EUR/USD fell on Monday and slipped toward 1.1850 ahead of the US session. Trading stayed inside the recent range as volumes remained light. Eurozone industrial production fell 1.4% in December. November was revised to a 0.3% gain from 0.7%.

Eurozone Output Update

Output rose 1.2% year over year in December, slightly below the 1.3% forecast. November’s annual growth was 2.2%. The pair stayed range-bound after softer US CPI data on Friday. Many Asian markets were closed for Lunar New Year, and US markets were shut for President’s Day. Later, traders were set to focus on comments from Fed Vice Chair for Supervision Michelle Bowman and ECB Governor Joachim Nagel. The week ahead was expected to be data-heavy. On the 4-hour chart, EUR/USD tested support on an upward trendline near 1.1855. Another support level was the 11 February low at 1.1833.

Technical Levels To Watch

MACD was slightly below zero and RSI was under 50, both pointing to weaker momentum. A break below 1.1833 could open the door to 1.1775. Resistance levels were 1.1890 and 1.1925. We saw a similar setup in 2025, when the euro struggled to hold 1.1850 against the dollar. That level now feels far away, with the pair trading much lower near 1.06. The bearish tone from then has only strengthened over the past year. The economic gap has become clearer since that time. Data from late 2025 showed Eurozone industrial production down another 0.5% in December. By contrast, the US jobs report for January 2026 showed a strong 215,000 new positions. This mix of European softness and US resilience has kept pressure on the euro. For derivatives traders, that backdrop still favors bearish positioning. One way to express this view is by buying EUR/USD puts with strikes near 1.05, aiming for another push below recent lows in the coming weeks. Low volatility can also make longer-dated options cheaper, which may improve the risk-to-reward profile. Looking further back, EUR/USD broke below parity in 2022 during the energy crisis, driven by a similar gap in economic outlooks. That episode shows how fundamentals can push the pair much lower than many expect. In this environment, trades structured to benefit from a move toward 1.04—or lower—can be a rational response. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Commerzbank said the Turkish lira is close to its quarter-end target of **44.0 USD/TRY**. It linked the move to **higher inflation expectations**, a **weaker external balance**, and **falling reserves**. Turkey’s central bank monthly survey showed that market expectations for **end-2026 inflation** rose by about **1 percentage point**, from **23.2%** to **24.1%**. The figures also include an **end-2027 inflation** forecast of **17%**. Balance of payments data for December showed a **wider**, seasonally adjusted **current-account deficit**. The report also said **capital inflows** have weakened. The bank said these factors suggest the lira will keep **depreciating** against the US dollar. It also noted that the exchange rate has repeatedly **broken through new levels**. The Turkish lira is under steady pressure and is being pushed toward **44.0 per US dollar**. This reflects doubts about Turkey’s economic rebalancing, especially as inflation expectations keep rising. The latest official data from January shows annual inflation is still high at **69.5%**, which suggests price pressures are not yet under control. With the market’s **end-of-year inflation** forecast now at **24.1%**, investors appear to expect little real improvement. This pessimism, also seen in shifts in sentiment during 2025, makes **long USD/TRY** positions look attractive. Traders may consider **USD/TRY call options** with strike prices above the current spot rate to benefit if the lira continues to weaken. The balance of payments picture is also negative. The seasonally adjusted current-account deficit is widening again, and capital inflows are drying up. In similar periods in 2024 and 2025, these trends often came before sharp moves. The central bank’s net reserves have reportedly fallen by **$4.8 billion** in the past month. This supports positioning for further lira weakness, including through **longer-dated USD/TRY futures** that match a gradual depreciation trend.

here to set up a live account on VT Markets now

USD/CHF climbed to around 0.7700 on Monday. Trading was quiet and stayed in a narrow band between about 0.7650 and 0.7730, as many Asian markets were closed and the US was shut for President’s Day. Swiss CPI data released on Friday showed inflation fell by 0.1% in January, compared with expectations for no change. The decline was mainly due to lower import prices and a stronger Swiss franc.

