National Bank of Canada analysts say weaker Canadian economic data, lower inflation, and higher trade uncertainty have reduced the odds of Bank of Canada rate hikes in 2026. They now expect any tightening to be delayed until at least early 2027. They say a path to 2026 rate hikes still exists, but it is now less likely. They add that if the Bank of Canada starts leaning toward rate cuts, they would not expect that shift before late this year. They forecast that if monetary policy stays unchanged, Canadian government bond yields should remain broadly steady through 2026. They also say Canadian yields may still outperform global peers, including U.S. Treasuries, UK gilts, and Japanese government bonds. The article notes it was produced with help from an artificial intelligence tool and reviewed by an editor. The path to a 2026 Bank of Canada rate hike has narrowed sharply. Recent data supports this view. January’s inflation report came in cooler at 1.9%, and GDP growth stalled in the final quarter of 2025. This strengthens the case that the central bank will delay any tightening until at least early 2027. If monetary policy stays on hold, we expect bond yields to move sideways for the rest of the year. Traders could position for a low-volatility market by selling options on BAX or CGB futures to collect premium. Another way to express the view that the market is overpricing hike risk is to receive fixed on short-term interest rate swaps. From a risk-management standpoint, we still prefer Canadian rates over global peers such as U.S. Treasuries. The 10-year Canadian government bond yield has already outperformed its U.S. equivalent by 15 basis points since the start of the year. We expect this outperformance to continue as global trade uncertainty rises. This change in rate expectations also makes the Canadian dollar less appealing. It has already slipped below 0.73 USD. More weakness is likely as long as the Bank of Canada stays on hold. Investors could express this view by shorting CAD futures or buying call options on the USD/CAD pair.

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The U.S. import price index fell to 0% year over year in December. In the previous reading, it was 0.1% year over year. This means import prices were flat compared with a year earlier. The latest figure is a small decline from the prior month’s annual pace.

Implications For Fed Policy

The December 2025 import price data, showing 0% inflation year over year, suggests global disinflation is spilling into the U.S. economy. This gives the Federal Reserve more room to ease its hawkish tone from last year. Bond markets are already reflecting this shift, with higher odds of rate cuts later this year. This view was reinforced by the January 2026 Consumer Price Index report released last week. It showed core inflation falling to 2.8%, the lowest level since early 2023. As a result, Fed funds futures now price in a greater than 60% chance of at least one rate cut by the July 2026 meeting. That is a major shift from the more cautious outlook in late 2025. Given this, it may make sense to look at trades that can benefit if rates fall. One approach is buying call options on long-term Treasury bond futures (ZB) or related ETFs. This can profit if bond prices rise as markets gain confidence that the Fed’s 2024–2025 rate-hiking cycle is over. For equities, lower rates often support growth and technology stocks, which were pressured by higher rates through much of 2025. A bullish call spread on the Nasdaq 100 can capture potential upside with defined risk. Lower borrowing costs can help lift valuations for these rate-sensitive companies. That said, the advance estimate for Q4 2025 GDP was a softer-than-expected 1.5%. This suggests lower inflation may also reflect slower growth. That uncertainty has pushed the VIX into the upper teens. To trade potential volatility around the next Fed meeting in March, straddles on the S&P 500 are one option. We may also see a weaker U.S. dollar, which could be expressed by buying put options on dollar-tracking funds.

Managing Growth And Volatility Risk

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The United States export price index rose 3.1% year on year in December, down from 3.3% in the previous reading. This is a 0.2 percentage point slowdown in the annual rate. The data refers to export prices measured by the export price index.

Export Price Inflation Eases

The December 2025 report shows the U.S. Export Price Index easing to 3.1%, which supports a broader trend of slowing price pressure. This suggests the strong dollar and last year’s tight monetary policy are helping cool an important part of inflation. Overall, it points to a shifting economic backdrop. This result also aligns with the January 2026 Consumer Price Index report, where core inflation fell to 2.8%—its lowest level since mid-2024. With disinflation continuing, more Federal Reserve rate hikes look less likely. We should prepare for a more neutral, or even dovish, stance from the Fed. With that in mind, we expect the U.S. dollar may weaken against currencies backed by more hawkish central banks. For example, the European Central Bank kept its key rate at 3.5% last week and highlighted ongoing concerns about wage growth. This policy gap can support strategies such as buying EUR/USD call options or using futures over the coming weeks. This backdrop can also benefit interest rate products. As inflation cools, bond yields often face downward pressure. A similar move occurred in the second half of 2023, when early disinflation signals helped drive a strong bond rally. As a result, buying call options on long-duration Treasury bond ETFs may be a sensible approach.

