Commerzbank expects a decline in US crude production due to low prices.
The US Energy Information Administration predicts that in 2026, US crude oil production will average about 13.6 million barrels per day. However, this output is expected to drop by 340,000 barrels per day by 2027 due to less drilling. The production peak is estimated to be 13.89 million barrels per day in November 2025.
By the end of this year, production may decrease to 13.52 million barrels per day and fall further to 13.16 million barrels per day by the end of 2024. The main reason for less drilling activity is lower oil prices. Currently, the average price for West Texas Intermediate (WTI) oil is around $52 per barrel this year and is predicted to drop to $50 per barrel next year.
Commerzbank analyst notes that record crude oil imports in China are driven by higher refinery operations and stockpiling
China’s Record Oil Imports
In December and throughout 2025, China set a new record for crude oil imports. This surge came from increased refinery activity and efforts to build reserves. In December alone, China imported 56 million tons, or about 13.2 million barrels per day. This amount is 17% more than last year and 6.4% higher than the previous month.
For the entire year of 2025, imports reached a historic high of 579 million tons, averaging 11.6 million barrels per day. This was a 4.6% increase from the year before. China’s crude oil processing also rose by 4% in the first eleven months compared to the same period last year. We expect data on December’s processing rates soon.
Moreover, China has been increasing its strategic reserves. In the first eleven months of 2025, the country imported about 46 million tons, or 1 million barrels per day, in addition to what its refineries processed. This stockpiling helped absorb last year’s oversupply and prevented a larger drop in oil prices.
China’s record oil import of 13.2 million barrels per day in December 2025 supported oil prices significantly toward the end of the year. This demand took in a large part of the global oversupply and stopped prices from falling further. The key question now is whether this strong buying will continue into the first quarter of 2026.
China’s Refinery Processing
The purchases weren’t solely for storage; refinery processing in China also increased in 2025. Recent economic data shows that the Caixin Manufacturing PMI for December was at 50.8, signaling slight growth that may keep demand steady. This suggests a strong foundation that could sustain crude consumption in the near future.
However, it’s important to note that a significant portion of the buying in 2025, around 1 million barrels per day, was specifically for building strategic reserves. Historically, when these stockpiling goals are met, the demand from this source can stop suddenly. A rapid end to reserve filling could quickly put pressure back on the market.
This uncertainty in demand comes as OPEC+ maintains its production cuts, keeping WTI crude prices around $85 per barrel. The cartel’s discipline is currently stabilizing the market, but it could be challenged if China’s appetite for imports decreases. Traders should monitor China’s weekly import and inventory data very closely.
With the risks of high demand against a potential drop in stockpiling, implied volatility in short-term crude options has increased. This situation suggests that strategies focused on price movement, rather than a clear direction, could be beneficial. The market is positioned for a significant change, and options for WTI and Brent delivery in February and March reflect this tension.
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The British Pound hovers around 1.3380, held back by strong US economic data
During the North American session, GBP/USD held steady around 1.3380, with the British Pound moving sideways against the US Dollar. The pair could not break above the 200-day Simple Moving Average (SMA) due to strong US economic data, which limited the Pound’s gains.
US economic data revealed that the Consumer Price Index (CPI) stayed at 2.7%, while the Producer Price Index (PPI) rose to 3% in November. The job market showed strength, with the Unemployment Rate at 4.4% and Initial Jobless Claims falling to 198K.
