Canada’s CPI inflation slowed in January. Headline inflation was 2.3%. Inflation excluding indirect taxes was 2.1%, down from 2.5% in December. The Bank of Canada’s core trim and core median measures eased to an average of 2.5% year over year. That was down from 2.6% in December, after a 0.1% month-on-month rise.

Core Inflation Trends

Core trim and core median came in at 2.4% and 2.5%. Both are still above the Bank’s 2% target. Over the past three months, they averaged a 1.2% annualised rate. The share of the CPI basket seeing unusually fast price increases also declined. About 23% of the basket rose at an annual rate above 5% over the last three months. That was down from 28% in December and 30% in November. Overall, the data gives policymakers more room to cut interest rates if the economy weakens. The base case mentioned in the source did not assume further rate cuts, even as grocery and services prices stayed high. From our perspective in mid-February 2025, the January inflation report is an important shift. With headline inflation down to 2.3%, the Bank of Canada has more flexibility to cut rates if the economy continues to soften. This supports the view that the next move in policy is likely to be a cut.

Market Implications For Rates

The Bank’s preferred core measures have eased to 2.5%. The annualised pace over the past three months was a very low 1.2%. With the policy rate held at 4.25% since December 2024, markets are likely to price in a higher chance of a rate cut at the spring meetings. This could support strategies that benefit from lower yields, such as buying call options on Government of Canada bond futures. A more dovish Bank of Canada also tends to weigh on the Canadian dollar, especially versus the U.S. dollar. The Federal Reserve has been more cautious about when it might cut rates. If this policy gap widens, it could favour trades that expect a weaker loonie, such as buying puts on CAD futures. This has been a key theme we have tracked since the start of the year. This inflation report follows weak growth data. Canada’s GDP growth nearly stalled in Q4 2024, and the unemployment rate rose to 5.8% in January 2025. If rate cuts arrive sooner than expected to support the economy, Canadian equities could benefit. That could lead to more interest in call options on the S&P/TSX 60, as traders position for easier financial conditions. Disinflation also appears to be spreading across more categories, rather than being limited to a few items. The share of the basket with high price growth fell to 23% in January, continuing the drop from 30% in November 2024. This steady trend strengthens the case for the Bank of Canada to act, and it may also reduce implied volatility in rate markets as the policy path becomes clearer. Create your live VT Markets account and start trading now.

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New Zealand’s GDT Price Index rose 3.6% in the latest update, down from a 6.7% rise in the previous release. The latest Global Dairy Trade data shows weaker momentum. The index is still rising, but the pace has slowed from 6.7% to 3.6%. We see this as a sign that the dairy price rally is fading. It may be time to take profits on long dairy futures and get ready for a period of consolidation or a pullback in the weeks ahead.

Dairy Rally Losing Momentum

This slowdown is a headwind for the New Zealand dollar, because dairy remains a major part of the country’s export income. Stats NZ data for the year ending December 2025 shows dairy made up more than 28% of total goods exports. With that in mind, we are looking for chances to short NZD against currencies with stronger outlooks, such as the US dollar. The RBNZ is likely to watch this closely. Softer export prices can make it harder to manage inflation, which was still 3.9% in the last quarter of 2025. This could also reduce the odds of further rate hikes that markets had priced in. A shift in rate expectations would add to our bearish view on NZD. We see the slower price growth as a result of softer global demand, especially from key buyers. China’s January 2026 import data showed whole milk powder purchases fell 4% month over month. That is a clear change from the strong buying seen in late 2025. This supports the view that dairy prices may have peaked for now. In response, we are considering buying NZD/USD put options that expire in late March or April. This approach lets us benefit if the currency falls, while keeping risk capped at the premium paid. The slower GDT price index is the main driver for this trade, as its impact can spread across the New Zealand economy.

