USD/JPY dipped to around 153.25 in early Asian trading on Wednesday. The move came as the Japanese yen gained support on expectations that the Bank of Japan could raise rates in the coming months, along with upbeat sentiment around Prime Minister Sanae Takaichi’s stimulus plans. Takaichi and BoJ Governor Kazuo Ueda both stressed the need for close policy coordination. They also said policymakers should avoid sudden swings in the FX market, while aiming for sustainable, demand-led growth.

Policy Coordination And Yen Support

Takaichi set out a “smart stimulus” plan based on careful, disciplined calculations. She said the goal is to support growth without sparking runaway inflation, which helps ease concerns about the long-term sustainability of public debt. On the US side, some factors may limit further USD weakness, including improving growth prospects and stronger business confidence. Minutes from the Federal Open Market Committee are due later in the day and could influence the pair. Over the coming weeks, we expect USD/JPY to stay under pressure. What started as growing optimism around Prime Minister Takaichi’s fiscal agenda and a possible BoJ rate hike in late 2025 has now become a key market theme. Japan’s national core CPI rose 2.4% in January 2026, staying above the 2% target, which strengthens the case for further BoJ tightening. In this setup, traders may look at strategies that benefit from a stronger yen, such as buying JPY calls or USD puts. It is also worth recalling that the BoJ’s first small rate hike in December 2025 triggered a sharp, though temporary, drop in the pair from around 155.00. Past cycles suggest that early stages of tightening often lead to sustained currency gains.

Volatility Trades And Diverging Central Banks

Still, the US dollar side makes this more than a one-way trade. Last year’s narrative of a more growth-focused Trump administration is being reinforced by strong data, which may slow any decline in the dollar. For example, the latest US jobs report showed a solid gain of 250,000 nonfarm payrolls, keeping pressure on the Federal Reserve. If US growth remains strong, the Fed is unlikely to signal rate cuts soon. That creates a clear policy split with the BoJ as it tightens. The US–Japan rate gap also remains very wide—still above 4.5%—which continues to support the dollar. With strong forces pulling in both directions, implied volatility in USD/JPY options may rise. That could make trades that benefit from large moves—regardless of direction—more appealing. Traders may want to look for chances to trade volatility itself, as the tension between a hawkish Fed and a newly hawkish BoJ could drive sharp swings in the pair. Create your live VT Markets account and start trading now.

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Silver (XAG/USD) dropped nearly 5% as the US Dollar stayed strong and US Treasury yields were steady. It traded near $73.49 after earlier touching $76.87. The chart shows a series of lower highs and a slide to a six-day low at $72.00. A clear break below $72.00 could open the door to $70.00.

Technical Momentum And Key Levels

The Relative Strength Index is trending lower and remains bearish. This suggests a possible test of the 100-day simple moving average at $64.71. If selling continues, traders will likely watch $60.00 next. On the upside, a move back above $75.00 could bring the 50-day simple moving average at $79.39 into focus, with $80.00 as the next level after that. Silver is priced in US dollars, so it often reacts to interest rates and the Dollar. Prices can also move on geopolitical risk, recession fears, investor demand, mine supply, recycling flows, and industrial use. Industrial demand from electronics and solar can push prices higher, while weaker demand can drag them lower. Silver often moves with gold, and traders use the gold/silver ratio to compare their relative value.

