EUR/USD rose on Monday as the US Dollar fell to a six-week low, with the US Dollar Index (DXY) at 98.36, down 0.29%. The pair traded at 1.1757–1.1758, up 0.32%.

Improved risk mood supported the euro, with the pair near the 1.1800 level. The two-week ceasefire was described as fragile, with the US and Iran possibly returning to talks after a meeting last Saturday.

Strait Of Hormuz Tensions

Talks in Pakistan lasted 21 hours. Iran was unwilling to give up its nuclear programme and control of the Strait of Hormuz, and the White House then imposed a blockade in the Strait of Hormuz.

Donald Trump said Tehran wants a deal. The New York Post reported Iran was studying a halt to uranium enrichment, a US condition for ending the war, and EUR/USD rose after the report.

US Existing Home Sales fell to a nine-month low of 3.98 million in March, down 3.6% month-on-month. In Hungary, Peter Magyar won by a landslide over Viktor Orban, who had been in power for 16 years.

ECB Vice President Luis de Guindos said the conflict impact depends on its duration, and ECB’s Vujcic said energy prices are within the baseline. Markets were watching March PPI, the ADP Employment Change 4-week average, Fed speakers, and ECB remarks from Philip Lane (twice) and Mario Cipollone.

How The Macro Picture Changed

We remember looking at the market in 2025 when a fragile truce in the Middle East and a weak US housing report pushed the EUR/USD toward 1.1800. Today, on April 14, 2026, the landscape is entirely different, with the pair struggling to hold ground around 1.0750. The dynamics that drove the dollar down last year have clearly reversed course.

The US Dollar Index (DXY), which had fallen to the 98 level, is now trading firmly above 105.5. This reversal is largely due to divergent central bank policies, with recent US inflation data for March 2026 coming in at a stubborn 3.4%, forcing the Fed to maintain a hawkish stance. Meanwhile, with Eurozone inflation having cooled to 2.2%, the European Central Bank is now openly discussing a rate cut for this summer.

The geopolitical focus has also shifted significantly since the tensions in the Strait of Hormuz dominated last year’s news. While the pro-EU political changes in Hungary offered the Euro temporary support in 2025, broader economic fundamentals are now the main driver. The market appears less sensitive to Middle East headlines and more focused on interest rate differentials between the US and Europe.

Given this context, traders should consider strategies that benefit from a stronger dollar and weaker euro. Buying put options on the EUR/USD with expiration dates in June or July can offer a way to profit from a potential ECB rate cut. This approach provides downside exposure while clearly defining the maximum risk involved in the trade.

For those anticipating increased market movement around the next central bank meetings, a long straddle could be effective. This strategy involves buying both a call and a put option, profiting if the EUR/USD makes a significant move in either direction. With US employment data and Eurozone inflation figures due in the next few weeks, implied volatility is likely to rise, creating opportunities for this kind of play.

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HSBC Asset Management says China’s technology sector remains a key equity theme, even as attention moves towards tensions in the Middle East. It links this to gains in the Shenzhen Chinext index, which it says are supported by advanced manufacturing, green energy and semiconductors.

Over the past two years, the Shenzhen Chinext index, often called the “China Nasdaq”, delivered a double-digit return. China’s latest five-year plan put tech capability as a priority, alongside higher productivity and economic self-reliance.

China Technology Sector Outlook

The plan is part of efforts to rebalance the economy and build domestic sources of growth. The article says tech, AI and other innovation-led industries remain central to China’s equity market outlook.

The article was created with the help of an Artificial Intelligence tool and reviewed by an editor.

The long-term focus on China’s innovation-led sectors remains relevant. We recall the analysis from 2025 which highlighted the ChiNext index’s stellar performance during the 2023-2024 period, driven by strong policy support. This foundation continues to influence our current market view.

Given the ChiNext index has posted a steady 4% gain so far this year, the underlying bullish trend persists. This sustained momentum suggests that buying call options on ChiNext-tracking ETFs could be a viable strategy to capture further upside. We see this as a continuation of the theme that gained traction over the last few years.