Equity Strategy Implications

For equities, a less aggressive Fed is generally supportive—especially for growth and technology stocks. One approach is buying call options on major indices such as the Nasdaq-100 to capture potential gains. Another is selling out-of-the-money put options, which can benefit if the market stays stable or rises. Create your live VT Markets account and start trading now.

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US export prices rose 0.3% month over month in December. This was above the 0.1% forecast. This result shows export prices rose faster than expected. The report compares the actual figure (0.3%) with the forecast (0.1%).

Export Prices Signal Persistent Inflation

The 0.3% rise in the December 2025 export price index was higher than expected. It was an early sign that inflation could stay persistent. The data suggested strong global demand for U.S. goods and showed that price pressures were easing more slowly than many hoped. This helped set a cautious market tone going into the new year. More recent data has supported this view. The January Consumer Price Index showed inflation picked up again, rising 0.4% month over month. The latest jobs report also showed the unemployment rate holding at a low 3.6%. Together, these numbers suggest the inflation pressures seen in late 2025 were not a one-off, but part of an ongoing trend. As a result, markets are quickly adjusting expectations for Federal Reserve policy. Fed funds futures now point to a later first rate cut. The probability of a May cut has fallen below 40%, down from above 80% a month ago. This mirrors what happened in 2023, when sticky data pushed the Fed to stay hawkish longer than markets expected. For traders, this points to a stronger U.S. dollar and interest rates staying higher for longer. Consider long exposure to the dollar index (DXY). Also consider buying puts or taking short positions in long-duration Treasury bond ETFs. The 10-year Treasury yield has already moved back above 4.35%, and it may have further to rise. This backdrop can also weigh on rate-sensitive sectors such as technology and other growth stocks. Protective puts on indices like the Nasdaq 100 can help hedge against a potential decline, since borrowing costs are now expected to stay elevated. With uncertainty rising, call options on the VIX may also help if market volatility increases.

Implications For Risk Assets

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The U.S. Import Price Index rose 0.1% month over month in December. That was below the 0.2% forecast. This result suggests import prices rose more slowly than expected. The release did not include further details. Looking back at December 2025, the import price index increased just 0.1%, also below the 0.2% estimate. This suggests imported inflation was cooling more than expected at the end of last year. On its own, this data point supports the idea that overall price pressures in the economy are easing. More recent data also points to disinflation. In January 2026, the latest CPI report showed core inflation slowed to a 2.8% annual rate, the lowest since early 2023. Fed funds futures now price a 70% chance of a rate cut by the Federal Reserve’s July meeting. In response, we are looking at call options on interest rate futures, which would benefit if rates fall in the coming months. In equities, this outlook supports index-based strategies, since lower interest rates often lift stock valuations. We are positioning for this by buying S&P 500 call options that expire in the second quarter. This mirrors what we saw in late 2023, when early signs of a Fed pivot helped drive a strong market rally. A less aggressive Federal Reserve could also push the U.S. dollar lower. The Dollar Index (DXY) has already fallen 1.5% since the start of the month. We expect that trend to continue. That makes trades that benefit from a weaker dollar worth considering, such as call options on the euro or Japanese yen.

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The US Employment Cost Index (ECI) rose 0.7% in the fourth quarter. Forecasts were 0.8%. The result was 0.1 percentage points below the forecast. This points to slower growth in employment costs than expected for the quarter.

