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.
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.
Geopolitical Risk And Trade Policy Uncertainty
In the US, the Supreme Court blocked extra duties, saying Trump went beyond his authority by using economic emergency powers. After the ruling, Trump announced 10% global tariffs that could increase to 15%. He also warned that tariffs could rise further if countries do not follow trade deals. From a technical view, gold is still holding above a rising support line that starts around $4,400. It is also above the 20-day EMA near $5,010. The 14-day RSI is near 60.00. Key support levels are $5,120, then $5,010, $4,880, and $4,750. Resistance sits near $5,240 and $5,380. Central banks bought 1,136 tonnes of gold worth about $70 billion in 2022, the largest annual purchase on record. Gold often moves in the opposite direction to the US Dollar, US Treasuries, and risk assets, and it can react to interest rates and geopolitical stress. Right now, geopolitical risk and trade policy uncertainty are doing most of the work. Together, they are putting a strong floor under gold near $5,200 and lifting demand for safe-haven assets. The upcoming US-Iran talks are a key trigger. If the tone worsens, volatility is likely to rise.Central Bank Demand And Macro Drivers
This trend has strengthened in recent years, helped by steady central bank buying. After record purchases in 2022 and 2023, central banks added another 980 tonnes in 2025. This signals ongoing concern about fiat currencies. Sticky inflation through 2024 has also kept institutional demand for hard assets firm. For traders, the clear uptrend may favour using options to control downside risk while staying bullish. Call options or bull call spreads could benefit if gold pushes toward the $5,380 target highlighted in the technical outlook. The support area near $5,120 and the moving average around $5,010 are key levels to watch when planning these trades. Options markets are also showing the tension. Implied volatility on gold futures is rising ahead of geopolitical deadlines. Open interest is building in out-of-the-money calls, especially strikes above $5,300 that expire next quarter. This suggests traders are positioning for a sharp rise rather than a drop. Gold is also getting support from a weaker, choppy US Dollar since the Supreme Court decision changed the trade outlook. A volatile or falling dollar typically supports gold. Traders may want to watch the Dollar Index closely. If it breaks below recent lows and stays there, gold could retest $5,240 and move higher. Create your live VT Markets account and start trading now.EUR/JPY rises toward 184.60 as the yen stays weak amid uncertainty over the pace of Japan’s policy normalisation
EUR/JPY traded near 184.60 on Wednesday, up 0.58% on the day, as the Japanese Yen weakened. The rise came as markets questioned how fast Japan might normalise monetary policy.
Local media said Prime Minister Sanae Takaichi warned about more rate hikes during a meeting last week with Bank of Japan (BoJ) Governor Kazuo Ueda. Ueda said they discussed general economic and financial conditions, and that no specific policy requests were made.
BoJ Policy Signals And Yen Weakness
Reports that some board nominees may favour looser policy added to the view that normalisation will stay slow. As a result, markets pulled back expectations for near-term rate hikes in Japan, which pressured the Yen. In the Euro area, the Euro stayed firm after European Central Bank (ECB) President Christine Lagarde said inflation and the current rate level are in a good place. She said policy decisions will be made meeting by meeting and will depend on incoming data. German data were mixed. The GfK Consumer Confidence index for March fell to -24.7 from a revised -24.2 in February, below the -23.5 forecast. Germany’s fourth-quarter GDP was confirmed at 0.3% quarter-on-quarter and 0.4% year-on-year. Eurozone January HICP was revised to -0.6% month-on-month from -0.5%, while the annual rate was confirmed at 1.7%. Core HICP was confirmed at -1.1% month-on-month and 2.2% year-on-year.EURJPY Outlook And Trade Positioning
With the BoJ seen as reluctant to tighten, the Yen still looks vulnerable. That backdrop supports EUR/JPY, which is now testing the 184.60 area. Traders may look for ways to benefit if the pair continues to grind higher in the coming weeks. This cautious BoJ stance comes even though Japan’s national core CPI for January held at 2.0%, staying above the BoJ’s target for an extended period. This supports the view that political concerns may be outweighing the data, which can favour long EUR/JPY positions. The market is now focused on spring wage negotiations, which could still force a policy shift. Earlier, the carry trade—borrowing in low-yielding Yen to invest in higher-yielding currencies—drove markets through much of 2025. The gap between a patient ECB and a hesitant BoJ suggests this theme could continue. This keeps strategies that benefit from the interest-rate differential in focus. On the Euro side, the currency remains steady as the ECB stays in wait-and-see mode. Flash estimates for February showed Eurozone inflation at 2.6%, suggesting disinflation is not fast enough to force near-term rate cuts. This steadier ECB outlook makes the Euro a practical way to express a bearish view on the Yen. For derivatives traders, buying EUR/JPY call options may be attractive. This can capture upside if Yen weakness continues, while limiting risk to the premium paid. Out-of-the-money calls with one- to two-month expiries may offer a lower-cost way to position for another move higher. Because a surprise policy change or verbal intervention from Japanese officials can trigger sharp reversals—as seen last year in 2025—risk management matters. Buying cheap, far out-of-the-money EUR/JPY put options can help protect against a sudden drop. This can act as a hedge in a trade that remains politically sensitive. Create your live VT Markets account and start trading now.China’s commerce ministry says it will work with the US and says Beijing met its phase-one trade deal duties
China’s commerce ministry said it is willing to work with the US through the China–US economic and trade consultation mechanism. The ministry said China has met its obligations under the Phase One agreement.
