USD/CHF rose on Wednesday as the US Dollar strengthened, which weighed on the Swiss Franc. The pair traded near 0.7746 after bouncing from an intraday low of 0.7719. Traders scaled back expectations for near-term Federal Reserve rate cuts because inflation concerns remain. Chicago Fed President Austan Goolsbee said he is cautious about cutting rates too soon without clear evidence that inflation is moving back toward the 2% target.

Fed Policy Expectations

Markets expect the Fed to keep rates unchanged at the March and April meetings. They are still pricing in almost 50 basis points of cuts by year-end. CME FedWatch shows the probability of a June cut at about 40%, down from about 50% a week ago. July is priced at about 65%. In Switzerland, the ZEW Survey – Expectations index rose to 9.8 in February from -4.7 the month before. SNB Chairman Martin Schlegel said a few months of negative inflation are possible, but he expects inflation to rise in the coming quarters. He also said the SNB is ready to intervene in currency markets. No major US data is scheduled for Wednesday, so focus will be on Fed comments later in the day. Attention then shifts to US PPI data and Switzerland’s Q4 GDP report on Friday. Back in early 2025, markets were debating Fed policy when USD/CHF was trading near 0.7750. Now, with the pair holding near 0.8950, the key driver has been policy divergence. The Swiss National Bank cut rates twice in late 2025 while the Fed stayed on hold, widening the interest rate differential.

Policy Divergence And Market Implications

The “sticky inflation” warnings from Fed officials in early 2025 proved accurate, as core inflation has stayed above target. January 2026 CPI showed inflation running at 2.9% year over year. As a result, the Fed is expected to keep its policy rate in the 4.75–5.00% range for the foreseeable future. This is very different from what markets expected a year ago, when they were pricing in substantial easing. In Switzerland, last year’s SNB comments about possible negative inflation were followed by action aimed at preventing deflation. Swiss inflation is currently a modest 1.3%, giving the SNB little reason to move away from its current 1.00% policy rate. The SNB’s willingness to intervene in FX markets, as noted last year, also continues to limit franc strength. For derivatives traders, this backdrop makes long USD/CHF positions attractive because of the positive carry. One way to express this view is to sell out-of-the-money CHF call options (the same as USD/CHF put options). This can generate premium while the rate differential remains supportive. The “structural headwinds” tied to US trade policy that were a concern in 2025 have now shown up in ongoing tariff talks. That added volatility can make premium-selling strategies more appealing. In the weeks ahead, we will watch the next US Producer Price Index release for signs that inflation remains persistent. Switzerland’s final Q4 2025 GDP figures are also due next week. A weak report would likely reinforce the SNB’s dovish stance. Any data that supports this policy divergence could provide further support for USD/CHF. Create your live VT Markets account and start trading now.

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Eurozone inflation slowed to 1.7% year-on-year in January, down from 2.0% in December and 2.5% a year earlier. EU inflation also eased, to 2.0% from 2.3%, compared with 2.8% previously. The lowest annual inflation rates were France at 0.4%, Denmark at 0.6%, and Finland and Italy at 1.0%. The highest were Romania at 8.5%, Slovakia at 4.3%, and Estonia at 3.8%.

Eurozone Inflation Snapshot

Compared with December, inflation fell in 23 member states, stayed the same in one, and rose in three. Services added +1.45 percentage points to euro area inflation. Food, alcohol, and tobacco added +0.51 percentage points. Energy reduced inflation, with a -0.39 percentage point contribution. The article says it was produced with help from an AI tool and reviewed by an editor. In early 2025, inflation was clearly trending lower. That shift shaped market expectations for the whole year. When Eurozone inflation fell to 1.7% in January 2025, it suggested the European Central Bank would have room to cut rates. That expectation proved accurate. The ECB began easing in summer 2025 and cut the deposit facility rate from its peak. As of February 25, 2026, the outlook is less clear and may require a different approach. The latest data for January 2026 showed inflation rising to 2.4%. The increase was driven by strong wage growth and new supply chain disruptions in the Red Sea. This has raised doubts about further rate cuts in the first half of 2026. As in 2025, the main issue is services inflation, which remains stubborn. Eurostat data shows negotiated wage growth in Q4 2025 stayed high at 4.5%. That has kept services costs from cooling as fast as expected. Because of this, markets may need to rethink the likely path of monetary policy in the months ahead.