Macro Drivers And Market Positioning

During the sharp sell-off in 2025, silver fell hard as the US dollar surged. The picture today (February 18, 2026) looks different. The US Dollar Index (DXY) has eased to 101.5 after January 2026 inflation came in at an annualized 2.4%. This has increased expectations for Fed rate cuts by mid-year. Industrial demand remains a major support. Industry reports for Q4 2025 show global demand for silver in photovoltaics (solar panels) rose 15% year over year, and the trend is strengthening into 2026. Strong physical buying helps offset selling pressure from financial markets. Silver is also gaining versus gold. The gold-to-silver ratio, which jumped above 90:1 at the 2025 lows, has tightened to 83:1. This suggests silver is starting to outperform, and may still offer better value than gold. For derivatives traders, this setup can make selling out-of-the-money puts below $72 appealing for premium collection, since that area held as support in late 2025. Another approach is buying call spreads that target a move toward $80, which offers defined risk while positioning for a retest of the pre-2025-correction highs. Last year’s downside risk toward $64.70 appears to have eased after silver built a base near $68 in November 2025. Now, $75—which used to be resistance—has become support. The latest Commitment of Traders report also shows managed money increased its net-long silver futures position for a third straight week, reinforcing the improvement in sentiment. Create your live VT Markets account and start trading now.

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BNP Paribas analysts expect China’s GDP growth to be 5.0% in 2025, unchanged from 2024. They forecast a moderate slowdown in 2026 as domestic demand weakens and pressure in the property sector continues. They expect fiscal and monetary policy to remain supportive in 2025 and 2026. However, they also expect policymakers to stay cautious while trying to boost private consumption.

Near Term Export Outlook

In the near term, they expect Chinese exports to remain competitive. They also expect exports to face new protectionist measures. They note that deflationary pressures are still present. They expect only a small improvement in 2026. A moderate slowdown in 2026, after 5.0% growth in 2025, points to a more defensive approach. Recent data from China’s National Bureau of Statistics already shows cooling momentum, with the January 2026 manufacturing PMI at 49.2 (contraction). Traders may consider buying put options on broad Chinese equity indices, such as the FTSE A50, to hedge against a possible downturn. Deflation remains a key theme in the coming weeks. The latest official data shows the Consumer Price Index (CPI) fell 0.6% year over year in January 2026, the fourth straight monthly decline. This backdrop could pressure the yuan, which could make call options on USD/CNH a potential way to position for further currency weakness.

Policy Signals And Market Volatility

Authorities appear supportive but cautious, which reduces the odds of a large, market-moving stimulus. The People’s Bank of China’s decision last week to keep its key lending rate unchanged, despite weak inflation data, supports this cautious stance. This tension—slowing growth but restrained policy—could increase volatility, making strategies such as straddles on the Hang Seng China Enterprises Index worth considering. Exports face rising headwinds from new protectionist actions. After targeted tariffs on electric vehicles last year, reports this month suggest the EU is opening a new anti-subsidy investigation into Chinese wind turbines. Traders could consider puts on export-focused industrial ETFs with high exposure to European demand. Continued stress in the property sector is weighing on domestic demand. Data from early February 2026 shows new home sales among the top 100 developers fell by more than 30% from a year earlier, suggesting the issue is still unresolved. Bearish strategies, such as selling call spreads on real estate-focused ETFs, may be one way to express this ongoing weakness. Create your live VT Markets account and start trading now.

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The RBNZ makes its first policy decision of 2026 on Wednesday. Markets price a 99% chance it holds the Official Cash Rate at 2.25%. The focus is on the new forecasts and whether the Bank shifts its guidance away from mid-2027 as the expected timing for the first rate hike. Governor Anna Breman will lead her first policy event. CPI inflation is 3.1%, which is above the 1% to 3% target band. Q1 business inflation expectations have risen, and markets price around 40 basis points of tightening by year-end. ING expects two hikes from Q3, taking the OCR to 2.75%. Breman speaks again on Thursday evening.