It said it wants the US to assess the agreement’s implementation objectively. It also said China will defend its rights and interests, and urged the US not to shift blame or create new obstacles.
Market Reaction So Far
There was no immediate reaction in offshore trading. USD/CNH was down 0.16%, near 6.8666. A trade war is an economic conflict caused by protectionist steps such as tariffs. These measures can lead to retaliation, raise import costs, and increase the cost of living. The US–China trade dispute began in early 2018 after the US imposed trade barriers over claims of unfair practices and intellectual property theft. China responded with tariffs on US goods, including cars and soya beans. A Phase One deal was signed in January 2020. The pandemic reduced focus on the dispute. Later US policy kept tariffs in place and added more levies. The text says Trump imposed 60% tariffs on China on 20 January 2025, which increased tensions and pressured supply chains and inflation.Trading Implications And Positioning
So far, the market is largely ignoring China’s verbal reassurances. The small move higher in the yuan is minor. This suggests traders are paying more attention to the hard impact of tariffs reinstated in 2025 than to diplomatic statements. As a result, markets are stuck in a tense wait-and-see period, with a high risk of sudden policy changes from either side. The impact of the renewed trade war is already showing up in recent data. US Customs figures cited for January 2026 show container volume from major Chinese ports fell 45% versus January 2025, just before the new tariffs fully took effect. This suggests the disruption is not just a risk—it is already affecting supply chains. Because uncertainty is high, it may make more sense to focus on strategies that benefit from volatility rather than taking a strong one-way view. The VIX, often called the market’s “fear gauge,” has averaged above 22 over the past month, well above the calmer levels seen in 2024. Buying options on major indices or currency pairs such as the Australian dollar may be a practical way to position for potential turbulence. In 2018–2019, Beijing often used the currency to help offset tariff costs. Any sign that the People’s Bank of China is guiding the yuan weaker would be a key signal. For that reason, it may be useful to watch options markets for positioning that expects a higher USD/CNH exchange rate. Some sectors are also emerging as clearer bearish targets, especially technology. The semiconductor ETF has already underperformed the broader market by more than 8% since the start of the year. With Beijing signaling potential retaliation against US agriculture, we may also see ongoing volatility in soybean and corn futures, which could create opportunities for active traders. Create your live VT Markets account and start trading now.INGING’s Min Joo Kang expects Japan’s central bank to prefer a June rate hike, guided by data, despite pressure
The Bank of Japan (BoJ) is expected to keep making rate decisions based on economic data, even as it faces some government pressure and a slightly more dovish board. Inflation is expected to cool, with Tokyo CPI forecast to slow. That lowers the chance of an early policy move.
A rate rise in June looks more likely than an increase in April, because key wage and inflation data should be clearer by then. Any policy change will likely wait until the inflation outlook is more certain.
Policy Decisions Driven By Data
The BoJ board has nine members: the governor, two deputy governors, and six other members. The BoJ raised rates unanimously in December. Two academic candidates with reflationist views have been nominated to replace Asahi Noguchi and Junko Nakagawa, who retire in March and June. The nominees are Ayano Sato of Aoyama Gakuin University and Toichiro Asada of Chuo University, pending approval. Even with these changes, the board’s overall balance is expected to shift only slightly. Noguchi is already the most dovish member, and Nakagawa is generally seen as neutral to dovish. The BoJ is also expected to adjust the pace of bond purchases for fiscal year 2027, with an announcement likely at the April meeting. We see a growing chance of a BoJ rate hike by the April 2026 meeting, even with the slightly more dovish tilt we noted last year. The spring wage negotiations are a key trigger behind this change in expectations. This is similar to the period before the June 2025 hike, when strong data eventually pushed the Bank to act. Recent numbers have been stronger than expected. January core CPI reached 2.2%, staying above the BoJ’s target for a fourth straight month. The yen has also remained weak, with USD/JPY near 152, which adds pressure on policymakers to respond. This differs from the first half of 2025, when softer inflation gave the BoJ room to wait.Market Positioning For Yen Volatility
Traders may want to prepare for higher yen volatility in the coming weeks. Implied volatility on yen options is still fairly low, which suggests the market may be underpricing the risk of a surprise move at the March meeting. Buying JPY call options or selling USD/JPY call spreads may offer attractive risk-reward setups. We think the BoJ is waiting for confirmation from the “shunto” wage talks. Early reports suggest wage agreements could beat last year’s 3.6% growth. A strong result would likely push the BoJ toward a policy shift to keep inflation expectations anchored. As a result, short-term interest rate futures could react sharply to wage-related headlines in the weeks ahead. Create your live VT Markets account and start trading now.Eurozone core HICP inflation was unchanged at -1.1% month on month in January
Eurozone core Harmonised Index of Consumer Prices (HICP) was -1.1% month-on-month in January. This was the same as the previous month.
A core inflation reading of -1.1% in January is a strong deflation signal for the Eurozone. Because this measure excludes energy and food, it suggests weak consumer demand is becoming entrenched. This result also increases pressure on the European Central Bank to consider whether current policy is doing enough.