Weaker Wage Growth Signals Earlier Fed Pivot

The fourth-quarter ECI shows weaker wage growth, which we see as a meaningful dovish signal. It suggests that a key driver of inflation is slowing faster than expected. We interpret this as raising the odds of an earlier-than-expected policy pivot by the Federal Reserve. This ECI reading is not isolated. It supports the trend seen in the January CPI report, where core inflation kept moving down toward 3.1%. In response, market pricing has shifted. CME rate futures now imply more than a 70% chance of a rate cut by the June 2026 meeting—up notably from a few weeks ago. For traders in interest rate derivatives, this backdrop favors positioning for lower yields. We should consider long positions in SOFR futures and Treasury note futures to benefit from the repricing of the rate curve. Near term, the path of least resistance for yields now looks lower. In equities, the chance of lower rates is supportive, especially for growth and tech. We should consider buying call options or using bullish call spreads on indices such as the Nasdaq 100 and S&P 500. This data lowers the “higher for longer” risk that has weighed on equity valuations.

Positioning For Lower Volatility Regime

This outlook also suggests volatility could fall as the Fed’s path becomes clearer. The VIX, which recently moved down toward 13, may drop further if the disinflation story continues. We could consider strategies that benefit from lower volatility, such as selling premium via short straddles on less volatile names. A useful comparison is the market reaction in late 2025, when early signs of easing inflation triggered a strong rally in both bonds and stocks. That period showed how quickly markets can reprice when a more accommodative central bank comes into view. Today’s setup feels similar, which argues for acting before the consensus fully shifts. Create your live VT Markets account and start trading now.

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Australian consumer and business surveys weakened in recent releases. Westpac Consumer Sentiment fell for a third month in February, down 2.6% month on month after the Reserve Bank of Australia (RBA) rate rise. In the Westpac survey, 80% of respondents expected higher rates. One-third expected an increase of 100bps, and sentiment was near the lower end of the past year’s range.

Business Survey Signals Mixed Momentum

In the NAB Business Survey for January, business confidence rose to +3 from +2 in December. Business conditions eased to +7 from +9. Trading and profitability were weaker, and the employment index was unchanged. Forward orders improved to +2 from -1. Capacity utilisation slipped to 82.9%, still 1.5 points above the long-term average. Price pressures eased across several measures. Labour costs rose 1.3% versus 1.7% previously. Purchase costs rose 1.1% versus 1.3%. Final product prices rose 0.5% versus 0.8%. The business survey was conducted before the latest RBA rate rise. The original article said it was produced using an AI tool and reviewed by an editor.

Market Implications For Rates And Risk Assets

Australian consumer and business surveys are losing momentum. The Westpac consumer sentiment index has now fallen for three months in a row after the latest RBA rate hike. This suggests households are already feeling the impact of tighter policy. Since most consumers expect rates to rise further, this cautious mood may last. Even with weaker consumer sentiment, we do not expect the RBA to soften its hawkish stance soon. Q4 2025 inflation was still above the target band at 4.1%. That points to continued pressure on the RBA to keep policy tight. As a result, interest rate futures may be pricing too little risk of another hike by mid-year. Traders may want to consider strategies that benefit if short-term rates stay firm or move slightly higher. The business survey is mixed. Conditions and price pressures are easing, but capacity utilisation is still well above its long-run average at 82.9%. We saw a similar pattern in early 2025, when underlying economic strength stopped the RBA from pivoting even as sentiment softened. This suggests the economy is slowing, but not collapsing. That backdrop can create volatility, and may suit options strategies that look for a range-bound ASX 200 rather than a strong move up or down. For the Australian dollar, the push and pull between a hawkish central bank and a slowing economy can be a headwind. With other central banks, including the US Federal Reserve, also staying firm, the AUD may struggle to rise on rate differentials alone. Traders may want to use currency derivatives to hedge against AUD weakness, especially versus the US dollar, if global growth indicators continue to cool. Create your live VT Markets account and start trading now.

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EUR/USD traded near 1.1905 on Tuesday. It was little changed and stayed close to one-week highs after rising for two days. The US Dollar remained weak ahead of key US data releases, while overall market sentiment was mildly risk-on. Concerns about US employment continued after last week’s weak jobs report. White House adviser Kevin Hassett said job growth could slow in the coming months due to migration policies and higher productivity. Traders were also looking ahead to January Nonfarm Payrolls (NFP) on Wednesday.