Impact Of Economic Data
These reports led to lower expectations for Federal Reserve rate cuts, which boosted the US Dollar. Consequently, the US Dollar Index (DXY) rose by 0.10% to 99.43, affecting the Pound. On the other hand, even though UK economic growth in November 2025 was better than expected, the Pound strengthened against the Euro but remained weak against the Dollar. Money markets still expect the Bank of England to cut rates two times by 2026. Looking ahead, upcoming data releases will include UK jobs and inflation numbers, while the US will release housing data and Core PCE indicators. The short-term outlook for GBP/USD suggests bearish trends, with a chance of testing the 50-day SMA and finding support levels. The heat map shows the percentage changes in major currencies, indicating that the Pound is the weakest against the Dollar but the strongest against the Euro.Central Bank Policy Differences
The US Dollar is gaining strength because the Federal Reserve may keep interest rates high for longer. This situation pressures the British Pound, as the Bank of England is expected to lower rates twice this year. The widening gap between the central banks is the main factor influencing the GBP/USD pair. Last Friday, January 9th, the jobs report confirmed US economic strength, adding 215,000 jobs compared to expectations of 180,000. With the unemployment rate stable at 4.4% in December 2025, it becomes harder for the Fed to justify aggressive rate cuts. As a result, the Dollar Index is moving closer to its recent highs of around 99.50. Traders have reacted by cutting bets on Fed easing, and derivative markets now predict just 44 basis points of cuts for all of 2026. This is a shift from the 60 basis points expected a few weeks ago. This new pricing makes holding dollars more appealing and supports further gains. Meanwhile, the Pound lacks support despite better-than-expected UK growth figures in November 2025. The market is overlooking this, and overnight index swaps indicate a nearly 90% chance of a Bank of England rate cut by May. This expectation limits any real strength in the Pound. Given this outlook, we see potential in strategies that profit from a falling GBP/USD, such as buying put options with strike prices below 1.3300. The pair’s failure to stay above the crucial 200-day SMA at 1.3405 indicates technical weakness. The next key support level to watch is the 50-day SMA around 1.3334. We should closely monitor next week’s UK inflation data and the US Core PCE report for any surprises. Recall that during 2022-2023, a single inflation report could drastically alter central bank expectations overnight. A high UK consumer price index could swiftly challenge the bearish outlook for the Pound. Create your live VT Markets account and start trading now.In December, Russia’s Consumer Price Index decreased to 0.3%, down from 0.42%.
Russia’s Consumer Price Index (CPI) for December fell to 0.3%, down from 0.42% the previous month. This indicates a slowdown in inflation compared to last month.
Gold prices dipped below $4,600 due to profit-taking and uncertainties about potential interest rate cuts by the Federal Reserve. Additionally, the AUD/USD pair dropped after strong US economic data reduced expectations for early Fed rate cuts.
The USD/JPY rate fell to 158.00 as the Japanese yen gained strength amid concerns about potential government intervention. In contrast, WTI oil prices slightly increased as tensions with Iran eased, although a supply surplus kept prices from rising significantly.
Pound Sterling Stability
Pound Sterling remained steady, with GBP/USD close to 1.3380, supported by strong US data that lifted the dollar. This week’s focus will be on US personal consumption expenditures and key events in Davos, which are critical for dollar traders. For those looking to trade, forecasts for 2026 highlight top brokers for different needs, including low spreads, high leverage, and access to markets in Europe and Latin America. Traders should weigh each broker’s pros and cons based on their specific requirements. The decline in Russia’s monthly inflation to 0.3% is an important indicator. The Central Bank of Russia has maintained a high key rate of 16% throughout 2025 to combat price pressures. This latest data might encourage them to hint at rate cuts in the first quarter, which could weaken the ruble.US Economic Strength
Meanwhile, the US shows continued economic strength, which is pushing back our expectations for Fed rate cuts. The Fed funds rate has remained steady at 6.00% since last September, leading the market to reconsider early easing bets. This difference in policy is a key factor in strengthening the US dollar against major currencies like the Euro and Pound Sterling. We see this dollar strength affecting gold prices, which are declining from their peak above $4,600 an ounce. With the prospect of sustained high US interest rates, holding non-yielding gold becomes less appealing. Many traders are taking profits after the significant gains seen over the past year. Now, attention turns to the upcoming US Core PCE data, the Fed’s preferred measure of inflation. The November 2025 reading showed inflation at 3.5% year-over-year, above the Fed’s target. A strong reading could confirm a hawkish stance, potentially driving the dollar even higher, similar to the persistent inflation we observed in 2023. For derivative traders, this situation calls for using options to position for ongoing dollar strength against the Euro and Yen, with pairs like USD/JPY nearing multi-decade highs. We are also considering volatility strategies around the US PCE release, as any unexpected weakness could trigger a swift reversal in crowded trades. The goal is to set up positions that gain from the diverging actions of global central banks. Create your live VT Markets account and start trading now.The Japanese yen strengthens against the US dollar, outperforming nearly all G10 currencies, according to Scotiabank
The Japanese Yen (JPY) recently rose by 0.3% against the US Dollar (USD), showing strong performance among the G10 currencies. This increase follows warnings from Japanese officials about possible intervention to stabilize the yen, especially after the Ministry of Finance hinted at taking “bold action.”