Implications For Rates Volatility

Given these conditions, derivatives traders may want to reduce positions that rely on fast and large ECB rate cuts. There may now be value in trades that protect against rates staying higher for longer than markets expected just weeks ago. One possible approach is paying fixed on short-dated interest rate swaps, such as 1-year or 2-year tenors. With uncertainty rising, rate-market volatility is picking up. This is a sharp change from the steady disinflation trend seen in early 2025. Buying options on EURIBOR or Bund futures, such as straddles, can benefit from a large move in either direction—whether the ECB becomes more hawkish or ends up easing because growth weakens. This type of strategy can perform well when central bank policy is hard to predict. Equities, which benefited from falling inflation last year, now face pressure from the risk of tighter monetary conditions. It may be time to hedge equity exposure that was built on expectations of continued rate cuts. Buying put options on the EURO STOXX 50 index is a direct way to protect a portfolio against a possible market drop. Create your live VT Markets account and start trading now.

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Nvidia has driven the AI rally for the past three years, even as US growth stocks have weakened in 2026. The NASDAQ 100 has dropped more than 3% over the past month and is down for the year. Analysts expect Nvidia earnings per share (EPS) of about $1.54, up 70% year over year. Revenue is forecast to rise 68% to $66.12 billion.

Options Setup For Earnings Night

Demand for AI chips and data-centre servers is still the main driver. UBS estimates direct AI capex at $423 billion in 2025, rising to more than $570 billion in 2026. Some forecasts go as high as $700 billion. The backdrop is also tense. Markets are pricing in geopolitical risk tied to a possible attack on Iran and renewed efforts to bring back US tariffs. Since last November, investors have rotated out of AI-linked stocks and into consumer staples, utilities, and healthcare. Guidance matters as much as the headline results. Wall Street expects Q1 revenue of $71 billion, about $5 billion higher quarter on quarter. The market reaction is likely to hinge on this: above $71 billion could be received well, while below $70 billion could draw a sharp negative response. Gross margin is another focus point, after Q3 came in at 73.6% and the company targeted the mid-70% range. Other key topics include PC system-on-a-chip work with Intel, sales in China, Vera Rubin timing, and an OpenAI commitment reportedly reduced from $100 billion to $30 billion.

Key Levels And What Sets The Tone

Key technical levels include support from $164 to $171, resistance near $211, and a longer-term level near $235. Traders are also watching the 200-day and 50-day SMAs. With the NASDAQ 100 already down more than 3% over the past month, markets look nervous heading into Nvidia’s earnings tonight, February 25, 2026. Many traders see this report as a major test of the AI story, which raises the odds of a large move and keeps volatility elevated. The numbers may look strong, but forward guidance for Q1 is likely to decide the direction. Bulls will want revenue guidance above $71 billion to rebuild momentum. A guide below $70 billion could spark a fast sell-off. That range also gives options traders clear reference points when choosing strikes. This setup echoes 2023, when Nvidia’s May earnings surprise sent the stock up more than 24% in a day and lifted the broader market. Past reports have produced large swings, which helps explain why implied volatility is high ahead of tonight’s release. Technically, $211 is the key resistance level. If guidance is strong, call options above that level could benefit, with the next resistance near $235. On the downside, the $164 to $171 area is the key support zone, now aligned with the 200-day moving average. This is not only about Nvidia. Many investors treat the report as a read-through on the entire AI spending cycle. A strong result could lift other major AI names like Meta, Microsoft, and Amazon, and it could also move the QQQ ETF, which offers another way to trade the outcome. A miss could speed up the shift away from tech that has been underway since last November. Beyond the headline guidance, the tone on gross margins and China sales during the conference call will matter. Any weakness there, or an unclear explanation for the reduced OpenAI commitment, could drag on sentiment even if the top-line figures look good. The first market reaction after the release may shape positioning into March. It will help decide whether traders rotate back into the AI trade that defined 2025 or stay defensive in areas like utilities and healthcare. The next few hours could set the tone for the next few weeks. Create your live VT Markets account and start trading now.

