The U.S. Import Price Index rose 0.1% month over month in December. That was below the 0.2% forecast. This result suggests import prices rose more slowly than expected. The release did not include further details. Looking back at December 2025, the import price index increased just 0.1%, also below the 0.2% estimate. This suggests imported inflation was cooling more than expected at the end of last year. On its own, this data point supports the idea that overall price pressures in the economy are easing. More recent data also points to disinflation. In January 2026, the latest CPI report showed core inflation slowed to a 2.8% annual rate, the lowest since early 2023. Fed funds futures now price a 70% chance of a rate cut by the Federal Reserve’s July meeting. In response, we are looking at call options on interest rate futures, which would benefit if rates fall in the coming months. In equities, this outlook supports index-based strategies, since lower interest rates often lift stock valuations. We are positioning for this by buying S&P 500 call options that expire in the second quarter. This mirrors what we saw in late 2023, when early signs of a Fed pivot helped drive a strong market rally. A less aggressive Federal Reserve could also push the U.S. dollar lower. The Dollar Index (DXY) has already fallen 1.5% since the start of the month. We expect that trend to continue. That makes trades that benefit from a weaker dollar worth considering, such as call options on the euro or Japanese yen.

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The US Employment Cost Index (ECI) rose 0.7% in the fourth quarter. Forecasts were 0.8%. The result was 0.1 percentage points below the forecast. This points to slower growth in employment costs than expected for the quarter.

Weaker Wage Growth Signals Earlier Fed Pivot

The fourth-quarter ECI shows weaker wage growth, which we see as a meaningful dovish signal. It suggests that a key driver of inflation is slowing faster than expected. We interpret this as raising the odds of an earlier-than-expected policy pivot by the Federal Reserve. This ECI reading is not isolated. It supports the trend seen in the January CPI report, where core inflation kept moving down toward 3.1%. In response, market pricing has shifted. CME rate futures now imply more than a 70% chance of a rate cut by the June 2026 meeting—up notably from a few weeks ago. For traders in interest rate derivatives, this backdrop favors positioning for lower yields. We should consider long positions in SOFR futures and Treasury note futures to benefit from the repricing of the rate curve. Near term, the path of least resistance for yields now looks lower. In equities, the chance of lower rates is supportive, especially for growth and tech. We should consider buying call options or using bullish call spreads on indices such as the Nasdaq 100 and S&P 500. This data lowers the “higher for longer” risk that has weighed on equity valuations.

Positioning For Lower Volatility Regime

This outlook also suggests volatility could fall as the Fed’s path becomes clearer. The VIX, which recently moved down toward 13, may drop further if the disinflation story continues. We could consider strategies that benefit from lower volatility, such as selling premium via short straddles on less volatile names. A useful comparison is the market reaction in late 2025, when early signs of easing inflation triggered a strong rally in both bonds and stocks. That period showed how quickly markets can reprice when a more accommodative central bank comes into view. Today’s setup feels similar, which argues for acting before the consensus fully shifts. Create your live VT Markets account and start trading now.

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Australian consumer and business surveys weakened in recent releases. Westpac Consumer Sentiment fell for a third month in February, down 2.6% month on month after the Reserve Bank of Australia (RBA) rate rise. In the Westpac survey, 80% of respondents expected higher rates. One-third expected an increase of 100bps, and sentiment was near the lower end of the past year’s range.

Business Survey Signals Mixed Momentum

In the NAB Business Survey for January, business confidence rose to +3 from +2 in December. Business conditions eased to +7 from +9. Trading and profitability were weaker, and the employment index was unchanged. Forward orders improved to +2 from -1. Capacity utilisation slipped to 82.9%, still 1.5 points above the long-term average. Price pressures eased across several measures. Labour costs rose 1.3% versus 1.7% previously. Purchase costs rose 1.1% versus 1.3%. Final product prices rose 0.5% versus 0.8%. The business survey was conducted before the latest RBA rate rise. The original article said it was produced using an AI tool and reviewed by an editor.

