Barbara Lambrecht of Commerzbank: Copper faces immediate challenges but has long-term demand potential
Copper prices are currently feeling short-term pressure from rising exchange inventories and overall market volatility. However, demand in the long run is still expected to be strong.
In January, China’s energy companies, which are major consumers of copper, increased their spending on grid expansion by 35% compared to the previous year. This indicates that grid expansion is on track.
The China Nonferrous Metals Industry Association forecasts a 5% growth in copper production this year, down from 10% last year. They have also called for the government to increase its copper reserves.
Right now, copper is facing challenges mainly due to rising exchange inventories and market fluctuations. LME copper stocks have increased by over 15% since the start of the year, reaching 125,000 tonnes. This rise is negatively impacting front-month contracts. Therefore, strategies like buying puts or setting up bearish spreads for March or April delivery could help hedge against potential price drops in the near term.
Despite these challenges, strong demand, especially from China, remains a key support factor. The 35% increase in grid expansion investment for January is a promising sign that the country is actively working towards its energy transition goals. This structural demand, which requires a lot of copper, provides a solid foundation for prices in the longer term.
In the past, we noticed a slowdown in Chinese refined copper output growth, and this trend is likely to continue through 2025. Additionally, ongoing labor negotiations in major South American mines could limit global supply, strengthening the market outlook later this year. The push for China to boost its strategic reserves would also tighten the market by removing physical copper from circulation.
Given these developments, a calendar spread might be a smart choice for derivative traders in the coming weeks. This strategy could involve selling near-term futures contracts while buying contracts for late 2026, allowing traders to take advantage of the anticipated price increase later this year. This approach enables them to build a long-term position while managing immediate challenges.
Lee Hardman of MUFG observes the Pound’s decline attributed to political factors and a dovish Bank of England.
The Pound has seen a significant drop, with the EUR/GBP rising above its 200-day moving average. This decline is mainly due to expectations of a more cautious approach from the Bank of England and uncertainties in UK politics, especially regarding Prime Minister Keir Starmer and possible leadership challenges.
Pound Trend Reversal
Recently, the Pound changed course after trading below its 200-day moving average for the first time since April of last year, hitting a low of 0.8613. Following this, EUR/GBP climbed to 0.8721. The market is now predicting that the Bank of England will cut rates further, with two cuts expected this year and a chance of a third. Ongoing political risks are adding pressure to the Pound. The FXStreet Insights Team, comprising journalists and analysts, has shared their views on the market dynamics affecting these currency movements. Their insights help clarify the economic and political developments tied to the Pound. The Pound has weakened significantly as the market expects a more cautious stance from the Bank of England. The EUR/GBP exchange rate has risen above its 200-day moving average, indicating potential further weakness for the Pound. This change is driven by altered interest rate expectations and renewed political uncertainty surrounding the government. To strengthen this outlook, recent data revealed that the UK’s January 2026 CPI unexpectedly dropped to 1.9%, just below the Bank’s 2% target, allowing for quicker rate cuts. Additionally, a YouGov poll from late January 2026 indicated government approval ratings declining to a six-month low, raising worries about political stability. Together, these factors suggest a weaker Pound in the near future.Strategy for Traders
In light of this situation, traders should think about buying put options on GBP/USD to benefit from a further decline. Alternatively, purchasing call options on EUR/GBP would directly capitalize on the technical breakout and underlying weakness of the Pound. These strategies offer a clear way to take a bearish stance on sterling with defined risks. The current mix of political tension and monetary policy changes is a classic setup for increased currency volatility. Looking back to the market turmoil in autumn 2022, it’s clear how quickly UK political events can dramatically affect the GBP. We can expect implied volatility on sterling options to rise in the coming weeks. Traders who anticipate significant price swings but are unsure of the direction may consider buying volatility through strategies such as straddles – this involves buying both a call and a put option at the same exercise price, profiting from substantial moves in either direction. For those already holding UK assets, this is a crucial moment to hedge currency risk by acquiring protective GBP puts. Create your live VT Markets account and start trading now.Pound Sterling rebounds against US Dollar as expectations rise for dovish Fed policies
The Pound Sterling (GBP) has bounced back against the US Dollar after a sharp drop, which was triggered by the Bank of England hinting at a possible interest rate cut. In their recent announcement, the Bank of England decided to keep interest rates steady at 3.75%. This came with a 5-4 vote, which was tighter than expected since many had anticipated a 7-2 vote in favor of holding the rates.
