UK core output producer price inflation (PPI), year on year and not seasonally adjusted, was 2.9% in January. This was down from 3.2% in the previous period.

Core PPI Signals Easing Price Pressures

Core factory gate inflation fell to 2.9%. This is an important signal for us. Producer prices often move before consumer prices. So this suggests the Bank of England may face less pressure to keep interest rates high. We are now expecting a more dovish policy path in the coming weeks. In the rates market, this supports earlier Bank of England rate cuts. We are watching Short Sterling or SONIA futures. We expect contracts for the second half of the year to rally as the market prices in easier policy. This is a clear change from the more cautious view we had a few months ago. For the pound, this is bearish. If rate expectations fall, sterling becomes less attractive to hold. We expect the pound to weaken against the dollar, especially if the US Federal Reserve keeps rates higher for longer. We are considering buying GBP put options to hedge or to position for a further drop. This backdrop could help UK stocks. Lower borrowing costs can support valuations. A weaker pound can also lift overseas earnings when they are translated back into sterling, which matters for many FTSE 100 companies. We see potential upside in FTSE 100 futures and call options. This PPI reading also fits with other recent data. January CPI cooled to 3.4%, down from 3.9% in December. This trend matches the Bank of England’s cautious tone and suggests it is moving closer to a policy shift. The market is now pricing a 75% chance of a rate cut by August, up sharply from last month.

Market Implications For Rates FX And Equities

After the aggressive rate-hiking cycle of 2024 and early 2025, continued disinflation suggests the inflation fight is largely being won. The focus is now shifting from reducing inflation to supporting growth. That change in the story is likely to drive market returns over the next quarter. Create your live VT Markets account and start trading now.

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The UK Retail Price Index (RPI) fell 0.5% month on month in January. This was below the forecast 0.4% fall. January’s -0.5% RPI drop is larger than the -0.4% we expected. This suggests UK inflation pressures are easing faster than anticipated. It strengthens the case for the Bank of England to consider interest rate cuts sooner than markets previously priced.

Rates Market Implications

We should now watch interest rate swaps and SONIA futures, as the front end of the curve is likely to rally. The market is pricing in almost a full percentage point of cuts by 2026. That is a big jump from the 75 basis points priced in last week. This data also supports the view that the first cut could come as early as May. For currency traders, weaker inflation is negative for the British pound. The case to short GBP versus the dollar is stronger, especially if the Federal Reserve cuts rates more slowly. This also shows up in options: the premium on three-month GBP/USD put options is up more than 5% this morning. This backdrop is usually positive for UK equities, which can benefit from lower borrowing costs. The FTSE 250, with more exposure to the domestic UK economy, may outperform the more global FTSE 100. We would consider buying FTSE 250 call options to gain upside while limiting risk. It is also worth noting that this report follows the very weak 0.1% GDP growth figure for Q4 2025. Together, the data points to a slowing economy where inflation is no longer the main concern for policymakers. That is a clear shift from most of last year’s narrative.

Key Takeaways For Markets

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The UK Retail Price Index (RPI) rose 3.8% year on year in January. This was below the 3.9% forecast. The reading was 0.1 percentage points under expectations. It points to slightly lower annual RPI inflation than predicted for the month.

Inflation Trend And Policy Outlook

January’s RPI print of 3.8%, just under the forecast, supports the view that inflation is trending lower. This extends the pattern seen through 2025, when the headline rate steadily dropped from above 5%. It also increases the chance that the Bank of England will cut interest rates sooner than expected. Markets are already reacting at the front end of the curve. Short Sterling or SONIA futures for the second quarter have moved higher. Traders now price in close to an 80% chance of a 25 basis point cut at the May Monetary Policy Committee meeting, up from about 60% last week. As a result, more traders are using interest rate derivatives to position for falling yields. Gilt futures are benefiting from this shift in sentiment, and we expect the move higher to continue in the coming weeks. The 2-year Gilt yield, which is very sensitive to Bank Rate expectations, has already fallen 10 basis points in early trading. We saw something similar in late 2023, when softer inflation data triggered a strong rally in government bonds. The prospect of earlier rate cuts is also pressuring Sterling. We expect GBP/USD to struggle to hold above 1.28 as the UK’s yield advantage over the US narrows. Derivative traders may consider GBP puts as a simple way to position for possible weakness in the pound.