Swiss Inflation Stays Near The Bottom Of The SNB Range

Year over year, Swiss CPI rose 0.1%, in line with forecasts. This keeps inflation near the lower end of the Swiss National Bank’s 0% to 2% price stability range. The Swiss franc has gained almost 3% against the US dollar so far in 2026, after rising more than 12% last year. This has increased talk that the SNB could step in to slow any further CHF gains. The US dollar is still trading near recent lows versus major peers. US consumer inflation rose 0.2% in January versus 0.3% expected, and the annual rate fell to 2.4% from 2.7% in December, below the 2.5% forecast. A correction dated 16 February at 13:00 GMT said Swiss CPI fell in January, not December, and that US CPI was 2.7% in December, not November.

Market Catalysts And Strategy Implications

The tight USD/CHF range suggests both currencies are weak for different reasons, which makes trading conditions difficult. The US dollar is capped by expectations of Federal Reserve rate cuts. The Swiss franc is held back by disinflation. With neither side in control, strategies that benefit from low volatility, such as selling short-dated straddles, may work in the near term. The main risk is a surprise SNB move to weaken the franc, especially after its strong gains through 2025. The latest drop in Swiss PMI to 49.2 shows the stronger franc is already hurting the export-led economy, which gives the SNB a reason to act. Because of that, buying longer-dated, out-of-the-money USD/CHF call options can be a lower-cost way to prepare for a sudden upside spike. It is also important to remember the market shock in January 2015, when the SNB unexpectedly removed its currency floor against the euro. Volatility surged to extreme levels. That episode shows the central bank can make major policy shifts without warning. In this environment, holding unhedged short USD/CHF positions carries high risk. On the US side, the dollar is also limited by domestic data. The latest jobs report showed Non-Farm Payrolls at 155,000, below forecasts. This points to a cooling labor market and supports the case for more Fed easing. Fed funds futures now price in a more than 70% chance of a rate cut by the April meeting, which could keep pressure on the dollar. With these forces pulling in opposite directions, any break from the 0.7650–0.7730 range could be fast and large. A long-volatility strategy, such as buying a strangle, may be attractive because it can profit from a big move either way. It also helps protect a trader from being caught on the wrong side of either SNB action or a more aggressive Fed cut. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

GBP/USD was flat near 1.3640 in early European trading on Monday. The pair held close to the 20-day EMA. Traders are now looking to the UK labour market report for the three months to December, due Tuesday. The ILO unemployment rate is expected to remain at 5.1%.

Uk Labour Data In Focus

Average Earnings Including Bonuses is expected to rise 4.6% year on year. This figure is a key measure of wage growth. GBP/USD is also consolidating around 1.2750, with little clear direction ahead of this week’s key UK inflation and jobs reports. This calm ahead of major data is common. It gives traders time to plan for the volatility that often follows. A similar pause happened in 2025 around 1.3640, when markets were preparing for an unemployment rate of 5.1%. The backdrop has changed a lot since the post-pandemic recovery period. Back then, the focus was different. Now, attention is on inflation that is proving hard to bring down. This week’s data matters. Analysts expect UK unemployment to stay near a low 4.0%, while wage growth is seen holding around 5.8%. Readings this strong can make it harder for the Bank of England to hint at near-term rate cuts. That support can help limit downside in the pound.

Options Strategies And Breakout Risk

For derivatives traders, the range-bound price action can make selling short-dated options to collect premium an option. However, the bigger trade may come after the data. A long strangle—buying an out-of-the-money call and an out-of-the-money put—can benefit if the release triggers a large move. The US side also matters. Expectations for Federal Reserve rate cuts have moved further out as US data stays firm. Last month’s US jobs report showed more than 220,000 jobs added, which has supported the dollar. If UK data disappoints, GBP/USD could drop sharply. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Markets are rethinking US dollar rates after a volatile stretch and mixed US data. A DBS economist said 10-year US Treasury yields are near the bank’s short-term forecast of 4%. DBS called the US economy “Goldilocks,” pointing to strong non-farm payrolls and a softer CPI. It said labour market data is the main factor that will decide how soon rate cuts can begin.