Despite previous doubts, GBP/USD has managed to partially recover its losses. The decision by the Bank of England to maintain the current interest rate is tied to lower inflation forecasts and updated monetary guidance. Analysts believe GBP/USD could approach its 200-day moving average as market expectations shift. The financial situation is evolving in response to these developments.
Policy Divergence
The Bank of England is signaling potential rate cuts more clearly than expected, putting downward pressure on the Pound. The close 5-4 vote to maintain rates suggests an internal shift toward easing policy. This creates a bearish outlook for Sterling in the near future. We should keep an eye on the competition between the UK and the US when it comes to rate cuts. While the markets expect the US Federal Reserve to adopt a softer stance, the Bank of England has given clearer signals about its direction. This difference in policy is likely the main factor affecting the GBP/USD exchange rate. Our perspective is supported by recent economic data. UK inflation remained stubbornly high at 2.9% as of January 2026. However, unemployment rose to 4.3% in the last quarter of 2025, suggesting a slowing economy. This gives the Bank of England strong reasons to focus on growth rather than just controlling the last bits of inflation.Market Strategy Considerations
In contrast, the US economy is showing strength, as the latest jobs report for January added a hefty 280,000 new jobs. While core inflation has eased to 2.6%, this strong labor market may lead the Fed to be more patient than the Bank of England. This situation strengthens the likelihood of the Pound weakening against the Dollar in the coming weeks. Given this outlook, we should consider strategies that benefit from a drop in the GBP/USD pair. One option is buying put options, which allows us to bet on this decrease while knowing our maximum potential loss. The rising uncertainty may also lead to increased implied volatility, making options an appealing choice. For a more immediate position, we can explore shorting GBP futures contracts, aiming for a test of the 200-day moving average. Alternatively, a bear put spread could be a more cautious approach, allowing us to profit from a moderate decline in the Pound’s value while keeping initial costs lower than a full put option. Create your live VT Markets account and start trading now.Huw Pill warns against being overly optimistic about the upcoming inflation dip during talks with businesses.
The Governor of the Bank of England, Huw Pill, cautioned against becoming too relaxed about the expected drop in inflation in April. He suggested that people should not read too much into changes in growth projections, even as the labor market appears more relaxed than expected.
Recent pay intention data indicates that disinflation is still in progress, but it’s not fully accomplished. Additionally, the data on pay and pricing plans raises some concerns.
British Pound Performance
The British Pound had mixed results against major currencies, performing best against the Japanese Yen. When compared to the US Dollar, the Pound saw a slight rise of 0.02%. The heat map below shows how different currencies are changing relative to each other, with the base currency on the left and the quote currency at the top. For example, GBP against USD had a 0.02% change. We shouldn’t anticipate early interest rate cuts, even with a possible drop in inflation in April. The Bank of England warns about becoming too comfortable with disinflation. This suggests that the base rate will likely remain high for some time. This caution is justified when we look at the numbers. UK wage growth was still strong at 4.5% at the end of 2025, and January’s CPI reading of 3.1% is well above the 2% target. These figures indicate that the disinflation process is ongoing.Pound’s Strength and Market Implications
Today’s strength of the Pound, particularly with a 0.40% gain against the dollar, reflects this outlook. Traders expect the UK to keep interest rates steady while other central banks might lower theirs sooner. This difference in interest rates makes holding the Pound more appealing. For those trading derivatives, we should prepare for volatility around upcoming inflation and jobs data. The market has already pushed back its forecast for the first rate cut from June to September, indicating its sensitivity to new information. Buying straddles on GBP pairs before key data releases could be a good strategy for capitalizing on potential price movements. We recall how persistent services inflation was throughout most of 2025, which explains the Bank’s current cautious strategy. In the coming weeks, it seems wise to hold onto the Pound against currencies from central banks that are more likely to ease, like the Japanese Yen. The recent 0.43% movement in GBP/JPY could signal the start of a continuing trend. Create your live VT Markets account and start trading now.Canada’s employment change in January was lower than expected, decreasing by 24.8K instead of the anticipated 7K.