Market Implications For Rates And Risk Assets

Australian consumer and business surveys are losing momentum. The Westpac consumer sentiment index has now fallen for three months in a row after the latest RBA rate hike. This suggests households are already feeling the impact of tighter policy. Since most consumers expect rates to rise further, this cautious mood may last. Even with weaker consumer sentiment, we do not expect the RBA to soften its hawkish stance soon. Q4 2025 inflation was still above the target band at 4.1%. That points to continued pressure on the RBA to keep policy tight. As a result, interest rate futures may be pricing too little risk of another hike by mid-year. Traders may want to consider strategies that benefit if short-term rates stay firm or move slightly higher. The business survey is mixed. Conditions and price pressures are easing, but capacity utilisation is still well above its long-run average at 82.9%. We saw a similar pattern in early 2025, when underlying economic strength stopped the RBA from pivoting even as sentiment softened. This suggests the economy is slowing, but not collapsing. That backdrop can create volatility, and may suit options strategies that look for a range-bound ASX 200 rather than a strong move up or down. For the Australian dollar, the push and pull between a hawkish central bank and a slowing economy can be a headwind. With other central banks, including the US Federal Reserve, also staying firm, the AUD may struggle to rise on rate differentials alone. Traders may want to use currency derivatives to hedge against AUD weakness, especially versus the US dollar, if global growth indicators continue to cool. Create your live VT Markets account and start trading now.

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EUR/USD traded near 1.1905 on Tuesday. It was little changed and stayed close to one-week highs after rising for two days. The US Dollar remained weak ahead of key US data releases, while overall market sentiment was mildly risk-on. Concerns about US employment continued after last week’s weak jobs report. White House adviser Kevin Hassett said job growth could slow in the coming months due to migration policies and higher productivity. Traders were also looking ahead to January Nonfarm Payrolls (NFP) on Wednesday.

Eurozone Inflation And ECB Rate Outlook

In Europe, ECB President Christine Lagarde said inflation is expected to settle around 2% over the medium term. Recent ECB guidance also pointed to stable interest rates in the months ahead. The Eurozone data calendar was light, so attention shifted to US releases, including Retail Sales and the ADP 4-week average. These reports could shape expectations ahead of Wednesday’s NFP. CME FedWatch pricing showed a 17% chance of a Fed cut in March and 34% in April, with June near 75%. Markets also priced odds above 70% for at least one additional cut before year-end. US Retail Sales were expected to rise 0.4% in December (after 0.6% in November). Sales excluding autos were forecast at 0.3% (after 0.5%). On the technical side, resistance was near 1.1925 and 1.1970. Support sat at 1.1895, 1.1834, and 1.1820. RSI was near 60, and MACD stayed positive.

Looking Back At The 2025 Rate Cut Narrative

In our analysis at this point in 2025, EUR/USD was moving toward 1.19. The main drivers were a weak dollar and growing expectations for Federal Reserve rate cuts. Markets were pricing about a 75% chance of a cut by June 2025, supported by signs of a softer US jobs market. That view helped set the stage for a strong euro rally. That forecast largely played out. January 2025 NFP came in below expectations, and the Fed cut rates twice by autumn. The widening policy gap helped push EUR/USD to a peak near 1.23 in Q3 2025. However, US inflation stayed higher than expected—above 3.5%—which led the Fed to pivot back toward tighter policy late last year. As of February 10, 2026, the picture has flipped. US inflation is at 3.1%, still above the Fed’s target, while Eurozone inflation has eased to 2.8%. The latest US jobs report (January 2026) showed a strong gain of 353,000 jobs, reducing near-term recession concerns. For derivatives traders, this suggests the bullish euro trend that started early last year has ended. With the Fed now more focused on fighting inflation than the ECB, options strategies may favor a stronger dollar. Traders could consider buying EUR/USD puts or selling call spreads to position for a move back toward the 1.0700 area seen in late 2025. The change from last year is clear. The CME FedWatch Tool now shows the chance of a Fed cut in March 2026 at under 20%. Combined with solid US economic performance, this points to a potential rise in implied volatility. Traders may want to position for EUR/USD to stay range-bound or drift lower in the weeks ahead. Create your live VT Markets account and start trading now.