Fed Cut Timing Shifts Later

DBS has pushed back its expected timing for Federal Reserve cuts to the second half of 2026. It now forecasts two 25bp cuts: one in 3Q and one in 4Q. On this path, DBS sees a terminal rate of 3.25%. Before, it expected one 25bp cut in 1Q, with a terminal rate of 3.50%. This updated forecast depends on a labour market that cools at a moderate pace and inflation that keeps easing. The article also notes that political pressure from Trump to lower rates could play a role. The piece was produced using an AI tool and reviewed by an editor, and was published by the FXStreet Insights Team.

Market Pricing And Strategy Implications

Markets are resetting expectations after recent volatility and uneven economic reports. The chance of a Fed rate cut before July 2026 has dropped sharply. This has forced investors to reprice derivatives such as Secured Overnight Financing Rate (SOFR) futures. Traders are now closing positions that assumed earlier policy easing. The US economy still looks “Goldilocks.” The January 2026 jobs report showed a strong gain of 315,000 jobs. At the same time, the January CPI cooled slightly to 2.9%. This mix of solid job growth and softer inflation reduces the need for the Fed to act quickly, and it also lowers the risk the Fed needs to hike again. If cuts are delayed, short-term yields could stay high over the next few months. That creates an opening for strategies such as selling short-dated call options on Fed Funds futures to earn premium as expectations reset. Markets are adjusting to “higher for longer,” at least through the first half of the year. With 10-year Treasury yields sitting just below 4%, that level is a key line for the market. A clear break above it could lead to a broader sell-off in bond futures and hit long-duration positions. We are watching options activity in 10-year Treasury note futures for signs that large players are taking firm positions. Because the Fed remains data-driven, implied volatility in rate options may stay supported. The MOVE index, which tracks Treasury volatility, has risen to 115. That reflects uncertainty around when the first cut will arrive. Traders should expect sharp moves around key inflation and jobs releases. This pattern is not new. Much of 2025 saw markets repeatedly bet on early cuts, only to push those bets back as growth stayed resilient. The lesson was clear: do not front-run the Fed when the labour market is still this strong. DBS’s revised view—cuts in 3Q and 4Q—still depends on the economy cooling further. Investors also need to weigh possible political pressure to ease policy later in the year. That makes the timing of any Fed move harder to forecast. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Recent U.S. job growth has eased near-term pressure on the Federal Reserve to cut interest rates. The January nonfarm payrolls report reduced downside risks for the U.S. dollar and short-term U.S. yields. Inflation data still leave room for rate cuts if price growth keeps cooling. The January CPI report showed headline inflation at 2.4% year over year and core inflation at 2.5%.

Inflation And Fed Policy Outlook

Inflation is expected to slow further as the impact of last year’s tariff increases fades. Weakness in the labor market should limit wage growth, while stronger productivity could support growth without adding price pressure. Lower U.S. interest rates, more FX hedging by overseas holders of U.S. assets, and shifting allocations into non‑U.S. markets are all factors that could support a weaker U.S. dollar in 2026. Stronger performance from assets outside the U.S. could also encourage more flows into non‑U.S. markets and put further pressure on the dollar. After the strong employment data, markets have likely priced out an immediate Fed rate cut. This suggests short-dated options on interest rate futures may be expensive. Still, with January CPI slowing to 2.4%, the case for easing later in 2026 remains intact. This backdrop supports strategies that benefit from a weaker U.S. dollar over the medium term. We think traders should consider buying call options on currency pairs such as EUR/USD and GBP/USD with expiries in the second half of the year. Historically, the dollar often weakens in the months leading into a Fed easing cycle, similar to what we saw in 2019.

Positioning For A Weaker Dollar

This view is supported by the latest Producer Price Index (PPI), which fell month over month. That decline suggests consumer inflation should keep cooling. While the January jobs report was strong, wage growth slowed to its weakest pace since late 2024. This gives the Fed more room to focus on inflation without pressure from an overheated labor market. We are also seeing the expected diversification away from U.S. assets. Year to date, the MSCI EAFE index—which tracks developed markets outside the U.S. and Canada—has outperformed the S&P 500 by more than 3%, drawing in meaningful capital. Traders could reflect this theme by buying call options on ETFs that track major international indices. The inflation impact from the 2025 tariff hikes is now dropping out of the year-over-year comparisons, adding to the current disinflation trend. This may reduce U.S. interest rate volatility compared with other major economies. As a result, selling options premium on the U.S. Dollar Index (DXY), with a target below 100, could be an attractive strategy in the coming months. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

GBP/JPY rose for a second day. It bounced from near 207.50 and climbed from a low of 207.57 to test resistance at 209.60. The 209.60 level also blocked gains last Thursday and Friday. The rise followed weak Japanese GDP data, which eased recent Yen strength. Japan’s economy grew just 0.1% in Q4 2025, below the 0.4% forecast. The annualised rate was 0.2%, far under the 1.6% forecast.