Growth Backdrop And Rates Bias

This inflation reading also follows Q4 2025 GDP data showing very weak growth of just 0.1%. Falling inflation combined with a flat economy strengthens the case that the Bank will focus more on supporting growth. This reinforces our view that the most likely direction for UK rates is down. Create your live VT Markets account and start trading now.

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UK core Consumer Price Index (CPI) rose 3.1% year on year in January, in line with market expectations. Core CPI strips out food and energy prices. The release shows the annual rate stayed at 3.1% for the month.

Near Term Market Reaction

Because January core inflation came in exactly as expected at 3.1%, we do not expect an immediate market shock. The lack of surprise has already reduced short-term volatility in sterling and gilt futures. Over the next few days, this could make selling near-term options premium an appealing strategy as the market absorbs this in-line data. Still, the bigger picture for the Bank of England remains complex, which creates opportunities. Inflation is cooling, but wage growth is still high. Recent data showed UK wage growth for the three months to December 2025 was 4.7%, well above a level consistent with a 2% inflation target. This gap between easing inflation and stubborn domestic price pressure is the main theme to trade. This supports our view that the Bank of England will keep rates unchanged at its March meeting. The Bank held rates steady through 2025 to bring inflation down, and it is unlikely to cut too soon. Overnight index swaps now imply only a 40% chance of a cut by June 2026, with the first fully priced cut pushed out to August. For rates traders, this suggests the front end of the UK yield curve should stay high and well supported. We see value in positioning for a flatter curve: near-term rate expectations may remain firm, while longer-term growth worries continue. This points to derivatives that benefit if the spread between two-year and ten-year gilt yields narrows. In FX, a “higher for longer” rate backdrop should help put a floor under sterling versus the dollar and the euro. But with UK GDP flat in Q4 2025, sterling’s upside also looks limited. We like selling GBP volatility through options strategies such as short strangles, aiming to benefit from potentially range-bound trading in the weeks ahead.

Equity Derivatives Implications

For equity derivatives, the lack of an inflation downside surprise is mildly positive. However, the outlook for firm interest rates may limit any strong FTSE 100 rally. We see this as a chance to add medium-term downside protection. Buying FTSE index put options expiring in the second quarter could be a sensible hedge if weakening growth starts to dominate the inflation story. Create your live VT Markets account and start trading now.

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The United Kingdom Consumer Price Index (CPI) fell by 0.5% month-on-month in January. This matched market forecasts of -0.5%. This release shows prices fell compared with the previous month. The report text did not include any other figures.

Market Reaction And Volatility

January’s CPI print matched expectations, with a 0.5% monthly drop. Because there was no surprise, we are unlikely to see an immediate sharp market move. When data lands as forecast, uncertainty often falls. That typically leads to lower implied volatility in options on both the FTSE and the pound. This stable inflation reading supports the view that the Bank of England could have room to cut rates later this year. Markets already reflect this: overnight index swaps are pricing in close to an 80% chance of a rate cut by the August meeting. One way to position for lower rates in the second half of the year is through SONIA futures. A more dovish Bank of England usually puts downward pressure on sterling. A similar setup happened in mid-2025, when softer inflation messaging was followed by a drop in GBP/USD from 1.28 to below 1.25 over the next month. Traders may consider GBP/USD put options to hedge risk, or to seek gains if this pattern repeats.

Equity Implications And Positioning

For equities, the prospect of lower rates can be supportive. Cheaper borrowing helps companies, and stocks can look more attractive versus bonds. Open interest is rising in call options on the FTSE 250, which is more tied to the UK economy than the FTSE 100. This suggests some traders are already positioning for a potential rally on expectations of easier monetary policy. Create your live VT Markets account and start trading now.

