GBP/JPY extended Tuesday’s rally and rose for a second day on Wednesday. It climbed above 211.00 in the first half of the European session, hitting its highest level in more than two weeks. The yen weakened after reports that Prime Minister Sanae Takaichi voiced concerns about further rate hikes during a meeting last week with BoJ Governor Kazuo Ueda. Japan also nominated two reflation-leaning members to the BoJ board. This pushed markets to scale back expectations for how fast rates will rise.

Risk Mood And Dollar Dynamics

A stronger appetite for risk lowered demand for the yen as a safe-haven, which supported the cross. The US dollar also eased on worries that President Donald Trump’s trade policies could hurt growth, which helped the pound. The move higher was also supported by technical buying after Tuesday’s break above 209.50–209.60. Even so, analysts said the upside may be limited. Traders are increasingly pricing in a Bank of England rate cut as early as March. At the same time, geopolitical risks and the chance of Japanese intervention to slow yen weakness could cap further gains in GBP/JPY. Looking back to late 2025, GBP/JPY surged after breaking above 211.00. As of February 25, 2026, the broad fundamental picture is still in place, with the cross now consolidating near 214.00. The interest rate gap between the UK and Japan remains a key driver of this strength.

Policy Divergence And Market Positioning

The cautious approach from the Bank of Japan that we saw last year has now become the clear policy stance. Japan’s national core inflation for January 2026 came in at a modest 2.1%, giving the BoJ little reason to deliver the aggressive rate hikes some had expected. This lack of action continues to weigh on the yen. By contrast, the rate-cut story for the Bank of England has shifted. UK inflation data for January 2026 showed core inflation still high at 3.9%, well above the BoE’s target. As a result, money markets now see the first cut arriving no earlier than the third quarter of 2026, which keeps the pound supported. For derivatives traders, this setup still favors long exposure. One approach is to buy GBP/JPY call options with May 2026 expiries and strikes around 216.00 to target further upside with defined risk. Another is to sell out-of-the-money put spreads below 210.00 to earn premium while the uptrend holds. Intervention risk from Japanese authorities remains important to watch. Verbal warnings often increase when USD/JPY reaches major psychological levels, and that typically overlaps with strength in GBP/JPY. If the pair moves into the 215.00–217.00 zone, traders should monitor comments from finance ministry officials. A sharp drop in global risk sentiment could also trigger a fast unwind of long positions. Create your live VT Markets account and start trading now.

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Pound Sterling rose against most major currencies, but not against the antipodean ones. It gained 0.23% to near 1.3520 versus the US Dollar during Wednesday’s European session. This move came despite dovish comments from Bank of England Governor Andrew Bailey. On Tuesday, he told Parliament’s Treasury Committee there is room for interest rate cuts if inflation returns to the 2% target.

Bailey Keeps Rate Cut Timing Unclear

Bailey did not say a cut would happen at the next policy meeting. He called a rate cut at the next meeting “a genuinely open question”. On Monday, Monetary Policy Committee member Alan Taylor urged two to three rate cuts in the near term. He pointed to downside risks to employment and signs that inflation pressures are easing. A softer US Dollar also helped GBP/USD. The US Dollar Index fell 0.2% to around 97.65. The Dollar weakened after President Donald Trump’s State of the Union address to Congress. He praised economic achievements and criticised the Supreme Court for ruling against tariffs.