Key Global Risk Events

New Zealand’s January trade balance, exports, and imports are due Thursday. In the US, the Fed releases minutes from January (with two dissents in favour of a cut) on Wednesday. Jobless claims and the Philadelphia Fed survey follow on Thursday. On Friday, the US releases preliminary Q4 GDP (3.0% forecast vs 4.4% prior), core PCE (0.3% month-on-month), and final February UoM sentiment. Fed speakers appear through Thursday and Friday. NZD/USD opened Tuesday at 0.60344, traded between 0.60044 and 0.60520, and closed at 0.60480 (down 0.22%). It sits above the 50-day EMA (0.59041) and the 200-day EMA (0.58545). The broader range is about 0.5990 to 0.60940. Stochastic %K is 68.90 and %D is 73.49, with %K below %D. Support levels are 0.60044, then 0.5990 and 0.59041. A close above 0.60940 would target 0.6120 to 0.6122. With the Reserve Bank of New Zealand decision due today, markets are set for a move. A hold at 2.25% is the base case, so the key is Breman’s guidance and whether she supports the market’s pricing for two hikes later this year. With CPI running hot at 3.1%, a hawkish tone could trigger a breakout.

Nzdusd Volatility Setup

NZD/USD has been stuck between 0.6000 and 0.6094, which makes it a strong setup for volatility trades. One-week implied volatility is up to 11.8%, showing the market expects a sizable move after the decision. Traders may look at straddles or strangles, which can benefit from a sharp move either way without needing to pick hawkish or dovish outcomes. The backdrop also includes the US Fed minutes from January, where two members voted for a cut. This points to a policy split, especially as US core PCE inflation cooled through the second half of 2025 and ended the year at 2.9%. That softer Fed tilt can support NZD/USD, so a hawkish RBNZ surprise could have a bigger impact. If you expect a hawkish RBNZ, call options with strikes just above 0.6094 could be a way to position for a breakout. If Breman signals a firm stance against inflation, NZD/USD could move quickly toward the July 2025 highs near 0.6120. Options also cap risk to the premium paid, which can help around major events. If Breman sounds cautious on growth or pushes back against rate-hike pricing, NZD/USD could slide back toward 0.6000. In that case, put options may be a direct way to target downside. A clear break below 0.6000 could open room for a deeper pullback toward the 50-day moving average near 0.5900. Beyond the decision, New Zealand’s trade data on Thursday also matters. The terms of trade improved in late 2025 as commodity prices recovered. Another strong export result would support the currency and could turn any dovish-driven dip into a medium-term buying opportunity. Create your live VT Markets account and start trading now.

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RBA minutes said the latest rate rise was needed. Future moves will depend on new data and changes in risk. The cash rate is 3.60%, and markets are pricing about a 70% chance of another rise in May. Australia’s Q4 Wage Price Index is due on Wednesday. January jobs data follows on Thursday. Forecasts are for 20K jobs added versus 65.2K previously, participation at 66.8%, and unemployment at 4.2%. Preliminary February S&P Global PMI is also due.

Fed Data And Market Focus

The Fed releases January minutes on Wednesday after a 10–2 vote kept rates at 3.50% to 3.75%. Two members voted for an immediate cut. US jobless claims and the Philadelphia Fed survey follow on Thursday. Friday brings Q4 GDP (3.0% forecast versus 4.4% prior), core PCE (0.3% m/m forecast), and final February UoM sentiment. AUD/USD opened at 0.70754, traded between 0.70901 and 0.70283, and closed at 0.70824, down 0.10%. It is above the 50-day EMA at 0.68497 and the 200-day EMA at 0.66344. It is below the 0.71473 high but above the 0.66636 January low. Stochastic (14,5,5) shows %K 77.27 and %D 83.79. Key levels are support at 0.70283, then 0.7000, and resistance at 0.7100, then 0.71473 and 0.7200. The AUD is also influenced by RBA policy, Australia’s 2–3% inflation goal, China’s demand, iron ore exports worth $118 billion in 2021, and the trade balance. The Reserve Bank of Australia is holding policy steady for now and is watching incoming data for its next move. With the cash rate at 3.10%, the market is watching whether easing inflation could allow cuts later in the year. In Q4 2025, annual inflation cooled to 3.5%, down from the highs of earlier years.