Potential Strategy For NZD USD

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USD/CHF traded near 0.7729 on Tuesday, close to a one-week high. The Swiss franc weakened as the US dollar strengthened. The US Dollar Index held near 97.40, up about 0.32%. Recent US data helped the move: – The NY Empire State Manufacturing Index came in at 7.1 in February, above the 6.0 forecast, but down from 7.7. – The ADP Employment Change four-week average rose to 10.3K from a revised 7.8K (previously 6.5K). Traders have scaled back expectations for a near-term Federal Reserve rate cut. This followed stronger Nonfarm Payrolls data and an Unemployment Rate that fell to 4.3% from 4.4%. The CME FedWatch Tool shows June as the most likely month for the first cut. Markets are focused on: – The Fed’s Meeting Minutes on Wednesday – Friday’s core PCE Price Index – The advance estimate of fourth-quarter US GDP These releases could shift rate expectations and move the dollar. Lower demand for safe-haven assets also pressured the franc after a second round of US–Iran nuclear talks in Geneva. In Switzerland, CPI rose 0.1% in January. The SNB targets 0–2% inflation, and markets expect rates to stay unchanged in March and remain steady through 2026. We first discussed this setup in February 2025, when USD/CHF traded near 0.7729. At the time, markets expected Fed rate cuts to begin by June 2025 because inflation was easing. That view was generally bearish for the US dollar versus the Swiss franc. Over the past year, the story changed. The Fed delivered only two of the four expected rate cuts in the second half of 2025, then paused. The US economy held up better than expected, and that strength has continued into this year. The US Dollar Index (DXY) shows the shift, now trading around 104.5—well above the 97.40 level from this time last year. January 2026 data is adding to the dollar’s support and weakening the case for more Fed easing. The latest Nonfarm Payrolls report showed a stronger-than-expected gain of 210,000 jobs. The most recent CPI report showed inflation rising to 3.2% year over year. As a result, markets have sharply reduced the odds of a March 2026 rate cut. The Swiss National Bank has also stayed on hold. Swiss inflation remains low, at 1.4% in the latest report. The diplomatic progress with Iran seen in early 2025 has mostly held, which has reduced safe-haven demand that can lift the franc. The gap in economic momentum and monetary policy between the US and Switzerland is becoming clearer. Given this setup, we think USD/CHF is more likely to move higher in the coming weeks. The dollar’s yield advantage is widening again, which makes it more attractive to hold than the franc. Traders may want to consider strategies that benefit from a stronger dollar versus the franc. Derivative trades can be built to match this view. One approach is to buy near-the-money USD/CHF call options, such as a 0.9000 strike expiring in April, to gain upside with defined risk. A lower-cost alternative is a bull call spread, which can help offset the cost of the calls.

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Pound Sterling fell during the North American session as trading resumed after the US President’s Day holiday. GBP/USD dropped 0.71%, or nearly 100 pips, to 1.3529 after weaker-than-expected UK jobs data.

Pound Under Pressure

The UK jobless rate hit a 10-year high, putting more pressure on the exchange rate. In 2025, a report showing the highest jobless rate in a decade sent the Pound down almost 100 pips. The move showed how quickly Sterling can react to signs of economic weakness. When the UK outlook worsens, the currency often falls too. Today, February 17, 2026, the tension is still there, but the main issue has changed. The latest Office for National Statistics data puts the UK unemployment rate at 4.3%, while growth remains flat. The bigger worry is sticky inflation, especially in services. That could stop the Bank of England from cutting rates to support growth. This mix of weak growth and stubborn inflation adds uncertainty, which often helps option traders. Implied volatility in GBP/USD is rising from the lows seen late last year. Traders may look at buying straddles to position for a breakout, since the Bank of England’s next step could push the pair sharply in either direction.

Strategy For Volatility

With the signs of economic weakness we saw in 2025, a bearish stance may make sense. Buying out-of-the-money GBP/USD put options is a low-cost way to prepare for a drop if upcoming growth data disappoints. This approach limits risk while offering meaningful upside if Sterling weakens. The US dollar also matters, since it is the other side of the pair. Recent US data shows core inflation is easing more slowly than expected. That has pushed back expectations for Federal Reserve rate cuts. If the UK is forced to cut rates before the US, that policy gap can weigh on GBP/USD. If you already hold long positions, consider hedging against a possible decline. Buying protective puts with a strike price near the key 1.2500 support level—an area that held several times last year—can be a cost-effective form of insurance. It may help protect portfolios if weak UK data triggers a sudden reversal. Create your live VT Markets account and start trading now.

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GBP/USD fell 0.71% (nearly 100 pips) to around 1.3529 during Tuesday’s North American session, following the US Presidents’ Day holiday. The drop came after a weaker UK jobs report. ONS data showed the ILO unemployment rate rose to 5.2% in the three months to December, up from 5.1% in November and above forecasts. It was the highest level in a decade, excluding the pandemic period. Average earnings excluding bonuses slowed to 4.2% from 4.4% over the same period.

