Deutsche Bank says improved risk appetite and less dovish rate expectations are supporting the US Dollar Index
Risk appetite rose across several asset classes. At the same time, expectations for rate cuts became less dovish, which helped support the US Dollar Index. Markets reduced the amount of Fed easing they had priced in as confidence in the near-term outlook improved and fears of widespread unemployment eased.
For the first time this year, the probability of a Federal Reserve rate cut by the June meeting dropped below 50%, ending at 48%. This followed core PCE coming in at 3.0%, which increased doubts about an early cut.
Turkey’s trade deficit narrowed to $8.38B from $9.3B in January, reflecting improved external balances
Turkey’s trade balance improved in January. The deficit narrowed to -8.38B from -9.3B in the previous period.
This means exports and imports moved closer together. The trade balance was still negative, but the gap got smaller.
A smaller trade deficit is a positive sign for the Turkish Lira. It suggests policies meant to rebalance the economy may be starting to work. Derivatives traders can treat this as added support for trades that expect the Lira to stay stable or strengthen in the near term.
This result adds to the better momentum seen in Q4 2025. Inflation fell to 38% in December, and the Central Bank kept rates steady at 50%. Together, these points improve the macro outlook. Under these conditions, selling USD/TRY futures or buying Lira call options looks more supported by fundamentals for the weeks ahead.
This also fits with the major policy shift that started in mid-2023 and continued through 2024. The current stability reflects that long period of tighter monetary policy. January’s trade numbers are among the first key data points of 2026 showing that this difficult approach is producing the intended results.
For equity derivatives traders, this backdrop is supportive for the BIST 100. A more stable currency lowers uncertainty and can attract foreign capital. Net portfolio inflows topped $12B in the second half of 2025. Given this, it may make sense to hold or add to long positions in BIST 100 futures.
A steadier market should also reduce the sharp currency swings seen in recent years. The Lira’s VIX-like volatility measure has dropped from above 40% in 2024 to just under 25% this month. This makes volatility-selling options strategies more realistic, including short strangles on EUR/TRY.
Turkey’s economic confidence index rose to 100.7 from 99.4 in January, indicating improved sentiment
Turkey’s Economic Confidence Index rose to 100.7 in January, up from 99.4 the previous month. This is a move above the key 100-point level.
The index combines sentiment data from across the economy. It helps track how confidence changes over time.
Economic Confidence Shifts Above Threshold
The Economic Confidence Index has moved above 100, a sign of optimism not seen since early 2025. This change suggests sentiment is shifting from negative to positive. For Turkish assets, that is generally a bullish signal. For derivatives traders, it may point to improving momentum over the next few weeks. This stronger mood adds to the solid performance of the BIST 100 index in the final quarter of 2025. One way to gain from a continued rise is to consider call options on the index with March and April 2026 expirations. Another approach is to sell out-of-the-money put options to earn premium, based on the view that higher confidence may help support prices. The Turkish lira has also been more stable, staying below 30.00 per US dollar through February 2026. Inflation data released in January showed a slow decline, with annual inflation at 45%. That improves the fundamental backdrop for the currency. In this setting, derivatives positions that benefit from lira strength—or from lower USD/TRY volatility—may be worth considering. The Central Bank has also kept its policy rate at 40% in its last two meetings, which signals a focus on stability. Along with rising confidence, this could push implied volatility lower. If the market keeps strengthening without large swings, strategies such as selling straddles may perform well compared with the sharper moves seen for much of last year.Volatility Strategies For A Stable Market
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USD/CAD edged lower to around 1.3670 in early European trading on Thursday. This kept the Canadian Dollar supported, with the pair holding above 1.3650. The move followed a softer US Dollar, as markets weighed uncertainty around US economic policy and possible tariff hikes.
US Trade Representative Jamieson Greer said on Wednesday that President Donald Trump plans to raise tariff rates to 15% or higher for many countries in the coming days. This authority lasts for 150 days unless Congress extends it.
