GBP/USD held near 1.3620 after the latest US inflation report pushed traders to raise the chances of a Federal Reserve rate cut in June. The pair was little changed on the day and was on track to finish the week up 0.12%. The US inflation data has changed our view. Prices rose just 0.1% month-on-month, below market forecasts. This makes it easier for the Fed to start cutting rates. Market pricing now puts the odds of a June cut above 75%. This shift is weighing on the US dollar. With this backdrop, we see room for more GBP/USD gains in the weeks ahead. One way to express this view is to buy GBP/USD call options that expire in late June or July. These would benefit if the exchange rate rises on expectations of easier Fed policy. We also need to account for policy divergence, which is a big change from most of 2025, when central banks largely moved together. UK inflation remains high—3.5% last month—well above the Bank of England’s target. That suggests the BoE may keep rates unchanged for longer. A softer Fed alongside a steadier BoE should support the pound. Still, upcoming data will matter, especially the next US non-farm payrolls report. A much stronger jobs reading could reduce expectations for a June cut and push implied volatility higher. Because of this, strategies such as bull call spreads may be a sensible way to limit cost and manage risk.

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Russia’s consumer price index (CPI) rose 1.62% month over month in January. Economists expected a 2% increase. The January figure was 0.38 percentage points below the forecast. In other words, monthly inflation was lower than expected.

Implications For Monetary Policy

January inflation came in at 1.62% instead of 2%. This suggests price pressures may be easing faster than expected. As a result, the Central Bank of Russia may feel less pressure to raise rates again from the current key rate of 15%. Markets may now focus more on when the bank could start cutting rates later this year. This could weigh on the Russian ruble, which has been supported by high interest rates. The ruble has recently been steady near 95 per U.S. dollar, but that stability could be tested if the rate advantage shrinks. Traders may increase positions that benefit from a weaker ruble, such as buying USD/RUB call options for the coming months. For bonds, the data is supportive. It suggests rates may be near a peak. In 2025, worries about stubborn inflation pushed government bond yields up sharply, which drove bond prices down. A lower inflation print may encourage traders to look for a rebound in Russian government bond (OFZ) prices, including through futures. The news can also help Russian equities. If investors expect lower borrowing costs, the outlook for company profits improves. The MOEX Russia Index has struggled to stay above 3,500 points, and many firms said in Q4 2025 that high financing costs were hurting results. This inflation reading may increase interest in call options on the index if markets begin to price in a more dovish central bank.

Market Positioning And Risk Sentiment

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Russia’s consumer price index (CPI) rose 1.6% month-on-month in January. This was below the expected 2.0% rise. The difference between the forecast and the actual result was 0.4 percentage points. Prices rose more slowly than expected.

Implications For Monetary Policy

January’s weaker inflation reading matters. A 1.6% month-on-month CPI versus a 2.0% forecast suggests the Central Bank of Russia’s tight policy may be starting to ease price pressure. This makes us rethink when rate cuts could begin. We should expect a more dovish tone in forward rate markets. The CBR has kept its key rate at a restrictive 14% since the last hike in October 2025. This CPI print could bring forward rate-cut expectations from the third quarter to as early as May. Traders may want to position in front-end interest rate swaps for a lower 2026 terminal rate. This shift in rate expectations also affects the ruble. A less hawkish central bank reduces the appeal of the RUB carry trade, which may weaken the ruble versus the dollar. We should consider buying USD/RUB call options. Implied volatility may rise ahead of the next CBR meeting, and spot could retest the 105 level seen last fall. This view is supported by other recent data. Rosstat’s January manufacturing PMI dipped to 49.1, the first reading below 50 in over a year, which signals slower growth. December 2025 industrial production rose only 2.2% year-on-year, below the 3.0% consensus.

