Ahead of New York, S&P 500 futures lead gains; Nasdaq tests resistance and needs confirmation above the upper threshold
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.
ABN AMRO’s Quaedvlieg says a Warsh-led Fed may cut rates and adopt dovish guidance despite an upbeat outlook
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.Sterling rises broadly in European trading, except against antipodeans, up 0.23% near 1.3520 versus the dollar
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.HSBC expects USD/CAD to be capped as oil supports the Canadian dollar amid softer US trade rhetoric and dollar trends
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.Amid uncertainty over BoJ rate hikes, the yen falls broadly, slipping 0.6% to 156.80 against the USD
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.U.S. MBA mortgage applications fell to 0.4% from 2.8% in February 20, data show
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.BBH’s Elias Haddad says DXY should stay mid-range as rate spreads persist and fresh catalysts are lacking
BBH said the USD index (DXY) is trading near the middle of a 96.00–100.00 range that has held since June. It expects this range to hold in the near term. The dollar is mostly following interest-rate gaps, and there are no near-term catalysts that would likely change major central bank rate expectations.
BBH is more negative on the dollar over the longer term. It links this to concerns about confidence in US trade and security policy, US fiscal credibility, and possible politicisation of the Fed.
Fed Patience And Consumer Resilience
The note said the Fed can afford to be patient before it starts cutting rates again. That view is supported by stronger February consumer data. The Conference Board Consumer Confidence index rose more than expected. The labour differential index increased to 7.4 from 6.8 in January, and six-month job expectations improved to -10.4 from -13.9. It also highlighted comments from Fed officials that played down near-term rate cuts. Core inflation is still near 3%, and unemployment has been steady. Kansas City Fed President Jeff Schmid and St. Louis Fed President Alberto Musalem were scheduled to speak. Schmid previously voted to keep rates unchanged at the October and December 2025 FOMC meetings. With the DXY stuck between 96.00 and 100.00, the near-term approach is to trade the range. Implied volatility in major currency pairs has fallen sharply. The FX Volatility Index recently dipped below 7.0 for the first time since Q3 2025. This setup can favor selling options—such as EUR/USD straddles—to collect premium while the market waits for a new trigger. Even so, we remain structurally bearish on the dollar because concerns about US fiscal credibility are rising. The Congressional Budget Office’s January 2026 report projects public debt-to-GDP will exceed 110% this year. That level can weigh on long-term confidence. These fiscal concerns are a key reason we expect the dollar to eventually break below its current range. Traders may want to use income from short-term, range-based strategies to fund longer-term bearish positions. One approach is to buy long-dated put options on the DXY, with expiries in late 2026 or early 2027. This can be a relatively low-cost way to position for a break below the 96.00 support level. A similar pattern played out from 2002 to 2004, when a period of range trading was followed by a multi-year dollar decline tied to structural deficits.Positioning For A Range Break Lower
The Fed’s patient stance, reinforced by recent official comments, helps support this two-step approach. Better-than-expected February consumer confidence—especially the jobs differential index rising to 7.4—gives the Fed room to keep rates steady for now. This delay in easing keeps the dollar pinned in its current range and creates time to prepare for potential weakness later. Create your live VT Markets account and start trading now.Rabobank’s Jane Foley says reflationist BoJ nominees unsettle the yen and bonds, but policy direction stays steady
Prime Minister Takaichi nominated two reflationist university professors, Sato and Asada, to the Bank of Japan (BoJ) Board. The news triggered short-term moves in the yen and the Japanese government bond (JGB) market.
Two seats will open this year. Noguchi retires in March, and Nakagawa’s term ends in June. Noguchi is seen as dovish, while Nakagawa often votes with the majority.
