Canada’s wholesale sales rose 2.0% month on month in December, missing the 2.1% forecast.
Canada’s wholesale sales rose 2% month over month in December. This was slightly below the 2.1% increase that markets expected.
That is a 0.1 percentage point miss versus forecasts. No other details were included in the release information shared.
While the miss is small, it adds to signs that economic growth is cooling. Recent data points in the same direction: January inflation fell to 2.8%, below the Bank of Canada’s target range, and last month’s jobs report showed weaker-than-expected hiring. Together, these suggest last year’s momentum is fading faster than expected.
With this run of softer data, it becomes harder for the Bank of Canada to justify another rate hike at its March meeting. We now expect the Bank to hold rates steady and to shift its messaging toward a more neutral, or even dovish, tone. In a similar slowdown in late 2023, the Bank kept rates on hold for several months before later signaling cuts.
Based on this view, we are positioning for a weaker Canadian dollar in the coming weeks. USD/CAD has already moved from 1.34 to 1.36 since the start of the year, and we see room for more upside. We are considering buying USD/CAD call options expiring in April to benefit if the CAD continues to weaken.
In rates markets, traders are now pricing in a higher chance of cuts later this year. We are looking at Canadian Overnight Repo Rate Average (CORRA) futures as a way to position for a lower policy rate by the third quarter. This directly reflects the risk that the central bank will need to respond to a slowing economy.
On the equity side, slower growth can weigh on earnings, especially in consumer-focused sectors. We see value in buying put options on the S&P/TSX 60 index as a hedge against a potential pullback. Implied volatility is still fairly low, which makes protective puts a relatively cheap hedge for the weeks ahead.
In January, Canada’s BoC core CPI slipped to 2.6% year over year, down from 2.8% previously
Canada’s Bank of Canada core Consumer Price Index (CPI) rose 2.6% year over year in January. That is down from 2.8% in the prior reading.
The 0.2 percentage point decline shows core prices are rising more slowly than before. Core inflation excludes some volatile items.
Core Inflation Signals Earlier Rate Cuts
This morning’s drop in core inflation to 2.6% is an important signal. It suggests the Bank of Canada’s restrictive policy through 2025 is working, and may be working faster than many expected. This result brings forward the likely timing of an interest rate cut. With this data, we should expect a more dovish tone from the Bank of Canada at its next meeting. CORRA futures now price in more than a 70% chance of a 25 basis point cut by the April meeting, up from about 40% last week. We should consider positioning in derivatives that benefit from lower short-term rates, such as buying call options on three-month CORRA futures. The Canadian dollar will likely weaken as expectations for rate cuts build. That would widen the policy gap with the U.S. Federal Reserve, where inflation is proving somewhat more persistent. We should consider buying USD/CAD call options with expirations over the next two to three months to benefit from this move. This view is also supported by soft Q4 2025 GDP data, which showed the Canadian economy stalling. We saw a similar pattern in the second half of 2025. Employment started to soften after a long stretch of strength. That was the first clear sign that led the BoC to pause its hiking cycle. This drop in core CPI looks like the second—and more important—signal that a policy pivot may be close.Volatility May Fade As Market Reprices
The initial market response may push implied volatility higher. But the path for the BoC now looks clearer. In the coming weeks, volatility could fall as the market settles on the idea of a spring rate cut. That may create an opportunity to sell volatility in longer-dated Canadian interest rate options, based on the view that the new dovish direction is now more firmly in place. Create your live VT Markets account and start trading now.In January, Canada’s BoC core CPI slowed to 2.6% year over year, down from 2.8% previously
Canada’s core Consumer Price Index (CPI) rose 2.6% year over year in January. That was down from 2.8% in the prior reading.
This 0.2 percentage point decline shows core prices are rising more slowly than before. Core inflation excludes some volatile items.
Implications For Bank Of Canada Policy
This morning’s drop in core inflation to 2.6% is an important signal. It suggests the Bank of Canada’s restrictive policy through 2025 is working, and possibly faster than many expected. It also brings forward the timing for a potential interest rate cut. Based on this data, we should expect a more dovish tone from the Bank of Canada at its next meeting. CORRA futures are now pricing in more than a 70% chance of a 25 basis point cut by the April meeting, up from about 40% last week. We should consider positioning in derivatives that benefit from lower short-term rates, such as buying call options on three-month CORRA futures. The Canadian dollar may weaken as rate-cut expectations strengthen. This would widen the policy gap with the U.S. Federal Reserve, where inflation remains somewhat more persistent. We should consider buying USD/CAD call options with expirations over the next two to three months to capture this move. This view is also supported by soft Q4 2025 GDP data showing the Canadian economy has stalled. We saw a similar pattern in the second half of 2025. Employment started to cool after a long period of strength. That was the first major sign of stress and helped push the BoC to pause its hiking cycle. This sharper drop in core CPI looks like the second, and more meaningful, sign that a policy pivot could be close.Volatility And Positioning Opportunities
The initial market reaction may trigger a jump in implied volatility. Still, the policy path for the BoC now looks clearer. Over the next few weeks, volatility could fall as markets converge around a spring rate cut. That may create an opportunity to sell volatility in longer-dated Canadian interest rate options, based on the view that the new dovish direction is now established. Create your live VT Markets account and start trading now.February’s Empire State manufacturing index in New York topped forecasts, rising to 7.1 versus 6 expected
The New York Empire State Manufacturing Index in the United States came in above forecasts in February. The forecast was 6, while the actual reading was 7.1.