Market Positioning And Risk Assets

Looking back to 2025, repeated rate hikes often capped the RTS Index and kept it below 1,300 for months. If policy shifts toward easing, that headwind could fade. Russian equity derivatives may look attractive again. We should consider long positions in RTS index futures to benefit from a potential policy pivot. In the next few weeks, the key driver will be comments from CBR officials ahead of the next meeting. Any statement that recognizes disinflation could act as a catalyst. We should also track weekly inflation numbers to confirm that January’s result was not a one-off. Create your live VT Markets account and start trading now.

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BoE Chief Economist Huw Pill said on Friday that he does not expect a collapse in UK economic activity. Speaking at an event hosted by Santander in London, he pointed to forward-looking indicators. He questioned whether firms’ wage and price plans are settling at levels slightly above what is consistent with a 2% CPI target. He said underlying inflation looks closer to 2.5% than 2%. He said UK growth is positive but not very strong, with a clear cyclical element. He added that forward-looking indicators do not suggest a collapse in activity. He said supply constraints may help explain the weak pace of activity. He also said much of the rise in the UK unemployment rate is likely structural rather than cyclical. The main issue appears to be that underlying inflation is settling around 2.5%, not the 2% target—and this will shape Bank of England policy. The latest CPI data for January 2026 supports this view: inflation held at 2.6% and did not fall meaningfully. As a result, derivatives markets are likely to price in fewer rate cuts, or later cuts, than previously expected for the rest of this year. This sticky inflation, together with steady (if unspectacular) growth, should keep supporting the pound. In 2025, interest rate differentials were a key driver of G10 currency pairs, and that pattern is likely to continue. Traders may treat any weakness in GBP/USD as a chance to build long positions. For UK equities, the outlook points to limited upside. The January 2026 manufacturing PMI was just below the neutral 50 level, highlighting weak momentum and the risk of pressure on earnings. This environment tends to favour FTSE 100 strategies that benefit from range-bound markets, such as selling out-of-the-money call options. Pill’s view that much of the rise in unemployment is structural is also important. The jobless rate rose through most of 2025 and reached 4.5% in Q4. It is unlikely to fall quickly, even if activity improves modestly. That gives the Bank another reason to be patient and keep rates higher for longer to ensure inflation is fully under control.

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Agnico Eagle Mines reported adjusted earnings of **$2.69 per share** for **Q4 2025**, up from **$1.26** a year earlier and above the Zacks estimate of **$2.56**. Revenue was **$3,564 million**, up **60.3%** year over year, beating the **$3,240.7 million** estimate. **Payable gold production** was **840,608 ounces** versus **847,401 ounces** a year earlier and above the estimate of **839,674 ounces**. **Total cash costs** were **$1,089 per ounce** versus **$923**, above the estimate of **$945**. **Realized gold prices** were **$4,163 per ounce** versus **$2,660**, above the estimate of **$3,593**. **AISC** was **$1,517 per ounce** versus **$1,316**, above the estimate of **$1,315**. **Cash and cash equivalents** ended at **$2,866 million**, up **21.7%** sequentially, with **long-term debt** of about **$196.3 million**. **Cash from operating activities** was **$2,112 million** versus **$1,132 million**. For **2026**, gold production is forecast at **3.3-3.5 million ounces**, with **cash costs** of **$1,020-$1,120** and **AISC** of **$1,400-$1,550 per ounce**. Guidance includes **$275-$305 million** in exploration and corporate development spending, **$1.55-$1.75 billion** in depreciation, **$230-$260 million** in G&A, **$75-$95 million** in other costs, a **34%-36%** tax rate, **$3.4-$3.6 billion** in cash taxes, **$2.2-$2.4 billion** in capex, and **$290-$330 million** in capitalized exploration. Shares rose **117%** over the past year versus a **144.4%** industry gain. Zacks ranks: **AEM #2**; **Coeur Mining** (42 cents estimate, 106.61% average surprise, #1) reports **18 Feb**; **Valmont** ($4.95, 4.38%, #2) reports **17 Feb**; **Avino** (6 cents, 150%, #2) reports **11 March**. Agnico Eagle’s **Q4 2025** results show a company that benefited from a sharp jump in gold prices. The realized price of **$4,163 per ounce** was the main reason earnings beat estimates. Results were highly sensitive to the gold spot price. The price strength also fits with the inflation and “safe haven” demand seen through 2025. The main drawback was the steep rise in costs. **AISC climbed to $1,517 per ounce.** That is not surprising given high inflation last year. For example, the U.S. Consumer Price Index averaged above **4%** in 2025, which raised labor and energy costs across the industry. The 2026 cost outlook points to more stability, but costs are still high. That leaves less room for error if gold prices fall. Because of this setup, Agnico Eagle’s **implied volatility** may stay high in the near term. The stock often trades like a high-beta bet on gold itself. Hitting the 2026 production target of **3.3 to 3.5 million ounces** matters, but gold prices will likely matter more. For traders who think the forces that pushed gold above **$4,000** will continue, **buying call options** on AEM can provide leveraged upside. The stock also lagged the industry last year (up **117%** versus **144.4%**), which may leave room to catch up if sentiment stays positive. This approach assumes strong gold prices will outweigh concerns about higher operating costs. If gold has peaked and a correction is coming, Agnico Eagle’s high cost base increases downside risk. **Buying put options** or using **bearish put spreads** could be ways to position for a pullback. Even a **10%-15%** drop in gold prices could squeeze margins and lead to a larger percentage drop in AEM’s share price.