Looking Back At Early 2025

At this time last year, in early 2025, the Pound was rising even as the Bank of England pointed clearly towards rate cuts. Markets focused on dovish comments from Governor Bailey and other MPC members, who were worried about rising unemployment. A weak US Dollar also helped lift GBP/USD towards 1.35. Since then, conditions have changed a lot. The two rate cuts in mid-2025 did not bring inflation fully under control. January 2026 data showed inflation at a stubborn 2.8%, still above the 2% target. As a result, expectations have shifted. Futures markets now price in only one possible BoE rate cut for the rest of this year, far fewer than the two or three expected back then. On the other side of the pair, the US Dollar did not stay weak. Stronger economic data and a Federal Reserve focused on sticky service-sector inflation pushed the Dollar Index from the 97s to around 104.50 today. This strength is the main reason GBP/USD now trades closer to 1.2550, well below the levels discussed a year ago. Because of this gap, traders may want strategies that can benefit from large moves around key data releases. Buying straddles or strangles on GBP/USD options ahead of the next BoE meeting or a UK inflation report could make sense. These strategies can profit from a big move either up or down, as the market is split between sticky inflation and a slowing economy. For traders with a directional view, the earlier strong downtrend in GBP may be fading now that inflation limits what the BoE can do. A cautious long position in GBP futures could be considered, as much of the dovish repricing may already be priced in. Hedging with short EUR/GBP positions could add protection, since the Eurozone economy shows deeper signs of weakness. However, the jobs risks flagged in 2025 have not disappeared. The UK unemployment rate rose to 4.5% last month. If the labour market weakens further, the BoE could be pushed to change course, which would hurt long GBP positions. For that reason, tight stop-losses are advisable on any bullish Sterling trades in the coming weeks. Create your live VT Markets account and start trading now.

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NZD/USD rose for a second straight day and traded near 0.5990 during European hours on Wednesday, moving closer to 0.6000. The pair climbed after the US Dollar weakened following President Donald Trump’s first State of the Union address of his second term. Trump said his administration had delivered a “turnaround for the ages,” pointing to lower inflation and stronger economic performance. He also highlighted actions on illegal immigration and fentanyl. He added that higher tariffs could be placed on countries that “play games” with trade agreements, after the Supreme Court struck down several global levies.

Fed Policy Outlook

NZD/USD gains may be limited if the US Dollar finds support from expectations that the Federal Reserve will keep rates unchanged for longer. Boston Fed President Susan Collins said it may be appropriate to hold rates at the current level for some time. Richmond Fed President Thomas Barkin said policy is “well-positioned” to manage risks. Last week, the Reserve Bank of New Zealand kept the Official Cash Rate at 2.25% and said policy would remain accommodative as inflation moves toward the middle of its target band. Traders see a low chance of the first rate hike happening before October or December. The latest push in NZD/USD toward 0.6000 looks like a short-term political reaction, not a lasting change in fundamentals. We view this rally as a chance to position for a pullback. The US Dollar’s brief weakness after the State of the Union speech may be hiding the factors that still support the currency. Our bearish view is mainly based on the wide gap between the two central banks’ policies. The Federal Reserve has kept the Fed Funds Rate at 5.25%–5.50% since mid-2023 to fight inflation, which averaged above 3% through 2025. By contrast, the RBNZ is holding the Official Cash Rate at a much lower 2.25%. This gives the US Dollar a clear yield advantage. Looking back at 2025 data, the US economy stayed resilient, while New Zealand struggled with a slow recovery after a short recession. New Zealand inflation has eased to 2.8% year over year, which is within the RBNZ target band. That gives the RBNZ little reason to raise rates soon. In the US, the Fed remains alert to the risk that inflation could pick up again.

External Drivers And Trade Headwinds

External forces are also pressuring the New Zealand Dollar. Growth in China, New Zealand’s largest trading partner, has remained slow. This has reduced demand for key exports. In addition, the Global Dairy Trade Price Index—a key measure of New Zealand’s export income—has fallen 7% over the past six months, creating another headwind for the Kiwi. Against this backdrop, the rally toward 0.6000 may offer an attractive level to open bearish positions. Derivatives traders could consider buying NZD/USD put options to benefit from a decline while limiting upside risk. Another approach is to build short positions using NZD futures contracts, based on the view that the pair could revisit last year’s lows. Create your live VT Markets account and start trading now.

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ICE Brent settled just over 1% lower after reports suggested Iran may be close to a deal, ahead of more US–Iran talks on Thursday. At the same time, the US has continued to build up military assets in the Middle East. President Trump also set a 10–15 day deadline, which would land in early March. The market is still carrying a risk premium because it is unclear whether a deal will be reached, and there is still a risk of military action if it is not. Prices remain highly sensitive to headlines tied to the talks and regional security.