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AUD/USD traded near 0.7090 on Wednesday, up 0.42% on the day. The move followed stronger inflation in Australia, which lifted expectations for tighter monetary policy. Australian Bureau of Statistics data showed CPI rose 0.4% month-on-month in January, up from 0.1% in December. The Trimmed Mean rose 0.3% on the month, after 0.2% previously.

Australian Inflation Lifts RBA Tightening Expectations

Year-on-year, the Trimmed Mean rose to 3.4%. This was up from 3.3% and above forecasts. Headline inflation held at 3.8%, even though markets expected a small slowdown. The Reserve Bank of Australia recently raised its cash rate by 25 basis points to 3.85%. It also flagged ongoing upside risks to inflation. Money markets now fully price in another rate rise in the coming months. In the US, the Dollar had no clear direction after President Donald Trump’s address to Congress. The US Dollar Index hovered near 98.00 as markets weighed trade policy comments and the outlook, alongside mixed data that shaped Federal Reserve expectations. In the near term, the backdrop supports AUD/USD because the RBA and the Fed appear to be moving on different policy paths. The pair remains sensitive to geopolitical and trade headlines.

Trading Considerations For AUD USD

A familiar pattern is emerging: Australian inflation data continues to surprise on the upside. In January 2026, the monthly Consumer Price Index (CPI) rose 0.5%, beating forecasts and raising concerns that price pressures may stay stubborn. This is similar to what we saw at times in 2025, suggesting the inflation fight is not over. This persistent inflation supports the Reserve Bank of Australia’s decision to keep the cash rate at 4.35% at its February 2026 meeting, while still sounding hawkish. That tone differs from late-2025 expectations, when some investors looked for a shift to a more neutral stance. The RBA’s firmer position offers fundamental support for the Australian dollar. The US picture looks different. The latest Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation measure, continued to cool and came in at 2.4% year-on-year to January 2026. This reinforces the view that the Federal Reserve may be closer to rate cuts later this year, creating a clear policy gap versus Australia. For derivatives traders, this widening gap may support long AUD/USD setups. One approach is to buy AUD/USD call options with expiries in the next one to three months. This gives upside exposure while keeping maximum risk defined. Another option is to go long the Australian dollar against the US dollar using futures. This provides more direct exposure to a potential AUD/USD rise. However, futures carry more risk than options if the market moves sharply against the position. Given the uncertain global backdrop, strategies that benefit from higher volatility may also fit. With key central bank meetings ahead, an AUD/USD straddle could be effective. This involves buying both a call and a put at the same strike price, aiming to profit from a large move in either direction. Create your live VT Markets account and start trading now.

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US index futures held onto yesterday’s rebound during London hours on 25 February 2026, but the tone was mixed. S&P 500 futures led, Dow futures stayed steady, and Nasdaq futures improved but still sat below a resistance band that has capped gains since 17 February. Dow futures (YM) traded at 49,290, above the central pivot (48,852) and POC (49,230). The upper gate was 49,208–49,428, with an upper range at 50,360. Levels noted were 49,124, 49,072, 49,030, 48,988, and 48,936. The lower gate was 48,496–48,276, with a lower range at 47,344. Delta was neutral.

Key Levels And Near Term Structure

S&P 500 futures (ES) traded at 6,912, above the aligned intraday and daily central pivot at 6,866.50 and above the POC at 6,905. The upper gate was 6,893–6,909. Upside references were 6,923, 6,936, 6,952, and 6,979.50. The lower gate sat at 6,842–6,827, with a lower range at 6,764.00. Delta was positive. Nasdaq futures (NQ/MNQ) traded at 25,076, above the central pivot (25,051) and POC (25,040), but below the upper gate at 25,134–25,186. Further levels were 25,228, 25,269, 25,321, and 25,405. The lower gate was 24,978–24,934, with a lower range at 24,744. Delta was positive. The current setup points to an uneven recovery, with clear opportunities and risks in the weeks ahead. The S&P 500 is showing strength by holding above the key 6,909 resistance area. The Nasdaq is still lagging and struggling below its main resistance near 25,186. This gap between the two is the key thing to watch. This split also fits the bigger macro picture. Last week’s Consumer Price Index (CPI) showed inflation stuck at 3.4% year over year, higher than expected. Sticky inflation reduces the chance of near-term Federal Reserve rate cuts. That matters most for the rate-sensitive Nasdaq, which helps explain why tech is underperforming. A similar pattern appeared in Q3 2025. The Nasdaq lagged for several weeks on inflation worries, then later caught up. That history suggests today’s tech weakness can fade, but it likely needs a trigger. Until Nasdaq can break and hold above its 25,186 upper gate, expect more rotation and choppy price action.