Manufacturing data for the New York region was stronger than expected, with a reading of 7.1 versus a forecast of 6. This points to firmer economic activity than the market had been expecting. This upside surprise puts the Federal Reserve’s “patient” stance on interest rates under more pressure.
Implications For Fed Policy
This report is not happening in isolation. January CPI showed inflation still stuck at 3.4%, and the latest jobs report added a solid 225,000 payrolls. Together with today’s manufacturing strength, the data suggests the economy may not need rate cuts soon. Markets may start to price a lower chance of cuts in the first half of the year. With that in mind, we should consider trades that benefit if rates stay higher for longer. This could include using options to position for lower Treasury prices, or selling interest-rate futures tied to SOFR. The period of easy monetary policy may be fading. For equities, the signal is mixed, so positioning should be tactical. We can buy call options on cyclical sectors like industrials (XLI), which tend to benefit from stronger manufacturing. At the same time, it may be wise to protect the broader portfolio by buying put options on the Nasdaq 100, which is usually more sensitive to higher interest rates. This strength can also support a stronger U.S. dollar. A more hawkish Fed outlook often attracts foreign capital, which can lift the currency. We should consider long USD exposure, such as call options on the U.S. Dollar Index (UUP).Historical Context And Positioning
It is worth recalling the market shifts we saw in 2025. Looking further back to the 2022 cycle, a run of strong economic reports quickly pushed the Fed from patient to aggressive. Today’s setup is starting to feel similar, so we should be ready for that kind of shift. Create your live VT Markets account and start trading now.Weak UK jobs data pressures sterling, ends GBP/JPY gains and turns near-term bias bearish below 210.00
GBP/JPY dropped after weak UK jobs data raised expectations for Bank of England rate cuts this year. The pair traded near 207.28, down about 0.93% on the day and close to a two-month low.
Markets are now fully pricing in two BoE cuts this year, with the first possibly as soon as March. The Japanese yen stayed firm, supported by optimism about Prime Minister Sanae Takaichi’s pro-stimulus plans and expectations of a Bank of Japan rate rise in the coming months.
Four Hour Chart Trend Shift
On the four-hour chart, the short-term trend has turned bearish as price moved below key moving averages. The pair pulled back from multi-year highs after failing to hold above 214.00 earlier this month. It then weakened further after breaking below 210.00 and failing on a retest. The 21-period SMA is now below the 50-period SMA. Resistance sits near 208.58, with a broader cap around 208.50–209.00. Support is near 207.00. A break below 207.00 could open the way to 205.00. A move back above 210.00 could shift attention to 212.00. The MACD histogram is slightly below zero, which signals fading momentum. The RSI is near 31, close to oversold. We saw a similar shift in 2025, when the short-term trend turned negative after the pair broke below 210.00 following weak UK labor data. That break mattered, and the pair has struggled to regain that level since. The mix of a dovish Bank of England and a cautiously tightening Bank of Japan still shapes our approach today.Options Strategy And Volatility Setup
The Bank of England did deliver two rate cuts in the second half of 2025. With new data showing UK Q4 2025 GDP fell by 0.1%, there is little reason to expect tighter policy. This supports an approach of selling rallies in GBP/JPY using options. We expect traders to keep buying GBP put options to hedge against further weakness in the UK economy. On the other side, the expected Bank of Japan hikes only happened once in late 2025, lifting the policy rate to 0.10%. Officials now appear reluctant to tighten further before this year’s spring wage talks, which limits yen strength for now. That points to a more range-bound market than first expected. In this environment, simple one-way trades can be risky, and strategies such as straddles may be more suitable. Right now, the pair is rotating around 207.00, a level flagged as near-term support back in 2025. As price consolidates, implied volatility has fallen. That makes option premiums cheaper and can improve the risk-reward for positioning ahead of the next breakout. We think traders should consider call options with strikes above 209.00 or put options with strikes below 206.50 to target the next larger move. Create your live VT Markets account and start trading now.In January, the US ADP four-week average employment change rose to 10.3K from 6.5K previously
The United States ADP Employment Change 4-week average rose to 10.3K in January 2024. It was 6.5K in the prior period.