Officials aim to shift the USD/JPY exchange rate back to a range of 154.50 to 158. Meanwhile, Japan’s bond market is also seeing upward movement, with the 2-year Japanese Government Bond (JGB) yield increasing above 1.20% and the 10-year yield approaching 2.20%.
Global Market Trends
Market experts are closely monitoring global trends. Recently, gold prices fell below $4,600 due to profit-taking. Additionally, the AUD/USD pair declined after strong US data shifted expectations for early rate cuts by the Federal Reserve. FXStreet highlights the risks of investing in open markets, including the possibility of total loss. They recommend conducting thorough personal research before making investment decisions and caution that provided information may contain errors or may not be fully up to date. We should take the Ministry of Finance’s mention of “bold action” seriously, as it indicates a strong chance of intervention to bolster the yen. The latest core Consumer Price Index (CPI) reading from December 2025 is 2.8%, which supports the notion that persistent inflation gives the Bank of Japan a reason to back a stronger currency. Looking back to 2025, we recall the decisive actions taken when the USD/JPY rate crossed 152 in 2022. The current situation near 159 suggests that the officials’ tolerance has been stretched. Their immediate goal appears to be returning the rate to its former range of 154.50 to 158.00.Volatility and Strategy
Implied volatility in JPY options is likely to increase in the coming weeks, making strategies that benefit from price swings appealing. The weak US Non-Farm Payrolls data from early January has already put pressure on the dollar, creating a favorable environment for Japanese officials to intervene. Consequently, buying USD/JPY put options is a simple way to prepare for a significant drop driven by intervention, with clearly defined risk. Create your live VT Markets account and start trading now.As the US dollar weakens, the Pound Sterling rises slightly, according to Scotiabank experts
The Pound Sterling (GBP) rose by 0.2% against the US Dollar (USD), showing strength amid a generally weak USD. This increase comes after better-than-expected industrial production data, which has boosted short-term rate expectations for the Bank of England (BoE).
GBP/USD is stabilizing near the 200-day moving average (MA) of 1.3406. While there are indications of potential rate cuts, market expectations have changed. Now, they anticipate about 42 basis points in cuts by year’s end, down from 47 basis points last Friday.
Technical Conditions
From a technical standpoint, conditions are neutral, with the Relative Strength Index (RSI) around 50. The pair is experiencing congestion near the 200-day MA. There are risks of consolidation between the support level of 1.3350 and the resistance level of 1.3450. We are observing a familiar trend in the Pound Sterling’s performance against the US Dollar. One year ago, in early 2025, the GBP/USD pair was also stabilizing around its 200-day moving average near 1.3400. Today, it shows similar neutrality, hovering around 1.2850, without a clear direction. This sideways trend aligns with changing interest rate expectations. Just as stronger industrial data in early 2025 led to reduced bets on Bank of England rate cuts, we’re witnessing a similar scenario now. The latest UK inflation data for December 2025 was slightly above predictions at 2.8%, leading to fewer anticipated rate cuts for the year.Opportunities for Derivative Traders
For derivative traders, the current consolidation suggests low implied volatility, presenting an opportunity to sell premium. The CBOE Sterling Volatility Index (BPVIX) is at a low of 7.5, making strategies like selling straddles or iron condors appealing. These strategies benefit from the currency pair staying within a defined range, which seems likely in the near future. The key is to identify the current trading channel, which lies between the support level of 1.2780 and the resistance level of 1.2920. This mirrors the narrow range of 1.3350 to 1.3450 that dominated trading last year. Selling options with strike prices outside this channel allows traders to collect premium while the market remains directionless. However, traders should keep an eye on upcoming economic data from both the UK and the US. Any significant surprises in inflation or employment could disrupt the current balance and increase volatility. This was a risk in 2025 and continues to be a major concern for short-volatility positions today. Create your live VT Markets account and start trading now.Scotiabank strategists say the Euro rises slightly but underperforms compared to other G10 currencies.
