Gold fell in the North American session on Monday as the US Dollar pared earlier losses and risk appetite weakened amid limited progress in US-Iran talks. XAU/USD traded at $4,673, down 0.75%.

Geopolitical developments kept pressure on bullion, with Iran linked to a plan to reopen the Strait of Hormuz if US restrictions on Iranian ports are lifted. Axios reported Tehran proposed a three-stage process covering the war, the Strait of Hormuz, and nuclear discussions.

Rates And Geopolitics Drive Gold

US President Donald Trump cancelled his envoy’s trip to Pakistan and said Iran had sent a “much better” deal, but it was still not enough. Markets also focused on expectations for higher-for-longer US rates, which weighed on the non-yielding metal.

The US 10-year Treasury yield rose 3.5 basis points to 4.342%. Prime Terminal data showed swaps pricing for the Federal Reserve to keep rates steady in 2026.

The Fed meeting runs from Tuesday to Wednesday, with a policy statement and a press conference by Chair Jerome Powell. Powell’s chair term ends on May 15, while his Fed term runs to January 31, 2028.

A Reuters poll put the median end-2026 gold forecast at $4,916, up from $4,746.50 three weeks earlier. Tuesday’s calendar includes ADP Employment Change 4-week average, housing data, and the Conference Board Consumer Confidence survey for April.

Technical Levels And Market Positioning

Technically, gold held below $4,700, with resistance at the 20- and 100-day SMAs above $4,729 and $4,733. Support levels were cited at $4,650, $4,600, and the April 2 low of $4,554, while upside levels included $4,750 and $4,800.

Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, according to the World Gold Council. Gold is described as inversely related to the US Dollar and US Treasuries, and often moves with rate expectations.

We are seeing gold prices weaken as the market prioritizes the strong US Dollar and rising Treasury yields over gold’s safe-haven appeal. With the US 10-year yield at 4.342%, holding a non-yielding asset like gold becomes more expensive. This pressure is likely to continue heading into the Federal Reserve meeting this week.

The upcoming Fed meeting is the most critical event, especially since it marks Jerome Powell’s last press conference as Chair. Uncertainty around his successor creates potential for significant volatility, as any hint of a more hawkish or dovish stance from the next Fed leadership will move markets. This is a continuation of the “higher-for-longer” rate environment that we first saw take hold back in 2024.

For the next few days, derivative strategies that favor downside or range-bound price action could be considered. Buying put options with strike prices near the $4,650 and $4,600 support levels offers a defined-risk way to trade a potential drop following the Fed meeting. The technical momentum currently supports this cautious, bearish stance.

However, we must watch the Middle East headlines closely, as the geopolitical situation remains a wildcard. Just as we witnessed during the conflicts that unfolded in 2022 and 2024, any sudden escalation could trigger a flight to safety and send gold sharply higher, overriding the interest rate concerns. A de-escalation, on the other hand, would likely add to the current downward pressure.

Despite the short-term headwinds, the underlying support for gold remains strong due to persistent central bank buying. Following the record-breaking purchases we saw in recent years, where central banks added over 1,000 tonnes to reserves annually in 2023 and 2024, this demand creates a solid floor under the market. Therefore, significant dips below $4,600 might be viewed by many as long-term buying opportunities.

In the coming weeks, nimble traders should be prepared to pivot quickly based on the Fed’s new direction and geopolitical news. While puts are attractive now, a surprisingly dovish signal from the Fed or an escalation in Iran could make call options targeting the $4,750 and $4,800 levels very appealing. Watching the $4,733 resistance level is key, as a break above it would signal that the bears are losing control.

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TD Securities expects the Federal Reserve to keep the fed funds rate at 3.50–3.75% at the April FOMC. It expects Chair Powell to avoid firm guidance on the next policy move.

The note says the labour market remains balanced, while headline inflation has risen due to an oil shock linked to Iran. It expects the Committee to repeat a patient approach because uncertainty remains high.

Powell Status And Leadership Outlook

It reports that the Department of Justice has dropped its investigation into Powell, which could make this meeting his last as chair. It adds that whether Powell stays on as a governor after Warsh is confirmed would be Powell’s decision.