In hindsight, this small rise in January 2024 was an early sign that the labor market was holding up better than expected. That strength kept going through 2024 and 2025. As a result, the Federal Reserve did not cut rates as early as many investors expected. This long stretch of higher rates has shaped the market we trade today.
Shifting Rate Cut Expectations
Now, in February 2026, the story is starting to change. The latest jobs report showed the slowest hiring pace in more than a year. Core inflation has also dropped to 2.3%. Together, these signals suggest the economy may be cooling enough for the Fed to act. The market now prices in a more than 70% chance of the first rate cut by the May meeting. For interest-rate traders, this points to the start of an easing cycle. We see value in using SOFR futures options to position for a faster pace of cuts than the market currently expects in the second half of the year. The main risk is that economic data suddenly heats up again, which looks unlikely right now. In equities, this shift creates uncertainty that can be traded with derivatives. Rate cuts often support stocks, but the weaker growth that leads to cuts can also hurt earnings. For that reason, we think buying VIX call options or using collars on major indices like the SPX can be a cost-effective way to protect against a near-term downturn. We also see opportunities in currency derivatives. The U.S. dollar has been strong for almost two years. As the Fed gets closer to cutting rates, the dollar may weaken against currencies where central banks stay more hawkish. Long-dated options on pairs like EUR/USD could offer leveraged exposure to this trend.Currency And Volatility Positioning
Create your live VT Markets account and start trading now.Savage says lower JGB yields and strong five-year demand have eased fiscal fears, boosting the yen since the February election
Global trading in 2026 has focused on interest rates as a brake on steady equity buying. Bond rallies have not done as much to cushion stock declines. But recent moves in Japanese government bond (JGB) yields suggest this may be changing.
Demand at Japan’s latest 5-year JGB auction rose to a 3.10 bid-to-cover ratio. This was the first increase in demand since September.
Election Driven Market Repricing
After the 8 February election, markets repriced risks tied to fiscal dominance and foreign exchange. Since the vote, Japan’s yield curve has flattened and the yen has strengthened. The yen’s gains have come alongside equity selling linked to profit-taking. Strong domestic bond demand has also kept more money invested inside Japan. USD/JPY 150 is now a key level to watch as the next support for the US dollar. It is also seen as a point where moves in equities and bonds could become less volatile. This article was produced using an AI tool and reviewed by an editor. FXStreet’s Insights Team selects market observations and adds notes from internal and external analysts.Trading Implications And Positioning
Market sentiment has shifted since the February 8 election, which appears to be easing concerns about fiscal policy. This showed up clearly in the 5-year JGB auction, where the bid-to-cover ratio reached 3.10. That is a strong pickup from the roughly 2.5 average seen through much of 2025, and it suggests domestic investors are keeping capital at home. The yen has strengthened by more than 2% against the dollar since the vote, putting the USD/JPY 150 level in focus as key support. Traders may consider buying USD/JPY put options with strikes just below 150 to position for a possible break lower. Another approach is to sell out-of-the-money call spreads, based on the view that yen strength could limit any major dollar rebound. This yen strength is also happening alongside profit-taking in stocks. The Nikkei 225 is down about 4% from its January peak. This points to a classic risk-off rotation. Buying puts on the Nikkei 225 or related ETFs could work as a hedge, or as a direct way to target further unwinding of equity positions. The most important near-term change is the drop in JGB yields and the resulting flattening of the yield curve. This is different from much of 2025, when rising global yields weighed on most assets. Now, Japan’s bond rally is supporting yen strength. In this setup, strategies that pair long yen exposure with short equity positions may do well, since the two trends appear closely linked. Create your live VT Markets account and start trading now.For a second session in a row, EUR falls against USD after weak Eurozone sentiment data disappoints investors
EUR/USD fell for a second straight day and traded near one-week lows around 1.1830. The pair extended its slide from last week’s 1.1925 peak, with selling pressure building after the latest ZEW survey.
Germany’s ZEW Economic Sentiment Index eased to 58.3 in February from 59.6 in January, well below the 65.0 forecast. The current situation gauge improved to -65.9 from -72.7, but still fell short of the -65.7 consensus.
The Eurozone Economic Sentiment Index dropped to 39.4 from 40.8, missing expectations of 45.2. In Germany, HICP fell 0.1% month-on-month in January, while annual inflation rose to 2.1% from 2.0% in December.
