Markets await US inflation data as sterling slips for a fourth session, hovering near 1.3600 after peaking at 1.3700
The Pound fell for a fourth straight day against the US Dollar. It traded near 1.3600 on Friday after pulling back from weekly highs above 1.3700. A risk-off mood supported the Dollar. Trading was quiet ahead of the US Consumer Price Index (CPI) release.
US headline inflation is expected to rise 0.3% in January. The annual rate is forecast to ease to 2.5% from 2.7% in December. Core CPI is expected to slow to 2.5% year on year from 2.6%.
Commerzbank says OPEC, EIA and IEA disagree on 2026 oil balances and warns oversupply risks persist
We face a sharply divided outlook for the oil market in 2026. Major agencies still cannot agree on whether the market will be balanced or in a large surplus. This uncertainty is keeping Brent crude steady near $67.6 per barrel. For derivatives traders, this split in forecasts can create clear opportunities in the weeks ahead.
Geopolitics is still a key support for prices and helps justify a risk premium. Reports from early February say US-Iran talks have stalled. The US Treasury has also widened sanctions on groups believed to be moving Iranian oil. With roughly 1.5 million barrels per day of Iranian supply still at risk, prices have held up even as some forecasts turn bearish.
Geopolitical Risk And Price Support
Supply chain changes are also tightening the market, especially as India keeps cutting its reliance on Russian barrels. Indian imports of Russian crude fell almost 20% in the final quarter of 2025 due to payment problems. That pushed buyers into the spot market for Middle Eastern and African grades. The rush for replacement barrels is supporting prices in the near term. Still, the risk of oversupply in the first half of this year is real. It should not be ignored. This week’s news that Kazakhstan’s Kashagan field is ramping up earlier than planned after January maintenance could add 400,000 barrels per day by March. That lines up with the IEA’s view that a glut of more than 3 million barrels per day is possible in this half of the year. We have seen this kind of split between agencies before. In 2024, the IEA and OPEC differed on demand growth by more than 1 million barrels per day, which helped drive similar volatility. On top of that, January 2026 US inflation came in slightly above expectations. That adds downside risk to demand because it could delay interest rate cuts. With a likely near-term surplus followed by a possible deficit later in the year, calendar spreads are starting to look attractive.Trading Ideas For The Curve
Traders may want strategies that benefit from near-term weakness or sideways trading. One approach is selling out-of-the-money calls in the March and April contracts. At the same time, buying longer-dated calls for the third and fourth quarters could position for a supply deficit in the second half of the year. Create your live VT Markets account and start trading now.The eurozone’s seasonally adjusted trade surplus rose to €11.6B from €10.7B previously.
The eurozone’s seasonally adjusted trade balance rose to €11.6bn in December, up from €10.7bn in the prior period.
The larger Eurozone trade surplus in December 2025 confirms a clear trend: external demand is improving. This is a positive sign and suggests the Eurozone economy is holding up better than many expected going into the year. We should update our outlook and expect stronger growth in Q1 2026.
This strength could support the euro in the coming weeks. Data from the U.S. Commodity Futures Trading Commission shows speculative net-long euro positions have been rising since January, which suggests this view is spreading. We should consider long EUR/USD exposure, potentially through call options to limit downside while targeting a move toward 1.10.
European equities could also benefit, especially in export-heavy markets like Germany. The German DAX, which has many exporters, is already up more than 3% since the start of the year. The latest trade data may add another tailwind, making call options on major European indices an appealing approach.
This positive picture is complicated by last week’s January 2026 inflation report. Core CPI stayed at 2.3%, slightly above the ECB’s target. Strong trade data plus sticky inflation makes a near-term ECB rate cut less likely. This is different from 2025, when markets expected sharp cuts this year.
Because rate cuts look unlikely soon, we should be careful with long government bond positions. We expect short-term yields could keep edging higher as markets reprice ECB expectations. Traders could look at strategies that benefit from higher yields, such as shorting German 2-year bond futures.