Warsh’s Senate hearing is described as providing limited clarity on near-term policy. The note expects immediate rate cuts to be difficult amid uncertainty tied to the Iran conflict.

TD Securities forecasts the Fed stays on hold until September 2026, then delivers 75 bps of easing through March 2027. It projects 50 bps of cuts in September and December, plus 25 bps in March 2027, taking the rate to 3.00%.

It says underlying inflation may improve as tariff and oil effects fade. It also points to Q1 ECI data this week as a check on labour-cost pressures.

Trading Implications For Rates Volatility

With the Federal Reserve expected to hold the policy rate at 3.50-3.75%, the immediate outlook is for stability in short-term rates. The Iran-related oil shock, which we saw push Brent crude past $110 a barrel in February, is keeping the Fed cautious for now. This suggests that selling short-dated volatility, such as weekly or monthly options on SOFR futures, could be a viable strategy to collect premium while the Fed waits.

Given the heightened uncertainty, however, this period of calm may not last. Any escalation or de-escalation in the Middle East could cause a sharp move in rates and oil prices. Therefore, buying longer-dated options expiring after the summer, perhaps around the September FOMC meeting, could serve as a valuable hedge against a sudden policy shift.

We see a path for rate cuts beginning in September, totaling 50 basis points by the end of this year. Traders could position for this by buying interest rate futures contracts that settle in late 2026, such as the December SOFR futures, to lock in today’s higher rates. This reflects the view that as oil and tariff impacts fade, the Fed will resume its easing cycle.

The labor market remains balanced and is not seen as an inflation risk, with recent payroll reports averaging a solid 200,000 jobs and the Q1 Employment Cost Index showing wage growth moderating. This reinforces the idea that the current inflation spike is temporary. We recall the aggressive hiking cycle of 2022-2023, and the Fed’s current patience shows they want to avoid reacting to transitory supply shocks.

The expected transition from Chair Powell to Kevin Warsh introduces another layer of uncertainty. Warsh has been critical of the Fed’s past performance on inflation, suggesting a more hawkish long-term stance. This could mean any easing cycle that begins in September might be shallower or shorter than previously anticipated, affecting derivative pricing for 2027 and beyond.

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WTI crude was steady on Monday near $95.00 a barrel, with volatility linked to US-Iran talks and disruption in the Strait of Hormuz. Reports said Iran sent a proposal to the US to reopen the waterway and end the war, while leaving nuclear talks for later.

The White House said President Donald Trump discussed the proposal, but the US is not considering it. The Strait of Hormuz remains under a dual US-Iran blockade, with supply still disrupted.

Strait Of Hormuz Disruption And Market Impact

The head of the UN maritime agency said about 2,000 commercial vessels and 20,000 seafarers are stranded in the Strait of Hormuz. Disruption in the waterway may continue after the conflict ends.

On charts, WTI stayed above key moving averages, with the 50-day SMA at $85.97, the 100-day SMA at $72.87, and the 200-day SMA at $67.40. The RSI (14) was near 55 and the ADX (14) near 24.

Support levels were cited at the 50-day SMA at $85.98, then the 100-day SMA at $72.88 and the 200-day SMA at $67.41. WTI is a US-sourced light, sweet crude priced at the Cushing hub.

WTI prices are driven by supply and demand, political events, OPEC decisions, and the US Dollar. API inventory data is published Tuesday and EIA data Wednesday, with results within 1% of each other 75% of the time.

Market Conditions In April 2026

As we look at the market on April 28, 2026, the situation has changed dramatically from the tensions we saw throughout 2025. We remember how WTI crude held firm around $95 a barrel this time last year due to the complete blockade of the Strait of Hormuz. With a fragile diplomatic resolution reached late in 2025 allowing limited transit, that acute risk premium has vanished, and prices are now consolidating around $78 a barrel.

The market’s focus has shifted from singular geopolitical flashpoints to broader fundamentals of supply and demand. In response to the price drop following the Hormuz reopening, OPEC+ initiated production cuts of 2.2 million barrels per day in January 2026, which are providing a floor for prices. However, the latest IEA report this month showed global demand growth slowing to its lowest level since 2022, creating a tug-of-war between managed supply and weakening consumption.

