After hotter-than-expected January CPI, the Australian dollar rose to two-week highs, boosting expectations of an RBA rate hike
The Australian Dollar rose to almost a two-week high after January inflation came in above forecasts. AUD/USD gained more than 0.85% to around 0.7120 after CPI rose 3.8% year on year and trimmed mean CPI edged up from 3.3% to 3.4%.
The US Dollar Index fell toward 97.70 as uncertainty over US trade policy weighed on the currency. EUR/USD traded near 1.1800 and was up more than 0.20%, after softer Eurozone inflation reinforced expectations that the ECB will keep policy steady.
OCBC strategists see USD/CNY falling and watch the fix as RMB strength persists amid softer dollar sentiment
USD/CNY dropped sharply after the Spring Festival holidays, following a weaker USD/CNH. The move came after a softer U.S. dollar and better risk sentiment, along with a belief that policymakers are comfortable with a stronger renminbi.
Now the focus is on the daily fixing levels. Traders are watching to see whether authorities allow faster gains or try to slow them. Today’s fix, and the next few sessions, will be closely monitored for signals on the pace of renminbi appreciation.
Downside Bias And Key Levels
Price action still shows a downside bias, although a quick rebound is possible. Key support sits at 6.8465–6.85. If that zone breaks, the next support is near 6.82. The report says the renminbi’s strength was driven by several factors, not a single trigger. It also notes the article was produced with help from an artificial intelligence tool and reviewed by an editor. Looking back to early 2025, the yuan strengthened sharply as the dollar weakened and markets believed policymakers were fine with a stronger currency. Traders focused on the People’s Bank of China (PBoC) daily fix to see whether USD/CNY would break the key 6.85 support level. That strength was largely supported by improved risk sentiment after the holiday period. Over the past year, that downside bias in USD/CNY has reversed. The dollar has regained strength, supported by January 2026 U.S. inflation data showing persistent 3.2% inflation. This is very different from 2025 and changes the outlook for the yuan.Policy Signals And Positioning
China’s economic backdrop has also changed. The January 2026 trade surplus narrowed to $78 billion, slightly below forecasts. This could push officials to prefer a weaker currency to support exports. This week, the PBoC’s daily fixes have repeatedly been set weaker than market estimates, keeping the pair above 7.02. With this shift in policy, the risk of a sharp snapback—raised last year—has already played out and is now the main trend. The current approach is to position for further yuan weakness, which implies a higher USD/CNY. Derivatives traders may consider buying USD/CNY call options to gain upside exposure with defined risk. Create your live VT Markets account and start trading now.Musalem says inflation is nearly one point above the Fed’s goal as employment cools gradually and orderly
St. Louis Fed President Alberto Musalem said inflation is nearly a full percentage point above the Fed’s target, while the labour market is cooling in an orderly way. He spoke at the Missouri Athletic Club Speaker Series on Wednesday.
He said his base outlook is for the economy to grow at or above 2%. He also said financial conditions remain accommodative, helped by deregulation and fiscal tailwinds. He expects unemployment to level off around 4.3% to 4.4%.