The current surplus also stands out compared with the energy-driven deficits seen in 2023. Moving back to a solid surplus points to a real improvement in the Eurozone’s trade position. It also suggests the region is in a stronger place than it was during the post-pandemic recovery.
Eurozone employment rose 0.2% quarter-on-quarter in Q4, beating forecasts of 0.1%
Eurozone employment rose by 0.2% quarter-on-quarter in the fourth quarter. This was above the 0.1% gain expected.
The release shows that eurozone employment grew faster than forecast. No other figures were included in the update.
The fourth-quarter 2025 employment result is stronger than we expected. Growth of 0.2% beat the 0.1% consensus and points to a resilient eurozone labour market. This pushes back against the widely held view that a sharp slowdown was already underway and fully priced in.
Stronger data like this gives the European Central Bank less reason to cut rates soon. We should now assign a higher chance that rates stay elevated through the second quarter of 2026. This matters even more because January core inflation was still high at 2.4%, well above the ECB’s target.
This setup should support the euro against the US dollar. Buying near-term EUR/USD call options could be a practical way to position for upside. We saw a similar move in late 2025, when stronger inflation data lifted the exchange rate by about 1.5% over two weeks.
For equity indices like the Euro Stoxx 50, the picture is mixed. A solid economy helps earnings, but “higher for longer” rates are a headwind and may limit upside. Traders could consider selling out-of-the-money calls to collect premium, positioning for a range-bound market rather than a breakout.
The clearest reaction may be in rates. We should expect German Bund futures to sell off as markets price a more hawkish ECB. This fits with last month’s data showing the eurozone narrowly avoided a technical recession, supporting the view that the economy can handle current rate levels.
Eurozone seasonally adjusted GDP rose 0.3% quarter on quarter in the fourth quarter, matching economists’ expectations exactly
Eurozone GDP rose **0.3% quarter-on-quarter** in the fourth quarter, **seasonally adjusted**. This matched the **0.3%** forecast.
The data suggests the economy kept growing at a modest pace into year-end. No additional details were included in the update.
Market Expectations And Volatility
Fourth-quarter 2024 growth came in at **0.3%**, exactly as expected. Since markets had already priced this in, it is unlikely to trigger a major move in equities. By removing near-term uncertainty, the report could help **implied volatility** on indices such as the **Euro Stoxx 50** ease in the coming weeks. The figure also supports the view that the Eurozone is avoiding a technical recession. However, growth remains **weak and fragile**. Germany, the bloc’s largest economy, **contracted by 0.3% for full-year 2024**, which underscores the softness beneath the surface. This limits the upside for European assets and keeps the broader outlook cautious. For monetary policy, a weak-but-steady GDP print gives the **European Central Bank** little reason to change course. With **January 2025 inflation at 2.8%**, attention stays on **when** the ECB may begin cutting rates later this year. This GDP release reinforces the expectation that **rate hikes are off the table**. With uncertainty reduced, some traders may look at **selling volatility**. If the Euro Stoxx 50 remains range-bound, strategies like **short straddles** or **iron condors** may benefit from premium collection in a stable market and from time decay.Fx Implications And Range Trading
In FX, this GDP result does not materially change the outlook for **EUR/USD**. The main driver remains the relative timing of rate cuts between the ECB and the **U.S. Federal Reserve**. As a result, the pair may continue to trade within its recent range, which can support **range-based options strategies**. Create your live VT Markets account and start trading now.Eurozone fourth-quarter employment growth met expectations and held steady at 0.6% year on year
Eurozone employment rose 0.6% year on year in the fourth quarter, matching the market forecast of 0.6%.
The Q4 2025 employment figure landed exactly as expected at 0.6%. This supports the market view that the Eurozone economy is stuck in low gear. With no surprise in the data, near-term volatility is unlikely. However, it reinforces a key theme for the weeks ahead: the European Central Bank is likely to keep a dovish stance, with little reason to think about rate hikes.