The Euro (EUR) rose slightly by 0.1% against the US Dollar (USD), but it still lags behind other G10 currencies as we enter Friday’s North American trading session, according to Scotiabank’s Chief FX Strategists.
The European Central Bank (ECB) is currently neutral, with no immediate plans to discuss interest rates. Germany’s final Consumer Price Index (CPI) met expectations at 1.8% year-on-year, causing no significant market reactions.
Stability in Rate Expectations
Right now, stable rate expectations may provide some support for the Euro. Upcoming events, like the ZEW sentiment report on Tuesday and preliminary PMI data on Friday, could lead to significant changes in the currency’s direction. The Euro has been trading between 1.15 and 1.19. It briefly fell below the 50-day moving average at 1.1662 but found support at the 200-day moving average of 1.1589. Analysts expect it to stay range-bound between 1.1580 and 1.1680 in the short term. Currently, the Euro is stuck in a narrow range against the dollar, indicating a neutral outlook for the coming weeks. The European Central Bank has reiterated its wait-and-see approach, with no rush to discuss interest rate changes. This has driven implied volatility on EUR/USD options down to multi-year lows, recently hovering around 6.0% for one-month contracts.Inflation Figures and Strategy
Looking back at the last quarter of 2025, inflation data across the Eurozone did not prompt the central bank to change its stance. For example, the final German CPI for December 2025 matched expectations, showing that price pressures are stable and not rising unexpectedly. This stability is a major reason the currency pair lacks a strong directional influence. In this low-volatility environment with a clear range, selling options premium seems like a smart strategy. We suggest setting up trades that profit from time decay, such as short iron condors with strikes beyond the 1.1580 support and 1.1680 resistance levels. These positions would gain if the EUR/USD continues its sideways movement leading into the February options expiration. However, we should watch for next week’s important data releases that could add movement to the market. Tuesday’s German ZEW Economic Sentiment and Friday’s preliminary PMI figures for the Eurozone will be key events. Any significant surprises in this data could impact the current range and prompt a re-evaluation of short-volatility positions. Create your live VT Markets account and start trading now.Despite the China trade agreement, the CAD remains stable and unaffected by US equity or oil prices.
The Canadian Dollar (CAD) has stayed mostly the same, despite small changes in US stock futures and crude oil prices. Scotiabank’s Chief FX Strategists, Shaun Osborne and Eric Theoret, noted that the recent trade deal between Canada and China hasn’t boosted the CAD.
Prime Minister Carney’s agreement with China includes lower tariffs on Chinese electric vehicles and Canadian agricultural goods, aiming to increase trade in the energy sector. This is expected to benefit the Canadian economy and could help stabilize the USD/CAD exchange rate, which is currently around 1.39.