Inflation And Labor Market Backdrop
Musalem said about half of the extra inflation is coming from tariffs, and he expects that effect to fade as the year goes on. He added that inflation could stay high for longer, but that is not his base case. He said the job market could be exposed to higher layoffs, but again, that is not his base case. He also said policy is well balanced and is now neutral in real terms. He said a government shutdown may have pushed CPI inflation lower, and that this could last through April. Because of this, he said PCE inflation may be a better measure. He added that the Fed still needs to bring inflation back to target. In his view, that could support spending and growth, and it could also bring down the 10-year yield. He said he is looking forward to seeing what Warsh’s priorities will be, and he expects the Fed to keep focusing on its dual mandate under a new chair.Market Implications In 2026
In 2025, the view was that fading tariff effects would pull inflation down. But the January 2026 CPI report showed inflation is still sticky at 2.6% year over year. This makes the return to the 2% target look slower than expected. The labour market is also still cooling in a steady, orderly way, as expected last year. The January 2026 jobs report showed unemployment ticking up to 4.2%, which is still strong by historical standards. For traders, this reduces the pressure on the Fed to cut rates because of job-market weakness. It supports a “higher for longer” view. A key change from last year is Fed leadership. In 2025, this was still only speculation. Now Chair Warsh has been confirmed and is leading the Fed. Markets are pricing in a more hawkish approach. His public comments have stressed “finishing the job” on inflation, similar to periods like 2022 when the central bank’s resolve was tested. With more uncertainty, assuming volatility stays low is risky. Demand is rising for options that protect against higher interest-rate volatility. Futures markets also show that the chance of a rate cut before mid-year has nearly disappeared. Strategies that benefit from a sideways, range-bound market may work better while the Fed stays on hold. Last year’s view that financial conditions were accommodative is now being tested. The 10-year Treasury yield rose 25 basis points in February 2026 alone, reaching 4.5% as markets reset expectations under a more hawkish Fed. This suggests that what looked “neutral” in 2025 is now seen as not restrictive enough to bring inflation back to target. Create your live VT Markets account and start trading now.Societe Generale says USD/ZAR is consolidating, but missing the 50-day average risks deeper losses below the range floor
USD/ZAR is trading sideways after bottoming near 15.63 last month. The 50-day moving average is around 16.25–16.40, which also marks the top of the recent range.
If the pair cannot break above 16.25–16.40, the downtrend may resume. A move below 15.63 could open the way to 15.45–15.30, and then 15.00.
South Africa Fiscal Backdrop Improves
South Africa’s public finances look better than expected. Tax revenue has come in stronger, and the growth picture has improved. The budget deficit is tracking the 4.5% of GDP target, and lower fiscal risk is supportive for South African government bonds. For the rand, valuation is starting to look stretched. The real effective exchange rate is near 113 versus a 10-year average of 106. At the same time, SARB rate cuts are reducing the carry advantage. In options markets, the 3-month USD/ZAR risk reversal is about 2.67. That is more bearish than during last year’s tariff-related volatility and suggests positioning for a rebound in USD/ZAR. We expect USD/ZAR to retest the bottom of its recent range. The pair has struggled to break above the 50-day moving average, which is acting as resistance near 16.25. It is now hovering just above the key 15.63 pivot low, so the next few weeks are likely to be decisive. If this support fails, the downside move could accelerate.Options Strategies And Key Levels
A clear break below 15.63 would likely extend the decline toward 15.45 and possibly 15.00. This view is supported by South Africa’s improving fiscal outlook. The budget delivered earlier this month showed the deficit narrowing toward 3.9% of GDP, helped by stronger-than-expected tax revenue. Ongoing fiscal consolidation is also making South Africa’s government bonds more attractive. That said, we think the risk of a sharp rebound higher in USD/ZAR is increasing. The rand’s real effective exchange rate is near 113, well above its 10-year average of 106. In addition, the South African Reserve Bank cut its main rate last month to 6.25%, which reduces the yield advantage that has supported the currency. With less carry, holding ZAR becomes less appealing. Options pricing also points to more concern about rand weakness. The 3-month risk reversal is wider than it was during the trade-related volatility seen in 2025. This suggests traders are buying protection against a weaker rand. As a result, buying USD/ZAR call options may be a relatively low-cost way to position for a bounce. Traders looking for mean reversion could use calls to gain upside exposure if 15.63 holds. For traders expecting more ZAR strength, buying put options with a strike just below 15.60 could be an effective approach. This would benefit from a confirmed breakdown if the fiscal story continues to support the rand. The key is to look for follow-through selling, especially if the pair closes below 15.63 for several days in a row. Create your live VT Markets account and start trading now.USD/CHF slips for a fourth session, trading near 0.7729 in a 0.7718–0.7757 range, above the 20-day SMA
USD/CHF has fallen for a fourth straight trading day, down 0.14%. Over the past three days, it has traded in a tight 0.7718–0.7757 range. It was last at 0.7729, just above the 20-day SMA at 0.7726.