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USD/JPY moved above the mid-153.00s in Asia on Wednesday after sharp swings the day before. However, it stayed below Tuesday’s weekly high as traders waited for the FOMC Minutes. Japan’s softer Q4 GDP increased pressure on Prime Minister Takaichi to consider more stimulus after her landslide victory. The IMF warned against cutting the consumption tax, saying it would reduce fiscal room and raise debt risks.

Yen Weakness And Policy Uncertainty

The yen weakened on expectations that Takaichi may resist further Bank of Japan rate hikes. A stronger risk mood—helped by easing geopolitical tensions and signs of progress in US-Iran nuclear talks—also reduced demand for the yen as a safe-haven. A modest rise in the US dollar also supported the pair. Still, hopes that Takaichi will keep public finances disciplined while backing growth could encourage the BoJ to keep normalising policy, which may limit further yen losses. The IMF urged Japan to continue raising rates to anchor inflation expectations. The Reuters Tankan poll showed manufacturers’ confidence rose for the first time in three months in February. Exports also rose 16.8% year on year in January, the fastest pace since November 2022. The dollar’s upside may be limited because markets still expect several Fed rate cuts this year. Traders are also focused on Friday’s US PCE Price Index for more clues on the rate outlook.

Market Focus Turns To Rates And Volatility

Looking back to early 2025, USD/JPY often hovered around 153.00, as markets weighed possible Bank of Japan (BoJ) tightening against expected Federal Reserve rate cuts. A key question was whether Japan’s new leadership would allow tighter policy. That uncertainty drove large two-way moves. Since then, the policy gap has become clearer, and the pair has moved much higher. While the BoJ ended negative rates last year, it has raised rates only slightly. The overnight call rate is still just 0.1%. Meanwhile, Japan’s national core CPI has stayed above the 2% target, most recently at 2.3% year over year, keeping pressure on the BoJ to act more firmly. In the US, the aggressive Fed cuts many expected in 2025 arrived more slowly. The Fed Funds rate has dropped only 75 basis points from its peak. Recent data has also supported the dollar. For example, last week’s US CPI was hotter than expected at 3.2%, which reduced expectations for large cuts in 2026 and kept interest-rate differentials in the dollar’s favour. With USD/JPY now near 158.00, the risk of official intervention by Japanese authorities is rising, which may limit further gains. CFTC data also shows speculative net short yen positions remain extremely high. This crowded trade could reverse quickly if the BoJ turns more hawkish. Because of this, traders may consider buying cheap out-of-the-money USD/JPY puts, such as a 152.00 strike expiring in six to eight weeks. This offers a lower-cost way to benefit from a surprise policy shift or verbal intervention that triggers a fast unwind of short-yen positions. The defined risk of options may be preferable to shorting the pair outright in this environment. For traders who think yen weakness will continue for a while before any reversal, a bullish call spread may be a more cautious approach. For example, one could buy a 159.00 call and sell a 161.00 call expiring next month. This reduces the premium paid, limits risk, and still allows gains if the pair rises in a steady, controlled move. Create your live VT Markets account and start trading now.

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Gold prices rose in Malaysia on Wednesday, according to FXStreet data. Gold was priced at 618.23 MYR per gram, up from 611.67 MYR on Tuesday. Gold climbed to 7,210.90 MYR per tola from 7,134.37 MYR the day before. It was also listed at 6,182.29 MYR for 10 grams and 19,229.17 MYR per troy ounce.

How Fxstreet Calculates Malaysia Gold Prices

FXStreet calculates Malaysia’s gold prices by converting global gold rates using the USD/MYR exchange rate and local weight units. Prices are updated daily at the time of publication and are for reference only, since local rates may differ. Gold has long served as a store of value and a means of exchange. It is widely used in jewellery. Many investors also view it as a safe-haven asset and a hedge against inflation and weaker currencies. Central banks hold the largest gold reserves. According to the World Gold Council, they bought 1,136 tonnes—worth about $70 billion—in 2022, the highest yearly total on record. Gold often moves in the opposite direction to the US Dollar and US Treasuries, and it can fall when stocks rise. It may gain when interest rates decline. Gold is priced in US dollars and traded as XAU/USD.