Key Market Drivers
Oil prices can influence the Canadian Dollar because Canada is a major oil exporter, and higher crude prices often support CAD. Markets are also watching US-Iran nuclear talks. Officials are due to meet in Geneva on Thursday for a third round of indirect discussions. Canada’s GDP and the US Producer Price Index (PPI) are due on Friday. For US PPI, forecasts are 0.3% month-on-month in January versus 0.5% in December, and 2.6% year-on-year versus 3.0% previously. Key CAD drivers include Bank of Canada interest rates, oil prices, inflation, the trade balance, broader economic data, overall market risk appetite, and US economic conditions. The Bank of Canada’s inflation target aims to keep inflation within a 1–3% range. In early 2025, the US dollar weakened as markets worried about potential trade tariffs. This helped support the Canadian dollar and kept USD/CAD below 1.3700. As tariff concerns faded, attention shifted quickly to stubborn inflation data on both sides of the border.Options Strategy Outlook
The hotter-than-expected US PPI data in January 2025 set the tone for much of that year. It pushed the Federal Reserve to delay planned rate cuts. Canada has faced its own inflation pressures. Statistics Canada data for January 2026 showed annual inflation holding at 2.8%. That persistence makes it harder for the Bank of Canada to move too far away from the Fed’s policy path. Geopolitical risks first highlighted in 2025 have continued to support crude oil, a key Canadian export. With WTI near $85 a barrel and tensions still elevated in the Middle East, the commodity-linked loonie has found a firmer base. This has also limited major upside in USD/CAD over the past year. With these forces pulling in both directions and both central banks staying cautious, implied volatility in USD/CAD options may be underpriced. Buying straddles or strangles could be effective in the coming weeks. These strategies can benefit from a large move in either direction, which could come from the next major inflation report or a sudden shift in oil prices. Alternatively, if you expect the Canadian dollar to stay firm, selling USD/CAD call options with strike prices above 1.3800 can generate premium. This approach reflects the view that high oil prices and a relatively hawkish Bank of Canada could limit the chances of a sustained upside breakout. It is a calculated bet on the range-bound trading seen recently. Create your live VT Markets account and start trading now.Sterling stays firm despite BoE cut expectations, with GBP/USD near 1.3560 as US policy uncertainty weakens the dollar
GBP/USD rose for a fifth day in a row, trading near 1.3560 in early European hours on Thursday. The pair stayed firm as the US Dollar weakened, with markets unsettled by uncertainty over White House economic policy.
In his State of the Union address on Tuesday, US President Donald Trump said the US economy is rebounding. He defended tariffs as helping growth and criticised the Supreme Court for striking down part of his tariff policy.
BoE Rate Cut Expectations
Further gains in GBP/USD may be capped by expectations that the Bank of England will take a more dovish path. Markets are leaning toward an interest rate cut in March, driven by a softer UK labour market and easing inflation. MPC member Alan Taylor said two to three near-term rate cuts could be needed, pointing to risks to employment and easing price pressures. UK CPI inflation fell to 3.0% in January from 3.4% in December. That was the lowest level since mid-2025 and a larger drop than expected. BoE Governor Andrew Bailey told Parliament’s Treasury Committee that a March cut is “a genuinely open question”. He noted services inflation was 4.4% in January versus the BoE projection of 4.1%. Meanwhile, Chief Economist Huw Pill warned against being “beguiled” by headline inflation moving closer to the 2% target. GBP/USD is holding up for now, mainly because uncertainty around US economic policy is weighing on the dollar. That dollar weakness is giving the pound short-term support and keeping the pair near 1.3560. However, the setup looks fragile and may create a clear trading opportunity.Historical Sterling Reaction