Price action is consolidating in a symmetrical triangle within a broader downtrend. A break below triangle support around 0.7650–0.7665 would signal a likely continuation lower.
Technical Momentum Remains Bearish
The RSI remains bearish and is trending lower, which keeps downside risks in focus. If support breaks, the pair could re-test the year-to-date low at 0.7603 (set on 27 January). Below that, 0.7600 is the next level, followed by the August 2011 low at 0.7069. On the upside, rebounds may be limited by triangle resistance near 0.7772 and the 0.7800 level. Additional resistance is seen at the 50-day SMA (0.7841) and the 100-day SMA (0.7911). At this point in 2025, USD/CHF was also consolidating in a bearish symmetrical triangle, which pointed to a continuation of the downtrend. The pattern later broke down, with sellers pushing the pair below the key support trendline near 0.7650. The bearish RSI momentum noted at the time also proved to be a useful signal for the subsequent decline. The selloff accelerated in the second half of 2025. A key driver was the Swiss National Bank keeping its policy rate at 1.75% to fight inflation, which was last reported in January 2026 at a still-elevated 2.1% year-over-year. This stance has contrasted with the Federal Reserve’s pause, narrowing the rate gap and supporting the franc. Since then, the pair has broken below the 2025 low of 0.7603 and moved into a new, lower trading range.Options Positioning For Continued Weakness
Right now, the pair is finding temporary support near 0.7420, but the broader technical setup remains weak. Any rally toward the 0.7500 psychological level may attract heavy selling. Momentum still suggests the path of least resistance is lower. Over the coming weeks, selling call options or using bear call spreads with strikes near 0.7500 may offer an attractive approach. This can generate premium while keeping risk defined, based on the view that upside moves may be short-lived. With limited upside potential, selling into strength may be preferable to buying dips. Traders expecting the main downtrend to continue could also consider buying put options with strikes below 0.7400. This offers a defined-risk way to position for a possible move toward multi-year lows. The next Swiss inflation report will be important to watch, as a higher-than-expected reading could trigger another wave of USD/CHF selling. Create your live VT Markets account and start trading now.XAG/USD climbs near $91 as easing tariff worries and supply shortages fuel safe-haven buying and a strong rebound
XAG/USD gained about 4% on Wednesday and closed near $91. That put it back above $90 for the first time since the late-January sell-off. The move followed an earlier drop from above $121 to around $64 in early February—a decline of roughly 47%.
The bounce came as tariff fears eased and safe-haven demand increased after President Trump announced 15% global tariffs. COMEX registered inventories stayed below 100 million ounces, and physical supply in London remained tight.
Supply Deficit Outlook
The silver market is expected to post a sixth straight annual supply deficit in 2026. Demand is projected to exceed supply by about 67 to 200 million ounces. Mine output was reported near 820 million ounces, with little room to expand. The Federal Reserve held rates at 3.50% to 3.75% in January. The minutes showed several officials discussed possible rate hikes if inflation stays above target. Jerome Powell’s term ends in May 2026. On the charts, price held above the 50-day EMA near $81 and the 200-day EMA around $59, and both averages are still rising. A break above $92 could open a move toward $96 to $100. A drop below $87 could shift focus back to the 50-day EMA. Silver’s fast rebound above $90 highlights a familiar tug-of-war: strong fundamentals versus a hawkish central bank. The 47% plunge from the January 2025 record high is a clear reminder of how volatile this market can be. The rebound is constructive, but the Fed’s openness to more hikes remains the biggest headwind for precious metals.Options Approach For Volatility
Silver’s supply-and-demand setup remains very supportive and helps create a floor under prices. The market is still in a structural deficit, now running into a sixth year. This is being driven by rising industrial demand. Photovoltaics alone reportedly used more than 230 million ounces in 2025, and we expect that number to grow this year. Alongside very low COMEX inventories and renewed safe-haven buying linked to new global tariffs, the backdrop remains bullish. Over the next few weeks, options may be a better way to manage the volatility than taking outright positions. For example, a call spread—such as a March or April $95/$100 spread—can capture more upside while keeping risk defined, which is sensible after such a sharp sell-off. If you are concerned about overbought conditions, buying puts below the $87 support area can help hedge against another fast reversal. Further out, the chance of a more dovish Fed chair after May could be a meaningful tailwind in the second half of the year. The current hawkish tone is a near-term risk, but the longer-term outlook is supported by industrial demand and the potential for a weaker dollar. Longer-dated derivatives, such as June or July call options, can be used to position for that potential policy shift. Create your live VT Markets account and start trading now.AUD rises over 0.80% against the US dollar as strong inflation boosts expectations of an RBA rate rise
The Australian dollar rose more than 0.80% against the US dollar on Wednesday. AUD/USD traded at 0.7118 after bouncing from a low of 0.7057.
