MUFG’s Derek Halpenny says stronger JGBs are easing fiscal worries, but risk-off still dominates as the yen leads G10 on lower yields
Global markets turned cautious. US Treasury yields fell and equities weakened. In G10 FX, the Japanese yen outperformed, while gold and silver prices dropped.
The yen got a lift from a strong rally in Japanese government bonds (JGBs). A 5-year JGB auction also showed healthy demand, with a bid-to-cover ratio of 3.1 versus a 12-month average of 3.48.
Traders watch FOMC minutes as the Dollar Index holds above 97.00 near 97.20 in Europe
The US Dollar Index (DXY) stayed above 97.00 and traded near 97.20 during European trading on Tuesday. It was firmer for a second day as markets waited for the FOMC meeting minutes, due on Wednesday.
Next, traders will focus on the Q4 annualised GDP and the core PCE Price Index, both due on Friday. Softer US CPI data for January has raised expectations for rate cuts later this year.
Fed Minutes And Near Term Catalysts
CME Group’s FedWatch shows a 52.7% chance of a 25-basis-point cut in June and a 42.7% chance in July. January Nonfarm Payrolls rose by the most in over a year, and the Unemployment Rate fell unexpectedly. The PCE Price Index has stayed closer to 3% than the Fed’s 2% target. Disinflation has also been uneven since mid-2025. The USD is the US currency and is widely used outside the US. It accounts for over 88% of global FX turnover, or about $6.6 trillion a day (2022). Fed policy is a major driver of the USD, mainly through interest rates set to manage inflation and employment. Quantitative easing increases credit and often weakens the USD. Quantitative tightening reduces bond buying and tends to support the USD. The US Dollar Index is holding up, creating a difficult setup. Markets expect the Fed to start cutting rates around mid-year, but the dollar’s current strength suggests traders are not fully convinced. This push and pull may create opportunities for derivative traders in the coming weeks.Options Positioning And Volatility
Recent data has made the outlook less clear, but it supports the dollar for now. Final Q4 2025 GDP was revised slightly higher to 3.1%. More importantly, January core PCE inflation was a stubborn 2.9%. This matches the uneven disinflation seen in late 2025 and gives the Fed less reason to cut rates quickly. The chance of a June rate cut, which was above 50%, has now eased as traders adjust positions. A similar pattern played out in early 2024, when markets priced in large cuts that the Fed did not want to deliver. That led to a rebound in yields and the dollar. This history argues for caution, and implied volatility in interest rate futures is likely to rise. With this level of uncertainty, we think options strategies offer the best risk-reward. Traders who expect the Fed to delay cuts could consider buying call options on the US Dollar Index to position for more strength. Alternatively, a long straddle on a major pair like EUR/USD could benefit from a large move once the Fed’s policy path becomes clearer. The labour market remains the main reason the Fed can afford to wait. January’s strong jobs report, along with weekly jobless claims holding below 210,000, suggests there is little urgency to ease policy. We will watch closely for any change in tone from Fed officials, as their comments are likely to drive sentiment before the next meeting. Create your live VT Markets account and start trading now.Deutsche Bank’s Raja says weak UK labour market supports BoE rate cuts as slack rises and unemployment climbs
UK labour market data still look weak. HMRC payrolled employees fell for a fifth straight month. The January flash estimate shows an 11k drop.
Redundancies are still high, at 145k in the three months to Dec-25 (LFS data). The unemployment rate rose to 5.2% over the same period.