Canada saw a net job loss of 24.8K in January, much lower than the expected gain of 7K. This decline could impact the labour market and the economic outlook for the country.
Analyzing economic indicators and labour market changes can help us understand how this job loss affects market trends.
Weakening Canadian Economy
This unexpected job loss signals that the Canadian economy may be weakening. Losing 24.8K jobs, when modest growth was anticipated, raises the likelihood that the Bank of Canada will need to lower interest rates soon. We now see an increased chance of a policy shift from the central bank in the coming months. In light of this, we should consider positioning for lower interest rates in Canada using derivatives. This might include buying Bankers’ Acceptance futures (BAX), which would gain value if the Bank of Canada cuts its overnight rate. Overnight index swaps already show almost a 50% chance of a rate cut by April, up from 20% last week. A more dovish central bank will likely weaken the Canadian dollar, especially against the US dollar. The USD/CAD exchange rate is nearing 1.37, and we expect this trend to continue as US economic data remains strong. We should look into buying call options on USD/CAD to benefit from a further increase.Impact on Canadian Stock Market
This poor employment outlook also negatively affects the Canadian stock market. In 2025, we saw how worries about slowing growth pressured the TSX Composite Index after past rate hikes. It might be wise now to hedge long positions by buying put options on broad market ETFs. This jobs report comes amid other softening data, including inflation dropping to 2.5% in December 2025 and a mere 0.5% growth in Q4 GDP. These trends support our belief that interest rates will likely move lower. We will be on the lookout for the next CPI release to confirm this direction. Create your live VT Markets account and start trading now.Canada’s unemployment rate is 6.5%, falling short of the expected 6.8%
In January 2026, Canada’s unemployment rate was 6.5%, which is better than the expected 6.8%. This indicates an improvement in the job market, showing that fewer Canadians are unemployed. It also reflects positively on the health of the Canadian economy.
Market Sentiment and Dynamics
This data can influence economic feelings and market behavior. Recent financial updates include comments from FED officials and insights from the Reserve Bank of India. Additionally, we see that silver prices are rising due to increased demand, while stock performances are varying. Editor’s picks highlight currency changes, with EUR/USD reaching two-day highs and GBP/USD going over 1.3600. The price of gold is increasing, and cryptocurrencies like Bitcoin, Ethereum, and XRP are bouncing back. There’s also analysis on how the Japanese Yen might perform ahead of an election and XRP’s rise, supported by ETF investments. A guide for the best brokers in 2026 shares information on top brokers, affordable trading options, and particular strategies for currency and commodity trading. It stresses the need for investor caution since market conditions can change quickly. Personal research is advised before making any financial commitments. FXStreet offers financial insights but notes that the accuracy of the information may vary. The unexpected drop in Canada’s unemployment rate to 6.5% sends a strong message to the market. A stronger job market might cause the Bank of Canada to postpone any planned interest rate cuts. We believe this will help strengthen the Canadian dollar in the coming weeks.Derivative Trading Strategies
This trend isn’t isolated. We experienced similar resilience in 2024 when GDP growth exceeded expectations, even with inflation remaining high at over 3%. Back then, the Bank of Canada kept its policy rate at 5% for more than a year, showing its willingness to maintain strict policies. The latest job report – with wage growth rising to 4.8% last month – suggests this patience may continue. For derivative traders, this trend points to strategies that could benefit from a stronger Canadian dollar, especially compared to the US dollar. Buying call options on the CAD or selling USD/CAD futures set to expire in late March or April could be a smart move. This trade plays directly into the growing difference in policy between the data-driven Bank of Canada and a Federal Reserve that still indicates potential easing. Furthermore, the stability in energy markets supports this outlook. West Texas Intermediate crude has remained above $85 per barrel for the last quarter, which strengthens a key pillar of the Canadian economy. This eliminates a major barrier that has previously affected the currency. While the Canadian situation is promising, the broader market’s focus on interest rate cuts is boosting assets like gold and silver. This creates mixed feelings in the market. Therefore, it may be wise to utilize defined-risk option strategies, like bull call spreads on the CAD, to take advantage of potential gains while limiting losses. The recent decline in Amazon’s stock and the uncertainty around the Japanese yen’s election underscore the market’s fragility. These factors might lead to short-term shifts towards the safety of the US dollar, providing better chances to go long on CAD positions. We will keep an eye out for any declines in CAD to enhance our strategy. Create your live VT Markets account and start trading now.BBH: USD slightly declines against commodity-linked currencies as AI investments boost commodities
Brown Brothers Harriman (BBH) has reported that the USD has weakened, especially against commodity-linked currencies. A rise in AI capital expenditures is expected to boost demand for commodities, particularly precious and industrial metals.