The key issue is the strong expectation that the Bank of England will cut rates in March. The January inflation drop to 3.0%, which was sharper than forecast, reinforces this view. Market pricing from Overnight Index Swaps now points to a more than 70% chance of a 25-basis-point cut next month. History also matters. In past easing cycles, such as 2020, Sterling often came under pressure after the first rate cut. That differs from much of 2025, when the pound was relatively steady as policy stayed on hold. This pattern suggests Sterling may have more downside once a cut is confirmed. On the other side, the US dollar’s weakness is being driven by politics and headlines, including Trump’s tariff comments in the State of the Union address. While that uncertainty is supporting GBP/USD for now, US data has remained firm. For example, job reports from early February 2026 still showed a tight labour market, which makes the case for a weaker dollar less clear-cut. Given this backdrop, traders may want to prepare for a fall in GBP/USD ahead of the March central bank meeting. One approach is to buy GBP/USD put options, which can benefit from a decline while limiting losses if dollar weakness unexpectedly deepens. Recent Commodity Futures Trading Commission (CFTC) data also shows large speculators have increased net short positions in Sterling in recent weeks. Create your live VT Markets account and start trading now.In early European trade, GBP/JPY slips to 211.30 as Ueda signals possible BoJ rate hikes soon
GBP/JPY slipped 0.3% to around 211.30 in early European trading on Thursday, after rising in the previous two sessions. The drop followed comments from Bank of Japan (BoJ) Governor Kazuo Ueda, which kept the door open for more rate hikes.
Ueda told the Yomiuri newspaper on Tuesday that the BoJ will review data at its March and April meetings before deciding whether to raise rates this year. He said the bank will keep lifting rates if its economic and inflation outlook is increasingly likely to be met.
BoJ Signals And Policy Uncertainty
A Mainichi report on Tuesday said Japan’s Prime Minister, Sanae Takaichi, does not support further BoJ rate hikes. The report cited a meeting between Takaichi and Ueda on 16 February. New nominations to the BoJ’s nine-member board—Toichiro Asada and Ayano Sato—have also increased uncertainty about the bank’s future policy direction. Sterling was mostly steady. Even so, traders still expect a Bank of England rate cut at the March meeting, following weaker UK jobs data and easing inflation. MPC member Alan Taylor said earlier this week that two to three rate cuts may be needed soon. The BoJ targets inflation at about 2%. It launched quantitative and qualitative easing (QQE) in 2013, added negative rates and yield-curve control in 2016, and raised rates in March 2024 after inflation moved above target. With GBP/JPY now trading near 225.00, there are similarities to what happened in 2025. At that time, the pair briefly fell toward 211.00 after similar talk of BoJ tightening. This suggests that BoJ “verbal intervention” often causes short-lived dips that many traders treat as buying opportunities. Ueda’s early-2025 hints about rate hikes led to only two small increases across the whole year, as political pressure limited more aggressive moves. With Japan’s latest core inflation for January 2026 coming in at a softer 1.8%, we expect the BoJ to remain cautious in the near term. That implies any Yen strength driven by these headlines may not last long.Pound Yen Outlook And Options Positioning
On the other side of the pair, the Bank of England did go ahead with the rate cuts discussed in early 2025, cutting its main rate three times during that year. However, with UK inflation proving sticky—holding at 2.5% in the latest reading—the market is no longer pricing in more cuts in the first half of 2026. This policy gap supports a stronger fundamental outlook for the Pound versus the Yen. Over the next few weeks, this points to continued upward momentum in GBP/JPY. Long call options could be a practical way to gain from potential upside. Given the history of sharp but temporary pullbacks after BoJ comments, selling out-of-the-money puts may also be a way to earn premium. This strategy fits the view that the main trend remains higher, even if short-term volatility increases. Create your live VT Markets account and start trading now.EUR/GBP trades near 0.8715 as UK political uncertainty weighs on sterling; markets await Lagarde’s ECB speech
EUR/GBP rose to around 0.8715 in early European trade on Thursday, moving above 0.8700. The pair climbed as UK political risk pressured the Pound. Markets were also focused on a speech from ECB President Christine Lagarde later in the day.
Manchester’s Gorton and Denton constituency is holding a by-election on Thursday to fill a vacant seat. Investors are watching the vote as a key test for Prime Minister Keir Starmer, following reports of internal party tensions and low approval ratings.