Options Strategies For Chinext

Recent economic data reinforces this positive outlook, with China’s Q1 2026 GDP growing by 4.9% and March industrial production figures showing particular strength in high-tech manufacturing. This fundamental support may make selling cash-secured puts an attractive strategy for traders willing to acquire shares on a potential dip. This suggests a solid floor is forming under these key sectors.

We have observed that implied volatility on these indexes has cooled from its highs in late 2025. This environment makes purchasing options less expensive than it was previously. Therefore, initiating long call positions to bet on a rise in the coming weeks is more cost-effective now.

The government’s commitment, reaffirmed during the March 2026 policy meetings, to cultivating “new quality productive forces” provides a significant tailwind. This explicit backing for AI and semiconductors reduces policy risk and strengthens the case for continued investment. It signals that the government’s priorities are unchanged.

Considering the steady but not explosive growth this year, we might also look at bull call spreads. This approach would help finance the purchase of a call option by selling another one at a higher strike price. It lowers the upfront cost while still profiting from a moderate rise in the ChiNext index.

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USD/CAD fell about 0.40% on Monday to near 1.3790, as the Canadian Dollar rose with higher oil prices and a softer US Dollar. The pair broke below 1.3840, made a fresh weekly low, and reversed most of the early April move towards 1.3950, setting up a second straight weekly drop.

WTI jumped as much as 9% to above $105 per barrel after President Donald Trump announced a US blockade of the Strait of Hormuz. The route has been effectively closed since late February, after talks between the US and Iran in Pakistan collapsed.

Energy Prices Lift The Canadian Dollar

Higher energy prices supported the Canadian Dollar as the Bank of Canada held its overnight rate at 2.25% in March. The next BoC decision is due on 29 April with the Monetary Policy Report.

US March PPI is forecast at 1.2% month-on-month (0.7% prior) and 4.6% year-on-year (3.4% prior). The data comes ahead of the 28–29 April FOMC meeting.

Technically, USD/CAD traded near 1.3792, below the 5-minute 200-EMA at 1.3819 with Stochastic RSI near 84. On the 4-hour chart it sat near the 200-EMA at 1.3791, with support at 1.3790 and 1.3680, while the daily chart showed support at the 50-day EMA (1.3773) and resistance at the 200-day EMA (1.3815).

Looking back at the situation from April 2025, we see a market driven by a sudden geopolitical crisis and spiking oil prices. Today, the environment is notably different, with geopolitical tensions in the Strait of Hormuz having eased significantly over the past year. This relative calm has brought stability to energy markets, which dramatically changes the outlook for the Canadian dollar.

Policy And Volatility Shift Trading Playbooks

The surge in West Texas Intermediate crude to over $105 per barrel that we saw in 2025 is a distant memory. As of this week, WTI is trading in a more stable range around $84.50 per barrel, reflecting a balanced global supply picture rather than the conflict-driven panic of last year. This removes the extreme tailwind that was boosting the loonie, suggesting that any CAD strength will need to come from other fundamental factors.

Central bank policy has also evolved considerably since the Bank of Canada was holding rates at 2.25% last spring. With Canadian inflation having cooled to a 2.7% annual rate as of the last report, the BoC is now in a holding pattern at 4.50%, with markets pricing in the possibility of a rate cut this summer. This contrasts with the uncertainty of 2025, when rising energy costs were threatening to complicate monetary policy.

The USD/CAD exchange rate, currently near 1.3620, reflects this new reality, trading well below the volatile 1.3790 levels seen during the height of the crisis in 2025. The US Producer Price Index data that caused concern last year is now showing a more subdued trend, with the latest figures indicating a 2.1% year-over-year increase. This suggests inflationary pressures from the production side are contained, giving the Federal Reserve more flexibility.