Key Event Risk Ahead

The UK calendar was quiet on Monday. Traders are now waiting for UK employment data due Tuesday, which kept positioning cautious. From a technical view, price is testing 209.60 as the neckline of a possible bullish Head & Shoulders pattern. MACD is above the Signal line near zero. The histogram is positive and widening, and RSI is near 50. If the pair breaks above 209.60, the next levels are 210.54 and around 211.65. Support sits near 208.00. A drop below 207.57 would invalidate the bullish setup. The pair is testing 209.60 mainly because Japan showed very little growth late last year. GDP for Q4 2025 came in at a modest 0.1%, well below expectations. This also highlights the policy gap between the UK’s higher interest rates and Japan’s ongoing stimulus.

Options Strategy And Risk

On the Pound side, caution is needed ahead of UK employment data tomorrow. UK inflation rose to 4.2% in January 2026. If wages come in strong, the Bank of England may need to stay aggressive. For context, average earnings growth was around 5.8% for much of the second half of 2025, which can keep pressure on rates. With a bullish pattern pointing toward 211.65, buying call options with a strike near 210.00 may be a practical way to trade the potential move. This approach keeps downside risk limited to the premium paid. Volatility is also high. The pair’s average daily range was over 180 pips last month, which makes defined-risk options more appealing. The main risk is a weak UK jobs report, which could push the pair sharply lower. Watch 207.57 closely. A break below it would invalidate the bullish setup. A small position in put options could help hedge against a negative surprise. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Australian Dollar rose against the US Dollar after a two-day pullback. AUD/USD was up 0.2% to around 0.7090 in European trading on Monday. Markets are waiting for the Reserve Bank of Australia (RBA) minutes on Tuesday. At its previous meeting, the RBA raised the Official Cash Rate by 25 basis points to 3.85%.

Australian Jobs Data In Focus

Australian jobs data for January is due on Wednesday. Forecasts point to 20K new jobs, down from 65.2K in December. The Unemployment Rate is expected at 4.2%, up from 4.1%. In the US, trading was quieter because of President’s Day. The US Dollar Index was slightly higher, near 97.00. Attention also turns to the Federal Open Market Committee (FOMC) minutes from the January meeting, due on Wednesday. Central banks aim to keep prices stable and often target inflation near 2%. They mostly use interest rates. They raise rates to tighten policy and cut them to loosen policy. Policy boards, led by a chair or president, make these decisions. Public communication is also limited during the blackout period.

Central Bank Expectations Shift

In February 2025, markets expected the RBA to stay hawkish. That helped keep the Aussie dollar supported near 0.7100 against the US dollar. Today, the picture is very different. AUD/USD is trading much lower, closer to 0.6600. This shows how central bank expectations have shifted over the past year. A year ago, the RBA cash rate was 3.85%, and Governor Bullock signaled more hikes were possible. Now the cash rate is lower, at 3.60%, after cuts in late 2025. Meanwhile, the US Federal Reserve rate is 4.00%. This gap in rates now makes holding US dollars more attractive than holding Australian dollars, compared with a year ago. Australia’s labor market also looks weaker. In February 2025, markets were looking for a solid gain of 20,000 jobs. But the latest data for January 2026 showed a smaller increase of only 12,000. The unemployment rate has also risen from 4.2% a year ago to 4.5% now. This reduces the need for the RBA to consider rate hikes. Meanwhile, the US Dollar Index (DXY) was steady around 97.00 in February 2025. Today, it is much stronger, trading near 104.50. The US economy has held up better than many other developed economies. This strength in the greenback is a major headwind for AUD/USD. Given this backdrop, we think the Aussie dollar has limited upside in the coming weeks. Derivatives traders may consider strategies that benefit if AUD/USD stays in a range or drifts slightly lower, such as selling call spreads. Implied volatility is also lower than it was during the 2025 hiking cycle, which makes options strategies cheaper to put on. The upcoming RBA minutes and the quarterly inflation report will be key for any sign the central bank is shifting away from its neutral stance. Stronger-than-expected Australian data could still trigger a short-term rally, but the broader trend looks capped. For now, we prefer selling into strength rather than chasing rallies. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

