UK CFTC data shows GBP non-commercial net positions increased to -£52K from -£54.7K.

The move indicates a smaller net short position in sterling compared with the previous report.

Sterling Positioning Turns Less Negative

We are seeing a slight reduction in net short positions on the British Pound, moving from -£54.7K to -£52K. This suggests some of the most pessimistic traders are closing their bets against sterling. However, the overall market sentiment remains clearly bearish, not bullish.

This cautious shift likely reflects recent data showing UK inflation for March 2026 cooled to 2.8%, moving closer to the Bank of England’s target. While preliminary Q1 GDP growth was a sluggish 0.2%, it did avert a recession, removing a key tail risk for now. This mixed but slightly improved picture is prompting a re-evaluation of the most extreme short GBP positions.

The key question remains the timing of the Bank of England’s first rate cut, which markets are now pricing for the third quarter. Recent meeting minutes showed a growing dovish sentiment within the committee, with more members favouring a cut. This contrasts with the US Federal Reserve, which continues to signal a “higher for longer” stance, capping any significant rally in GBP/USD.

We remember the significant sterling volatility throughout 2025 following the new government’s first budget, and traders are still wary of being caught short. Given the reduced pessimism but lack of a clear bullish catalyst, selling out-of-the-money options to collect premium could be a prudent strategy. This approach capitalizes on the idea that sterling may trade within a range while we await a definitive policy move from the Bank.

Options Strategy Focuses On Range Trading

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US CFTC data shows non-commercial net positions in gold at 164K. The previous reading was 162.5K.

This is an increase of 1.5K net positions from the prior report. The figures refer to futures and options positioning reported by the CFTC.

The latest figures show large speculators slightly increased their bullish bets on gold. This is not a massive shift, but it confirms the underlying positive sentiment we have seen building among hedge funds. It tells us that despite a quiet market, big players are not backing away from their long positions.

This positioning reflects a broader economic narrative that is becoming clearer. We saw March Consumer Price Index data cool to 3.1%, a welcome decline from the stubborn 3.8% figures we wrestled with at the end of 2025. This has led the futures market to price in a 60% probability of a Federal Reserve rate cut by the third quarter, making gold more attractive.

We also have to consider the strong fundamental support coming from official channels. New data from the World Gold Council shows central banks continued their aggressive buying, adding another 250 tonnes in the first quarter of this year, building on the record pace set in 2025. This institutional demand creates a solid price floor and absorbs a significant amount of market supply.

For traders, this suggests a strategy of buying call options with expiries for late this year might be sensible. This approach allows participation in a potential rally driven by a Fed policy shift, while defining the risk if gold remains range-bound for a few more months. Selling out-of-the-money puts could also be a viable strategy to generate income, banking on the idea that strong central bank demand will prevent any severe price drops.

US CFTC data shows S&P 500 NC net positions rose to -110.1K.

The prior reading was -115.8K.

Speculative Shorts Are Being Reduced

We are seeing that large speculators are reducing their bets against the S&P 500. This means the bearish sentiment that has dominated the market is starting to ease. This is not yet a bullish signal, but it is a clear sign that conviction on the short side is fading.

This shift in positioning comes as recent economic data for March 2026 showed core inflation moderating to a 3.2% annual rate, easing fears of more aggressive central bank action. We’ve seen Treasury yields pull back from their recent highs in response, with the 10-year note now trading below 4.5%. This provides some relief for equity valuations which were under pressure throughout the first quarter.

As we are in the middle of Q1 2026 earnings season, results are coming in better than initially feared, particularly from large-cap technology firms. With nearly 60% of S&P 500 companies having reported, the blended earnings growth rate is tracking at a positive 3.5%, beating expectations. Strong corporate performance provides a fundamental reason for traders to close out their short positions.

From a derivatives perspective, this may put downward pressure on implied volatility. We’ve watched the VIX index fall from above 20 in March to around 17.5 recently, making long-volatility positions less attractive. Traders might consider selling out-of-the-money puts on market dips to collect premium, capitalizing on this potential stability.