Eurozone Inflation And ECB Rate Outlook

In Europe, ECB President Christine Lagarde said inflation is expected to settle around 2% over the medium term. Recent ECB guidance also pointed to stable interest rates in the months ahead. The Eurozone data calendar was light, so attention shifted to US releases, including Retail Sales and the ADP 4-week average. These reports could shape expectations ahead of Wednesday’s NFP. CME FedWatch pricing showed a 17% chance of a Fed cut in March and 34% in April, with June near 75%. Markets also priced odds above 70% for at least one additional cut before year-end. US Retail Sales were expected to rise 0.4% in December (after 0.6% in November). Sales excluding autos were forecast at 0.3% (after 0.5%). On the technical side, resistance was near 1.1925 and 1.1970. Support sat at 1.1895, 1.1834, and 1.1820. RSI was near 60, and MACD stayed positive.

Looking Back At The 2025 Rate Cut Narrative

In our analysis at this point in 2025, EUR/USD was moving toward 1.19. The main drivers were a weak dollar and growing expectations for Federal Reserve rate cuts. Markets were pricing about a 75% chance of a cut by June 2025, supported by signs of a softer US jobs market. That view helped set the stage for a strong euro rally. That forecast largely played out. January 2025 NFP came in below expectations, and the Fed cut rates twice by autumn. The widening policy gap helped push EUR/USD to a peak near 1.23 in Q3 2025. However, US inflation stayed higher than expected—above 3.5%—which led the Fed to pivot back toward tighter policy late last year. As of February 10, 2026, the picture has flipped. US inflation is at 3.1%, still above the Fed’s target, while Eurozone inflation has eased to 2.8%. The latest US jobs report (January 2026) showed a strong gain of 353,000 jobs, reducing near-term recession concerns. For derivatives traders, this suggests the bullish euro trend that started early last year has ended. With the Fed now more focused on fighting inflation than the ECB, options strategies may favor a stronger dollar. Traders could consider buying EUR/USD puts or selling call spreads to position for a move back toward the 1.0700 area seen in late 2025. The change from last year is clear. The CME FedWatch Tool now shows the chance of a Fed cut in March 2026 at under 20%. Combined with solid US economic performance, this points to a potential rise in implied volatility. Traders may want to position for EUR/USD to stay range-bound or drift lower in the weeks ahead. Create your live VT Markets account and start trading now.

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Gold traded slightly higher on Tuesday near $5,050. However, it stayed below resistance around $5,100. Losses were limited above $5,000 because a weaker US Dollar supported prices. The US Dollar Index fell for a third straight day. This followed weak job data last week and comments from White House adviser Kevin Hassett about slower job growth. Markets are watching December US Retail Sales on Tuesday, Nonfarm Payrolls on Wednesday, and CPI on Friday. On the 4-hour chart, the 100-period SMA is trending up and sits near $4,970. It is acting as support. MACD has cooled from recent highs, and RSI is 57. Price action is being viewed as the C-D leg of a possible Gartley pattern. The pattern points to a target near $5,340 and requires a move above the February 4 high around $5,100. A drop below $4,970 would shift focus to the February 6 low at $4,655. A break below $4,655 would invalidate the bullish setup. Central banks are the biggest holders of gold. They bought 1,136 tonnes worth about $70 billion in 2022. Gold often moves in the opposite direction of the US Dollar and US Treasuries, and it tends to rise when interest rates fall. Looking back to early 2025, gold was moving sideways between $5,000 and $5,100. The move was driven by a weak US Dollar and hopes of Fed easing. At the time, the technical setup suggested a bullish Gartley pattern that could push prices above $5,300. That view depended on the economic data due in that period. Today, on February 10, 2026, that upside target was partly reached later in 2025, but conditions have changed. Gold is now trading around $5,250, but the strong bullish confidence seen last year has faded because the US Dollar has strengthened again. A consistently weak dollar is no longer guaranteed. The US Dollar Index (DXY) has found support near 103.50 and is firming after the strong January Nonfarm Payrolls report showed 215,000 jobs added. This economic strength is pressuring precious metals. The market is behaving differently than it did at this time last year. Recent inflation data has also changed rate expectations for 2026. January CPI came in a bit hotter than expected at 3.1%. This makes the Federal Reserve less likely to signal near-term rate cuts. That is very different from the rate-cut speculation seen through much of 2025. For derivatives traders, this means buying outright call options may be too risky given these headwinds. Instead, bull call spreads may be a better fit. They reduce upfront cost and define risk. One approach could be to target the $5,350 strike for the long call. This structure can benefit from a moderate rise, while limiting both potential gains and losses. Another option is to watch volatility, which has been rising. The CBOE Gold Volatility Index (GVZ) is near 18.5, up from around 15 late last year. Traders could use put options with a strike below the $5,150 support area to hedge long positions if prices drop. It is also important to remember the strong physical demand that supports gold on pullbacks. The World Gold Council reported that central banks kept buying, adding another 1,050 tonnes to reserves through the end of 2025. This long-term demand can help put a floor under prices.