Labour Market Slack Increasing
The single-month unemployment rate is 5.4%. Youth unemployment hit 16.1% in the three months to December. Among economically inactive people aged 16–64, 23% say they want a job. Surveys also suggest hiring plans are limited. Deutsche Bank expects slack in the labour market to rise further. It forecasts two more Bank of England rate cuts this year, likely by summer. This view is based on wage growth cooling and CPI moving closer to target by spring.Implications For Rates
Ongoing weakness in the UK jobs market points to a clear direction for our strategy. As slack builds—shown by the unemployment rate reaching 5.2% in December 2025—we should expect the Bank of England to act sooner rather than later. We can position for lower rates using SONIA futures, which tend to rise as rate-cut expectations firm up. This view is backed by fresh data released this week. The Office for National Statistics said the unemployment rate remains high at 5.3%. At the same time, wage growth has slowed to 4.0%, well below the highs seen in 2025. This gives the Bank of England more reason to start easing policy to support the labour market. Rate cuts usually pressure the British Pound. We should consider trades that can benefit from a weaker sterling, such as buying GBP/USD put options. This could profit if sterling falls as the interest-rate gap with the US narrows. We saw a similar pattern in earlier easing cycles, including after the 2008 financial crisis. Large rate cuts were followed by a weaker pound. Today’s backdrop—slower inflation and a flat jobs market—looks similar to past periods of currency weakness. So we should not assume this time will be different. On the other hand, lower rates often support equities. We could consider buying call options on the FTSE 250, which is more focused on the UK economy. Rate cuts reduce borrowing costs for these firms and could help lift the market by summer. Finally, a change in central bank policy can raise market volatility. Uncertainty about the timing and size of cuts can cause larger moves in both FX and equities. We may want to buy options that benefit from higher volatility, which can also act as a hedge regardless of market direction. Create your live VT Markets account and start trading now.BNP Paribas expects 2026 eurozone growth of 1.6%, helped by Germany’s stimulus and defence spending, with inflation below 2%
BNP Paribas forecasts Eurozone growth of 1.6% in 2026, up from 1.5% in 2025. It expects quarterly growth of around 0.5% throughout 2026.
Inflation is expected to stay below the 2% target in 2026. BNP Paribas sees inflation rising in 2027, but only gradually.
Eurozone Growth Outlook
The outlook depends on stronger growth and fiscal support in Germany, along with higher military spending. BNP Paribas expects these factors to lift European growth compared with the United States. Based on this view, it expects the US dollar to keep weakening against the euro. It also forecasts EUR/GBP will rise steadily to 1.20 by Q4 2026. BNP Paribas expects the European Central Bank to raise rates in the second half of 2027. This would take the deposit facility rate to 2.5%. Overall, the Eurozone outlook remains firm. The 2026 growth forecast is unchanged at 1.6% after a resilient 2025. Recent data supports this steady trend. For example, the January 2026 S&P Global Eurozone Composite PMI came in at 51.5, pointing to continued expansion. This suggests derivative traders may want to consider trades that benefit from stable, positive momentum in Europe.Trading Implications
Inflation is still under control. Eurostat’s flash estimate for January 2026 puts headline inflation at 1.8%, comfortably below the 2% target. This supports the view that the ECB is unlikely to hike before the second half of 2027. A steady policy outlook may favor long-dated options strategies that benefit when volatility stays lower than expected. This contrasts with a cooling US economy. Q4 2025 GDP growth was slightly below forecasts, and recent jobs data shows wage pressure is easing. This gap in economic momentum is likely to be a key theme in the coming weeks. As a result, the dollar may continue to weaken against the euro. For traders, this favors a long EUR vs. USD view. Buying EUR/USD call options or selling put options are possible ways to express this. Because the forecast implies a gradual rise, traders may prefer structures that profit from a steady climb rather than a sudden jump. A similar move is expected in EUR/GBP. BNP Paribas expects a moderate rise toward 1.20 by the end of 2026. The Bank of England has sounded more dovish than the ECB, as the UK posted weaker growth in late 2025. This policy gap should continue to support the euro against the pound. The Eurozone’s 1.5% growth in 2025, despite global uncertainty, helped set up today’s stronger base. Supportive German fiscal policy and coordinated increases in military spending are now adding to growth. This underlying strength suggests that short-term dips in the euro could offer buying opportunities. Create your live VT Markets account and start trading now.GBP/JPY falls 0.85% to around 207.50 after weaker UK jobs data sparks heavy selling pressure
GBP/JPY fell nearly 0.85% to around 207.50 during Tuesday’s European session. The drop followed UK labour market data for the three months to December.