Looking back, we saw a similar dynamic in the second quarter of 2023 when speculative net shorts were covered as recession fears abated, which preceded a strong market rally into the summer. Therefore, we should monitor if this trend of shrinking short positions continues in the coming weeks.

What To Watch Next

A move toward a flat or net long position would be a much stronger signal that a durable market bottom may be forming.

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Australia’s CFTC AUD NC net positions were 64.8K in the latest report. The previous figure was 65.1K.

This shows a decrease of 0.3K from the prior period. The data refers to non-commercial net positioning in the Australian dollar.

Positioning Signals A Pause In Bullish Momentum

The latest positioning data shows that large speculators are slightly trimming their bullish bets on the Australian dollar. This isn’t a major reversal but suggests conviction is taking a breather after a strong run. We are seeing some profit-taking as the market waits for a new catalyst.

This hesitation makes sense when we look at the RBA’s stance through 2025, when they held rates high to fight inflation. Now, with the latest Q1 2026 inflation report showing the annual rate has eased to 3.2%, markets are starting to price in the possibility of a rate cut before the end of the year. This potential shift is capping the Aussie dollar’s upside for now.

We must also consider the slowdown in commodity prices, a key driver for the currency. Iron ore, for instance, has fallen over 15% from its peaks in late 2025, now trading around $115 per tonne due to softer industrial data out of China. This external pressure creates a significant headwind against further Aussie dollar appreciation.

Meanwhile, the US dollar remains firm, with the latest Non-Farm Payroll report from a few weeks ago showing a robust addition of 240,000 jobs. This persistent strength in the US economy suggests the Federal Reserve has little reason to cut interest rates soon. This narrows the interest rate advantage that the Aussie dollar enjoyed for much of last year.

Trading Implications And Key Catalysts Ahead

For traders, this environment of uncertainty points towards higher volatility in the coming weeks. We should consider using options to define our risk, such as buying puts to hedge existing long AUD positions. For those anticipating a breakout, strategies like long straddles could be effective if we expect a sharp move but are unsure of the direction.

The next major data points to watch will be the upcoming Australian employment figures and the RBA’s meeting minutes. These events will give us a clearer signal on domestic economic health and the central bank’s thinking. We should remain cautious until these reports clarify whether the speculative buying will resume or if this pause marks the beginning of a larger pullback.

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Rabobank said it expects the Bank of England’s Monetary Policy Committee to keep Bank Rate at 3.75% at the April meeting, with a cautious policy stance. It linked this view to markets stabilising in recent weeks.

It cited weaker domestic demand and already restrictive policy compared with 2022. It also said conditions are less likely to produce second-round effects.

Energy Prices And Near Term Inflation

The bank noted that energy prices have been lower than expected, even with the Strait of Hormuz still closed. It said this could lead to a small downward revision to its near-term inflation forecast if it persists.

Rabobank said a smaller inflation impulse would reduce the risk of entrenched inflation, while the outlook remains uncertain. It still expects one further rate rise, but does not expect a renewed rate-hiking cycle.

Looking back at the analysis from last year, we can see the Bank of England was expected to hold rates at 3.75% amid concerns over inflation, even with weaker demand. Now, in April 2026, the conversation has shifted entirely from hiking to the timing of potential cuts. The core dilemma of balancing inflation with a weak economy remains the central issue for the MPC.

The recent inflation data adds a layer of complexity to our strategy. The March 2026 CPI figure came in at 2.9%, slightly above the 2.7% that was forecast, showing that price pressures are proving stubborn. This sticky inflation makes the Bank of England hesitant to signal an immediate rate cut, echoing the “vigilant stance” we saw them adopt in 2025.