Actionable Trade And Risk Framework

For derivatives traders, a relative-value approach may work over the next one to two weeks. One example is a pair trade: long S&P 500 futures (ES) and short Nasdaq futures (NQ). This targets continued S&P outperformance versus tech, not the overall market direction. Options traders can also use the clearer technical levels. In the S&P 500, call spreads aimed at the 6,979 upper range offer defined risk while keeping upside exposure. In the Nasdaq, puts or put spreads struck below the 25,051 pivot can hedge against another rejection from overhead resistance. The key signal is how Nasdaq trades around the 25,134–25,186 resistance zone during the New York session. A clean break and acceptance above that area would suggest the market can rally together. Another failure there would raise the risk that the S&P 500 rally also loses momentum. Create your live VT Markets account and start trading now.

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ABN AMRO expects the Federal Reserve to cut rates by 75 bps this year. It also sees policy moving toward a 3.00% Federal Funds Rate by year-end, even though inflation remains above target. The report says a Kevin Warsh-led Fed would take a “conviction-based” approach. It adds that this could mean less transparency, with less communication and guidance from FOMC officials.

Fed Reaction Function Shift

ABN AMRO says it expects more rate cuts than the market currently prices in. It links this to a more dovish Fed reaction function over the past six months. In this view, inflation above target matters less than potential risks to employment. Based on the current median Summary of Economic Projections, the note says there is room to keep easing in 25 bps steps. However, its base case of stronger inflation should limit near-term easing, while still pointing to a policy rate near 3.00% by year-end. The Federal Reserve is signaling that protecting jobs matters more than squeezing out every last bit of inflation. That suggests more rate cuts than the market currently expects for the rest of the year. Under Chair Warsh, policy would be driven more by conviction and less by pre-announcing each move. This approach is being tested now. January’s CPI shows inflation is still sticky at 3.2%, well above target. But the latest jobs report shows unemployment rising to 4.1%, keeping the Fed’s attention on the labor market. We think this supports a dovish bias and makes rate cuts in the coming months more likely.

Trading Implications

For derivatives traders, this supports positioning for lower short-term rates. Futures tied to the second half of 2026, such as Secured Overnight Financing Rate (SOFR) contracts, may be underpricing the chance of further cuts. Going long these contracts could be one way to benefit from a more dovish path. Less guidance also means more volatility around FOMC meetings. After a calmer period, buying options such as straddles on major indices or bond ETFs ahead of policy announcements could perform well. This strategy benefits from a large move in either direction, which becomes more likely when the Fed is intentionally less predictable. We are also watching for yield-curve steepening opportunities. If the Fed cuts short-term rates, longer-term yields may not fall as much because inflation remains persistent and the economic outlook is still fairly solid. This setup can favor trades that profit as the gap between 2-year and 10-year Treasury yields widens. This dovish reaction function is not new. It began to appear in the second half of 2025. During that period, officials often played down strong inflation readings while emphasizing any signs of labor-market weakness. That pattern now looks like it is becoming the core policy approach for 2026. Create your live VT Markets account and start trading now.

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Pound Sterling rose against most major currencies on Wednesday, but it did not gain against the antipodean currencies. It was up 0.23% and traded near 1.3520 against the US Dollar during the European session. This move happened even after Bank of England Governor Andrew Bailey delivered a dovish message. On Tuesday, he told Parliament’s Treasury Committee that there is room for rate cuts if inflation returns to the 2% target.