For derivative traders, this calmer environment suggests a shift away from strategies that thrive on high volatility. Last year, buying options like straddles on USD/CAD would have been profitable due to the large price swings, but now, selling volatility appears more attractive. We should consider strategies like writing covered calls against existing USD/CAD long positions or selling cash-secured puts at levels we find attractive to enter a long position, such as near the 1.3500 mark.

Given the potential for the Bank of Canada to cut rates ahead of the Federal Reserve, the Canadian dollar’s upside seems limited. This outlook makes bearish or neutral-to-bearish strategies on the CAD more compelling. Traders could look at buying USD/CAD call spreads to profit from a gradual grind higher in the currency pair, which limits risk while capturing potential upside driven by monetary policy divergence.

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OCBC strategists Sim Moh Siong and Christopher Wong expect Asian foreign exchange to start the week weaker. They link this to renewed geopolitical uncertainty, firmer crude prices, weaker risk appetite and demand for the US dollar.

They flag high-beta and net oil-importer currencies as more exposed, including KRW, THB, PHP and INR. They expect lower-beta currencies such as CNH and SGD to be more resilient.

Limited Hormuz Transit Resumes

They note that limited transit through the Strait of Hormuz has resumed. This may reduce the chance of markets pricing in the most severe disruption scenario, pointing to a softer open rather than a disorderly sell-off.

If conflict lasts and oil prices stay elevated rather than surge, they expect a move towards terms-of-trade differences. They prefer AUD over EUR and remain defensive on oil-importing Asian currencies, including KRW, INR, THB and PHP.

Given the recent rise in Brent crude to over $95 a barrel and the US Dollar Index pushing past 106.5, we expect a weaker start for many Asian currencies. This environment of geopolitical uncertainty is creating defensive demand for the dollar. We see this as a direct echo of the patterns observed during the Middle East tensions back in 2025.

Last year, we saw how high-beta, net oil importers like the Korean won and Thai baht underperformed significantly when oil prices became sticky. South Korea’s heavy reliance on energy imports, for instance, caused the won to weaken past 1,380 against the dollar during that period. Traders should consider buying puts on currencies like the KRW, THB, and INR to hedge against further downside in the coming weeks.

Favor Aud Over Eur

Conversely, we favor energy exporters like the Australian dollar, which benefits from higher commodity prices, especially when compared to energy-importing blocs like the Eurozone. Australia’s trade surplus just beat expectations last month, widening to A$12 billion on the back of strong LNG and coal exports. This reinforces our view to look at strategies like call spreads on AUD/EUR, anticipating further divergence.

The Chinese yuan and Singapore dollar should prove more resilient in this environment, much like they did in 2025. Singapore’s strong monetary framework and China’s managed currency regime provide a buffer against this type of external shock. These are not the currencies we would be looking to short right now.

The key is that oil prices seem sticky rather than spiking uncontrollably, as major shipping lanes remain open, albeit with higher insurance costs. This suggests a gradual grind rather than a market panic, making longer-dated options more attractive than short-term gambles. We will be watching headlines closely for any signs of de-escalation, which could be a trigger to take profits on these defensive positions.

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DBS Group Research economist Philip Wee expects the Monetary Authority of Singapore to reverse earlier easing by normalising the SGD Nominal Effective Exchange Rate (NEER) policy band. He expects MAS inflation forecasts to rise due to an energy shock, and notes the Singapore dollar’s trade-weighted level is above the band’s mid-point.

Market volatility is expected to return after the failure of Sunday’s Islamabad Summit between US Vice President J.D. Vance and Iranian Speaker Mohammad Bagher Ghalibaf. The report links this to hopes of de-escalation in the US-Iran conflict fading.

Hormuz Supply Shock Drives Policy Shift

The report says Deputy Prime Minister Gan Kim Yong described the Hormuz chokepoint as the worst since the 1973 oil embargo. It adds that this is treated as a supply shock rather than a normal price move.

It forecasts MAS will reverse two slope reductions made in January and April 2025. It predicts MAS will raise the core inflation forecast to 1.5–2.5% from 1–2%, and lift the CPI-All Items projection.