Strategy For Rates Volatility

On the other hand, the domestic economy is showing clear signs of strain, a continuation of the trend identified last year. The latest figures for Q1 2026 show GDP growth at a sluggish 0.1%, barely avoiding a recession. This weak performance puts significant pressure on the MPC to ease its restrictive policy to stimulate demand.

Given this conflict between sticky inflation and stagnant growth, trading interest rate volatility appears prudent. We should consider using options on SONIA futures, such as straddles, to profit from a significant rate move in either direction. The market is currently pricing in two full rate cuts by year-end, and any deviation from this path will likely cause a sharp repricing.

For those with a directional view, the weak growth backdrop suggests positioning for lower rates is the logical path forward. We can build positions in interest rate swaps or go long on SONIA futures contracts to benefit from eventual BoE cuts. However, the recent inflation data means we should be cautious about the timing, as the first cut may come later than the market currently anticipates.

A key difference from last year is the energy market, as the reopening of the Strait of Hormuz has helped stabilize prices. While in early 2025 this was a major uncertainty driving inflation forecasts, it is now a tailwind for disinflation. This supports the long-term view that the Bank will have to cut rates to support the economy.

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The US Dollar Index (DXY) has lost momentum near 98.50 and has drifted lower from recent highs. A pullback in US yields and profit-taking ahead of the weekend has weighed on the US Dollar, even with Oil above $90 this week and Middle East tensions still present.

Markets are positioning for next week’s central bank meetings, with the Fed, ECB, BoJ and BoE widely expected to keep rates unchanged. Attention is turning to guidance on inflation.

Major Fx Moves And Central Bank Focus

EUR/USD trades near 1.1710, edging up as the US Dollar softens, while caution ahead of the ECB limits gains. GBP/USD moved towards 1.3530 on the weaker US Dollar, as higher energy prices add to UK inflation risks.

USD/JPY eased from around 159.40 but remains elevated due to yield gaps, while intervention risk persists. AUD/USD rose towards 0.7150 as the US Dollar weakened and risk sentiment steadied.

WTI slid towards $94.40 per barrel, while keeping strong weekly gains amid Strait of Hormuz supply worries. Gold climbed towards $4,720 per ounce on the softer US Dollar and geopolitical uncertainty, with higher US yields limiting the move.

Events run from April 27 to May 1, including ECB and BoE speeches, the BoJ decision, the Fed decision, and data such as US Core PCE, US Q1 GDP, US ISM Manufacturing PMI, and Australia CPI. WTI is a US crude benchmark; prices are driven by supply and demand, OPEC policy, the US Dollar, and API and EIA inventory reports, which are within 1% of each other 75% of the time.

Key Risks Into Next Week

With the US Dollar Index showing signs of fatigue around 98.50, we see this as a temporary pause before a week of major central bank decisions. This pullback looks like profit-taking after a strong run, especially since recent US economic data, like the March jobs report which added over 290,000 jobs, continues to point towards a resilient economy. Traders should view this dip as a chance to position for volatility, not a confirmed trend reversal.

The Federal Reserve meeting is the main event, and any derivative strategy should be centered around its outcome. We saw throughout 2025 how persistent services inflation kept the Fed’s tone hawkish, with Core PCE averaging near 2.8% in the second half of that year. Given this history, options traders could consider straddles or strangles on major pairs like EUR/USD to capitalize on a sharp move in either direction following the press conference.

For USD/JPY, trading near 159.40 puts everyone on high alert for intervention from Japanese authorities. Looking back at 2024 and 2025, we know the Ministry of Finance has stepped in aggressively above the 155 level, so the risk of a sudden, sharp drop is very high. Cautious traders might use this pullback to reduce long positions or buy cheap out-of-the-money puts as a hedge against surprise action.

The gains in EUR/USD and GBP/USD towards 1.1710 and 1.3530, respectively, seem more related to the dollar’s softness than fundamental European strength. The economic divergence we saw in 2025, with the US outperforming the Eurozone, still lingers, likely limiting the upside for these currencies. The upcoming ECB and BoE meetings are expected to hold rates, so their guidance on inflation will be critical for direction.