Major companies like Amazon, Google, Microsoft, and Meta plan to invest about $660 billion in 2026 for new data centers and equipment. This investment represents 2.1% of US GDP, showing a 60% increase from 2025 and a 165% increase from 2024.
AI Drives Demand for Commodities
The growing investment in AI is likely to support commodities such as silver, gold, platinum, palladium, and copper. These materials are crucial for making advanced chips, wiring, and energy systems needed for new servers and power setups. Commodity-linked currencies like the AUD, CLP, ZAR, BRL, MXN, and PEN are expected to do well. This was noted by the FXStreet Insights Team, which includes journalists and market analysts. The anticipated boost in AI-related spending is already becoming evident in early 2026 corporate reports, which support the commodity sector. For example, Microsoft’s recent earnings call confirmed its ambitious plans for data center expansion, aligning with the expected demand for industrial metals. This fundamental support could pressure the US dollar against certain currencies in the weeks ahead. This trend is visible in the futures market, where copper prices on the COMEX have risen over 6% this year and recently surpassed the significant $4.40 per pound resistance level. Derivative traders might consider taking long positions in copper and silver futures to capitalize on this trend. Utilizing bull call spreads on these commodities could also be a smart strategy to gain potential upside while managing risk.Strength of Commodity-Linked Currencies
This trend is affecting commodity-linked currencies, with the Australian dollar now trading above 0.6900 against the US dollar for the first time since mid-2025. Buying AUD/USD call options or selling USD/MXN put credit spreads are good ways to take a bullish stance on these currencies. These strategies benefit from both rising commodity prices and a weaker US dollar. Looking back at late 2025, we noticed early signs of this shift as industrial metals started to rise steadily. This price movement indicated that the market was adjusting to the significant spending forecasts for 2026. The rally we’ve observed since January is simply a continuation of this established trend. We can also expect the Brazilian real and the South African rand to perform well, as demand for their main exports increases. The surge in precious metals like gold and silver is noteworthy, fueled not just by investment demand but also by their essential roles in high-performance servers and electronics. This creates several related trading opportunities tied to the ongoing boom in AI infrastructure. Create your live VT Markets account and start trading now.LDP likely to achieve landslide victory, ensuring political stability; investors should exercise caution
TD Securities forecasts a big win for the LDP in Japan’s upcoming Lower House election, which is likely to lead to a stable political climate.
However, caution is advised because if USD/JPY goes over 160, there might be foreign exchange intervention. Additionally, lower trading volumes are expected around Japan’s holiday on February 11th, which could increase market volatility.