For derivative traders, this means implied volatility has fallen sharply from the highs we experienced during the 2025 crisis. The CBOE Crude Oil Volatility Index (OVX) has settled from peaks near 55 to a more subdued 32, making options significantly cheaper than they were a year ago. This environment is less favorable for buying outright protection and suggests strategies that can benefit from range-bound price action are now more appropriate.

Unlike last year’s clear bullish trend, the technical picture now shows WTI trading within a well-defined channel, with the old 50-day SMA of around $86 now acting as major resistance. We are seeing a move away from simple long futures positions toward more defined-risk option strategies, like selling puts below $70 or establishing call spreads to target a modest recovery. The play is no longer about preparing for supply shocks, but about navigating a market caught between production discipline and economic headwinds.

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Earlier market surveys suggested a high chance of a Bank of Japan rate rise this week. After Governor Kazuo Ueda spoke at the IMF/World Bank meetings without signalling an imminent move, expectations shifted towards June.

The BoJ is described as cautious, with attention on core inflation when setting policy. Ueda referred to pressure on Japan’s terms of trade from higher-priced energy imports and the related downside risks to the economy.

Policy Signals And Market Timing

Ueda also pointed to Japan’s very low real interest rates, indicating monetary conditions remain highly accommodative despite the BoJ’s recent tightening. Some parties have said the BoJ is behind the curve, given relatively firm headline inflation.

The BoJ has focused on its own measures of core inflation and has recently provided more detail on them. The Bank is widely expected to revise up its inflation forecasts for the current fiscal year.

The BoJ’s guidance on core inflation is expected to influence expectations for a June rate rise.

The market is once again re-focusing its expectations for the next Bank of Japan rate hike towards the summer, likely July. As of late April 2026, Governor Ueda’s recent cautious tone has dampened speculation of a move at the June meeting. This creates an environment of uncertainty that derivatives can be used to navigate.

Trading Implications Into Summer

We see good reason for the Bank to remain cautious, as the yen continues to trade weakly above the 160 level against the dollar, importing inflation. While recent data shows core inflation holding at 2.4%, the Bank is wary of hiking rates too quickly and harming the fragile economic recovery. Ueda continues to remind us that despite a few hikes, real interest rates remain deeply negative, implying policy is still very supportive.

Looking back to the spring of 2025, we saw a similar pattern where expectations for a hike were pushed back from April to June based on the Governor’s communications. This established a clear playbook where the BoJ prioritizes its own core inflation measures and forward guidance over reacting to short-term market pressure. The Bank’s behavior has become more transparent, but its timing remains deliberately ambiguous.

For traders, this suggests that options pricing on the yen will likely increase heading into the July policy meeting. Positioning for a potential rise in volatility with straddles on USD/JPY could be a prudent strategy. The key signal to watch will be the Bank’s revised inflation forecasts, which will be the most important factor in shaping rate hike expectations for the second half of the year.

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The US Treasury’s 2-year note auction produced a yield of 3.812%. This was down from the previous auction yield of 3.936%.

The change represents a fall of 0.124 percentage points. This is also a drop of 12.4 basis points.

Market Pricing For Rate Cuts

The sharp drop in the 2-year note auction yield tells us the market is now firmly expecting the Federal Reserve to cut interest rates soon. This is a clear signal that bond traders are aggressively buying short-term debt to front-run the Fed’s pivot. We should be positioning for a lower rate environment in the coming weeks.

This market sentiment is supported by the latest economic data. The March 2026 core CPI report showed inflation has cooled to 2.7%, well off its highs from last year, and the most recent employment report indicated job growth slowing to 145,000. These figures give the Federal Reserve the justification it needs to begin easing policy.

For interest rate traders, this means positioning in derivatives that profit from falling yields. We should consider buying futures contracts on 2-year and 5-year Treasury notes, as their prices will rise as rates fall. Options on SOFR futures, specifically buying calls, also provide a direct way to bet on the timing and magnitude of the coming rate cuts.

In equity markets, this shift toward lower rates is typically bullish for growth-oriented stocks. We can use derivatives to gain exposure to this trend by buying call options on the Nasdaq 100 index (NDX). This strategy offers a leveraged bet that lower borrowing costs will boost technology and other growth sector valuations.