The ILO unemployment rate rose to 5.2%, its highest level in five years, versus expectations of 5.1%. Job growth came in at 52K, down from 82K previously.
Uk Labour Market Weakness Pressures Pound
Average Earnings Excluding Bonuses eased to 4.2% year-on-year from 4.4%, after the prior reading was revised to 4.4% from 4.5%. Average Earnings Including Bonuses slowed to 4.2% from 4.6% in the three months to November. These figures strengthened expectations that the Bank of England could cut rates soon. UK CPI data for January is due on Wednesday. Meanwhile, the Japanese yen traded broadly stronger after recovering Monday’s losses. Japan’s GDP grew 0.1% in Q4 2025, below forecasts of 0.4%, following a 0.7% decline in Q3 2025 (revised from -0.6%). The sharp fall in GBP/JPY reflects a weakening UK labour market. With unemployment rising to a five-year high of 5.2% for the period ending December 2025, the data points to a cooling economy. This has shifted expectations for the Bank of England’s next policy move.Derivative Strategy For Further Gbp Jpy Downside
Rate cuts now look more likely in the near term. The SONIA futures market is pricing an 85% chance of a 25-basis-point cut by the May meeting. This backdrop suggests the Pound could remain under pressure. For derivatives traders, this supports bearish GBP positioning in the weeks ahead. One defined-risk approach is buying GBP/JPY put options with strikes below the 207.00 level. These can gain value if the pair continues to fall as rate-cut expectations build. A similar pattern appeared in 2019. A run of weak labour reports was followed by a more dovish BoE stance, and the Pound weakened over the next quarter. The current setup shows clear similarities. On the other side, the yen has stayed firm despite weaker GDP growth in late 2025. Part of this resilience appears tied to expectations that the Bank of Japan is slowly moving toward policy normalization. A soft Pound alongside a steadier yen supports a bearish GBP/JPY view. Attention now turns to Wednesday’s UK CPI release for January. A softer inflation print would likely reinforce expectations for BoE cuts and could trigger another move lower in the Pound. That makes positioning for further GBP weakness especially relevant ahead of this key data. Create your live VT Markets account and start trading now.WTI trades above $63 as markets calm, with traders watching US-Iran talks and rangebound prices
Crude oil prices dipped slightly on Tuesday in quiet trading, but they stayed within February’s range. The US benchmark WTI eased from Monday’s $63.70 high and was holding above $63.00 at the time of writing.
With many Asian markets closed for the Lunar New Year and the US returning from a long weekend, trading volumes were low. Focus stayed on US–Iran talks, set to resume in Geneva later on Tuesday.
Market Focus Shifts
US President Donald Trump said he would take part “indirectly” in the talks. Iran’s foreign minister said the US position on the nuclear issue had moved to a “more realistic” one. The US has sent aircraft carriers to the Arabian Sea, showing that military action is still an option. Separately, Reuters reported that OPEC+ members are discussing a return to output increases from April, as they expect global demand to rise during the western summer. Oil markets still face a familiar push and pull, even if the details have changed from a year ago. At this time in 2025, WTI was trading calmly around $63 a barrel and most attention was on the US–Iran talks. Now, with WTI near $84.50, the market is focused on supply chain security and stronger-than-expected global demand. Last year, the chance that OPEC+ would raise output for the summer helped cap prices. Now, in February 2026, the group is keeping a tight grip on production even though the latest EIA report shows fourth-quarter demand beat forecasts by almost 400,000 barrels a day. This tighter supply is a key difference from early 2025 and it supports today’s prices.Options And Volatility
In February 2025, the calm and range-bound market made selling volatility look attractive. Now, the CBOE Crude Oil Volatility Index is higher, near 42, as traders worry about possible disruption in the Strait of Hormuz. That supports considering option-buying strategies, such as straddles or strangles, which can benefit from a large move in either direction over the next few weeks. Last year, the main trigger was the outcome of the Geneva talks. The near-term catalysts are different now. We are watching the OPEC+ technical meeting in early March for any change in production guidance. A flare-up in maritime tensions in the Arabian Sea could also spark a sudden price jump, which may make defensive long call positions appealing. Create your live VT Markets account and start trading now.Danske now expects the Fed to cut rates in June and September and hold them at 3.00–3.25% through 2026–2027
Danske Research has changed its forecast for the US Federal Reserve. It now expects two 25 basis point rate cuts in June and September, not March and June. It also expects the policy rate to stay at 3.00–3.25% through 2026 and 2027.