Market Sensitivity To Iran Talks

US inventory data from the American Petroleum Institute (API) showed US crude stocks rose by 11.4m barrels over the week. That was far above expectations for a 1.9m barrel increase. The next OPEC+ meeting is set for 1 March, and supply increases are expected to resume from April. This is happening even though the oil balance suggests the market does not need extra supply. With Brent trading around $82 a barrel, the market remains highly reactive to geopolitical headlines from the Middle East. Prices are being pulled between supply concerns and diplomatic signals, creating uncertainty in the weeks ahead. Traders should be prepared for sharp moves after any new developments. This setup feels familiar. Similar US–Iran tensions in 2025 pushed a large risk premium into prices ahead of diplomatic deadlines, only for it to fade quickly when positive news emerged. The risk of military action was a constant theme then, much like the shipping risks we track in the Red Sea today.

Options Positioning For Elevated Volatility

With these mixed signals, derivatives traders may want strategies that can benefit from higher volatility. The market is caught between a supply-driven drop and a geopolitically driven spike, which makes simple directional trades riskier. Options strategies such as long straddles or strangles may perform well no matter which way prices break in early March. On the bearish side, recent inventory data argues against higher prices. The latest EIA report showed a surprise build of 4.2m barrels in US crude stocks, far above expectations for a small draw. This may signal weaker underlying demand than current prices imply—something also seen after large API builds last year. Traders should also watch the upcoming OPEC+ meeting scheduled for March 4th. With prices above $80, there is a growing view that the group will avoid deeper cuts and may signal more supply returning in Q2. That would likely cap rallies that are not driven by a major supply disruption. For the coming weeks, options can help traders define risk clearly. Buying puts can protect against a sudden drop if the geopolitical risk premium disappears after a diplomatic breakthrough. Holding long calls keeps exposure to a sharp jump if tensions escalate into direct conflict. Create your live VT Markets account and start trading now.

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The US dollar stayed firm against other currencies on Tuesday after a volatile start to the week. It then eased on Wednesday as investor mood improved. Eurostat is expected to publish revised January Harmonised Index of Consumer Prices (HICP) data. In the US, markets are watching comments from Federal Reserve policymakers. US equities jumped on Tuesday, and the USD Index fell from its intraday highs before ending the day slightly higher. Early Wednesday in Europe, US stock index futures were flat, and the USD Index was lower near 97.70.

Dollar Inflation And Fed Outlook

During Asian trading on Wednesday, President Donald Trump delivered his State of the Union speech. He said there is no inflation and described “tremendous growth.” He also linked tariffs to an economic turnaround and said trading partners want to keep existing trade deals despite a Supreme Court ruling. EUR/USD traded near 1.1800, up more than 0.2% on the day after finishing Tuesday slightly lower. USD/JPY, after three straight daily gains, traded around 156.00. Japan’s Deputy Chief Cabinet Secretary Masanao Ozaki said monetary policy details should be left to the Bank of Japan. Gold fell more than 1% on Tuesday but held above $5,100, then rebounded toward $5,200. Australia’s CPI inflation was unchanged at 3.8% in January versus 3.7% expected, and AUD/USD rose above 0.7100. GBP/USD traded above 1.3500. Last year at this time, we saw the US dollar lose momentum, with the DXY sliding toward 97.70 after political claims of “no inflation.” Today looks different. The January 2026 CPI report came in at 3.1%, showing inflation is still a key issue for the Federal Reserve. With inflation staying firm, the Fed is likely to keep a hawkish tone, which makes a long, steady dollar decline less likely in the next few weeks. Because Fed commentary can surprise markets, traders may want strategies that benefit from volatility rather than picking a direction. One example is buying a straddle on the USD using options on an ETF such as UUP. This can position you for a large move up or down, while reducing the risk of betting on the wrong direction in a headline-driven market.