The US Dollar kept a slight upward bias as US markets reopened after a long weekend. Traders focused on the New York Empire State Manufacturing Index, with Fed minutes due Wednesday and US GDP and PCE inflation data due Friday.
From a technical view, EUR/USD broke a mid-January support area and tested 1.1830. On the 4-hour chart, the MACD stayed negative and the RSI slipped below 40. Support sits near 1.1775, while resistance is seen around 1.1870 and 1.1890.
Looking back to this time in 2025, EUR/USD was under heavy pressure as Eurozone sentiment weakened. Today, February 17, 2026, the story is starting to change, with recent data pointing to a cautious recovery. For example, Germany’s latest industrial production figures for December 2025 showed a modest 0.4% rebound, hinting that the slowdown may be easing.
The market debate around European Central Bank easing that dominated last year has flipped. With the Eurozone’s core HICP holding at 2.5% in the January 2026 reading, we think markets may be underpricing the chance of a more hawkish ECB later this year. That is a clear shift from the dovish tone that shaped most of 2025.
On the other side, the US Dollar’s mild bullish tone from early 2025 has faded. The Federal Reserve has left rates unchanged in the last two meetings, and the January jobs report showed wage growth cooling to 3.1% year-on-year, the slowest pace since mid-2024. This supports the view that the Fed’s tightening cycle is over.
For derivatives traders, this backdrop argues for reassessing Euro-bearish positions. We see value in medium-term EUR/USD call options with strikes above 1.2000 to position for a possible breakout later this spring. Historically, when the policy gap between the Fed and the ECB begins to narrow, EUR/USD has often moved into multi-month uptrends, as it did after 2021.
With that setup, we expect implied volatility to rise as markets weigh diverging central-bank paths. One way to express a cautiously bullish view is to sell out-of-the-money EUR/USD puts to collect premium. This approach can benefit if spot rises, and it can also benefit from time decay if the pair stays range-bound in the near term.
During the European session, GBP/USD regained half of its earlier losses but remained down 0.23% near 1.3600
GBP/USD recovered about half of its early losses during European trading on Tuesday. Still, it remained 0.23% lower near 1.3600. Earlier, it fell to 1.3551, near a two-week low, after weak UK labour data.
The UK Office for National Statistics said the ILO unemployment rate rose to 5.2% in the three months to December. That was up from 5.1% and the highest level in five years. Markets had expected 5.1%. Job gains also slowed, with 52K jobs added versus 82K previously.
Uk Labour Data Drives Sterling Weakness
The number of people claiming jobless benefits rose by 28.8K in January. Average Earnings Excluding Bonus increased 4.2%, down from 4.6%. Earnings including bonuses also rose 4.2%, down from 4.6%. This was the slowest wage growth in almost four years. On Monday, the pair failed to close above the 20-day simple moving average near 1.3635. Traders are watching support near 1.3500, the 200-day SMA near 1.3440, and Fibonacci support around 1.3340. Markets are also looking ahead to UK inflation data due on Wednesday. Sterling’s moves reflect expectations of a 25 bps Bank of England rate cut in March. Based on this morning’s jobs report, we see a clear bearish signal for the British pound. Unemployment is now at a five-year high, and wage growth is cooling faster than expected. Together, these signals point to a slowing UK economy.Rate Cut Expectations Pressure The Pound
These numbers strengthen our view that the Bank of England is likely to cut rates in March. Overnight index swaps now price an 85% chance of a 25-basis-point cut next month, up sharply from last week. This rising confidence is a major headwind for the pound. This outlook contrasts with the United States, where January retail sales were stronger than expected. This gap in policy direction—BoE easing while the Federal Reserve may hold rates steady for longer—should support the US dollar against the pound. That keeps GBP/USD downside strategies in focus. For derivatives traders, this may be a chance to position for further declines in GBP/USD. One approach is to buy put options expiring in late March or April, aiming for a move below the key 1.3500 support level. This offers downside exposure while keeping maximum risk defined. On the technical side, failing to hold above the 1.3635 moving average is a negative sign. In 2025, during the first BoE rate cuts, the pound often weakened in the weeks before the official decision. A break below trendline support near 1.3500 could speed up losses toward the 1.3440 area. Create your live VT Markets account and start trading now.BBH’s Elias Haddad expects the RBNZ to hold rates at 2.25% and signal earlier hikes, supporting the NZD
The Reserve Bank of New Zealand (RBNZ) is expected to keep the Official Cash Rate (OCR) unchanged at 2.25% while updating its OCR track. The main focus is the new forecast, not the rate decision.
In November, the RBNZ forecast the OCR would stay around 2.25% through 2026. It also projected almost 50bps of rate increases in 2027.