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Rabobank’s Michael Every says Europe is settling into a roughly 1.5% growth track. He also points to rising political division and a weak economic model. He argues that German deindustrialisation is being partly offset by rearmament, while broader EU reforms remain hard to deliver. In Germany, Bosch plans to cut 20,000 jobs as deindustrialisation continues. Rearmament is helping GDP, but the outlook depends on whether other industries rebound—and whether Europe can actually produce the weapons it expects to use.

European Policy Reform Gridlock

Reports cited say the EU is not delivering key economic fixes as the single market weakens. They also note calls for European payment alternatives to Visa and Mastercard, debate over “Made in Europe,” and pushback against plans to weaken the carbon border tax. The text also highlights that the US is handing two key NATO command posts to Europeans. It adds that French domestic politics are tense, linked to the Bank of France governor’s planned departure. Europe is weighing more Eurobonds to support Euro stablecoins and a plan to challenge the dollar’s global role. It notes how hard it is to change third-country systems built around the dollar, and says the Commission wants to map barriers to wider Euro use while respecting national monetary choices. Europe is still stuck in a slow-growth pattern and is struggling to move much beyond the 1.5% path that became clear in 2025. New Eurostat figures show Q4 2025 growth at a weak 0.2%, reinforcing the view that the bloc’s economy is losing momentum. This ongoing softness suggests any major upside for the Euro is limited, which can make strategies like selling out-of-the-money EUR/USD call options appealing.

Market Volatility And Hedging

Germany’s economic model is clearly shifting. The deindustrialisation that accelerated last year is now showing up in the data. Defense spending is supporting GDP, but German factory orders fell 1.2% in January, led by weakness in autos and chemicals. Traders may try to capture this split by using options to go long aerospace and defense stocks while considering puts on indices with heavy exposure to German manufacturing. Political fragmentation is still blocking a clear European “grand strategy,” a pattern that has continued since the 2025 debates on carbon taxes and payment systems. The EU’s push to promote the Euro is making limited progress, with EUR/USD struggling to hold gains above 1.07. This lack of unity creates steady pressure on the currency, suggesting the current range is more likely to break down than break higher. With high uncertainty and low growth, volatility is critical to watch. The VSTOXX index (Euro Stoxx 50 volatility) has edged up from its 2025 lows and is now around 18.5. Buying protective puts on major European indices like the DAX or Euro Stoxx 50 may be a sensible hedge against a sudden drop triggered by political or economic headlines. The mass layoffs announced by major industrial firms in 2025 were a clear warning for manufacturing. That trend has continued, with the latest Eurozone manufacturing PMI at a contractionary 47.1. This supports pair trades that short industrial-sector ETFs while taking long positions in less cyclical areas—or in sectors supported by government spending, such as defense. Political infighting inside EU institutions, including around the Bank of France, makes the European Central Bank’s job harder. With Eurozone inflation down to 2.1%, the ECB has little reason to sound hawkish. That limits policy support for the Euro and strengthens the case for bearish currency-derivative positions in the weeks ahead. Create your live VT Markets account and start trading now.

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