Usd Jpy Options Income Strategy

A year ago, USD/JPY was moving sideways around 156.00 as markets waited for signals on Bank of Japan policy. Since then, the BoJ started normalizing policy in late 2025, which has supported the yen. This morning, USD/JPY is closer to 149.50, making 156.00 an important technical resistance level. That setup can make selling out-of-the-money call options on USD/JPY attractive for income. A strike around 155.00 could offer a meaningful premium and still leave room for smaller rebounds. A return to the old highs may be less likely unless the BoJ unexpectedly shifts away from its tightening bias. Last February, gold was climbing toward $5,200 an ounce and stayed strong despite other market moves. Now, gold is struggling to hold $4,900 as higher US real yields make non-yielding assets less appealing. US 10-year real yields have risen above 2.1% in February 2026, which is very different from the low-yield backdrop that supported gold in early 2025. If you are worried about more downside, buying put options on gold, or on a gold ETF like GLD, can provide a direct hedge. This can help protect a portfolio from a break below key support levels, especially if upcoming US jobs data is strong and reinforces the Fed’s hawkish stance. We also remember strong risk-on sentiment in equities at this time last year, but the market mood is now more cautious. The VIX is hovering around 19, up from the low teens through much of early 2025. This suggests investors are more concerned about corporate profit margins, and it can make aggressive bullish derivative trades riskier than they were a year ago. Create your live VT Markets account and start trading now.

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USD/JPY found support near 155.35 on Wednesday after pulling back from a two-week high set the day before. It traded around 155.75, almost unchanged on the day, after rising over the past week. After the Fed struck a hawkish tone, the US Dollar still saw fresh selling. Traders were worried about new trade-policy disruptions linked to US President Donald Trump. Geopolitical risks also lifted demand for safe-haven assets like the Japanese Yen, which added pressure on USD/JPY during the session.

Japan Policy Signals And Yen Dynamics

Reports said Japan’s Prime Minister Sanae Takaichi voiced concerns about further rate hikes in a meeting last week with BoJ Governor Kazuo Ueda. Japan also nominated two reflationists to the BoJ board. This lowered expectations for faster rate increases and helped limit JPY strength. Repeated rebounds from the 200-day EMA breakout area, followed by a move higher, suggest the technical tone is improving. The MACD is above its signal line and back in positive territory, while the RSI sits near 54. Resistance stands at 156.90, then 158.40, with 160.00 above that. Support is at 155.00, then 153.50, and 152.70 near the 200-day EMA. In late 2025, we highlighted a constructive setup, and the bullish USD/JPY case played out as expected. The pair broke above the 156.00 and 158.40 resistance levels we tracked and later peaked just above 160.00 in December 2025. After a healthy pullback, USD/JPY is now consolidating near 157.80, which may offer a fresh entry area.

Policy Divergence And Trade Volatility

The key driver remains the wide gap between central bank policies, which has grown even larger. US inflation for January 2026 came in at a firm 3.2%, keeping the Federal Reserve hawkish at its latest meeting. In contrast, Japan’s national CPI last month was only 2.1%, allowing the Bank of Japan to signal that any tightening will be very gradual. This gap in policy continues to limit meaningful Japanese Yen strength. In late 2025 data, Japan’s Tankan survey for large manufacturers showed weaker business sentiment, supporting the BoJ’s cautious stance. This softer backdrop for the yen can help support long USD/JPY positions. For derivatives traders, this setup favors strategies that benefit from a slow grind higher or limited downside. Consider buying call options with strikes around 159.00 and 160.00, with expirations in April or May 2026. This targets a possible retest of prior highs while capping risk to the premium paid. Still, US trade-policy headlines can spark sharp volatility, as we saw last year. Surprise tariff news could trigger a rush to safety and a quick, temporary drop in USD/JPY. To help manage this risk, a small position in out-of-the-money puts can work as a hedge against bullish exposure. Create your live VT Markets account and start trading now.

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USD/JPY found support near 155.35 on Wednesday after pulling back from a two-week high set the day before. It traded near 155.75, roughly flat on the day, and maintained the upward trend seen over the past week. The US dollar came under selling pressure despite a hawkish Federal Reserve outlook. Concern over US President Donald Trump’s trade policies, along with broader geopolitical risks, increased safe-haven demand for the yen. This added intraday pressure on USD/JPY.