Market Insights and Projections
This article combines commercial insights and analysis from external experts. The FXStreet Insights Team is in charge of compiling these insights. Other market observations include the RBI maintaining its interest rates and silver’s strong rebound due to safe-haven demand. Also, news about Amazon’s $200 billion investment guidance was noted, influencing stock values. Currently relevant topics include election risks for the yen tied to USD/JPY and a correction on comments made by BoE’s Pill. The Pound Sterling has bounced back as the US dollar weakens, but it still faces weekly losses. As we near the second week of February 2026, the yen market feels reminiscent of early 2025, where expectations for political stability after an election were mixed with strong speculation about currency intervention. With USD/JPY approaching multi-decade highs once again, previous lessons are crucial for making upcoming trading decisions.Current Political and Economic Climate
Looking back, the Liberal Democratic Party did win the 2025 election as expected, but the promised stability has proven fragile. Currently, recent polls show approval ratings for the administration have fallen below 30%, raising doubts about its ability to enforce solid economic policies. This political uncertainty adds risks that were not as evident a year ago. One key warning from last year was the 160 level for USD/JPY, a threshold that prompted major yen-buying interventions by the Ministry of Finance in April and May 2024. Now, with the currency pair trading just below this key number, traders need to account for a high chance of sudden government action. Reduced liquidity around holidays could intensify the effects of such movements. For derivative traders, holding call options on USD/JPY may be risky without a hedge. The possibility of intervention poses a significant downside risk, making protective put options a wise choice to shield against a sharp decline. This strategy helps traders keep potential upside while limiting their maximum loss. The main driver remains the large interest rate gap between the US and Japan, which is more significant now than in early 2025. With the Bank of Japan’s policy rate at just 0.1% and the US Federal Reserve around 5.25%, there is still a strong incentive to sell yen for dollars. This divergence in policy is the primary factor pushing the currency pair to levels that worry authorities. Create your live VT Markets account and start trading now.Central pivot guides S&P 500 futures rebound after pullback
S&P 500 futures are in a two-way structure influencing the New York market setup. After a three-day pullback, ES is bouncing back from a lower range, with the central pivot as a key point for deciding whether to move towards the upper band or stay within the lower range.
Since October 2025, ES has been trading in this same two-way MacroStructure, showing rotational movement without a clear upward or downward trend. After reaching the upper structure earlier, ES is now returning to the lower range, bouncing from 6753 towards the daily Central Pivot at 6866.50 as the New York open approaches.
The Central Pivot at 6866.50 is critical for today’s session. If it breaks and holds above this level, it could move back toward the upper range, targeting 6909–7010. If it fails to stay above this pivot, then the lower structure remains active, with 6753 and 6803 as important levels if downward pressure continues.
The mid-London profile looks promising but is not confirmed yet. The Point of Control sits at 6803, serving as the current value anchor and showing support for the rebound. With increasing cumulative volume, the chance of a pivot resolution grows stronger.
For the New York session, there are two scenarios: if the market accepts above the CP, a return to the upper range is likely. If it rejects, we’ll stay in the lower structure.
Currently, S&P 500 futures are caught in a trading range defined since October 2025. Instead of following a clear trend, prices rotate between support and resistance levels, favoring traders who take advantage of the range instead of those looking for big breakouts.
The central pivot at 6866.50 is the main decision point. If it breaks and holds above this level, expect a move back toward the upper end of the range around 7000. However, if the market can’t overcome this pivot, a drop back to test support near 6753 is likely.
This sideways movement is backed by recent economic reports, including a January jobs gain of 190,000, which is moderate and doesn’t suggest economic overheating. Additionally, inflation data showed core PCE steady at 2.8%, giving the Federal Reserve little reason to change its neutral stance. This lack of strong economic catalysts keeps the market fixed in this two-way structure.
In terms of volatility, the VIX is around 17, historically indicating consolidation rather than a strong directional trend. We experienced a similar range-bound trading period in the summer of 2025, before a clear catalyst appeared in the fall. As long as no significant economic shift happens, this rotational environment is likely to continue.
For derivatives traders, this setup suggests that selling premium through strategies like iron condors could be effective, as these strategies benefit from the market staying within a set range. Alternatively, traders can consider buying short-term call options near the low of 6753 or put options near the high of 7000. The key is to manage risk around the central pivot and not chase moves that lack sustained momentum.
The Euro dropped to earlier lows of 1.1765 against the Dollar before recovering to around 1.1800.
The EUR/USD pair is staying low as we await important U.S. consumer sentiment data. The Euro has gained a little, trading just below 1.1800 after falling to 1.1765. This comes amid a global equity sell-off, causing a general risk-off sentiment primarily driven by worries about AI.
In the U.S., weak employment stats have increased pressure on the Federal Reserve. Initial jobless claims rose to 231,000, and job openings have dropped sharply. As a result, market expectations for potential Fed rate cuts have intensified, with a March cut now seeming more likely.