Derivative Trading Implications For Gold In Malaysia

The rise in gold to 618.23 MYR per gram reflects a broader global move. This is more than a small daily change. It suggests market sentiment is turning more supportive for gold. A key driver is the shifting outlook for interest rates. Gold does not pay interest, so it often benefits when rates are expected to fall. After the US Federal Reserve’s January 2026 meeting, market pricing shows more than a 60% chance of a rate cut by June. Inflation has remained steady near 2.1%, which supports those expectations. Lower rate expectations can make gold more attractive than assets that earn interest. This view is also weighing on the US Dollar, which helps gold. The US Dollar Index (DXY) has dropped from its late-2025 highs and is now trading below the important 100 level. If rate-cut talk grows stronger, this downtrend could continue. A weaker dollar has historically supported higher gold prices. Another factor is steady buying by central banks, which can help set a floor under prices. In the final quarter of 2025, central banks in emerging markets continued adding to their reserves at a fast pace. Ongoing demand, along with ongoing geopolitical risks in several regions, supports gold’s role as a safe haven. For derivatives traders, this mix of factors suggests the potential for more upside in the weeks ahead. With equity markets moving sideways over the past month, gold is becoming more appealing. This may be a time to consider strategies that benefit from stable or rising gold prices, especially if implied volatility starts to pick up. Create your live VT Markets account and start trading now.

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Silver rose to around $74.75 in early European trading on Wednesday. That was up 1.90% on the day, after prices moved back above $74.50. Demand rose as tensions between the US and Iran increased. Iran’s Foreign Minister Abbas Araqchi said on Tuesday that the US and Iran agreed on the main “guiding principles” in talks over their nuclear dispute. However, he said a deal is not close. US President Donald Trump said Iran will make a deal and warned of consequences if issues are not resolved.

Us Iran Tensions Lift Silver

US inflation data did not change near-term expectations for Federal Reserve rate cuts. Higher rates can limit gains in non-yielding assets like silver. US headline inflation fell to 2.4% year on year in January, down from 2.7% in December. Core CPI rose 2.5%, compared with 2.6% previously. Markets are watching the FOMC minutes from the January meeting on Wednesday, after the Fed kept rates at 3.50%–3.75%. US markets are also reopening after a long weekend, which could increase volatility. On the daily chart, XAG/USD was at $73.68. The 20-day EMA was $83.30, and RSI (14) was 42.17. Price remains below the EMA, and momentum is still below the midline. In early 2025, silver surged above $74. Safe-haven demand linked to US-Iran tensions was a key driver. This lifted prices even though technical indicators looked weak. As of today, February 18, 2026, much of that geopolitical risk has eased, and market conditions have changed.

Volatility And Strategy Outlook

The dovish Federal Reserve outlook we tracked last year played out. Two later rate cuts brought the federal funds rate to 2.75%–3.00%. This followed steady cooling in inflation, with the latest January CPI showing a manageable 2.1% annual rise. This backdrop has reduced support for non-yielding assets compared with a year ago. For derivatives traders, this has meant lower volatility. The Cboe Silver ETF Volatility Index (VXSLV) peaked above 40 during the 2025 geopolitical flare-ups. It is now closer to 28. Option premiums are therefore much cheaper. That lowers the cost to enter trades, but it also reduces potential returns for premium sellers. With silver now trading in a tighter range near $65, we think the sharp rallies are likely behind us for now. Selling out-of-the-money call spreads may be a useful income strategy in the coming weeks. This fits the lower-volatility environment and the view that silver may struggle to reach its 2025 highs without a major new catalyst. We also need to account for fundamentals, which look different from last year. The Silver Institute reports that industrial demand—especially from solar and electric vehicles—reached a record 654 million ounces in 2025. Because of this, it may make sense to use part of the premium earned from selling calls to buy long-dated, out-of-the-money puts. This can help protect against a drop if industrial activity slows unexpectedly. Create your live VT Markets account and start trading now.