It states the SGD NEER is about 1.8% above its mid-point. It adds USD/SGD still follows the global US dollar direction.

We believe the Monetary Authority of Singapore (MAS) is about to tighten its policy by strengthening the Singapore dollar. This comes after the breakdown of the Islamabad Summit, which has pushed global energy prices higher. The situation is being viewed as a serious supply shock, meaning the central bank will likely act to shield the economy from imported inflation.

Trade Ideas For A Stronger Singapore Dollar

This move would be a direct reversal of the easing we saw in January and April of last year, 2025. Recent data from March 2026 showed Singapore’s core inflation hitting 2.1% year-on-year, already touching the upper end of the MAS’s old forecast range. With Brent crude trading above $115 a barrel since President Trump’s blockade decision, we expect the MAS to officially raise its inflation forecasts at the next meeting.

We saw a similar playbook back in 2022 when the MAS aggressively tightened policy multiple times to combat inflation from the Ukraine conflict energy shock. The Deputy Prime Minister’s comments framing the Hormuz situation as the worst since 1973 suggest a similarly strong response is coming. Traders should prepare for the SGD NEER policy band to be re-centered or for its slope to be steepened to allow for faster appreciation.

For derivatives traders, this signals an opportunity to position for a stronger Singapore dollar in the coming weeks. The trade-weighted SGD is already trading firmly in the upper half of its policy band, around 1.8% above the midpoint. This shows underlying strength even before any official policy shift.

However, the US dollar is also gaining strength as a safe-haven asset, with the DXY index surging past 108. This means that while the SGD is likely to appreciate, its gains against the USD might be limited. The downward move in the USD/SGD pair could be a grind rather than a sharp drop.

Therefore, traders could consider buying SGD call options against a basket of other currencies, such as the Euro or Yen, which do not have the same safe-haven demand. For those focused on the main pair, selling low-premium, out-of-the-money USD/SGD call options could be a way to express the view that significant upside is capped. This strategy benefits from the expected strength in the SGD while acknowledging the powerful opposing force from the global USD.

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Gold (XAU/USD) fell about 0.20% on Monday as oil prices rose and inflation concerns increased. It traded at $4,734 after hitting $4,750 earlier in the day.

US President Donald Trump said Iran wanted to make a deal “very badly” and that it “did not agree to not having a nuclear weapon”. He also said the US would “get nuclear material back”.

Middle East Risk And Dollar Reaction

The US Dollar Index (DXY) turned negative after these comments, down 0.09% at 98.61. The US began a blockade in the Strait of Hormuz at 10:00 AM EDT on Monday to stop Iranian-flagged vessels and ships leaving Iranian ports.

US Existing Home Sales fell to 3.98 million in March, down 3.6% month on month and a nine-month low. Markets focused on the US-Iran situation instead.

San Francisco Fed President Mary Daly said a rate hold was more likely than a hike, and rates could stay steady if inflation remains high. US CPI rose 3.3% year on year in March, nearly 1% higher than February.

The US 10-year Treasury yield was 4.30%, down 1.5 basis points. Upcoming data includes ADP Employment Change (4-week average) and March PPI, forecast at 4.6% year on year.

Technical Levels And Volatility Setup

Technically, gold rebounded from $4,639, with the 20- and 100-day SMAs at $4,658–$4,668. Resistance is $4,750, then $4,800, $4,857, and the 50-day SMA at $4,897; support is $4,700, then $4,668/58 and $4,600.

Given the current date of April 14, 2026, gold is caught between the risk of a wider conflict with Iran and a Federal Reserve that is reluctant to cut rates due to inflation. The new US blockade in the Strait of Hormuz will be the primary driver of volatility, so we believe traders should consider strategies that benefit from large price swings. This means looking at options like straddles or strangles, which can profit whether the price moves sharply up or down.