Market Pricing Shifts

Prime Market Terminal put the odds of a 25 bps Bank of England cut at 71% for the 19 March meeting. For the full year, money markets priced in 49 bps of easing. UK CPI data is due on Wednesday. January inflation is expected to cool to 3.0% from 3.4%. In the US, the New York Empire State Manufacturing Index rose to 7.1 in January, slightly above the 7.0 expected, and down from 7.7 in December. The ADP Employment Change four-week average rose to 10.3K from 7.8K. GBP/USD was also quoted near 1.3502. A nearby level sits at 1.3522, with support around 1.3511, while a trend line stems from 1.3035. Around this time in 2025, a weak UK jobs report also pushed the pound sharply lower. Unemployment had reached a decade-high of 5.2% (excluding the pandemic), and markets quickly priced in a strong chance of a Bank of England rate cut in March.

Policy Divergence

Today, the picture looks different. UK unemployment has improved to 4.5% for the three months ending December 2025. More importantly, inflation remains sticky, with January 2026 CPI holding at 2.9%, still well above the central bank’s target. As a result, expectations for a near-term rate cut have dropped sharply, and markets now see only a small chance of a move before summer. In the US, the Federal Reserve remains cautious, much as it was in 2025. Recent comments from officials continue to stress a data-dependent approach, especially with core inflation still above 3%. This “higher for longer” stance in the US contrasts with the pressures facing the UK economy. This setup points to a different playbook than the simple short seen in 2025. With the US dollar still holding a clear rate advantage, traders may prefer strategies suited to range-bound trading or limited upside in GBP/USD. Options approaches such as selling call spreads may fit this view, based on the idea that any meaningful pound strength could be capped. Create your live VT Markets account and start trading now.

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Gold (XAU/USD) fell to about $4,863 on Tuesday, down 2.50% and near a two-week low. Thin holiday trading kept prices below $5,000. Lunar New Year closures have reduced liquidity. Chinese markets reopen next Tuesday, and US volumes should improve after Presidents’ Day. The US Dollar strengthened and Treasury yields rose, which pushed gold lower. The US Dollar Index was near 97.44, up about 0.37%.

Market Drivers And Current Positioning

US data was mixed. The NY Empire State Manufacturing Index rose to 7.1 in February (6.0 expected), but it was slightly below the prior 7.7. The ADP Employment Change four-week average increased to 10.3K, up from a revised 7.8K. After recent data, rate-cut expectations shifted. Traders now price almost 60 basis points of easing this year, with the first cut possibly in June, according to CME FedWatch. Geopolitical risk also stayed in focus after a second round of US-Iran nuclear talks in Geneva and reports of Iranian Revolutionary Guard drills in the Strait of Hormuz. On the 4-hour chart, price is below the 100-period SMA. Support is near $4,900, with lower levels at $4,800 and $4,700. Resistance is at $5,021, then $5,050–$5,100. MACD is negative and RSI is 39. This looks similar to what happened around this time in 2025, when gold dropped below $5,000. Then, as now, the main pressure came from a stronger US Dollar, which tends to weigh on gold. Last year’s dip showed how sensitive gold is to changes in expectations for Federal Reserve rate cuts. Now, those expectations are shifting again because inflation remains sticky. The latest Consumer Price Index showed prices up 3.1% year over year, above expectations. This has led markets to rethink when the Fed might make its first cut. The CME FedWatch Tool now shows the chance of a rate cut by May 2026 has fallen below 40%, a major change from a month ago.

Options Positioning And Risk Management

The “higher for longer” rate story is pushing the US Dollar Index (DXY) to about 104.3, well above the 97.4 level seen during the 2025 downturn. A stronger dollar makes gold more expensive for overseas buyers and is a major headwind. For derivatives traders, this setup points to possible short-term weakness. With that in mind, buying put options with strike prices below $5,100 could be a sensible approach. This can benefit from a drop back toward the psychological $5,000 level, without the unlimited risk that comes with shorting futures. The $5,050 level is key. A break below it could trigger more selling. At the same time, ongoing Middle East risks can help support gold prices. Buying cheap, out-of-the-money call options can hedge against a sudden escalation that could drive safe-haven demand. This creates a more balanced position and helps protect against surprise shocks. With uncertainty ahead of upcoming inflation data and Fed messaging, it may also make sense to use strategies that benefit from volatility. A long straddle—buying both a call and a put with the same strike and expiry—can work well. It can profit if gold makes a large move in either direction in the coming weeks. Create your live VT Markets account and start trading now.