Implications For ECB Policy
January 2026 flash CPI showed inflation easing to 1.8%, strengthening the case for rate cuts later this year. Traders are already positioning for this by buying ESTR futures, effectively betting that the ECB will cut rates before the third quarter. Weak employment data adds another argument in favor of those trades. For equities, the picture is mixed. Lower rates can support valuations, but weak growth can hurt earnings. February 2026 flash manufacturing PMI came in at 48.5, pointing to ongoing industrial weakness and limiting upside in the Euro Stoxx 50. As a result, some traders may sell call options on the index to collect premium, expecting the market to stay range-bound. The euro is also likely to stay under pressure against the US dollar in this environment. Even if the Federal Reserve is expected to remain on hold, stronger US growth still provides fundamental support for the dollar. Buying out-of-the-money EUR/USD put options could be a low-cost way to position for a move back toward the 1.05 level seen in late 2025. From today’s perspective in early 2026, this slow-growth phase looks like an extension of the problems seen through 2025. Earlier spikes in energy prices appear to have caused lasting damage to industrial competitiveness. This release is not a new turning point, but another confirmation of a longer-term trend traders have been managing.Market Outlook And Positioning
Create your live VT Markets account and start trading now.Silver rose 5.52% to $78.91 per troy ounce from $74.78 on Thursday, data shows.
Silver rose on Friday. XAG/USD hit $78.91 per troy ounce. That was up 5.52% from $74.78 on Thursday, and up 11.01% so far this year.
In other units, silver was $2.54 per gram. The Gold/Silver ratio was 63.11 on Friday, down from 65.73 on Thursday.
Silver is a precious metal. People buy it as coins and bars. It is also traded through products like Exchange Traded Funds (ETFs) that track its market price.
Many factors can move silver prices. These include geopolitical events, recession worries, and interest rates. Silver pays no yield, so rate changes can have a bigger impact.
Silver is priced in US dollars. A stronger dollar can pressure prices, while a weaker dollar can support them.
Other drivers include investor demand, mining supply, and recycling. Industrial demand also matters. Use in electronics and solar can push prices up or down. Economic conditions in the US, China, and India matter too, along with jewellery demand in India.
Silver often moves with gold. Traders also watch the Gold/Silver ratio to compare their prices.
The 5.52% jump to $78.91 shows volatility is now very high. The Cboe Silver ETF Volatility Index (VXSLV) jumped more than 30% this week. That makes option-selling strategies more appealing, since premiums are higher. Examples include covered calls on existing holdings or cash-secured puts.
This rally likely follows last week’s softer US inflation report. Inflation came in at 2.1%, which increased expectations for an earlier Federal Reserve rate cut. That support may make call options attractive for traders looking for more upside. Similar volatility spikes hit metals in early 2025 after changes in Fed rate-cut expectations.
Stronger industrial demand is also supporting prices. After the Green Infrastructure Initiative announced in January, the Silver Institute now expects industrial demand to rise 15% in 2026. That could make short-term pullbacks look like buying opportunities for bullish traders.
The Gold/Silver ratio also dropped to 63.11. This suggests silver is beating gold by a wide margin. It is the lowest ratio since the second half of 2025. One way to trade this is a pairs trade: long silver futures and short gold futures.
After an 11% gain this year, a short-term pullback is possible. High implied volatility makes protective puts more expensive, but they may still matter for large positions. Put spreads can lower the cost while still offering downside protection.
ING strategists say the dollar is mildly supported ahead of US CPI, amid a tech-led risk-off move and undervaluation
The US dollar was slightly firmer ahead of the US CPI release. Support came from a tech-led risk-off mood and from the dollar looking cheap versus other G10 currencies.
Markets were expected to react less to CPI than they did to the payrolls report. The Federal Reserve has also signaled it is not in a hurry to cut rates again.