Technical And Macro Drivers

The US Federal Reserve is keeping interest rates higher. This gives the US dollar a yield advantage and puts pressure on the Australian dollar. Traders are now watching US inflation and jobs data for signs the Fed may turn less hawkish. On the chart, AUD/USD is in a clear downtrend near 0.6550. It is well below the 50-day and 200-day moving averages. The pair is also moving sideways in a tight range, with support near the 0.6500 psychological level. Rallies have repeatedly failed near the 0.6620 resistance zone. China’s economic outlook is another drag on the Aussie. Recent China industrial production data missed expectations, which can reduce demand for Australian exports. This has weighed on iron ore, Australia’s largest export, with prices down to about $110 per tonne. Lower commodity prices are also pressuring Australia’s trade balance, as the surplus has narrowed in recent months. At the same time, a broader “risk-off” mood has investors leaning toward safer assets. With the US economy holding up and China looking cautious, traders have been less willing to buy risk-sensitive currencies like the AUD. In this environment, traders may prefer strategies that suit a range or allow for further downside in AUD/USD. Buying put options can help protect against weakness. Selling call options near the 0.6620 resistance level may generate income if the pair stays capped. Australian jobs data and key US inflation data are likely to be the next major catalysts. Create your live VT Markets account and start trading now.

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Rabobank’s Michael Every says Australia’s macroeconomic backdrop has changed in a meaningful way. Minutes from the Reserve Bank of Australia (RBA) lay out the case for a 25 bps rate rise, noting that staff forecasts were “materially stronger than those produced in August and November”. The IMF warned Australia that its 5% deposit scheme for first-time home buyers will lift housing inflation. It said the scheme should be removed. The article also reports warnings that it may already be too late to pull back the measure.

Policy Tension In Australia

This mix of housing support and higher interest rates is said to make the economy, and the path of the Overnight Cash Rate, harder to forecast. The piece adds that the RBA has previously warned that housing measures like this can be inflationary. The article notes it was created with help from an artificial intelligence tool and reviewed by an editor. We are seeing a clear clash between the RBA’s recent rate hike and government policy. The central bank’s minutes from late 2025 confirm that forecasts are now “materially stronger,” which supports a more hawkish stance. But fiscal support alongside monetary tightening adds uncertainty for the Australian dollar and bond markets. This is not just a debate on policy. January data showed Q4 2025 inflation was still high at 4.5%, above expectations. At the same time, CoreLogic data showed property values in major cities like Sydney rose by more than 3% last quarter, which works against the RBA’s goals. The IMF’s warning that the 5% deposit scheme is pushing up prices seems to be showing up in the data.

Implications For Rates Volatility

For those of us in derivatives, this points to higher volatility in interest rate products in the weeks ahead. The RBA may be pushed into a more aggressive path than the market expected just a few months earlier in late 2025. In that setting, using options to hedge against, or express a view on, further surprise policy moves may be sensible. We should watch the ASX 30 Day Interbank Cash Rate Futures, which have repriced sharply since January. The market now reflects at least a 70% chance of another 25 bps hike by June. That is a big shift from last year, when traders expected rate cuts. Positioning for a higher-for-longer rate outlook through futures or swaps is the most direct response to this ongoing policy conflict. Create your live VT Markets account and start trading now.

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EUR/USD fell during North American trading. It first touched 1.1804, then traded near 1.1845, down 0.07%. Risk-off sentiment supported the US Dollar as US–Iran tensions stayed high. This was despite nuclear talks resuming on Tuesday and reports of progress. The US also sent a fleet to the Middle East. US data pointed to a firmer labour market. The ADP Employment Change 4-week average rose to 10.3K from an upwardly revised 7.8K.