OCBC said recent equity market volatility has come with more Swiss franc gains. EUR/CHF is now holding well below 0.92. It said continued CHF strength could raise the risk that inflation falls below Swiss National Bank (SNB) forecasts. It noted that last week’s Swiss CPI was in line with the 0.1% year-on-year forecast for 1Q26. It added that more CHF gains could still push inflation below those forecasts.

Snb Tolerance For A Stronger Franc

OCBC said a long run of franc appreciation could test the SNB’s current tolerance for a stronger currency. It also said the bar for a return to negative interest rates remains high. The report pointed to recent Riksbank minutes. These minutes said Swedish krona strength is a downside risk to inflation. OCBC said Switzerland could face the same issue. If CHF strength continues, the SNB may shift to a softer policy stance. Recent equity market swings have pushed the VIX volatility index above 20% over the past month. This has driven safe-haven demand for the Swiss franc. As a result, EUR/CHF has dropped below 0.9200. That is a clear move away from the 0.95–0.97 range seen for much of 2025. This ongoing CHF strength is becoming a key problem for Swiss policymakers. A strong franc threatens the SNB’s inflation goals. It makes imports cheaper and can pull down local prices. With January 2026 inflation at just 0.1% year over year, the SNB has little room for further downside. This reading is close to the lower end of the SNB’s 0–2% target range. Any extra CHF strength would add to the risk of very low inflation.

March 19 2026 SnB Meeting

We think this makes it more likely the SNB will signal a softer policy stance. That would be similar to how Sweden’s Riksbank has discussed the krona. For derivatives traders, this raises the case for positioning for a rebound in EUR/CHF. If the SNB hints at a shift, EUR/CHF could jump. One way to express this view is to buy EUR/CHF call options that expire after the next SNB meeting. The key event is the SNB policy assessment on March 19, 2026. Any verbal intervention or more dovish comments ahead of the meeting could weaken the franc. Traders should also watch option volatility. If it rises, it may show the market is pricing in a higher chance of a policy change. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

India’s merchandise trade deficit rose to $34.68bn in January, above the expected $26.14bn. The trade deficit is the gap between imports and exports. A larger deficit means the country bought more from abroad than it sold overseas during the month.

Implications For The Indian Rupee

A January deficit this far above forecasts creates immediate downside pressure on the Indian rupee. We see this as a strong signal to consider short INR positions versus the U.S. dollar. Traders can use USD/INR futures or buy call options to position for potential rupee weakness in the weeks ahead. The wider deficit is being driven by high import costs. Brent crude has recently firmed around $95 per barrel, well above the $85 average seen in the last quarter of 2025. At the same time, export growth has been weak as manufacturing PMI readings from Europe soften. Costly imports combined with weaker external demand typically lead to a larger deficit. This puts the Reserve Bank of India in a tough spot. A weaker rupee can raise imported inflation. As markets start to price in a higher chance of a hawkish stance, bond market volatility may increase. Interest-rate derivatives, such as paying fixed on overnight index swaps, could become more appealing. For equity derivatives, the move may split sectors. Import-heavy businesses—such as autos and consumer durables—could see margin pressure, which may support short positions in related futures. Export-focused sectors like IT and pharmaceuticals often benefit from a weaker rupee, which may support long positions in their index futures.

Policy Response And Market Reaction

We are monitoring this closely. It echoes the third quarter of 2025, when a smaller deficit spike sparked notable currency jitters. At that time, the central bank mainly used verbal intervention to steady markets. With the current deficit nearly 33% above expectations, a more direct policy response cannot be ruled out. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now