Markets Look For Boe Clarity

GBP/USD extended its rise for a fourth straight day, reaching 1.3516 on Wednesday. Markets want more detail on why the Bank kept rates unchanged at the last meeting, especially since the decision was close. Markets expect two rate cuts in 2026, which would take the policy rate down to 3.25%. If Bailey hints at a cut as early as March, markets could start pricing in more than 50bps of easing this year. The Pound is holding near 1.3520 against the Dollar, even though the Bank of England is clearly pointing to future cuts. That gap suggests traders may be unsure about the timing or size of the BoE’s easing cycle. The argument for rate cuts is getting stronger. January 2026 inflation data showed CPI falling to 2.3%, only slightly above the BoE’s target. GDP growth in Q4 2025 was also almost flat at 0.1%, which adds pressure for policy support. This backdrop fits a dovish BoE and makes the Pound’s current strength look vulnerable. When the currency is strong but the central bank is dovish, implied volatility often rises. For traders, this can create opportunities to use strategies such as long strangles on GBP/USD, which profit if the price makes a large move in either direction. This approach can benefit from a sharp break if the BoE acts decisively or if new data forces markets to rethink their pricing.

Positioning Around Volatility

In 2025, the market often struggled to predict BoE policy shifts, repeatedly pricing in cuts that arrived later than expected. That history suggests the Pound may trend lower over time, but the path is unlikely to be smooth. If the first cut is delayed, a short-term squeeze could push the Pound higher before it eventually turns. It also matters that the US Federal Reserve is signalling its own easing cycle. However, strong US jobs data from January could make the Fed more cautious than the BoE. This policy gap—where the UK cuts sooner or faster than the US—could eventually weigh on GBP/USD. It may also help explain why the Pound is firm now, since both central banks are still expected to cut. Attention is now on the March Monetary Policy Committee meeting for a clearer shift in tone. Buying options that expire after that date is one way to position for a possible repricing in Sterling. This lets traders focus on the event risk without needing to predict the market’s immediate reaction. Create your live VT Markets account and start trading now.

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HSBC Global Research says USD/CAD mostly tracks the broader US Dollar trend. The pair is trading a little below what interest rate differentials would suggest, which points to strength in the Canadian Dollar. Higher oil prices, driven by tensions in the Middle East, are also supporting the Canadian Dollar. Oil is a major Canadian export and often influences the currency.

Tariff Uncertainty And Business Confidence

HSBC says tariff uncertainty can hurt business confidence. The report adds that this uncertainty has improved recently. HSBC also expects the US to take a less aggressive trade stance ahead of the US mid-term elections. Because of this, it sees a sharp jump in USD/CAD as unlikely. The article notes it was created with help from an AI tool and then reviewed by an editor. It also explains that the FXStreet Insights Team selects market observations from outside experts and analysts. As of today, February 25, 2026, the Canadian dollar still looks resilient, much like it did in 2025. USD/CAD is trading near 1.3550, which still looks low if you focus only on historical interest rate spreads. This suggests the loonie’s underlying strength remains a key factor for traders.

Energy Prices And Policy Divergence

Support from high energy prices remains in place. WTI crude futures are holding above $85 a barrel, helped by continued geopolitical tensions and a tighter supply outlook than last year. This helps put a floor under the Canadian dollar and makes it harder to stay bearish on CAD. On the policy side, the picture is clearer than last year. Canadian CPI is still firm at 2.9%, which makes the Bank of Canada less willing to cut rates. At the same time, markets are pricing a 75% chance of a Fed cut by June. If the rate gap narrows, it becomes harder for USD/CAD to rise for long. The calmer trade tone expected ahead of the coming US mid-term elections has mostly played out. Compared with the concerns in 2025, tariff uncertainty has not worsened. This has supported steadier business investment flows between the two countries and removes a key trigger that could have pushed the pair sharply higher. For derivatives traders, this setup suggests USD/CAD upside may be limited in the next few weeks. One possible approach is selling call options with strikes around 1.3700 to collect premium in a range-bound market. Another is using bearish call spreads, which can cap risk while still benefiting if the pair stays sideways or drifts lower. Still, this view can change quickly. A sudden global risk-off shock could boost safe-haven demand for the US dollar. A drop in oil below $75 would also weaken a main support for the loonie. Any short-volatility or bearish positions should be paired with clear risk limits. Create your live VT Markets account and start trading now.