In commodities, elevated oil prices above $94 per barrel continue to be a primary concern, fueled by geopolitical tensions around the Strait of Hormuz. We saw how OPEC+ extended production cuts through 2025 to support prices, and this supply discipline remains a key factor. Meanwhile, gold’s push towards $4,720 is a direct beneficiary of the weaker dollar, but its gains will be capped if US yields firm up after the Fed meeting.

The sheer volume of data next week, including US Q1 GDP, Core PCE, and PMIs from China, means that central bank decisions won’t happen in a vacuum. A hotter-than-expected US inflation print on Thursday could easily erase the dollar’s recent losses and reset market expectations. Traders should therefore remain nimble, as the current calm is unlikely to last beyond next Tuesday.

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Gold rose above $4,700 on Friday and was trading at $4,726, up 0.47%. The move followed reports of renewed Iran–US contacts over a possible second round of talks.

Iran’s Foreign Minister Abbas Araghchi was expected in Islamabad on Friday. The White House said Steve Wytkoff and Jared Kushner would travel to Pakistan on Saturday morning for Iran talks.

Markets React To Iran Talks

After the headlines, WTI crude fell by about 3.50%. US 10-year Treasury yields dipped 1.5 basis points to 4.31%, while the US Dollar Index fell 0.22% to 98.57.

Despite the day’s rise, gold was still set for a 2.30% weekly loss. The University of Michigan Consumer Sentiment Index dropped to 49.8 in April from 53.3 in March, the lowest since 1978.

One-year inflation expectations rose to 4.7% and five-year expectations increased to 3.5%. The Prime Terminal implied forward rate curve points to the Fed holding rates through 2026, with a first cut in July 2027.

Gold traded in a $4,700–$4,730 range, with resistance at the 100-day SMA of $4,729. Supports were $4,657, $4,600 and $4,554, with further levels at $4,750, $4,800 and the 50-day SMA at $4,869.

Key Risks And Trading Approach

We see gold caught between hopes for a peace deal in the Middle East and persistent economic worries at home. The potential for a US-Iran agreement is putting pressure on prices, as shown by the recent drop in crude oil. However, weak consumer sentiment and stubbornly high inflation expectations are providing a strong floor under the market.

We should not forget the underlying support from central banks, which continued their record-breaking purchases through 2025, mirroring the trend we saw in 2022 and 2023. The World Gold Council reported that over 1,000 tonnes were added to official reserves last year, signaling a strategic shift away from the dollar. This persistent demand creates a buffer against sharp sell-offs from diplomatic news.

Given the binary nature of the upcoming Iran talks, a sharp price move in either direction is highly probable. We believe that strategies that benefit from a spike in volatility, such as long straddles or strangles using options, are prudent. This allows us to profit whether a peace deal sends gold tumbling below $4,600 or failed talks propel it towards $4,800.

We are closely watching the $4,700 support level; a decisive break below this could trigger a rapid move toward the $4,554 swing low. For those already holding long positions, buying puts with a strike price around $4,650 could offer cheap insurance against a sudden diplomatic breakthrough. Conversely, any sign of talks faltering would make call options targeting the $4,800 resistance an attractive short-term play.

Beyond the immediate geopolitical headlines, next week’s Fed meeting and GDP data will be critical. While the market has priced in a “higher for longer” interest rate environment, any surprisingly weak economic data could reignite fears of stagflation. This scenario, reminiscent of what we saw develop through 2025, would be extremely bullish for gold, regardless of the Fed’s official stance.

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NZD/USD rose as the US Dollar softened on Friday, with the pair trading near 0.5880, up about 0.46% on the day. It was set for a third straight weekly gain.

Reports said US officials Steve Witkoff and Jared Kushner would travel to Islamabad for talks linked to Iran. Iran’s Foreign Minister Abbas Araghchi was also reported to be heading to Islamabad.