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NVIDIA has traded in a rising parallel channel for most of the past year. Late last week, the price broke below the lower boundary. This was the second break below the channel this month, which points to a more corrective phase. The old channel floor at $189.95 now acts as resistance (role reversal). A close back above $189.95, and back inside the channel, would cancel the breakdown. If the stock cannot reclaim $189.95, more selling and stop-loss triggers may follow. If weakness continues, the first support level is $169.56. This area may attract buyers and could lead to a retest of the broken channel line from below. If $169.56 fails, the next support is $153.13. That level would mark a deeper pullback inside the longer-term uptrend. Overall, the trend is weaker while the stock stays below $189.95. If selling pressure continues, $169.56 and $153.13 are the next key levels to watch. Because the stock recently broke below the main channel that guided NVIDIA through 2025, we now see this as a chance to position for more weakness or a period of sideways trading. One direct approach is to buy put options with March or April expirations. Strike prices near the $170 support level can target a continued drop. This also hedges against the loss of momentum after last year’s historic rally. The former support at $189.95 is now the most important resistance level. If you think a sharp rebound is unlikely, consider selling bear call spreads with the short strike just above $190. This can be a higher-probability trade as long as the stock stays below this new ceiling. Options data supports this shift: the 30-day put-to-call ratio has risen to 1.2, up from the 0.7 average in the final quarter of 2025. With the next earnings report expected in a few weeks, implied volatility (now 48%) may rise. That would make option premiums more expensive. The breakdown also comes right after last week’s industry-wide warnings about slowing data center demand, which increases the chance of a big move. For traders expecting a sharp move but unsure of direction, long straddles or strangles may be attractive. If this drop turns out to be a bear trap, similar to the brief dip in September 2025, selling bull put spreads is another option. By placing the short put strike below the minor support at $169.56, you can collect premium while betting that this first support level holds. Even after the pullback, the stock’s forward P/E is 55, still well above the semiconductor sector average of 32. That high valuation could make a quick recovery harder.

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EUR/USD traded in a narrow range during Wednesday’s Asian session, staying just below the mid-1.1800s. The pair paused after bouncing from the 1.1800 area, a one-and-a-half-week low. Markets are waiting for the FOMC Minutes for clues on the Federal Reserve’s rate-cut path. Traders are pricing in a Fed cut in June and at least two rate cuts in 2026, which could cap demand for the US dollar.

Fed Minutes In Focus

The US dollar also came under pressure due to concerns about Fed independence and developments in US-Iran talks. Iran’s Foreign Minister Abbas Araqchi said there was broad agreement on guiding principles to address the nuclear dispute. The euro stayed under pressure as expectations for an ECB rate cut resurfaced, driven by signs of weakness in the Eurozone. Germany’s ZEW sentiment dipped to 58.3 in February from 59.6 in January, while the Eurozone Economic Sentiment Index slipped to 39.4 from 40.8. EUR/USD is hovering near 1.0820 and struggling to pick a clear direction after last week’s drop. The market looks cautious, pulled between mixed signals from the Federal Reserve and the European Central Bank. This pause gives traders time to think about positioning for the weeks ahead. A near-term Fed rate cut now looks less likely, especially after January US inflation came in at 3.3%, still above the Fed’s target. Strong retail sales data also supports the case for the Fed to wait, possibly until the third quarter. As a result, options that benefit from a stronger dollar—such as buying EUR/USD puts—are drawing more interest.

Options Positioning And Volatility

In Europe, expectations for an earlier ECB rate cut are growing as the Eurozone economy slows. German industrial production fell 1.6% in December 2025, highlighting ongoing weakness in the region’s largest economy. This widening gap between the two economies may make selling EUR/USD call spreads attractive for collecting premium, since a strong rally may be hard to sustain. This is a big shift from late 2025, when the consensus expected coordinated rate cuts from both central banks through 2026. The continued strength of the US economy has forced a rethink of that outlook. Even so, implied volatility remains fairly low. That may change as key central bank meetings in March get closer. More traders are looking for ways to position for downside without paying too much upfront. One example is a bearish risk reversal, where an out-of-the-money call is sold to help fund the purchase of a put. Create your live VT Markets account and start trading now.

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