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National Bank of Canada said the U.S. federal fiscal path is still unsustainable, even with added revenue from tariffs. It noted that the Congressional Budget Office (CBO) now forecasts larger total deficits than in its earlier outlook. The bank said the One, Big, Beautiful Bill and stricter immigration policy are adding to the deficit and debt outlook. It said this is worse than the CBO’s earlier projections from Jan-25.

Fiscal Outlook And Policy Assumptions

It said the projections suggest the primary deficit could shrink over the next decade, but only if policy stays steady. It also said trade policy remains uncertain, including whether tariffs will stay in place after the current administration. It said uncertainty about future tariff policy increases risk for the U.S. macro outlook. It also said the White House may face pressure ahead of the midterm elections to cut debt, lower costs, and reduce tariff rates. The U.S. government’s fiscal path is unsustainable, which creates a challenging setup for the U.S. dollar in the weeks ahead. Even with tariff revenue, the debt outlook has worsened compared with the projections released in January 2025. This suggests dollar-linked assets could see more volatility. This uncertainty—especially around tariff policy ahead of the midterm elections—supports the case for buying volatility. The CBOE Volatility Index (VIX) has been rising and recently touched 19, up from the calmer conditions seen in late 2025. Options premiums on major currency pairs are also rising, reflecting growing concern.

Treasury Yields And Market Positioning

It is also important to watch the Treasury market. Continued government borrowing could push yields higher. The 10-year Treasury yield has already risen to 4.35% since the start of the year, and derivatives markets are pricing in a steeper yield curve. Traders may consider strategies that benefit from higher rates, such as buying put options on Treasury bond futures. In addition, the combination of the One, Big, Beautiful Bill passed in 2025 and tighter immigration policies has worsened the outlook. The CBO’s latest update confirmed these pressures and now projects that debt held by the public will exceed 110% of GDP by 2030. With this backdrop, long-term bullish positions on the dollar look risky without meaningful hedging. For now, the Dollar Index (DXY) is stuck between opposing forces and is hovering near 104. While the long-term debt story is a clear negative, sudden global risk events could still trigger a short-term flight to safety that supports the dollar. That is why options strategies like strangles may help capture a breakout in either direction. Create your live VT Markets account and start trading now.

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Rabobank’s Philip Marey said Kevin Warsh’s nomination as Federal Reserve Chair suggests lower US policy rates in 2026. The view is for three 25-basis-point cuts in 2026. That path would take the federal funds rate slightly below the median Federal Open Market Committee estimate of the neutral rate. Marey also said Warsh may try to convince other FOMC members to lower their neutral-rate forecasts, using an argument tied to artificial intelligence.