Australian inflation data came in above forecasts in January, which increased expectations that the Reserve Bank of Australia (RBA) may keep policy tighter. CPI rose 0.4% month-on-month versus 0.3% expected. Headline inflation was 3.8% year-on-year, and trimmed mean inflation rose from 3.3% to 3.4% year-on-year.
Fed And Rba Messaging
Federal Reserve officials also spoke, including Thomas Barkin and Jeffrey Schmid. RBA Governor Michelle Bullock said the economy has changed quickly since mid-2025, as disinflation progressed and growth slowed. Earlier this month, the RBA raised rates by 25 basis points to 3.85% after a strong jobs report. Markets priced in Fed cuts totalling 51 bps by year-end, while the RBA was projected to raise rates by 45 bps. In the week ahead, key releases include Australia’s Private Capital Expenditure (expected at 0%) and US Initial Jobless Claims on Thursday. Technical levels highlighted included support near 0.7050, 0.7000, and around 0.6900. Resistance was noted at 0.7150, 0.7200, and 0.7300. RSI was around 65. In 2025, a strong inflation report also pushed the Australian dollar higher versus the US dollar. Underlying inflation hit its highest level in more than a year, which pushed the RBA toward a more aggressive stance. This policy gap has remained a key theme, with AUD/USD now trading near 0.7450.Rba Policy And Market Implications
The RBA followed through on the hawkish shift, lifting the cash rate to 4.35% in late 2025. Inflation has eased from its peak, but the latest data shows it is still sticky at 3.9% year-over-year—well above the RBA’s target. That persistence supports the central bank’s decision to keep rates high for now. Australia’s labour market also remains tight. The unemployment rate was 4.1% in January, giving the RBA little reason to consider near-term easing. This contrasts with the US Federal Reserve, which has taken a cautious stance after a single 25 basis point cut in late 2025. For derivatives traders, the positive carry on long AUD positions remains attractive because of the interest-rate gap. However, as the initial sharp rally loses momentum, selling out-of-the-money puts or using bull put spreads may be a sensible way to collect premium while keeping a bullish view. The pair may find support near 0.7300, which was the prior upside target in 2025. It’s also important to watch global risk sentiment, because the Australian dollar often weakens in risk-off markets. A sudden jump in US inflation could quickly reduce expectations for Fed easing, narrowing the policy gap that has supported the Aussie. For that reason, tracking implied volatility in AUD/USD options remains important for managing risk in the weeks ahead. Create your live VT Markets account and start trading now.Taborsky says Glapinski and Litwiniuk see inflation nearing target, allowing cuts; markets expect a 3.25% terminal rate
NBP Governor Adam Glapinski said inflation should be close to the 2.5% target this year, and possibly again in 2027. These views are likely to influence the new NBP forecasts due in March. Monetary Policy Council member Przemyslaw Litwiniuk said a March rate cut is quite likely. He also pointed to further possible drops in inflation, linked to changes in the CPI basket and the suspension of the flash estimate.
Litwiniuk said rates should likely fall to 3.50% from the current 4.00%. Market pricing points to a lower 3.25% terminal rate. That differs from NBP messaging, which has focused on 3.50% as the end point of the easing cycle.
