a signal for a potential multi-month move. Create your live VT Markets account and start trading now.MUFG’s Derek Halpenny says UK CPI beat January forecasts; services and core rose, but overall disinflation continues
UK consumer price inflation was a little higher than expected in January. Core inflation and services inflation also rose more than forecast. Even so, the broader disinflation trend is still in place.
Markets are still focused on whether the Bank of England will cut rates by 25 basis points at the March meeting. This comes after weaker UK jobs data released the day before.
Services Inflation Surprises Again
Year-on-year services CPI came in at 4.4%. That was above the Bank of England’s projection of 4.1%. After the CPI release, market pricing for a 25 basis point cut in March may cool. The data may also support sterling after the previous day’s sell-off. The January 2026 UK inflation report has added real uncertainty. Headline CPI edged up to 2.9%. But services inflation stayed high at 3.8%, which is still well above the Bank of England’s target. As a result, the market is split on whether the Bank will restart rate cuts at the March meeting. A similar setup played out around this time in 2025. Then, stronger-than-expected services inflation also challenged the idea that the Bank was clearly moving toward easier policy. That sparked debate over whether a March 2025 cut made sense.Options Strategy Into March Meeting
In early 2025, services inflation was sticky. But later weak employment data was enough to push policymakers to act. The Bank of England ultimately delivered a 25-basis-point cut in March 2025. That decision showed that the wider disinflation trend and a weakening economy mattered most. Today’s backdrop is different. Bank Rate is now 4.0%, well below the 5.25% peak seen through most of 2024. UK GDP growth in Q4 2025 was only 0.1%. The Bank must balance two risks: cutting too soon and reigniting inflation, or holding too long and hurting a fragile economy. With uncertainty this high, traders may prefer strategies that can benefit from a large move in either direction. One approach is a GBP/USD options straddle. This means buying both a call and a put option with March expiry. The trade can profit if the pound moves sharply higher or lower after the Bank’s decision. Conditions make this idea more attractive. One-month implied volatility in sterling is near a low 6.5%, which keeps option premiums relatively cheap. That can be a cost-effective way to position for a potential repricing as the March policy meeting gets closer. Create your live VT Markets account and start trading now.GBP/USD holds near 1.3570 during European trading as sterling rises after the January UK CPI release near 1.3580
GBP/USD traded near 1.3570 in Europe on Wednesday after testing a symmetrical triangle breakdown around 1.3580. The pair was mostly flat, even as the Pound strengthened after the UK January CPI release.
UK headline CPI slowed to 3.0% year-on-year from 3.4% in December. Core CPI also eased to 3.1%, which added uncertainty to the Pound’s near-term outlook.