Eurozone Inflation And ECB Focus
In the Eurozone, inflation slowed to 1.7% year on year in January, the lowest in 16 months. Traders are also waiting for Germany’s preliminary CPI on Friday, which could shift expectations for ECB policy. The Pound Sterling dates back to 886 AD and is the UK’s official currency, issued by the Bank of England. It is the fourth most traded currency and accounts for about 12% of global FX turnover, or roughly $630 billion a day (2022 data). Major Sterling pairs include GBP/USD (11% of FX turnover), GBP/JPY (3%), and EUR/GBP (2%). Sterling is driven by Bank of England policy, which targets inflation near 2%, and by data such as GDP, PMIs, employment figures, and the trade balance. At this time in 2025, EUR/GBP was pushing above 0.8700, mainly due to political uncertainty around the UK government. The Manchester special election was viewed as a major test for the Prime Minister, adding pressure to the Pound. Concerns about domestic stability were a key headwind for the currency.Shift In The 2026 Policy Divergence
Fast forward to today, February 26, 2026, and the picture has changed. The pair is now trading closer to 0.8650. UK inflation, reported last week for January, remains sticky at 2.5%. This keeps pressure on the Bank of England to hold its 5.25% bank rate. That is different from a year ago, when Eurozone inflation was falling quickly. In the Eurozone, inflation has steadied. The latest Harmonised Index of Consumer Prices (HICP) for the euro area is 1.9%. With inflation near the ECB’s target, markets see a higher chance the ECB cuts rates before the Bank of England does. This expected policy gap is now the main driver of the pair. For derivatives traders in the weeks ahead, this points to a volatility trade. With both central banks staying data-dependent, buying option straddles ahead of the March policy meetings may be a practical way to capture a sharp move. A straddle benefits if price moves strongly in either direction, which could happen if one bank signals a clearer path than the other. The next data releases will matter. Traders will focus on preliminary February inflation prints and the UK’s annual budget statement. Any surprise in UK wage growth or German economic sentiment could break the current tight range. One-month option implied volatility has risen from 5.2% to 5.8% over the past week, suggesting the market is preparing for a larger move. Create your live VT Markets account and start trading now.Data compiled by FXStreet shows gold prices in Pakistan rose today
Gold prices in Pakistan rose on Thursday, according to FXStreet data. Gold was priced at PKR 46,482.28 per gram, up from PKR 46,100.03 on Wednesday.
Per tola, gold climbed to PKR 542,159.10 from PKR 537,701.70 the day before. Other listed rates were PKR 464,821.90 for 10 grams and PKR 1,445,762.00 per troy ounce.
Gold Pricing Method
FXStreet estimates local gold prices by converting global prices using the USD/PKR exchange rate and local units of measure. The numbers are updated daily using market rates at the time of publication. Local prices may vary slightly. Gold is used as a store of value and for jewellery. Many investors also use it to diversify during market stress. It can also help protect against inflation and weaker currencies. Central banks hold large gold reserves. In 2022, they added 1,136 tonnes, worth about $70 billion, according to the World Gold Council. This was the biggest annual increase since records began. Gold often moves in the opposite direction to the US Dollar and US Treasuries. It can also move differently from risk assets. Prices may react to geopolitics, recession worries, and interest rates, since gold does not pay interest.Market Outlook
Based on today’s date, gold’s key drivers suggest ongoing volatility, with room for gains in the weeks ahead. Recent changes in Federal Reserve messaging have raised the odds of future rate cuts after US Q4 2025 GDP growth came in at a modest 1.8%. This adds uncertainty. In such conditions, traders may look at strategies that can benefit from large moves, such as buying straddles on major gold ETFs. Gold’s role as a hedge against weaker currencies remains important, especially in emerging markets. In 2025, countries such as Pakistan dealt with inflation averaging above 20%. That helped boost local demand for gold as a store of value. This support can strengthen the bullish case and makes long-dated call options one way to position for the trend. Institutional