Market Pricing For Fed Cuts

The New York Empire State Manufacturing Index slipped to 7.1 from 7.7, but beat the 6.0 forecast. Markets scaled back expectations for Federal Reserve rate cuts. Prime Market Terminal showed 57 basis points of easing priced in through end-2026. In the Eurozone, Germany’s ZEW Economic Sentiment dropped to 58.3 from a prior five-year high, missing the 65.0 estimate. Eurozone industrial production growth slowed to 1.2% YoY in December 2025 from 2.2%, and came in below the 1.3% forecast. On February 18, the Eurozone calendar includes ECB speeches by Mario Cipollone and Isabel Schnabel. In the US, the focus is on Durable Goods Orders, housing data, Industrial Production, and the FOMC minutes. The gap between the US and Eurozone economies appears to be widening, which supports a stronger Dollar versus the Euro. The January 2026 Nonfarm Payrolls report showed a blockbuster 350,000 job gain two weeks ago. This reinforced the view that the US economy remains resilient. With that strength, it is hard for the Federal Reserve to justify aggressive rate cuts anytime soon.

Eurozone Growth Drag

In contrast, the outlook for the Euro is weakening as core Eurozone data stays soft. German factory orders fell sharply at the end of 2025, and that trend is weighing on the region’s industrial engine. This weakness suggests the European Central Bank will be much less willing to tighten policy, creating a clear policy gap versus the Fed. Given this backdrop, we should consider buying EUR/USD put options to position for a potential move lower, with strikes below 1.1800. The release of the January FOMC minutes is a key catalyst. It could confirm a hawkish Fed and drive the next leg lower. This approach helps define risk while keeping exposure to a downside move. Renewed US–Iran tensions add another layer of uncertainty that tends to favour the safe-haven Dollar. Implied volatility on EUR/USD options may start to rise, so it may be better to act before hedges become more expensive. The VIX, a measure of market fear, is edging up from recent lows below 14, suggesting traders are becoming more cautious. Technically, the pair is consolidating, but the descending trend line near 1.1863 is strong resistance. A break below the recent low at 1.1804 could be used as a trigger to add to shorts or bearish option structures. Until that break happens, selling out-of-the-money call options above 1.1950 could be a sensible way to collect premium. Create your live VT Markets account and start trading now.

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New Zealand’s Producer Price Index (PPI) output rose 0.1% quarter-on-quarter in the fourth quarter. The result was below the 0.7% increase expected.

Producer Price Pressures Easing Rapidly

The much lower-than-expected producer price inflation figure suggests price pressures are easing faster than we expected. This also suggests the Reserve Bank of New Zealand’s aggressive rate hikes through 2025 may be working more strongly than previously thought. We now need to take a hard look at how the market is pricing the path of the official cash rate (OCR). This data challenges the view that the RBNZ must keep rates “higher for longer.” With wholesale inflation close to flat, the case for further tightening has faded. The focus is likely to shift quickly to when the first rate cut may happen. We should expect interest rate markets to start pricing a higher chance of an OCR cut before the end of the third quarter. We saw a similar pattern last year. Fourth-quarter 2025 CPI came in at 4.7%, already below the RBNZ’s own late-2025 forecasts. This PPI result adds to that disinflation trend, especially since New Zealand’s GDP growth in the second half of 2025 was a weak 0.3%. The slowdown is clearly helping cool prices earlier in the supply chain. As a result, we see a clearer path toward a weaker New Zealand dollar. If expectations for rate cuts move forward, the NZD’s yield advantage will shrink, especially versus the US dollar. We expect NZD/USD to face meaningful pressure in the coming weeks. A simple strategy is to buy NZD/USD put options expiring in April or May. This gives downside exposure while limiting risk if the market moves against us in the short term. We are watching for a break below the 0.6050 support level that held through much of January.

Positioning For Lower Short Term Rates

We should also consider positioning for lower short-term interest rates using 90-day bank bill futures. Contracts for the second half of the year may be mispriced because they do not fully reflect the risk of multiple rate cuts. Buying these futures is a direct way to express the view that the RBNZ may need to act sooner than the market expects. Create your live VT Markets account and start trading now.

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New Zealand’s Producer Price Index (PPI) input fell 0.5% quarter-on-quarter in the fourth quarter. This was below expectations for a 0.5% rise.