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Gold traded slightly higher on Tuesday near $5,050. However, it stayed below resistance around $5,100. Losses were limited above $5,000 because a weaker US Dollar supported prices. The US Dollar Index fell for a third straight day. This followed weak job data last week and comments from White House adviser Kevin Hassett about slower job growth. Markets are watching December US Retail Sales on Tuesday, Nonfarm Payrolls on Wednesday, and CPI on Friday. On the 4-hour chart, the 100-period SMA is trending up and sits near $4,970. It is acting as support. MACD has cooled from recent highs, and RSI is 57. Price action is being viewed as the C-D leg of a possible Gartley pattern. The pattern points to a target near $5,340 and requires a move above the February 4 high around $5,100. A drop below $4,970 would shift focus to the February 6 low at $4,655. A break below $4,655 would invalidate the bullish setup. Central banks are the biggest holders of gold. They bought 1,136 tonnes worth about $70 billion in 2022. Gold often moves in the opposite direction of the US Dollar and US Treasuries, and it tends to rise when interest rates fall. Looking back to early 2025, gold was moving sideways between $5,000 and $5,100. The move was driven by a weak US Dollar and hopes of Fed easing. At the time, the technical setup suggested a bullish Gartley pattern that could push prices above $5,300. That view depended on the economic data due in that period. Today, on February 10, 2026, that upside target was partly reached later in 2025, but conditions have changed. Gold is now trading around $5,250, but the strong bullish confidence seen last year has faded because the US Dollar has strengthened again. A consistently weak dollar is no longer guaranteed. The US Dollar Index (DXY) has found support near 103.50 and is firming after the strong January Nonfarm Payrolls report showed 215,000 jobs added. This economic strength is pressuring precious metals. The market is behaving differently than it did at this time last year. Recent inflation data has also changed rate expectations for 2026. January CPI came in a bit hotter than expected at 3.1%. This makes the Federal Reserve less likely to signal near-term rate cuts. That is very different from the rate-cut speculation seen through much of 2025. For derivatives traders, this means buying outright call options may be too risky given these headwinds. Instead, bull call spreads may be a better fit. They reduce upfront cost and define risk. One approach could be to target the $5,350 strike for the long call. This structure can benefit from a moderate rise, while limiting both potential gains and losses. Another option is to watch volatility, which has been rising. The CBOE Gold Volatility Index (GVZ) is near 18.5, up from around 15 late last year. Traders could use put options with a strike below the $5,150 support area to hedge long positions if prices drop. It is also important to remember the strong physical demand that supports gold on pullbacks. The World Gold Council reported that central banks kept buying, adding another 1,050 tonnes to reserves through the end of 2025. This long-term demand can help put a floor under prices.

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Rabobank’s Michael Every says Europe is settling into a roughly 1.5% growth track. He also points to rising political division and a weak economic model. He argues that German deindustrialisation is being partly offset by rearmament, while broader EU reforms remain hard to deliver. In Germany, Bosch plans to cut 20,000 jobs as deindustrialisation continues. Rearmament is helping GDP, but the outlook depends on whether other industries rebound—and whether Europe can actually produce the weapons it expects to use.

European Policy Reform Gridlock

Reports cited say the EU is not delivering key economic fixes as the single market weakens. They also note calls for European payment alternatives to Visa and Mastercard, debate over “Made in Europe,” and pushback against plans to weaken the carbon border tax. The text also highlights that the US is handing two key NATO command posts to Europeans. It adds that French domestic politics are tense, linked to the Bank of France governor’s planned departure. Europe is weighing more Eurobonds to support Euro stablecoins and a plan to challenge the dollar’s global role. It notes how hard it is to change third-country systems built around the dollar, and says the Commission wants to map barriers to wider Euro use while respecting national monetary choices. Europe is still stuck in a slow-growth pattern and is struggling to move much beyond the 1.5% path that became clear in 2025. New Eurostat figures show Q4 2025 growth at a weak 0.2%, reinforcing the view that the bloc’s economy is losing momentum. This ongoing softness suggests any major upside for the Euro is limited, which can make strategies like selling out-of-the-money EUR/USD call options appealing.