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The Japanese Yen weakened against major currencies and fell 0.6% to about 156.80 per US Dollar during Wednesday’s European session. USD/JPY rose as the Yen lagged amid uncertainty over the Bank of Japan’s next interest-rate decision. A Mainichi report said Japan’s Prime Minister Sanae Takaichi does not support further BoJ rate increases. The report said she raised concerns in a meeting with BoJ Governor Kazuo Ueda on 16 February.

Political Pressure Builds

Japan also nominated Toichiro Asada and Ayano Sato to join the central bank’s nine-member board. The nominations came one day after the Mainichi report. The US Dollar recovered earlier losses ahead of the US market open. The US Dollar Index rose 0.1% to around 98.00. Earlier, the Dollar slipped after President Donald Trump delivered the first State of the Union address of his second administration to a joint session of Congress. Looking back at early 2025, political pressure on the Bank of Japan helped set the stage for the yen’s continued weakness. That weakness has persisted over the past year, as the yen’s carry-trade appeal has faded sharply. Today, USD/JPY is trading near 172.50, reflecting a wide gap in monetary policy.

Options Strategy Outlook

The BoJ eventually delivered a symbolic rate hike in November 2025, taking the policy rate to 0.0%. Markets largely viewed it as a one-off move meant to maintain credibility. Recent comments from board members have reinforced this dovish tone, suggesting little interest in further tightening even though Tokyo core inflation remains above 2.5%. This lack of action continues to weigh on the yen. Meanwhile, the US Dollar has stayed firm since President Trump’s address last year. Although the Fed held rates steady through 2025, newer data has shifted expectations. US core CPI for January 2026 came in hotter than forecast at 3.5%, reviving talk of a more hawkish Fed. This contrast—an inactive BoJ and a potentially more active Fed—remains the main driver of dollar strength. With USD/JPY in a clear uptrend, traders may consider buying call options to benefit from further yen weakness. April 2026 calls with a strike near 175.00 can help capture the momentum expected in the coming weeks. This approach limits downside risk while keeping exposure to potential upside. Policy divergence has also kept implied volatility high. One-month USD/JPY volatility is now 11.2%, above its recent average. That makes selling out-of-the-money yen puts against a basket of currencies a possible way to collect premium. It also reflects a broader view that the yen is unlikely to strengthen sharply in the near term. Still, traders should watch for the risk of verbal warnings or direct intervention from Japan’s Ministry of Finance, as seen in October 2025 around the 165.00 level. Consider using tight stop-losses on short-yen positions. Buying cheap, far out-of-the-money JPY call options can also serve as a low-cost hedge against a sudden policy shift or intervention. Create your live VT Markets account and start trading now.

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US MBA mortgage applications rose 0.4% in the week ending 20 February, down from a 2.8% rise the week before. This suggests mortgage demand is growing more slowly than it did in the prior week. No other figures were provided.

Housing Market Demand Slows

The U.S. housing market is losing momentum. MBA Mortgage Applications rose just 0.4%, down from 2.8% last week. This points to weaker demand, likely because higher interest rates are making mortgages less affordable. It also suggests the economy may be cooling faster than many expected. This slowdown in housing raises questions about what the Federal Reserve will do next. January 2026 inflation is still high, with CPI at 3.2%. Even so, weaker housing activity supports the argument for the Fed to pause further tightening. It may be worth watching interest-rate futures to see whether markets start pricing in a more dovish policy path in the months ahead. For sector-focused trades, one idea is to consider put options on homebuilder ETFs such as XHB. In 2025, the sector rallied on the belief that rates had peaked. That can make it more vulnerable when new data turns negative. If demand stays soft, this could be the early stage of a broader pullback, especially with the spring buying season starting on weaker footing. Housing can also be an early warning sign for the wider economy, as it was before 2008. With U.S. unemployment at 4.0% in January, the risk of a broader slowdown is rising. Because of that, protective puts on the S&P 500 may be a reasonable hedge for portfolios right now.

Volatility Hedging Considerations

Sticky inflation alongside slowing growth often leads to higher market volatility. The VIX is trading around 14, which is relatively low and may signal complacency. One approach is to consider VIX call options, which can be a lower-cost way to benefit if market volatility spikes in the coming weeks. Create your live VT Markets account and start trading now.

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