Dollar Weakness And Trade Implications

The expectation of Fed cuts will likely put downward pressure on the U.S. dollar. We should explore options strategies that benefit from a weaker dollar, such as buying calls on the Euro or selling puts on the Japanese Yen against the dollar. These trades anticipate capital flowing out of the U.S. as its yield advantage diminishes.

When we look back at 2025, the market was concerned about persistent inflation, with the 2-year yield briefly touching 4.4% in the third quarter of that year. The current environment is a significant reversal of that thinking. This auction result confirms the dovish pivot we have been anticipating since the start of this year.

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EUR/USD gave back part of its earlier rise on Monday as stalled US-Iran talks kept markets cautious and supported the US Dollar. The pair traded near 1.1723 after an intraday high of 1.1755.

The US Dollar Index (DXY) was around 98.47 after an intraday low of 98.22. Price moves were linked to fresh US-Iran headlines.

Us Iran Talks And Dollar Reaction

Axios reported that Iran has offered a proposal to reopen the Strait of Hormuz and end the war, while leaving nuclear talks for later. Washington has not yet responded, and US President Donald Trump has said limits on Iran’s nuclear programme are a condition for any deal.

Focus is also on this week’s Federal Reserve and European Central Bank meetings. Both are widely expected to keep interest rates unchanged, while higher Oil prices raise inflation concerns.

On the daily chart, EUR/USD remains mildly bullish, holding above the 50-, 100-, and 200-day simple moving averages. These averages cluster between about 1.1650 and 1.1710, with the RSI near 55.

MACD has moved back towards zero, and ADX is near 24. A drop below the moving-average zone could open 1.1600, while resistance sits near 1.1800.

From 2025 Backdrop To Current Market

We recall how fragile market sentiment was back in 2025, with stalled US-Iran talks keeping EUR/USD pinned around the 1.17 level. Today, the situation is vastly different, with the pair trading closer to 1.09 and the US Dollar Index (DXY) firm above 104, compared to the 98 level seen then. This highlights a significant shift in the underlying strength of the dollar.

The focus on both the Fed and ECB holding rates due to oil prices in 2025 now seems like a distant memory. Both central banks have since embarked on easing cycles, but the Federal Reserve is signaling a slower pace of cuts due to persistent US inflation, which is currently running at 2.9%. This policy divergence is a key reason for the dollar’s sustained strength and is creating opportunities in interest rate swaps.

The technical picture from last year suggested a stable base with modest momentum, which supported selling volatility through short straddles. However, the current environment is less certain, and implied volatility on one-month EUR/USD options has climbed to over 8%, up from the sub-6% levels we saw for much of 2025. This suggests traders should now consider buying options, like long strangles, to profit from a potential sharp move in either direction.

Those old support levels around 1.1650 are now a distant ceiling, with the market currently finding resistance near 1.1050. Traders are using this level to initiate bearish positions or buy put options, betting that the Fed’s cautious stance will keep a lid on any Euro rallies. A break below the year-to-date low of 1.0820 would likely trigger further downside momentum.

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The United States held an auction of 5-year Treasury notes. The auction yield fell to 3.955% from the previous 3.98%.

The drop in the 5-year note auction yield to 3.955% shows strong demand for government debt. This suggests the market is increasingly betting on lower interest rates in the near future. We see this as a clear signal of a flight to safety amid whispers of a slowing economy.

Cooling Inflation Supports Rate Cut Expectations

This move aligns with the latest Consumer Price Index report for March 2026, which showed core inflation cooling to 2.8%. That’s a noticeable drop from the stubborn 3.1% we saw in February. This data reinforces the idea that the Federal Reserve may have room to ease policy before the end of the year.

This is a significant change from the sentiment we observed through much of 2025 when yields were elevated. Looking back, persistent services inflation kept the 10-year Treasury yield above 4.4% for a prolonged period last year. The current demand for bonds suggests a major shift in market expectations.

Given this outlook, we are positioning for a continued decline in yields. Traders should consider long positions in Treasury futures contracts, such as the 5-Year T-Note futures (ZF). This is a direct play on bond prices rising as yields fall.