Market Volatility And Hedging

Germany’s economic model is clearly shifting. The deindustrialisation that accelerated last year is now showing up in the data. Defense spending is supporting GDP, but German factory orders fell 1.2% in January, led by weakness in autos and chemicals. Traders may try to capture this split by using options to go long aerospace and defense stocks while considering puts on indices with heavy exposure to German manufacturing. Political fragmentation is still blocking a clear European “grand strategy,” a pattern that has continued since the 2025 debates on carbon taxes and payment systems. The EU’s push to promote the Euro is making limited progress, with EUR/USD struggling to hold gains above 1.07. This lack of unity creates steady pressure on the currency, suggesting the current range is more likely to break down than break higher. With high uncertainty and low growth, volatility is critical to watch. The VSTOXX index (Euro Stoxx 50 volatility) has edged up from its 2025 lows and is now around 18.5. Buying protective puts on major European indices like the DAX or Euro Stoxx 50 may be a sensible hedge against a sudden drop triggered by political or economic headlines. The mass layoffs announced by major industrial firms in 2025 were a clear warning for manufacturing. That trend has continued, with the latest Eurozone manufacturing PMI at a contractionary 47.1. This supports pair trades that short industrial-sector ETFs while taking long positions in less cyclical areas—or in sectors supported by government spending, such as defense. Political infighting inside EU institutions, including around the Bank of France, makes the European Central Bank’s job harder. With Eurozone inflation down to 2.1%, the ECB has little reason to sound hawkish. That limits policy support for the Euro and strengthens the case for bearish currency-derivative positions in the weeks ahead. Create your live VT Markets account and start trading now.

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The Hang Seng Index (HSI) has rallied since mid-2025. However, the move is slowing as the index approaches overhead resistance along a multi-year trendline. Over the past five years, Chinese New Year (CNY) has come before a pivot in the HSI every time. In 4 out of 5 cases, the CNY period marked the start of that pivot. Ahead of CNY 2026, the setup looks similar. Momentum is still positive, but there is less room for mistakes. The key is to watch the weekly candles during CNY week and the week after. A bearish candle in that window has been linked with a higher chance of a bearish reversal.

Trading Implications For Cny 2026

One downside level to watch is 21,417 HKD. This lines up with the Value Area Low from the volume profile since 2018 and with anchored vWAP support from February 2024. The article also compares the HSI with the S&P 500 (SPX). It argues that the SPX response depends on whether China-related pressure stays local or turns global. In 2021 and 2024, HSI pivots were not followed by SPX declines. In 2022 and 2025, both markets weakened around CNY as broader macro or trade pressures increased. For CNY 2026, the HSI looks stretched while the SPX is near its highs. Current China risk is described as more local than systemic. After the strong rally in the Hang Seng Index since mid-2025, the focus is now on a possible reversal around Chinese New Year. This holiday has often marked an important turning point for the index, with pivots in four of the last five years. Today’s setup feels familiar because the index is pressing into long-term resistance.

Key Confirmation Signals

Recent data supports a more cautious view. China’s Caixin Manufacturing PMI for January 2026 came in at 50.1. That is only slightly above contraction and also missed expectations. Early reports on holiday travel and spending have been decent, but not strong, which may suggest consumer enthusiasm is leveling off. This soft backdrop adds to the case for a market pause or reassessment. For traders, this may be a good time to consider protective put options or bearish put spreads on the Hang Seng Index. The 21,417 HKD level provides a clear area to structure trades, because it could act as a realistic downside target if the seasonal pattern repeats. Implied volatility on HSI options has also risen to a three-month high near 28%, which suggests growing concern. The post-CNY reversal in 2025 was sharp and was driven by renewed global trade frictions that surprised many traders. It was a reminder that sentiment can shift quickly during this seasonal window. While this year’s risks seem more local, the recent example of a fast drop is still relevant. At the same time, a large spillover into the S&P 500 may be less likely right now. Historically, the SPX usually ignores HSI-specific volatility unless China’s problems connect to global macro stress, as they did in 2022. The current risk profile looks more contained, closer to the policy-driven moves seen in 2021 and 2024. This creates a possible relative value setup: bearish HSI exposure while staying neutral or cautiously bullish on the S&P 500. The difference is also visible in volatility markets. The VIX remains low, near 14, which suggests US markets are not pricing in major contagion risk from a potential China slowdown. The main trigger to watch is the HSI weekly price action during the holiday week and the week after. A bearish candlestick—especially a weekly close below the prior week’s low—would be a strong confirmation signal. That would suggest the uptrend has failed and a deeper correction may be starting. Create your live VT Markets account and start trading now.