Balance Sheet And Long Term Yields

The note said Warsh supports shrinking the Fed’s balance sheet and may want to shift the operating framework from ample reserves to scarce reserves. It also warned that longer-term yields could rise even as policy rates fall. The article linked this possible rise in longer-term rates to housing conditions, calling it a “housing recession”. It also said the piece was produced with help from an artificial intelligence tool and reviewed by an editor. Because the new Fed Chair is signaling a more dovish stance, we are positioning for lower short-term interest rates. Markets are increasingly pricing in three 25-basis-point cuts in 2026. This view is supported by January Core PCE inflation, which eased to 2.8%. Traders may want to use SOFR futures to benefit from an expected decline in the policy rate. However, the plan to shrink the Fed’s balance sheet creates a key tension that could push longer-term yields higher. This may set up an opportunity for yield-curve steepener trades: long the 10-year Treasury yield and short the 2-year. We saw the setup for this trade build through the second half of 2025 as the market absorbed this policy split.

Positioning For Higher Volatility

This mix of rate cuts and quantitative tightening could drive higher market volatility. The bond market’s MOVE index has already risen to 115, a clear jump from the calmer levels late last year. We think buying options that gain from larger price swings—especially in Treasury ETFs—is a sensible way to prepare for the next few weeks. The stated aim of this approach is to ease the housing recession that lasted through 2025. January’s existing home sales, running at a weak 3.95 million annual rate, underline the urgency. We are watching mortgage-backed securities closely, because their performance will show whether rate cuts can offset the upward pressure on mortgage rates caused by a shrinking Fed balance sheet. Create your live VT Markets account and start trading now.

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Gold (XAU/USD) ticked higher on Friday after a softer US CPI report raised expectations that the Federal Reserve will cut interest rates. Gold traded near $5,000, after sliding to around $4,880 the day before. Gold had already pulled back from record highs near $5,600, as higher volatility made traders less willing to hold aggressive long positions. On Thursday, Gold dropped about 3.5% and Silver (XAG/USD) fell nearly 11.5%. Stocks and cryptocurrencies also declined. In January, headline CPI rose 0.2% month over month. That was below expectations and down from 0.3% in December. Year over year, CPI eased to 2.4% from 2.7%, also below the 2.5% forecast. Core CPI (excluding food and energy) increased 0.3% month over month, matching expectations and up from 0.2%. Annual core inflation slipped to 2.5% from 2.6%, in line with forecasts. After the report, the US Dollar fell and Treasury yields dropped. Markets priced in more than 50 basis points of rate cuts this year. Geopolitical tensions and steady central-bank buying also supported demand. On the daily chart, price stayed above the 20-day SMA and the middle Bollinger Band at $4,969.20. The Bollinger Bands remain wide (upper $5,350.76; lower $4,587.64). RSI is 53.92. Support sits near $4,800 and $4,588, while resistance is in the $5,000 to $5,100 area. The cooler inflation data has meaningfully changed expectations for Fed policy. CME Group’s FedWatch Tool shows the market now sees more than an 85% chance of a June rate cut, up from about 60% a week ago. This shift toward easier policy makes non-yielding gold more attractive and is the main reason price has moved back toward $5,000. This move is also backed by strong underlying demand that has been in place for some time. In 2025, global central banks bought more than 1,000 metric tons of gold for a third straight year. That buying has helped put a firm floor under the market. Much of it reflects a push to reduce reliance on the US dollar, especially as geopolitical frictions continue. It also helps absorb sharp pullbacks. Still, the recent one-day drop of 3.5% from the record high near $5,600 has made traders more cautious. The Gold Volatility Index (GVZ) is near 25, well above its long-term average around 16, which makes options more expensive. That suggests traders still think prices can rise, but they are also paying up for protection against another sharp move lower. With volatility this high, derivatives traders may prefer strategies that can benefit from a large move in either direction. With price clustering around $5,000 and Bollinger Bands widening, long straddles or strangles could work well in the coming weeks. These trades would gain from a clean break above $5,100 or a sharp reversal back toward support near $4,800. If you think the recent peak was only a short-term top, high implied volatility can also favor premium-selling strategies. One approach is to use bear call spreads with strikes well above $5,400. This lets traders collect income while keeping risk defined. It is based on the view that the market may need time to consolidate before it can challenge the record highs again.