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Norway’s CPI was higher than expected. This pushed markets to shift their view of Norges Bank policy from “more rate cuts” to “a longer pause.” Market‑implied policy rates are now broadly flat for the rest of this year. Before, markets were pricing further cuts starting in early 2026. The Norwegian krone (NOK) is the best‑performing G10 currency so far in 2026, with the Australian dollar (AUD) next. Rabobank now expects EUR/NOK to reach 11.00 over a 12‑month horizon, and has brought that target forward in its forecast path.

Norges Bank Signals Patience

In January, Norges Bank said that “the outlook is uncertain,” after more dovish signals in December. It kept the guidance that the policy rate will be reduced further this year if the economy develops as expected. Governor Wolden Bache also said the bank is not in a hurry to cut, because inflation is still too high. The recent inflation surprise has reshaped the outlook for Norwegian rates. January CPI came in at 4.2%, well above the 3.7% forecast. This forced markets to rethink the likely path for Norges Bank. Expectations have moved away from near‑term cuts and toward the policy rate staying at 4.50% for longer. This shift has helped make the krone the strongest G10 currency so far this year. It also supports the view that EUR/NOK can keep trending lower from around 11.25. Forecasts have been updated to match this change, with a new target of 11.00 over the next twelve months. The krone’s strength is largely driven by the central bank’s more hawkish tone. Compared with late 2025, this is a major change. At that time, markets were confidently pricing at least two rate cuts for this year. The new view is backed by economic data: mainland GDP rose 0.8% in Q4 2025, which reduces the pressure on Norges Bank to ease quickly. Recent statements also suggest policymakers are in no rush to cut rates.

Derivative Strategy Implications

For derivatives traders, this points to positioning for further krone strength versus the euro in the coming weeks. Buying EUR/NOK put options is a straightforward way to express a move toward 11.00 with defined risk. The trade benefits if NOK strengthens while Norges Bank keeps policy tight. The inflation surprise initially lifted implied volatility. That may now create an opening. If the market settles into an “extended pause” view, selling option premium could appeal to traders who think the new direction is established. Traders should also review any interest‑rate swap positions that were based on falling Norwegian rates. Create your live VT Markets account and start trading now.

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The NAHB Housing Market Index in the United States came in at 36 in February. This was below the expected level of 38. A reading of 36 shows builder confidence is still weak. It remains well below the neutral level of 50. This adds to other recent signs that the housing sector is cooling.

Housing Market Weakness Signals

This weaker-than-expected result supports a pattern of softer economic data seen in recent weeks. It follows January’s jobs report, which showed hiring slowing to 145,000. It also comes as the 30-year mortgage rate has moved back above 6%. Together, these signals suggest the housing market is more fragile than many expected at the start of the year. Weakness in a sector that is highly sensitive to interest rates also increases pressure on the Federal Reserve to consider rate cuts sooner than expected. With January’s core inflation steady at 2.7%, this housing data may add weight to a more dovish view in upcoming meetings. Because of that, we are looking at trades that could benefit if rates fall, such as buying SOFR futures contracts. For equity derivatives traders, this is a reason to stay cautious on cyclical sectors linked to housing. We are considering buying put options on homebuilder ETFs such as XHB, as well as on major building materials suppliers. This setup is similar to the brief housing slowdown in mid-2025, which created good conditions for bearish option strategies in the sector.

Broader Market Hedging Considerations

This data may also be a headwind for the broader S&P 500. Protective puts on the index may be a sensible way to hedge long portfolios. In addition, a more dovish Fed could weaken the U.S. dollar. That makes us look at options strategies that could benefit if the euro or yen rises against the dollar in the coming months. Create your live VT Markets account and start trading now.