Options on interest rate sensitive ETFs, like IEF for intermediate-term bonds, are also looking attractive. Buying call options could provide leveraged exposure to the expected rise in bond prices. We believe this is a more capital-efficient strategy than holding the underlying asset.

Rate Sensitive Equity Trades Gain Appeal

Lower borrowing costs are typically beneficial for growth-oriented sectors of the stock market. We believe this environment supports taking a bullish stance on technology and other rate-sensitive equities. Derivative plays on indices like the Nasdaq 100 through call options or futures are now more compelling.

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USD/JPY is trading near 159.30 as traders position ahead of the Bank of Japan decision. Markets expect the BoJ to keep its benchmark rate at 0.75% while signalling it may tighten further.

The Yen has firmed on these expectations, even as policy differences with the US Federal Reserve continue to support the US Dollar. The Middle East conflict, nearing two months, is also sustaining demand for the Dollar as a safe haven.

Four Hour Technical Snapshot

On the four-hour chart, USD/JPY trades around 159.29. It is holding above support near 159.27 and the 100-period simple moving average at 159.21, while resistance sits near 159.30 and the 20-period SMA at 159.47.

The Relative Strength Index (14) is about 47, pointing to neutral momentum. Further support is seen at 159.20, with a break below about 159.10 suggesting a deeper move lower.

The technical analysis section was produced with help from an AI tool.

Looking back at the sentiment in late 2025, we recall the market being coiled with tension around the 159.30 level, anticipating a hawkish Bank of Japan. That period of extreme policy divergence has now passed, following decisive action that shifted the landscape entirely. The carry trade, which was once overwhelmingly profitable, has seen its appeal diminish as the interest rate differential between the Fed and BoJ has narrowed to below 375 basis points.

Volatility And Positioning Backdrop

The push above 160.00 late last year proved to be the breaking point, triggering yen-buying intervention from the Ministry of Finance, much like the actions we witnessed in 2022 and 2024. That move was substantial, driving the pair down aggressively and reminding traders that official warnings carry significant weight. Consequently, the high cost of fighting the authorities has made us cautious about rebuilding large short-yen positions near those historic highs.

Implied volatility on USD/JPY options, which spiked to over 14% during the intervention period, has now settled into a more subdued 8-9% range for 3-month contracts as of this week. This calmer environment suggests that strategies like selling strangles or straddles could be advantageous, aiming to collect premium as the pair consolidates in its new, lower range. The extreme directional bets that defined last year are giving way to more nuanced, range-bound plays.

The technical picture from 2025, with its focus on the 159.00 area, is now a distant memory. Our focus today is on the formidable resistance near the 148.00 level, which has capped rallies twice this year, while strong support has formed around 144.50. Derivative traders should use these boundaries to structure their positions, perhaps using knock-out options to cheapen entry costs for plays within this established channel.

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US equity futures fell on Monday, with DJIA futures down about 0.4% near 49,100 after briefly moving below 49,050. The S&P 500 dipped about 0.2% and the Nasdaq Composite fell roughly 0.4% after both set record highs on Friday.

Tension linked to Iran left energy markets tight, after President Donald Trump cancelled plans to send Steve Witkoff and Jared Kushner to Pakistan for ceasefire talks. Iran’s Foreign Ministry said no meeting with Washington is scheduled, while Axios reported Iran proposed reopening the Strait of Hormuz in return for deferring nuclear talks.

Oil Markets Tighten

WTI rose above $97 a barrel and Brent topped $109, both up about 3% on the day. Stochastic RSI on the 5-minute chart was near 34.

The FOMC decision is due Wednesday at 18:00 GMT, with the press conference at 18:30 GMT. CME FedWatch put the chance of a hold at 3.50% to 3.75% at about 99%, while Polymarket showed 40% odds of zero cuts in 2026 and 28% pricing one cut.

Five of the Magnificent Seven report this week, with Microsoft, Meta, Alphabet, and Amazon on Wednesday and Apple on Thursday. JPMorgan raised its year-end S&P 500 target to 7,600 from 7,200.

Verizon rose about 3.5% after lifting its 2026 adjusted earnings outlook, while Qualcomm jumped about 10% on partnership reports. Domino’s fell about 10%, Marvell dropped over 5%, and POET Technologies slid nearly 50%.