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Oil prices first fell after indirect US–Iran talks in Oman eased fears of a US strike on Iran. That reduced the geopolitical risk premium. Prices later rebounded as traders shifted their focus back to supply risks. Kazakhstan may export 35% less oil than planned this month if output at the Tengiz field recovers slowly. Reuters said daily exports through the CPC pipeline and its Black Sea terminal could average about 1.1 million barrels per day, down from the planned 1.7 million.

Supply Risks Take Center Stage

Prices are also getting support from the possibility that India could cut oil imports from Russia as part of a bilateral trade deal with the US. In December, India imported about 1.1–1.2 million barrels per day from Russia. If those barrels disappear, India would need to replace them elsewhere. If India buys less, Russia may have to offer deeper discounts and depend more on ships from its shadow fleet. The European Commission also plans to ban the transport of Russian oil on tankers from EU countries as part of its 20th sanctions package. The article was produced using an AI tool and checked by an editor. The market’s initial relief after the US–Iran talks now looks temporary. The geopolitical risk premium has faded, but supply fundamentals are taking over. With WTI recently moving above $88 per barrel, attention has shifted from the risk of conflict to real barrels being removed from the market.

Market Positioning For Higher Prices

Disruption in Kazakhstan is a major factor. Reports now show that January exports through the CPC pipeline were down by nearly 500,000 barrels per day, tightening supplies of light sweet crude. This does not look like a quick fix. The slow recovery at Tengiz suggests the issue could last into the first quarter. Trade flows are also shifting as India starts to reduce its reliance on Russian oil. Tanker tracking data shows India’s imports from Russia fell below 900,000 barrels per day last month, down from an average near 1.2 million barrels per day across much of 2025. That forces India to compete for barrels from other suppliers, which adds upward pressure to global benchmark prices. With supply tightening, volatility is likely to rise in the weeks ahead as the market prices in these constraints. The latest EIA report supports this view, forecasting a global supply deficit of more than 400,000 barrels per day this quarter. In this setting, buying call options or using bull call spreads on April or May contracts could be a sensible way to position for further price gains. Create your live VT Markets account and start trading now.