Technical Outlook And Key Levels

Reports said Japan’s Prime Minister Sanae Takaichi voiced concerns about further rate hikes during a meeting last week with Bank of Japan Governor Kazuo Ueda. Japan also nominated two reflation-leaning members to the BoJ board. These developments reduced expectations for faster rate hikes, which limited yen strength. From a technical view, repeated rebounds from the 200-day EMA breakout area keep the bias bullish. The MACD has crossed above its signal line and moved back into positive territory. The RSI is near 54 and remains above its midpoint. Resistance is at 156.90, then 158.40. If 158.40 breaks, 160.00 is the next major level. Support is at 155.00, then 153.50, with 152.70 near the 200-day EMA. Looking back at our 2025 analysis, the bullish setup we highlighted played out well. USD/JPY broke above the key resistance at 158.40 and later moved through the major 160.00 level that year. This confirmed the underlying strength we saw building and rewarded traders positioned for further gains. The main drivers of yen weakness have largely stayed in place. As expected, the Bank of Japan has remained cautious. Recent data supports that stance: Japan’s core CPI for January 2026 came in at 1.9%, still slightly below the 2% target. This ongoing shortfall continues to push back expectations of a more hawkish shift from the BoJ.

Strategy And Risk Framework

On the other side, the US dollar is facing headwinds, similar to what began to appear in 2025. US weekly jobless claims rose to 235,000 this month, the highest level in several quarters. This points to a modest cooling in the labor market. As a result, the pair may not rally in a straight line, and dips could offer opportunities. With the uptrend still in place but the dollar softer, traders may consider buying call options to target further gains while limiting downside risk. With spot trading around 161.50, one approach is to buy out-of-the-money calls—for example, a 163.00 strike expiring in the next few weeks. This offers defined risk while keeping long exposure, and it reduces the impact of a sharp, unexpected pullback. The 160.00 level, which was our main upside target in 2025, is now an important support zone. Treat this area as a key line in the sand. A sustained break below 160.00 would weaken the near-term bullish view and suggest a deeper correction is developing. Create your live VT Markets account and start trading now.

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France’s consumer confidence index rose to 91 in February. This was slightly above the forecast of 90. The February result beat expectations by 1 point. It suggests consumer sentiment was a bit stronger than predicted.

Consumer Confidence Slightly Beats Forecast

France’s consumer confidence reading for February was 91, just above the expected 90. This small upside surprise suggests households may be a little more resilient than markets assumed. That could support short-term opportunities in French consumer discretionary names, including luxury and automotive stocks. One approach is to look at short-dated call options in those areas. However, it’s important to keep the context in mind. A reading of 91 is still well below the long-term average of 100. In 2025, this indicator struggled to rise much, showing that cost-of-living worries have not gone away. Because of that, it may be safer to focus on income strategies—such as selling out-of-the-money puts on the CAC 40 to collect premium—rather than positioning for a big rally. The European Central Bank will likely notice the firmer tone in consumer sentiment, especially with January Eurozone inflation still around 2.6%, above the ECB’s target. A more confident consumer can help sustain demand and keep price pressures in place, which could reduce the need for near-term rate cuts. This makes positions that benefit from stable rates over the next quarter—such as certain interest-rate futures strategies—more appealing. Since the data was only a modest surprise, implied volatility may drift slightly lower.

Implied Volatility Likely To Ease

Markets have largely absorbed the news, pointing to a calmer period rather than a clear new trend. If volatility continues to soften, selling volatility—such as through options linked to the VSTOXX index—could be attractive over the next few weeks. Create your live VT Markets account and start trading now.

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EUR/USD rose 0.27% to near 1.1800 in European trading on Wednesday as the US Dollar weakened after President Donald Trump’s State of the Union address. The US Dollar Index (DXY) slipped 0.2% to around 97.65. In his speech, Trump highlighted his economic record and criticised a Supreme Court ruling against his tariff policy, calling it “unfortunate”. He said tariffs had helped drive an “economic turnaround”.