This change follows a strong January jobs report, which weakens the case for a near-term cut. Even so, the forecast still suggests cuts could restart in summer.
Implications For The Policy Path
Danske points to slower wage growth, softer housing inflation, and the risk that private consumption may weaken. It calls the June meeting the first under Fed chair Kevin Warsh. The article says it was produced with help from an artificial intelligence tool and reviewed by an editor. We need to adjust our view, because a March rate cut is now unlikely. This is a direct response to the strong January jobs report, which showed 295,000 jobs added—well above our 180,000 forecast. As a result, the Federal Reserve can afford to wait until summer before it starts cutting rates. This delay means front-end rate futures, such as March and May, may reprice higher to reflect a more hawkish near-term path. Markets will likely focus more on the June and September meetings for any cuts. Options strategies should be updated to fit the new timeline, with less value placed on near-term dovish outcomes.Trading And Hedging Considerations
For the US dollar, a later rate cut offers support we did not expect a few weeks ago. The dollar may stay stronger for longer, especially versus currencies where central banks may cut sooner. In this setting, short-term call options on the dollar index could be a useful hedge or a speculative trade. Equities fell during the aggressive rate hikes throughout 2025. A “higher for longer” policy stance could limit near-term stock gains. Traders may consider protective put options on major indices to hedge against disappointment from delayed easing. Volatility could rise as markets accept that stimulus may not arrive as soon as previously expected. Even with the delay, we still see a strong case for cuts starting in June if underlying data keeps cooling. For example, average hourly earnings rose 3.9% year over year in January, down from 4.5% in late 2025. A new Fed chair taking over in June also adds uncertainty that could shape policy in the second half of the year. Create your live VT Markets account and start trading now.FXStreet data shows Malaysia’s gold price is falling today after Tuesday’s figures were corrected
Gold prices in Malaysia fell on Tuesday, according to FXStreet data. Gold was MYR 615.69 per gram, down from MYR 625.81 on Monday.
Gold dropped to MYR 7,181.34 per tola from MYR 7,299.33 the day before. FXStreet also listed prices of MYR 6,156.94 for 10 grams and MYR 19,149.90 per troy ounce.