Dollar Retreat Lifts Kiwi

The US Dollar Index slipped from a one-week high near 98.94 to about 98.56, down roughly 0.27%. The move followed lower demand for safe-haven assets.

There were no confirmed signs of direct talks, with Pakistan acting as a channel between the sides. The ongoing US naval blockade was described as a barrier to negotiations.

Tensions continued around the Strait of Hormuz, which remained under a dual blockade that was disrupting oil supplies. Oil prices kept a risk premium, adding to inflation concerns.

In New Zealand, markets expected the RBNZ to raise rates further at its May meeting due to elevated inflation and oil-related risks. In the US, markets fully priced in a pause at next week’s Fed meeting, with rates expected to stay on hold for longer.

Key Market Risks Ahead

Traders were watching for changes in the US-Iran situation that could shift the US Dollar and NZD/USD.

With diplomatic channels opening between the US and China over the South China Sea, we are seeing a clear shift in risk sentiment. This is softening the US Dollar, which has helped push NZD/USD towards the 0.6150 mark. The current environment mirrors the setup we observed last year during the brief US-Iran de-escalation hopes.

The Reserve Bank of New Zealand is giving us strong reasons to favor the Kiwi dollar. With domestic inflation proving stubborn at 3.5%, well above target, the RBNZ is holding its Official Cash Rate at 5.75% and signaling it will stay there for some time. This contrasts sharply with other central banks that are closer to cutting rates.

In contrast, the US Federal Reserve appears to be on a different path. US inflation has cooled to 2.8%, increasing market confidence that the next move from the Fed will be a rate cut later this year. The CME FedWatch Tool currently shows a greater than 90% probability of a cut by the September meeting, creating a headwind for the US Dollar.

For derivative traders, this policy divergence suggests buying NZD/USD call options could be a prudent strategy. A trader might consider calls with a strike price around 0.6200 expiring in the next six to eight weeks. This position would profit from continued upside momentum while capping potential losses at the premium paid.

Alternatively, we could look at risk reversals, which measure the skew between call and put options. With the market still wary of a potential breakdown in geopolitical talks, implied volatility on NZD/USD puts may be elevated. We could structure a trade that takes advantage of this by selling puts to finance the purchase of calls, positioning for upside at a reduced cost.

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Commerzbank reported that Germany’s growth outlook is being reduced by an energy price shock, alongside external trade pressures and limited reforms. It said a longer shutdown of the Strait of Hormuz would raise the chance of recession.

The Ifo Business Climate Index fell to 84.4 from 86.3, which the bank linked to weaker conditions. It estimated that growth in 2026 will be about 0.6%, or 0.3% after adjusting for the unusually high number of working days.

Growth Risks From Strait Of Hormuz Shutdown

It said that even if the Strait of Hormuz reopens at the end of May after a total of three months, growth this year would still be 0.4 percentage points lower. It added that each extra day without oil shipments through the strait increases recession risk.

The bank stated that a fiscal stimulus worth 0.8% of GDP is largely offset by the energy shock, tariff rises, and the absence of broad reforms. It said it lowered its 2026 forecast to 0.6% four weeks earlier, and reiterated the 0.3% working-day-adjusted figure.

The sharp fall in the Ifo Business Climate Index to 84.4 clearly shows how hard the energy price shock is hitting the German economy. With growth forecasts for this year lowered to just 0.6%, we should expect continued pressure on German assets. This outlook is based on the assumption that the Strait of Hormuz reopens at the end of May; any delay will worsen the situation.

Given this de facto stagnation, traders should consider bearish positions on German equities. Buying put options on the DAX index is a straightforward strategy to capitalize on falling corporate earnings expectations. Recent data supports this view, with German industrial production figures released last week showing a 1.5% month-on-month contraction, the steepest since the energy supply issues we saw in 2025.