The inflation picture is a significant headwind for gold, as it keeps Treasury yields high and strengthens the case for the Fed to hold rates. With March CPI jumping to 3.3%, a pattern similar to the sharp inflation spike we saw in early 2022, the upcoming 4.6% PPI forecast will be critical. This sustained pressure on prices makes buying long-dated call options expensive, suggesting traders might prefer call spreads to reduce the initial cost.

Rising Crude Oil prices are fueling these inflation fears, but we must also watch for any de-escalation in the Middle East. President Trump’s comments about Iran wanting a deal introduce serious headline risk for anyone holding long gold positions. This makes it crucial to protect against a sudden price drop, possibly by purchasing put options with a strike price below the key $4,700 level.

From a technical standpoint, the area around $4,660, where the 20- and 100-day moving averages meet, provides a strong support floor. We expect to see traders selling cash-secured puts with strike prices near this level, allowing them to collect premium while waiting for a potential dip to buy. Volatility in gold options will likely remain high, just as we saw the Gold Volatility Index (GVZ) stay above 18 during the geopolitical events of 2024.

In the coming weeks, the market will focus on the Producer Price Index report and any further developments from the Strait of Hormuz. A surprisingly high inflation number could send gold down to test the $4,660 support, while any escalation of the blockade could easily push it past the $4,800 resistance. Traders should be prepared for either outcome, as the current environment does not favor a one-sided bet.

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The US Dollar Index (DXY) fell on Monday after reports of failed Iran–US peace talks and that the US Navy was moved to close the Strait of Hormuz. Market pricing also showed reduced safe-haven demand after Iran indicated it might lower uranium enrichment.

EUR/USD rose towards 1.1765, with the move driven mainly by a softer US Dollar and no new Eurozone data. GBP/USD extended a week-long rise near 1.3500, helped by the weaker Dollar.

Major Moves In FX And Commodities

USD/JPY slipped towards 159.30 as the Yen made modest gains and the Dollar lost support. AUD/USD climbed towards 0.7090 as risk sentiment steadied and the Dollar weakened.

WTI crude dropped to $98.90 per barrel despite earlier concerns about disruption in the Strait of Hormuz. Gold traded near $4,730 as attention stayed on risk assets.

The calendar includes the US IMF Meeting on April 14–17, plus data such as China trade figures on April 14, France CPI and Eurozone industrial production on April 15, China GDP Q1 and UK GDP on April 16, and US jobless claims on April 16.

WTI is a US-sourced crude benchmark traded via Cushing and affects and is affected by supply and demand, wars, sanctions, OPEC decisions, and the US Dollar. API and EIA inventory reports are weekly; their results are within 1% of each other 75% of the time, and OPEC has 12 members.

Key Lessons From Last Year

We remember how this time last year, in April 2025, markets reacted strangely to the Iran-US headlines. The US dollar actually weakened despite the apparent safe-haven bid, as traders called the bluff on the escalation. This serves as a key lesson on how the market is now more focused on economic substance than political posturing.

Today, the US Dollar Index is strong, trading firmly above 105.5, which is a stark contrast to the weakness seen after the 2025 incident. This strength is underpinned by sticky inflation, with the latest March Consumer Price Index data showing a 3.4% annual increase, reinforcing the Federal Reserve’s “higher for longer” interest rate stance. Derivative traders should consider that dollar weakness is unlikely without a significant downturn in economic data.

As a result, the EUR/USD is struggling to hold above 1.0700, pressured by both dollar strength and growing expectations that the European Central Bank will cut rates by June. Similarly, GBP/USD is facing headwinds around the 1.2550 level, as the strong dollar narrative is overwhelming most other currencies. Options strategies that bet against major upside in these pairs, such as selling call spreads, could be advantageous.

The situation with the Japanese Yen is becoming critical, as the dollar’s strength has pushed the USD/JPY pair toward the 157.00 level. Unlike last year when the yen gained ground, it is now extremely weak, and we must be on high alert for currency intervention by Japanese authorities. Any such move would cause a sudden, sharp drop in this pair, so holding long positions carries significant volatility risk.