How Fxstreet Calculates Local Gold Prices
FXStreet converts global gold prices into Malaysian Ringgit using the USD/MYR exchange rate and local weight units. Prices are updated daily at the time of publication. They are for reference only, and local prices may vary slightly. Central banks hold the most gold and use it as part of their reserves. World Gold Council data shows central banks bought 1,136 tonnes of gold worth about $70 billion in 2022. This was the highest yearly total since records began. Gold often moves in the opposite direction of the US Dollar and US Treasuries. It can also move against risk assets like stocks. Key drivers include geopolitics, recession worries, interest rates, and the US Dollar, since gold is priced in dollars (XAU/USD). Gold prices in Malaysian Ringgit fell today, February 17. This mirrors a weaker international XAU/USD price as the US Dollar strengthens again. The drop comes after a period of sideways trading. It may be a chance to buy, or a sign that prices could fall further. Derivatives traders should focus on whether this is a short-term pullback or the start of a new downtrend.Key Drivers For Derivative Traders
The main factor to watch is the outlook for US interest rates, because gold does not pay interest. US inflation data for January 2026 was slightly higher than expected at 3.2%. As a result, markets are moving expectations for the first Federal Reserve rate cut to a later date. Higher rates for longer tend to hurt gold, because yield-paying assets look more attractive. A stronger dollar also makes gold more expensive for buyers using other currencies, and that is happening now. The US Dollar Index (DXY) is up more than 2% so far this year and has recently tested resistance near 105.50. For derivatives traders, this negative relationship matters. If the dollar rally starts to fade, it could be a strong bullish signal for gold. Central bank buying has also supported gold in recent years. Buying stayed strong through 2025, but the latest World Gold Council data shows a 15% slowdown compared with the record pace in 2022. This may mean a key source of demand is becoming more sensitive to price, which could weaken the market’s support. With this backdrop, traders may consider buying put options to hedge against a move down toward the $1,900 per ounce support level in the global market. If you think the pullback is a buying chance, selling cash-secured puts or buying call spreads can offer a defined-risk way to trade a rebound. Watch for clear signs that the dollar rally is breaking, as that may be the main signal for a bullish entry in the weeks ahead. Create your live VT Markets account and start trading now.Sterling fell below 1.3600 against the dollar, hitting 1.3570 after disappointing UK labour figures came out
GBP/USD fell on Tuesday. It dropped below 1.3600 and touched around 1.3570. The move followed UK jobs data that showed weaker conditions.
The UK ILO Unemployment Rate rose to 5.2% in the three months to December. That is the highest level in almost five years and was above forecasts of 5.1%. The Claimant Count rose to 28.6K in January, up from 2.7K in December. Employment change also slowed, slipping to 52K from 82K.
Uk Wage Growth Slows
Wage growth cooled. Average Earnings Including Bonus rose 4.2% year on year in the last three months of 2025, down from 4.6%. Markets had expected 4.6%. This release followed a weak UK GDP report last week. Together, the data increased expectations that the Bank of England could lower borrowing costs at its March meeting. A correction dated 17 February at 08:24 GMT said the unemployment period was the three months to December, not January. It also clarified that the earlier 4.6% figure referred to Average Earnings Including Bonus, not Average Earnings Excluding Bonus. The latest labour data suggests the UK economy is losing momentum. Unemployment has reached a five-year high at 5.2%, and wage growth slowed more than expected. This weakness also matches last week’s GDP report, which showed the economy shrank by 0.1% in the final quarter of 2025.Rate Cut Expectations Build
These numbers increase pressure on the Bank of England to cut interest rates in March. Overnight index swaps now price in an 80%+ chance of a cut next month. This contrasts with the US, where strong job data has pushed back expectations for Federal Reserve rate cuts. We think traders should consider buying GBP/USD put options with strike prices near 1.3500 or lower. Late-March or April expiry could help capture downside after the central bank decision. This approach offers a way to profit from further GBP weakness while keeping risk limited to the premium paid. This setup is similar to past episodes, such as mid-2019, when repeated weak data was followed by a sharp fall in sterling. As the March meeting gets closer, we expect implied volatility in sterling options to rise. Taking bearish positions now may be cheaper than waiting until volatility increases. Create your live VT Markets account and start trading now.EUR/GBP rises towards 0.8725 after weak UK jobs data weakens sterling and boosts rate-cut bets
EUR/GBP rose for a second day, reaching around 0.8725 in early European trade after weaker UK jobs data. The UK claimant count increased by 28.6K in January, and the unemployment rate rose to 5.2% in the three months to December.
Average Earnings Excluding Bonus slowed to 4.2% year on year, in line with expectations. Average Earnings Including Bonus eased to 4.2% from 4.6%.