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Nomura Research now expects Norges Bank to deliver one more policy rate cut in December 2026, taking the rate to 3.75%. This follows Norway’s higher-than-expected January inflation and stronger wage growth. In January, CPI-ATE inflation rose by 0.3pp to 3.4% year-on-year. That was higher than the 2.9% forecasts from both Nomura and Norges Bank, and above the 3.0% consensus. CPI inflation rose by 0.4pp to 3.6% year-on-year, versus 3.2% (Nomura), 2.7% (Norges Bank), and 3.0% (consensus). Nomura expects wage growth to keep inflation sticky into 2026, even if wage growth slows over time. On this view, a 3.75% policy rate would still sit above Norges Bank’s long-run neutral range of 2.25% to 3.50%. One risk is the Norwegian krone’s recent strength against the US dollar and the euro, which could reduce imported inflation. Nomura says it has already built in slower goods price growth and still expects inflation to ease gradually, leaving room for one remaining cut. Given January 2026’s inflation surprise, we need to adjust our strategy for the weeks ahead. Underlying inflation came in at 3.4% and headline inflation at 3.6%, both well above our forecast and Norges Bank’s. This suggests price pressures are not easing as expected, and it calls for a rethink of the likely rate path. Sticky inflation is also backed by strong wage growth. In 2025, wage settlements averaged above 5%, and that strength appears to be carrying into 2026. This points to inflation staying higher for longer than we previously assumed. As a result, the market should not expect several rate cuts. Instead, it should prepare for one cut, pushed back to around December 2026. For interest rate traders, this implies that products pricing cuts in summer or autumn 2026 no longer fit the data. Consider paying fixed in Norwegian interest rate swaps, or selling forward rate agreements for the second half of the year. The 2-year Norwegian government bond yield, now around 4.1%, is likely to face upward pressure as markets reprice toward a more hawkish outlook. In FX, this supports a bullish view on the Norwegian krone. If Norges Bank holds rates at 4.0% for most of the year while other central banks (such as the ECB) are cutting, the NOK’s carry appeal improves. Further NOK strength looks possible, especially in EUR/NOK, which has already fallen from above 12.00 in mid-2025 to around 11.25 today. For equity derivatives, higher-for-longer rates are a headwind for the Oslo Børs OBX Index. Higher borrowing costs can squeeze margins, which can make bearish positions more attractive. Consider buying OBX put options either as a hedge or as a directional trade if the market reacts to tighter-for-longer policy. The main risk to this view is the krone’s own strength. A stronger NOK can lower inflation by making imports cheaper. While NOK has recently gained against the dollar and the euro, this disinflationary effect may not be strong enough to offset domestic drivers in the near term. We should track import price data closely, but keep the base case that rates stay high.

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The US Dollar fell against the Japanese Yen for a second straight day on Tuesday. USD/JPY traded near one-week lows, just above 155.00, after hitting 157.66 on Monday. Traders were waiting for the US Retail Sales report for December. Weak US employment data last week, plus comments from White House adviser Kevin Hassett about slower job growth in the coming months, increased expectations of Federal Reserve rate cuts in 2026. This put more pressure on the Dollar.

Dollar Under Pressure

Hassett’s comments also lowered expectations for the January Nonfarm Payrolls report. The NFP release was delayed until Wednesday because of last week’s partial government shutdown. US Retail Sales data due later on Tuesday is expected to show a small slowdown in December. This release, along with Friday’s US Consumer Price Index report, could shift expectations for US monetary policy and drive near-term moves in the Dollar. The Yen stayed firm after Prime Minister Sanae Takaichi won last weekend’s election. Her fiscal policy is expected to remain loose. However, plans to fund tax cuts without issuing new debt shaped market reactions. Japan’s Finance Minister Satsuki Katayama and currency diplomat Atsushi Mimura warned on Monday that they could act quickly if speculation puts pressure on the Yen. These comments supported the JPY.

February Policy Outlook

Now that we are in February 2026, pressure on the US Dollar has increased. The weak employment reports from late January were followed by a December 2025 Retail Sales reading of -0.3%. This confirmed softer consumer spending. Taken together, the data supports the view that the US economy is cooling faster than expected. The delayed January Nonfarm Payrolls report, released last Wednesday, added to that view. It showed 155,000 new jobs versus forecasts of 190,000. The miss has pushed markets to expect easier Fed policy. In derivatives markets, the probability of a Fed rate cut at the March 2026 meeting has risen to over 75%, up sharply from a month ago. In Japan, Prime Minister Takaichi’s fiscal plans remain in focus. The Bank of Japan has stayed quiet and kept a cautious tone. Still, the main driver is the expected Fed pivot, which is shrinking the rate gap that previously favored the Dollar. That makes the Yen more attractive even if the BoJ does not change policy. For traders, this points to a bearish outlook for USD/JPY, which is now testing support near 152.50. Buying put options with strike prices near 152.00 or 150.00 could be one way to benefit if the pair keeps falling in the weeks ahead. These levels may be reachable if upcoming US inflation data also cools. Because of the recent sharp swings, implied volatility in USD/JPY options has started to rise. Traders may want to use strategies such as bear put spreads to reduce the cost of buying options while keeping downside exposure. It is also important to watch for more verbal intervention from Japanese officials, as it could briefly slow the decline. Create your live VT Markets account and start trading now.

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