WTI crude oil is trading around $85 per barrel, lower than the $98.90 price we saw during the 2025 Strait of Hormuz scare. The current price is supported not by fleeting geopolitical fears but by fundamental factors, including disciplined OPEC+ supply cuts and a recent Energy Information Administration (EIA) report showing a draw of 2.1 million barrels in US inventories. This suggests price stability is more likely now than it was during the volatile news cycle of last year.

Implied volatility in the options market, as measured by the VIX index, is currently hovering at a moderate level near 15. This is far from the panic levels seen during past geopolitical flare-ups, indicating the market is not pricing in a major shock. This environment could make it relatively cheap to buy options to position for breakouts ahead of this week’s key economic data releases.

Looking ahead, the market’s focus is squarely on the economic calendar, especially today’s US Producer Price Index (PPI) and industrial production figures later this week. These releases will provide a much clearer signal for the dollar’s next move than the kind of unpredictable headlines that briefly shook markets in 2025. We believe positioning for data-driven moves, rather than headline reactions, will be the more profitable strategy in the coming weeks.

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Iran’s proposal to charge Strait of Hormuz tolls in Renminbi is creating headlines, but we see this as more of a political signal than a major economic shift. While it fuels the “petroyuan” narrative, the direct impact on global currency flows is likely to be minimal. Traders should therefore focus on the second-order effects, such as increased geopolitical risk and sentiment-driven volatility.

The broader de-dollarization trend we’ve been watching is a slow, multi-year process, not an overnight event. Looking back, SWIFT data through late 2025 showed the Renminbi’s share of global payments had grown to just over 5%, a significant increase but still dwarfed by the dollar. Similarly, the latest IMF COFER data from that period confirmed the dollar’s share of central bank reserves had only dipped slightly to around 57%, showing its entrenched position.

Limited Impact On Global Currency Flows

The argument that oil’s role in global trade is shrinking holds true, a trend we saw continue through 2025. With oil and related products making up a smaller slice of the global trade pie, a new toll on the roughly 21 million barrels per day passing through Hormuz is a new friction point, not a systemic threat to dollar dominance. This reinforces our view that the move is more about political posturing and diversifying away from Western financial systems.

For derivative traders, the primary takeaway is not to make large, directional bets on a USD collapse or a CNY surge based on this news alone. Instead, the strategy in the coming weeks should be to trade the increased uncertainty. We believe buying near-term volatility on currency pairs like USD/CNH using options, such as a straddle, is a prudent way to position for a potential spike in either direction.

This development also adds a new layer of risk directly to energy prices, which have been sensitive to Mideast tensions. The toll acts as a new tax on a critical chokepoint, raising the cost and risk of transport. A tactical approach would be to buy front-month call options on Brent or WTI futures to hedge against, or profit from, any sudden price flare-ups related to enforcement or shipping disruptions in the strait.

Trading Implications For Energy And Volatility

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Societe Generale reviewed Colombia’s presidential election ahead of the 31 May 2026 vote. Polls indicate a likely runoff, with second-round matchups favouring a unified right over the Historic Pact candidate, Gustavo Cepeda.

The note says Paloma Valencia and De la Espriella both perform better than Cepeda in runoff polling scenarios. It adds that fragmentation on the right remains the key risk factor.

Runoff Dynamics And Polling

Support for Valencia is described as rising as undecided voters consolidate around her. Cepeda is described as being close to a ceiling in polling support.

Odds are described as slightly favouring Valencia, while the credibility of polling is affected by a probe by the CNE (Consejo Nacional Electoral). The note also cites elevated institutional and fiscal stress, including tensions involving the central bank and limited fiscal space, which are linked to cautious market behaviour towards Colombian assets.

With the May 31st presidential election approaching, we see significant uncertainty priced into Colombian assets. Polls point toward a runoff, with the market-friendly unified right candidate having a slight edge, but the outcome is far from certain. This tension is creating clear opportunities and risks for derivative traders over the next six weeks.