January CPI was expected to meet consensus: 0.3% month-on-month and 2.5% year-on-year for both headline and core. This was expected to confirm the recent, more hawkish repricing in Fed expectations.
Short-term undervaluation was seen as a factor that could lift the dollar in the coming days. However, recent trading suggested investors have been selling into USD rallies, limiting the room for a broader rebound.
The recent selloff in US tech was viewed as supportive for the dollar, as it pointed to returning safe-haven demand.
The USD was described as cheap against most G10 currencies. Even so, medium-term bearish sentiment was still seen as a reason for sellers to use rallies as selling opportunities.
The dollar is getting a small boost ahead of the January inflation report, helped by a mild pullback in tech. The Nasdaq 100 is down about 3% from its late-January highs, which has pushed some money toward the dollar as a relative safe haven. This support may be short-lived, but it is helped by the dollar looking inexpensive versus other major currencies.
We expect the Consumer Price Index to show inflation easing to 2.5% year-over-year, in line with consensus. Last week’s jobs report showed 225,000 new jobs, which has already led markets to reduce expectations for a March rate cut. Fed funds futures now price less than a 20% chance of a cut next month, which supports the dollar for now.
This setup may create chances to sell into any post-CPI dollar rallies. One approach is to sell call options or use bear call spreads on the U.S. Dollar Index (DXY) at higher strikes, such as 105.50. This position benefits if the dollar’s strength fades, as we expect the medium-term downtrend to reassert itself.
A similar pattern appeared across much of 2025: dollar rallies tended to fade because the Fed’s easing cycle was the main story. The Fed cut rates three times in 2025 and is now on hold, but the broader bias for the dollar still looks lower. That backdrop suggests the current firmness is more likely temporary than the start of a sustained move.
Because the market has been more focused on jobs data, implied volatility in major pairs like EUR/USD has fallen ahead of CPI. That can make short-term options (such as weekly straddles or strangles) relatively cheap. These trades can profit if the market moves more than expected in either direction.
China’s year-on-year M2 money supply growth rose to 9% in January, beating forecasts of 8.4%
China’s M2 money supply rose 9% year on year in January, above the 8.4% forecast.
This means broad money grew faster than expected during the month. It was also 0.6 percentage points higher than the estimate.
Liquidity Injection Accelerates
January’s 9% M2 reading suggests Chinese authorities are adding more liquidity than we expected. This faster easing likely reflects recent weak data, including January’s official manufacturing PMI at 49.8, slightly below the 50 level that separates expansion from contraction. We should prepare for the market impact of this support in the weeks ahead. This extra liquidity could flow into local equities and support higher prices. That creates a potential opportunity to go long Chinese stock index futures such as the CSI 300 or A50. The jump in January aggregate financing to ¥5.8 trillion also supports the view that credit is moving strongly through the economy. A larger money supply can also put pressure on the currency. We should be ready for the offshore yuan (CNH) to weaken against the US dollar. Possible ways to express this view include buying USD/CNH call options or shorting the yuan using futures. We saw a similar pattern in the second half of 2025: easing aimed at supporting the property market was followed by a steady rise in industrial commodities. As the world’s largest consumer, China’s new stimulus could lift demand for materials like copper and iron ore. We should consider long positions in commodity futures to capture a potential increase in demand.Volatility Strategies And Risk Positioning
Because this data surprised the market, it may signal more active policy moves ahead and higher volatility. The gap between forecasts and actual releases appears to be widening, similar to what we saw in late 2025 before volatility rose sharply. That supports looking at strategies designed to benefit from larger price swings in related assets. Create your live VT Markets account and start trading now.In January, China’s new loans totalled 4,710B, missing analysts’ 5,000B forecast
China’s new yuan loans reached 4,710 billion in January. This was below forecasts of 5,000 billion.
The data shows lending was weaker than expected for the month. The report did not include additional figures.