Trading Implications Across Markets

The slowdown is also a significant headwind for the euro, which has struggled to stay above 1.05 against the dollar. We see further downside for the currency as President Trump’s tariff hikes add another layer of economic friction. Shorting EUR/USD futures or buying euro puts can hedge against this weakness.

Uncertainty over the Strait of Hormuz situation is keeping volatility high, with the VSTOXX index trading near its highest levels for the year. This environment makes buying call options on the VSTOXX an attractive trade, as it profits from increasing market fear. Every day the blockade continues, the risk of a recession grows, likely pushing volatility even higher.

In fixed income, the weak economic outlook has forced markets to push back expectations for any European Central Bank rate hikes. This has been supportive for German government bonds, with the 10-year Bund yield dropping 20 basis points this month in a flight to safety. Looking back at the sovereign debt crisis of 2011, we saw a similar pattern where German debt acted as a haven.

The core issue remains oil prices, with Brent crude holding firmly above $125 per barrel for nearly eight weeks. The key variable for traders is the timing of a potential reopening of the Strait, which would trigger a sharp price decline. Until then, high implied volatility in oil options makes strategies that profit from price movement, such as long straddles, a consideration.

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Standard Chartered economists Dan Pan and Steve Englander reviewed how the US Supreme Court’s ruling against IEEPA tariffs affects US tariff receipts. They report that tariff income fell after the decision but stayed well above pre-Liberation Day levels.

They expect tariff revenue to be about USD 25bn in each of March and April, the first two months after the ruling. Current receipts are about 3.4x pre-Liberation Day levels, compared with more than 4x 2024 levels at the end-2025 pace when tariffs were fully in place.

Tariff Revenue Impact

At the current rate, they estimate the revenue loss from the IEEPA ruling at USD 60bn annualised. They also state that IEEPA tariffs made up over half of US tariff revenue.

They note that further declines are possible as remedies expire and reimbursements speed up. A 10% Section 122 blanket tariff introduced after the ruling has helped offset the shortfall, but it has a 150-day limit and is due to end on 24 July 2026.

We see that the recent Supreme Court ruling on IEEPA tariffs has introduced significant uncertainty into the US fiscal picture. While the initial drop in tariff revenue to $25 billion per month wasn’t as severe as some expected, it still represents a material risk to the budget. This situation requires us to be nimble and prepare for heightened volatility, particularly in currency and interest rate markets.

The Congressional Budget Office’s latest April projection now shows the fiscal deficit widening by another $50 billion for the year, directly citing the fall in tariff receipts. This potential for increased government borrowing could put upward pressure on Treasury yields, making interest rate derivatives a key area to watch. We should consider positions that would benefit from a steeper yield curve as the government looks to fund this unexpected shortfall.

Key Date To Watch

The most critical date on our calendar is July 24, 2026, when the temporary 10% Section 122 tariff is set to expire. This tariff has been a crucial stopgap, and its removal without a replacement would create a fiscal cliff, likely weakening the US dollar. We are closely monitoring any legislative discussions for a long-term solution, as market sentiment will be highly sensitive to this news flow.

Market anxiety is already becoming visible, with the CBOE Volatility Index (VIX) creeping up to 19.5 this week from an average of 16 last month. This reminds us of the trade disputes in the late 2010s, where currency markets saw sharp swings based on tariff announcements. When we look back at the market stability of late 2025, it was partly supported by a strong and predictable revenue stream that is now in question.

This shift creates opportunities in specific equity sectors. We should be looking at options strategies that favour import-heavy industries, such as retail and consumer electronics, which stand to benefit from lower costs. Conversely, it would be prudent to hedge against weakness in domestic producers in sectors like steel and manufacturing that previously benefited from tariff protection.

The clear deadline in July suggests that trading volatility itself is a sound strategy. We can use options on major currency pairs like EUR/USD or equity index ETFs to position for a significant market move as that date approaches. A long straddle or strangle could be effective in capturing the price swing without needing to predict the exact direction.

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