Policy Shift Expected To Be Limited
The board changes are likely to tilt policy only slightly more dovish. Any immediate market move is expected to be temporary and may fade. After the recent yen weakness, some market participants think the BoJ could raise rates in April. However, the 19 March policy meeting is widely viewed as too soon, given how close it is to the December 2025 rate hike. The report also argues USD/JPY could fall in the coming months, supported by Japan’s exit from deflation, stock market reforms, targeted investment programmes, stronger business confidence, and a large pool of domestic savings. It also notes the article was created with an artificial intelligence tool and reviewed by an editor. The Prime Minister’s nominations have caused brief yen weakness. This pushed USD/JPY higher for a short time and stirred markets. We see this reaction as short-lived and likely to fade.Implications For Yen Outlook And Trades
The outgoing board members were already seen as dovish, so the overall policy path is unlikely to change much. In our view, this news does not change the yen’s fundamental outlook. Any shift in the BoJ’s bias should be minor. The BoJ’s December 2025 policy rate increase to 0.10% was an important signal that the bank is moving away from ultra-loose policy. January 2026 core inflation was 2.1%, still above target, which reduces the case for renewed easing. Against this backdrop, the market’s recent reaction looks exaggerated. For derivatives traders, this short bout of yen weakness may be a tactical opportunity. A higher USD/JPY can offer a better entry level to position for yen strength later. One way to express this view is to sell USD/JPY call option spreads, based on the idea that upside may now be limited. Some investors still expect another small hike in April, although we think March is too early for action. This uncertainty could raise near-term volatility, which may suit options strategies that benefit from price swings. Even so, the main positioning idea remains a stronger yen. We remain constructive on Japan’s economy. Business confidence has helped lift the Nikkei 225 above 42,000 recently. Combined with structural reforms and a large domestic savings base, this supports our view for a lower USD/JPY. Over the next few weeks, traders could consider buying USD/JPY put options with expiries in the second or third quarter of 2026. Create your live VT Markets account and start trading now.Ahead of US-Iran nuclear talks and India’s Q4 GDP release, the rupee remains steady against the dollar
The Indian Rupee was little changed against the US Dollar on Wednesday, with USD/INR holding near 91.00. Trading was cautious ahead of US-Iran nuclear talks on Thursday and India’s Q4 GDP release on Friday.
Oil prices stayed firm as tensions rose over Iran’s nuclear plans and after US President Donald Trump warned of possible military action. If no deal is reached, investors may fear a disruption to global oil supply. That could push oil prices higher and put pressure on the Rupee.
Key Data And Policy Drivers
India’s Q4 GDP is expected to show annualised growth of 7.2%, down from 8.2% in Q3 2025. The US Dollar eased after Trump delivered the longest State of the Union speech on record. He spoke about tariffs, tax cuts, a Supreme Court ruling on tariffs, and actions related to Venezuela. Elsewhere, the Dollar was steady. Markets expect the Federal Reserve to keep rates unchanged in March and April, with inflation still above the 2% target. On the technical side, USD/INR held just above the 20-day EMA near 90.94, while the 14-day RSI stayed in the 40.00–60.00 range. Support was noted at 90.58 and 90.15, with resistance at 91.35 and 91.66. India’s growth averaged 6.13% from 2006 to 2023, and inflation is judged against the RBI’s 4% target. Last week, US-Iran nuclear talks broke down, which quickly lifted market tension, as expected. At the same time, India’s Q4 2025 GDP came in at 6.9%, below the 7.2% forecast, confirming a slowdown. Together, these developments have made the outlook for the Rupee more cautious.Options Positioning And Trade Setups
Brent crude has jumped, now trading above $88 a barrel after staying in the low $80s for weeks. This matters for India, which imports more than 85% of its crude oil. Higher oil prices can increase importers’ demand for US Dollars, and that demand is already showing up in the market. The US Dollar has also remained firm. January’s US CPI data showed core inflation still running at 3.7%, well above the Fed’s target. This supports the view that the Federal Reserve will keep rates on hold at the next few meetings. A more hawkish Fed stance can help keep the Dollar strong against emerging market currencies. With uncertainty rising, implied volatility in USD/INR options has jumped over the past few sessions. This suggests the market is pricing in a larger-than-normal move in the coming weeks. In that context, staying on the sidelines also carries risk. Traders may consider buying call options to position for more Rupee weakness. Since the pair has pushed above the 91.35 resistance level, a move toward 92.00 looks more likely. Bull call spreads can help reduce upfront cost while still targeting that upside. For traders who expect a big move but are unsure of the direction, long straddles can be a useful strategy. This approach can profit from a strong breakout either way, taking advantage of higher volatility. The pair must move far enough to cover the option premiums before expiry. Create your live VT Markets account and start trading now.Amid US-Iran tensions and trade uncertainty, XAU/USD is up 0.6% and hovering near $5,200 in Europe
Gold (XAU/USD) rose 0.6% to near $5,200 during European trading on Wednesday. Buying picked up as US-Iran tensions rose and traders faced fresh uncertainty over US trade policy after a US Supreme Court ruling.
The US and Iran are set to hold nuclear talks on Thursday. On Monday, US President Donald Trump said military action could follow if Tehran does not abandon plans linked to its nuclear programme.