demand also gives gold a strong base. Central banks kept buying through 2025, adding more than 950 tonnes to global reserves, the second-highest yearly total on record. This steady buying, driven by efforts to diversify away from the dollar, suggests pullbacks may not last long. For income-focused traders, selling cash-secured puts on gold miners or related ETFs is one possible strategy. Geopolitical risk is another factor that can support prices. Ongoing trade tensions and regional conflicts can keep investors cautious, which helps gold’s safe-haven appeal. Traders may use out-of-the-money call options as a lower-cost way to hedge against a sudden rise in global tensions. Gold’s inverse link to the US Dollar also matters. As markets price in a more dovish Fed later this year, the Dollar Index (DXY) has already dropped 3% from its late-2025 highs, which supports gold. If the dollar keeps weakening, traders may build bullish exposure through futures or by using bull call spreads to cap risk. Create your live VT Markets account and start trading now.Safe-haven demand strengthens the Swiss franc amid trade tensions, keeping USD/CHF near 0.7720 for five days
USD/CHF fell for a fifth straight day and traded near 0.7720 during Asian hours on Thursday. The Swiss Franc rose on safe-haven demand as trade tensions picked up again.
Donald Trump moved ahead with new 10% tariffs on trading partners, even after the US Supreme Court blocked part of his proposed duties. In his State of the Union address, he said the US economy is recovering, argued that tariffs support growth, and criticised the Court’s decision.
The Swiss Franc also got support as markets scaled back expectations for near-term Swiss National Bank rate cuts. Swiss inflation was unchanged at 0.1% in January. That is within the SNB’s 0–2% target range and matches its first-quarter outlook.
The Swiss ZEW Expectations Index rose to 9.8 in February from -4.7 in January. This was its second-highest level since January last year. It also supports expectations that the SNB policy rate will stay at 0% through 2026.
Markets are watching Switzerland’s Q4 employment data due later on Thursday, and Q4 GDP on Friday. In the US, weekly initial jobless claims are due during the North American session.
We still see the Swiss Franc holding firm as trade talks between the US and the European Union keep markets on edge. This is similar to the safe-haven buying seen during the tariff disputes in early 2025. USD/CHF is now near 0.8850, well above last year’s lows, but selling pressure is starting to build again.
The Swiss National Bank is giving little reason to expect a shift away from its tight policy stance, which supports the franc. Swiss inflation for January 2026 came in at 1.2%. That is still within the SNB’s target range and well above the 0.1% seen at the start of last year. With the SNB’s next meeting in March, markets expect the policy rate to stay at 1.75%.
On the US side, recent data points to slower momentum, which could weigh on the dollar. The latest Non-Farm Payrolls report showed job growth of 185,000, below forecasts, and January inflation eased to 2.9%. This gap—steady conditions in Switzerland and a softer US outlook—supports the case for a lower USD/CHF.
In the weeks ahead, we think traders should look at strategies that limit exposure to a move higher in the pair. One option is to buy USD put options with a strike below the 0.8800 support level. This offers a defined-risk way to position for a potential drop. It lets traders benefit if the pair falls, while limiting the maximum loss to the premium paid.
We also remember the steep fall during the 2025 trade tensions, when the pair dropped below 0.8000. Today’s tensions are different, but the pattern is familiar: in uncertain times, investors often move into the Swiss Franc. Past volatility in these periods suggests that even small changes in geopolitical sentiment can trigger big moves in this pair.
EUR/USD rises for a second session but faces resistance near 1.1830 at the H4 100-SMA during Asia
EUR/USD rose for a second day and traded near 1.1830 in Thursday’s Asian session. The US dollar stayed weak as traders worried about the economic impact of US President Donald Trump’s trade policies.
The RSI is 56. This points to improving upside momentum, but it is not yet overbought. Earlier, the RSI was below 30. The MACD line is slightly above the signal line and just in positive territory, with a small positive histogram.