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Johnson Controls International plc (JCI) designs, makes, installs, and upgrades building products and systems. The stock trades on the NYSE as “JCI” in the Industrials sector. The company reports four segments: Building Solutions North America, Building Solutions EMEA/LA, Building Solutions Asia-Pacific, and Global Products. On the weekly chart, the share price is in a bullish Elliott Wave pattern. Further gains are expected as long as pullbacks stay above the 1/06/2026 low. A move toward $151.52 is projected before a later correction. The wave levels are as follows: wave I of (III) ended at $81.77, and wave II ended at $45.52 in July 2022. Within wave III, ((1)) ended at $69.60 in January 2023 and ((2)) ended at $47.90 in October 2023. Price is now moving through (5) of ((3)). Within ((3)), (1) reached $91.14, (2) dropped to $68.03, (3) rose to $123.78, and (4) pulled back to $108.41. The current (5) has already hit a minimum extension at $134.03, and $151.52 remains a possible next target. A pullback labeled ((4)) is expected in 3, 7, or 11 swings. Confirmation would come from a break of the trendline drawn through (2) and (4). If price falls below the 1/06/2026 low, then ((3)) is considered complete at the most recent peak. With the bullish structure still in place, the near-term plan is to stay with the current momentum. The stock appears to be in its final leg higher, with a potential target near $151.50. Traders may look to hold or open bullish positions—such as buying call options or using bull call spreads—to benefit from a likely final push upward. The chart strength also lines up with supportive fundamentals. U.S. Commerce Department data showed non-residential construction spending rose 1.2% in January 2026, above expectations. That trend supports JCI’s core business. It also follows a strong Q4 2025 earnings report, where demand for JCI’s smart building technology came in above analyst forecasts. The main level to watch over the next few weeks is the January 6, 2026 low. As long as price stays above that point, the bullish view remains valid, and short positions are not favored. Small pullbacks should be treated as pauses, not trend changes. The bigger setup is the correction labeled wave ((4)), expected after the current rally tops out. The plan is not to sell into strength, but to wait for signs that the up move is fading. That decline could create a better buying window for a longer-term trade. To get ready, the focus is on a completed rally followed by a break of the support trendline built from the October 2023 low and the mid-2025 low. Once the correction starts, tactics like selling cash-secured puts near defined support areas can help enter a new long position at a lower price. This can also generate premium income while waiting for the preferred entry zone.

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USD/CAD rose for a fifth straight day and traded near 1.3676. The pair moved higher after softer Canadian inflation data weakened the Canadian Dollar. Canada’s CPI was 0.0% month-on-month in January versus a 0.1% forecast, and 2.3% year-on-year versus 2.4% expected. BoC Core CPI rose 0.2% MoM in January after falling 0.4% in December. The annual core rate eased to 2.6% from 2.8%. The Bank of Canada targets 2% inflation and uses a 1–3% control band. It now expects CPI to average 2.0% in 2026 (previously 2.1%) and 2.1% in 2027.

Canadian Inflation And Oil Weigh On The Loonie

Oil prices also pressured the currency because Canada is a major crude exporter. WTI traded near $62.35, down about 1.95%, after a second round of US-Iran nuclear talks in Geneva. The US Dollar also strengthened. The DXY traded near 97.34, up about 0.25%. US data showed the Empire State Manufacturing Index at 7.1 in February (forecast 6; prior 7.7) and the ADP Employment Change four-week average at 10.3K (revised prior 7.8K). Markets are watching the FOMC minutes on Wednesday. On Friday, the focus turns to Core PCE inflation and the advance Q4 GDP estimate. A year ago, in early 2025, the Canadian dollar was weakening amid soft inflation and falling oil prices. At the time, Canadian CPI was only 2.3% year-over-year. That gave the Bank of Canada room to stay on hold. Today, the picture is very different. Over the past twelve months, conditions have shifted sharply. The January 2026 data shows Canadian inflation has risen to 2.9%. That surprised many investors and increased pressure on the Bank of Canada to keep policy restrictive. This is a clear break from the disinflation trend seen at this time last year.

Shifting Policy Divergence And Volatility Outlook

Oil, a key driver of the loonie, has also strengthened. WTI now trades above $80 a barrel, far above the $62 level seen in February 2025, when the possibility of a US-Iran deal weighed on prices. Higher energy prices now support the Canadian dollar in a way they did not a year ago. On the other side, the US dollar remains strong. The DXY is near 104.5, well above the 97 level from last year. US inflation has also stayed firm, with January 2026 reading 3.1%. As a result, markets have pushed back expectations for Federal Reserve rate cuts. This creates a complicated setup: the Fed is still hawkish, while the BoC faces renewed inflation pressure. With these forces pulling in different directions, volatility in USD/CAD may rise in the coming weeks. Strong Canadian inflation and high oil prices point to a lower USD/CAD, but broad US dollar strength remains a major offset. Derivatives traders may want to consider strategies that benefit from larger price swings, such as long-volatility options positions. Create your live VT Markets account and start trading now.

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