The increased political risk has pushed implied volatility higher across the board, particularly in options on the USD/COP currency pair. We have seen the peso weaken by over 3% this quarter, trading near 4,100 as investors seek safety. Traders expecting further instability can buy call options on USD/COP, positioning for a sharper depreciation of the peso if the Historic Pact candidate gains momentum.

On the equity side, the COLCAP index has been a notable underperformer in Latin America, down nearly 5% year-to-date while Brazil’s Bovespa is positive. This reflects anxiety over potential fiscal and institutional stress, regardless of the winner. Buying put options on a Colombian stock market ETF can serve as an effective hedge against a negative election surprise.

Rates Credit And Volatility

We remember the run-up to the 2022 election, when from our perspective in 2025, we saw Colombia’s 5-year Credit Default Swaps (CDS) widen significantly as a measure of risk. A similar trend is emerging now, with spreads ticking up by 25 basis points since the start of the year. This indicates that bond traders are already pricing in a higher probability of distress.

The central bank’s difficult position, battling inflation that remains sticky above 5%, gives it little room to support the economy. This backdrop amplifies market sensitivity to political news, suggesting even small shifts in polling could trigger outsized moves. Therefore, simple directional bets are risky, and strategies that profit from price swings, like long straddles, might be more prudent.

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AUD/USD rebounded on Monday after opening with a gap lower, as hopes of a US-Iran deal improved market mood and reduced support for the US Dollar. AUD/USD traded near 0.7089 after an intraday low around 0.6990.

The US Dollar Index (DXY) was around 98.54 after earlier trading near 99.00. US President Donald Trump said on Monday that the United States had been contacted by “the right people” in Iran, after weekend talks ended without a breakthrough and after he ordered a naval blockade targeting Iranian ports.

Middle East Risk And Oil Impact

Traders are watching Middle East developments, including any easing of tensions and possible reopening of the Strait of Hormuz. Higher Oil prices are adding to inflation concerns and affecting central bank policy expectations.

In the US, March headline CPI rose 0.9% month-on-month, up from 0.3% in February, and increased to 3.3% year-on-year from 2.4%. This has supported expectations that the Federal Reserve will keep interest rates unchanged in coming months.

In Australia, inflation remains above the RBA’s 2%–3% target range, and the RBA has raised rates twice this year. Employment data due Thursday and China’s trade balance figures due Tuesday are also in focus.

We remember the sharp rebound in AUD/USD around this time in 2025, when hopes for a US-Iran deal boosted risk sentiment. That optimism proved short-lived, and the geopolitical landscape remains a source of volatility. The pair is now trading significantly lower, near 0.6550, reflecting a much different economic environment.

Fed Rba Divergence And Strategy

Last year, strong inflation prints reinforced expectations for the Federal Reserve to hold rates steady. Now, with the latest March 2026 inflation data unexpectedly rising to 3.5%, markets are pricing out any near-term rate cuts from the Fed. This renewed dollar strength suggests that selling rallies in AUD/USD could be a viable strategy.

The Reserve Bank of Australia’s hawkish stance from 2025, which saw multiple rate hikes, has successfully brought inflation down from its peaks. With the latest quarterly inflation figures tracking lower, the RBA now has little reason to raise rates further, creating a policy divergence against the Fed. This fundamental backdrop supports owning downside protection, such as buying AUD/USD put options.

Concerns over China’s economy, a key focus for us in 2025, have intensified. Recent trade data for March 2026 showed a surprise contraction in both exports and imports, signaling weaker domestic and global demand. This has pushed key commodity prices, like iron ore, below the critical $100 per tonne level, directly weighing on the Aussie dollar.

Given the diverging central bank outlooks and headwinds from China, the path of least resistance for AUD/USD appears to be lower. With implied volatility in the currency pair remaining relatively subdued, purchasing put options to position for a move towards 0.6400 seems prudent. This strategy offers a defined-risk way to capitalize on further downside in the coming weeks.

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