Poland Rates And Inflation Outlook
EUR/PLN has traded in a narrow range. It tightened from 4.200–4.230 in January to 4.210–4.230 in February. Risks are seen as slightly tilted below 4.210, but no clear direction is stated. A year ago, NBP messaging looked clearly dovish, and the case for rate cuts seemed straightforward. Governor Glapinski and MPC member Litwiniuk signalled that rates could fall from 4.00% to a 3.50% terminal rate in 2025. The key reason was the expectation that inflation would move toward the 2.5% target. At the same time, the market was more aggressive. It priced a terminal rate closer to 3.25%. That reflected confidence in more downside inflation surprises, which would force the NBP to cut faster. The gap between central bank guidance and market pricing created a clear set of risks. In hindsight, the NBP did start easing, but the sharper cuts priced by the market did not fully happen. Underlying price pressure stayed firm. For example, January 2026 data shows Polish corporate wage growth is still very strong at 11.9% year-on-year, which makes the inflation outlook harder. This persistence means the debate about the final rate level is far from settled.Trading Implications For Eur Pln
The tight EUR/PLN range of 4.210–4.230 seen in early 2025 has since widened. The pair is now closer to 4.280. This reflects that the NBP has been more cautious than the market first expected. It also suggests the zloty’s strength has a limit as long as rate gaps versus the Eurozone are expected to narrow more slowly. For derivative traders, this uncertainty can support positioning for a rise in EUR/PLN volatility. If the market is still underestimating the NBP’s caution, buying options such as straddles or strangles could make sense. This gives exposure to a large move in either direction ahead of the NBP’s March meeting. In rates markets, forward rate agreements (FRAs) that price in cuts later this year may now be too optimistic. Given strong wage growth, there is a rising risk the NBP holds rates steady for longer. Traders may consider positions that benefit if Polish rate expectations reprice higher in the coming weeks. Create your live VT Markets account and start trading now.US five-year note auction yield falls to 3.615% from 3.823%, extending the decline
The US Treasury’s 5-year note auction cleared at 3.615%. This was lower than the previous auction yield of 3.823%.
The yield fell by 0.208 percentage points from the prior result. This means borrowing costs for this maturity are cheaper than they were at the last auction.
Strong Demand For Treasuries
The sharp drop in the 5-year auction yield points to very strong demand for government debt. It also suggests investors expect the Federal Reserve to cut interest rates soon. This view reflects growing expectations of a slowing economy. Recent economic data supports this shift. January 2026 inflation continued to cool, reaching 2.5% year over year. The final revision to Q4 2025 GDP also came in slightly lower than first reported. Together, these results give the Federal Reserve more room to consider easing monetary policy. With that in mind, we may want to position for lower interest rates using derivatives. One simple approach is to go long interest rate futures, especially the 5-year (ZF) and 10-year (ZN) Treasury note contracts. These positions can rise in value if bond prices climb as yields fall. A move into bonds for safety can also signal more caution in equities. Because of that, we may want to consider buying protective put options on major indices such as the S&P 500. This can help hedge against a potential market pullback in the coming weeks.Implications For Currency Markets
We saw a similar setup in 2025. The yield curve stayed inverted for much of the year, which historically has been a strong warning sign of an economic slowdown. Today’s strong bond auction results suggest that this trend may be picking up speed. Falling US interest rates can also put pressure on the US dollar. We may want to consider derivative positions that could benefit from this, such as long calls on the euro or Japanese yen. When US yields become less attractive, global capital often shifts toward other currencies. Create your live VT Markets account and start trading now.Gold climbs above $5,200 on trade-policy uncertainty and Fed cut expectations, rebounding from $5,121 lows
Gold rose more than 1% on Wednesday as uncertainty over US trade policy continued and markets expected Federal Reserve rate cuts. XAU/USD traded near $5,204 after earlier dipping to $5,121.
US President Donald Trump said the economy is doing well and called it a “golden age”. He added that lower interest rates would support housing, and that inflation is falling while wages are rising.