Key Macro Catalysts Ahead

Thursday brings Q1 GDP at 12:30 GMT, seen at 2.2% annualised versus 0.5% prior, plus core PCE expected at 3.2% YoY versus 3.0%. Friday’s ISM manufacturing PMI is forecast at 53 versus 52.7.

Given the market’s retreat from record highs, we should brace for higher volatility in the coming days. The mix of geopolitical tension, a pivotal Federal Reserve meeting, and concentrated tech earnings creates a perfect storm for wider price swings. Options strategies that profit from chop, such as straddles on the SPX or NDX, could be more prudent than holding outright directional futures bets.

The Iran impasse is the most immediate factor, and the jump in crude prices above $97 for WTI is a clear signal. With the Strait of Hormuz still facing disruption, a chokepoint for roughly 20% of the world’s daily oil consumption, being long energy remains the most direct trade. We should look at call options on energy ETFs or producers, as this energy shock will likely persist and weigh on industrial and transport stocks.

Wednesday’s Fed meeting is less about the rate hold, which is fully priced in, and more about future guidance. After the series of cuts we saw through 2025 failed to fully tame inflation, any hawkish language from Powell could solidify the market’s pricing for zero cuts this year. A surprisingly soft tone on inflation, however, could spark a sharp rally, making cheap, short-dated index calls an interesting speculative play.

This week’s direction will ultimately be decided by the technology giants reporting after Wednesday’s close. Expectations are incredibly high for AI-related capital expenditure, and any sign of a slowdown from Microsoft or Alphabet could unravel the recent rally. Considering the S&P 500 has already blown past the median year-end targets we saw at the start of 2026, the risk of a sharp pullback on any earnings disappointment is significant.

We must also watch Thursday’s economic data, where a hot core PCE reading above the expected 3.2% would reinforce the Fed’s cautious stance. Looking back at the persistent inflation of 2023, another accelerating print would be a major headwind for equities. This, combined with Friday’s ISM data, will likely confirm that higher oil prices are feeding directly into the cost of goods, complicating the path forward for the market.

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GBP/USD rose in Monday’s North American session, gaining 0.19% as US-Iran talks stalled and US equities traded lower. The pair traded at 1.3548 after rebounding from an intraday low of 1.3506.

Later on Monday, GBP/USD traded near 1.3565, up 0.23% on the day, supported by a softer US Dollar amid improving risk appetite. Reports referred to an Iranian proposal linked to reopening the Strait of Hormuz and ending the conflict with the United States.

Market Session Recap

In the Asian session, GBP/USD drew dip-buying interest near the 1.3500 psychological level and climbed to a more than one-week high. It traded just below the mid-1.3500s, up 0.10% on the day, with 1.3600 cited as an upside target.

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We recall that back in early 2025, there was brief optimism when GBP/USD tested the 1.3550 level, driven by hopes surrounding US-Iran talks. That period was defined by a fragile market mood where geopolitical headlines could shift the currency significantly. Today, with the pair trading much lower around 1.2720, that volatility serves as a key reminder of how external factors influence the market.

Given the current environment, where the Bank of England is cautiously watching UK inflation hover just above target at 2.1%, implied volatility in GBP/USD options is an important metric. The instability we saw last year shows that buying straddles could be a strategy to trade potential price swings in the coming weeks, especially ahead of central bank meetings. This would allow us to profit from a significant move without betting on a specific direction.

Options And Hedging

Unlike last year’s focus on the 1.3600 target, the current resistance level for the pair seems firmly capped near 1.2800. With the latest US jobs report showing a healthy addition of over 250,000 payrolls, the dollar’s fundamental strength appears more resilient than it did during the temporary peace hopes of 2025. We might therefore consider buying out-of-the-money put options with a strike price near 1.2600 to position for potential downside.

Looking back, the market’s singular focus on geopolitics in 2025 seems narrow compared to today’s broader economic concerns over divergent central bank policies. We see that while risk premiums from specific events can fade, persistent inflation remains a primary driver. For those with sterling-denominated assets, using futures contracts to hedge against a sustained break below 1.2700 remains a prudent approach.

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