USD/CAD Exchange Rate Outlook
Despite these developments, the USD/CAD exchange rate has remained steady. The USD has struggled to maintain levels above 1.3925. The short-term chart hints at a possible double top pattern, meaning if the USD falls below 1.3885, it could drop to around 1.3855. A significant decline may push the USD into the upper 1.37s. The positive Canada-China trade deal hasn’t had much impact, keeping the Canadian dollar stable. The USD/CAD pair is stuck within a range, capped firmly around 1.39. This creates an opportunity, as the benefits of the deal, especially for agricultural exports, have yet to be factored into the market. Historically, canola exports to China fell nearly 15% through 2025 due to tariff disagreements, so this new deal should provide a substantial long-term advantage. However, WTI crude oil prices remain steady but uninspiring in the $80-$85 range, which usually supports the CAD. This helps explain the currency’s muted reaction to otherwise favorable news. The technical analysis indicates a potential double top near 1.3925, suggesting downward pressure on the US dollar. If it breaks below the 1.3855 mark, the USD could shift toward the upper 1.37s. Given this scenario, traders might consider buying USD/CAD put options with strike prices around 1.3850 to prepare for a possible drop while managing their risk.Options Strategy and Market Implications
This sideways movement has also reduced implied volatility, making options more affordable. For those confident that the 1.39 cap will hold, selling USD call spreads with a ceiling above 1.3950 could be a smart way to earn premium. This strategy benefits from strong resistance and the anticipated absence of significant upward movement in the coming weeks. A key factor remains the interest rate difference between the Bank of Canada and the US Federal Reserve, which has kept the pair elevated for much of 2025. Last week’s data revealed US core inflation is still above 3%, while Canadian inflation has decreased to 2.6%. This ongoing divergence supports the US dollar, but the new trade fundamentals may start to change that. Create your live VT Markets account and start trading now.Silver falls to $89.70 amid reduced geopolitical tensions and Fed policy outlook
Silver prices fell sharply as geopolitical tensions decreased, leading to lower demand for safe-haven assets. The outlook for US monetary policy also remains restrictive, adding more pressure on precious metals like silver.
Currently, silver is trading at about $89.70, down 2.50%. This drop reflects a market that favors riskier assets, reducing silver’s appeal as a safe haven.
The recent decline in silver prices is tied to easing geopolitical tensions. US President Donald Trump’s remarks about stepping back from military action have calmed investors’ concerns, prompting a shift toward riskier investments.
Additionally, Trump’s backing of Federal Reserve Chair Jerome Powell has eased worries about the central bank’s independence. The lack of new tariffs is also helping to lower trade tensions.
Silver is further pressured by high US interest rates, with employment data suggesting that a tight monetary policy will last. In this environment, assets like silver, which do not earn interest, are less attractive compared to bonds.
The market is closely watching geopolitical events and announcements from the Federal Reserve that could affect precious metals.
Last year, silver prices dropped significantly as geopolitical fears eased, and the Fed indicated higher rates for a longer period. The current situation in January 2026 looks quite different, implying a potential change in strategy—a good opportunity to reassess positions.
In contrast to strong employment data from last year, the latest Consumer Price Index (CPI) for December 2025 came in at a gentler 2.8%. This has raised expectations for further Fed rate cuts this year. With the Federal Reserve now easing policy, the cost of holding non-yielding silver is decreasing, making call options and long futures positions more appealing than in most of 2025.
We are also seeing stronger industrial demand compared to last year. Global data for Q4 2025 showed a 15% year-over-year increase in solar panel installations, with this trend expected to accelerate in 2026 due to new green energy policies. This strong demand offers significant support for silver prices, independent of monetary policy effects.
The Gold/Silver ratio is another important indicator, currently near 85. This is historically high and suggests silver is undervalued compared to gold, similar to conditions before the 2025 rally. Traders may consider strategies that benefit from a narrowing of this ratio, such as buying silver futures while shorting gold futures.
While early 2025 saw easing tensions, we are now observing renewed naval activity in the South China Sea. This uncertainty is increasing demand for safe-haven assets, a factor that was missing during last year’s correction. For derivative traders, this indicates we should be ready for higher implied volatility in the upcoming weeks.
The Japanese yen strengthens as GBP/JPY declines for the third straight session amid intervention speculation
GBP/JPY has dropped for three days straight, nearing a one-week low around 211.60. This decline follows warnings from Japanese officials about possible currency intervention. Japanese Finance Minister Satsuki Katayama mentioned that any intervention could happen alongside actions from the US.
Political uncertainty in Japan, especially with rumors of Prime Minister Sanae Takaichi potentially dissolving parliament, is affecting the Yen’s performance. Many expect the Bank of Japan (BoJ) to keep its interest rate at 0.75% during the meeting set for January 23. A Reuters poll shows no rate changes are expected in January and March, although some economists predict a tightening by late 2026.