Shift In Market Drivers

Markets are also focused on the Federal Reserve. The Fed is not expected to cut interest rates at its March and April meetings. In Europe, attention is turning to Germany’s flash Harmonised Index of Consumer Prices (HICP) for February, due on Friday. Germany’s HICP is forecast to rise 0.5% month-on-month, after a 0.1% fall in January. The annual rate is seen at 2.1%. Destatis publishes the HICP each month, and it is harmonised across the EU to allow comparisons. From a technical view, EUR/USD traded near 1.1805. The 14-day RSI sat in the 40.00–60.00 range, and price was near the 20-day EMA at 1.1800. A daily close above 1.1835 could open a move toward 1.1900. A drop below 1.1742 could point to 1.1670. The date today is 2026-02-25T11:11:04.818Z. A year ago, EUR/USD was trying to break out of a descending triangle near 1.1800, driven by political headlines. Today, the pair is much lower, around 1.0850. The focus has shifted to differences in central bank policy. Because the main drivers have changed, last year’s trading approach no longer fits the market.

Options And Technical Outlook

In February 2025, the view was that the Fed was unlikely to cut rates, which supported the dollar. Now in 2026, the latest US CPI shows inflation is still sticky at 3.1%. The Fed has stayed hawkish, and the dollar has strengthened sharply over the past 12 months. Markets are now more firmly priced for “higher for longer” than they were last year. At the same time, the euro has weakened from the optimism linked to Germany’s inflation outlook in 2025. Recent Eurostat data shows Eurozone headline inflation has eased to 2.5%, while growth has stalled near zero. This increases pressure on the European Central Bank to cut rates sooner than the Fed, which is a major headwind for the euro. For traders, this points to more downside risk in EUR/USD. One way to express this view is to buy put options with a strike around 1.0700 and an expiry over the next 60 days. This keeps risk defined while giving exposure to a potential break below recent lows. Implied volatility has been relatively low, which may create opportunity. Sharp moves are possible around the March and April central bank meetings. If you expect a large swing but are unsure of direction, a long straddle could benefit from a big move either way, especially if policy surprises the market. The technical picture also supports the bearish shift. The 1.1835 resistance level from last year is no longer relevant. The key resistance level now is the psychological 1.1000 area. Critical support sits near the yearly low around 1.0720. Any rallies toward 1.0950 may be better viewed as chances to start or add to short positions. Create your live VT Markets account and start trading now.

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EUR/USD is getting modest support. This is mostly due to expected US dollar weakness, not euro strength. The euro does not look clearly undervalued. The European Central Bank is also staying cautious, even as Germany adopts a more expansionary fiscal stance. The Federal Reserve sounds firmer than markets expect. A later start and smaller scale US rate-cut cycle could cap further gains in EUR/USD.

Central Bank Divergence Limits Upside

The euro has benefitted as the main alternative to the US dollar when the dollar’s risk premium rose, driven by erratic US policymaking. This briefly pushed EUR/USD above 1.20 in January. Even so, the upside seems more limited than for currencies like JPY or CNY, where undervaluation is easier to argue. Germany’s fiscal approach should help keep Eurozone growth steadier through 2026. We expect upside in EUR/USD to stay constrained in the coming weeks because central bank paths are diverging. The Federal Reserve is signaling it will ease policy more patiently than markets anticipate. This mix should limit large gains in the pair. Recent US data supports this firmer Fed stance. January 2026 core PCE inflation held at 2.9%, and the latest jobs report showed a resilient labor market. These readings lower the pressure for the Fed to deliver deep cuts, which helps the dollar’s relative appeal.

Potential Approaches For Derivative Traders

By contrast, Eurozone inflation is still cooling. The latest Harmonised Index of Consumer Prices (HICP) eased to 2.1%. That gives the ECB more room to consider easing sooner than the Fed. A cautious tone from ECB officials also supports the view that the euro lacks strong, independent drivers for sustained appreciation. We remember how erratic US policymaking briefly lifted the pair above 1.20 in January 2025, as the dollar risk premium rose. But that was an unusual setup. Today, the euro still lacks a strong undervaluation case to repeat that kind of move. Germany’s steadier fiscal policy may provide a floor, but it is unlikely to drive a major rally on its own. For derivative traders, this backdrop may favor selling out-of-the-money EUR/USD call options into rallies to collect premium. Bearish setups, such as buying puts or using put spreads, may also be considered to hedge or seek gains if the pair falls. Overall, conditions look less supportive for strategies that depend on a strong, sustained uptrend. Create your live VT Markets account and start trading now.

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