Implications For Rbnz Policy Outlook

New Zealand’s Q4 2025 producer price input fell 0.5%, instead of rising 0.5% as expected. This is a clear deflationary signal. It suggests cost pressures are easing faster than we anticipated. Because of this, we may need to rethink when the Reserve Bank of New Zealand (RBNZ) could start cutting rates. The release comes just ahead of the RBNZ policy meeting on February 26, 2026. It also follows the January 2026 CPI report, which showed annual inflation slowing to 3.8%. Together, weaker consumer and producer price data supports a more dovish RBNZ. We now think the market may be underpricing the chance that the RBNZ signals a shift toward easing later this year. For the New Zealand dollar, this is bearish. Lower rate expectations usually weaken a currency, so NZD/USD may come under pressure. We should consider buying NZD put options to hedge risk or to position for a move down toward the support levels seen in late 2025. In rates markets, this points to lower yields, especially at the short end of the curve. Products such as 90-day bank bill futures may see more buying. We should also look at interest rate swaps to receive fixed and pay floating, which would benefit if the RBNZ cuts the Official Cash Rate earlier than the market expects. Because the data missed expectations by a wide margin, implied volatility in NZD-related assets may rise. This can make options strategies like straddles more attractive for traders who expect a large move after the RBNZ meeting but are unsure of the direction.

Volatility And Options Strategy Setup

We saw a similar pattern in 2023, when surprise inflation data forced a fast repricing of RBNZ policy and drove a spike in currency volatility. Create your live VT Markets account and start trading now.

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TD Securities expects US GDP growth of 2.3% (q/q annualised) in Q4 2025, after two stronger quarters. It says growth is cooling because consumers are spending less, federal government spending is falling, and net exports are weaker. It expects AI-related spending to keep supporting non-residential fixed investment. The firm will revisit its 2.3% Q4 forecast after the December data on durable goods, inventories, and trade, ahead of Friday’s GDP report.

Key Macro Watchpoints

In the same week, it expects December PCE inflation to rise. It also sees growth drifting back toward its long-run potential by the end of 2025. TD Securities links this to a trade policy shock from the Trump administration and a less restrictive Fed in 2025 as the labor market cools. Looking ahead, it projects GDP growth of about 2.3% (Q4/Q4) in 2026, similar to 2025. It forecasts the unemployment rate at 4.2% by Q4 2026, with the labor market continuing to stabilize through the end of 2026. TD Securities puts the odds of a US recession in the next year at 25%. We are now seeing the expected slowdown. The advance estimate for Q4 2025 GDP growth came in at 2.1%, confirming a step down from last year’s stronger pace. A 25% recession risk is still on the table, and major trade policy changes add uncertainty. Even so, implied volatility looks low. We think it makes sense to buy options that benefit from bigger market moves, such as VIX calls or index straddles, in the weeks ahead.

Rates Volatility And Policy Risk

The Fed’s rate cuts in 2025 were a response to a softer labor market. But the January 2026 jobs report showed unemployment holding at 3.9%. Also, December 2025 PCE inflation ticked up to 3.1%, which is not what the Fed wants to see. This points to the Fed staying on hold. That makes derivatives that benefit if there are no further rate cuts in the first half of 2026 look more attractive. The outlook also points to a split market. AI investment may keep supporting technology stocks even as the broader economy slows. That gap showed up in the latest earnings season: semiconductor firms beat expectations, while many consumer-focused companies guided lower. We can trade this theme with options—for example, by selling call spreads on broad indexes while staying long targeted tech ETFs. Larger tax refunds in the first half of 2026 could give consumers a temporary boost. The stimulus periods in 2020 and 2021 showed that these boosts can be strong but short-lived. This could create a short-term opportunity in consumer discretionary stocks, but we should be ready for spending to fade back to a weaker trend by summer. Create your live VT Markets account and start trading now.

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