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Poland’s January CPI came in above forecasts, mainly because of technical effects and volatile items. Even so, headline inflation stayed below the National Bank of Poland (NBP) target. The flash estimate showed CPI at 2.2% year on year in January, compared with 1.9% expected, and down from 2.4% in December. This was the second month in a row with inflation below the NBP’s 2.5% target (with a tolerance band of plus or minus 1 percentage point). Disinflation was driven mostly by cheaper petrol. Fuel prices fell 7.1% year on year, after a 3.1% drop in December. Despite the upside surprise, the broader trend still pointed to lower inflation. Based on this, a 25bp policy rate cut in March was still expected. The NBP’s March macroeconomic projection was expected to show a better inflation path than the December projection. That could mean a terminal policy rate below 3.50%, a level policymakers have referenced in recent weeks. With January inflation at 2.2%—below the central bank’s target for the second straight month—we see a clear case for monetary easing. The data supports our view that disinflation is firmly in place, even if there are small monthly surprises. We expect the NBP to cut its key rate by 25 basis points at its meeting next month. Because of this, we prefer receive-fixed positions in Polish interest rate swaps, on the view that floating rates will fall. The 2-year Polish government bond yield has already dropped to 3.95% this month, suggesting the market is pricing in easing before the NBP’s formal decision. We take this as confirmation that markets agree on the direction of rates. We also expect the Polish zloty to weaken as its yield advantage fades. EUR/PLN has already risen from 4.31 to 4.34 in early February 2026, and we think it can move higher. We are buying EUR/PLN call options expiring in April to benefit from this expected depreciation. Easier financial conditions should also support Polish equities. In the past, the WIG20 index rose by more than 8% in the three months after the NBP’s last easing cycle began in late 2024. With GDP growth slowing to 2.9% in Q4 2025, we are buying WIG20 index futures in expectation that a rate cut will support the economy and lift share prices.

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Germany’s gas storage is about 25% full at the start of February. This is far below recent years. A gas shortage this winter is unlikely, unless cold weather lasts well into March. Suppliers can respond by importing more liquefied natural gas (LNG). This added flexibility helps meet demand when storage is low.

Longer Term Storage Risk

Even so, gas storage sites are expected to be less full in the coming years than they were in the past. This raises the risk of winter shortages and makes gas prices more volatile. Storage facilities are not expected to hit the 90% target before the next heating season. That means the starting point for next winter could be worse than this winter. If storage drops to critical levels, European suppliers may have to buy gas at much higher spot prices and/or limit consumption. Any limits would mainly affect industry, to protect household supply. German gas storage is now at a critically low 24.8%. That is well below the five-year average of about 50% for this time of year. This is unlikely to cause an immediate shortage in the final weeks of winter, but it creates a very weak starting point for summer refilling. The market may be too relaxed because the near-term risk looks manageable.

Positioning Further Out The Curve

Strong LNG imports have been the main buffer. European terminals ran at over 85% capacity through January to meet demand. But relying on flexible LNG also exposes Europe to global price competition and possible shipping disruptions. We expect this to make it hard to refill storage quickly or cheaply in the months ahead. The main opportunity is not in the spot market. It is further out on the curve, especially in contracts for Q4 2026 and Q1 2027. These contracts seem to price in too little risk that inventories will miss the official 90% target before the next heating season starts. We are acting on this by taking long positions in these later-dated futures. Because higher price swings are expected, buying call options on these winter contracts is also a sensible approach. This can capture upside if prices spike due to supply fears later this year, while keeping risk capped. A higher chance of shortages should also lift implied volatility, which helps options holders. We can look back to autumn 2025 for a clear example. The price rally then was driven by concerns about low storage going into winter. Today’s setup could lead to an even stronger version of that move later this year. Create your live VT Markets account and start trading now.

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