The US Dollar is falling, partly due to comments from President Trump, which are affecting its value against other currencies. The Dollar Index has reached its lowest point since February 2022, signaling ongoing market uncertainty. This decline is worsened by worries about US tariffs, geopolitical tensions, and doubts about the Federal Reserve’s independence. The upcoming Federal Reserve meeting is not expected to change the Fed funds target range, offering little hope to the market.

Market Response To Dollar Decline

The Dollar Index has dropped to levels not seen since early 2022. Investors are selling off the USD as a result of this uncertainty. The dollar’s weakness was a notable issue throughout 2025, and it continues to be a major factor as we enter this year. The Dollar Index (DXY) is struggling to maintain the 96.50 mark, hovering near four-year lows set last year due to comments on trade policy. This ongoing pressure shows that political statements still greatly impact currency markets. For derivatives traders, this situation suggests it may be wise to buy volatility, as uncertainty is likely to persist. The CBOE Volatility Index (VIX) is currently high at around 23, a significant rise from the sub-18 average seen in 2024. Strategies like long straddles on important currency pairs could be effective for capitalizing on potential price movements caused by unexpected political news.

Federal Reserve Monetary Policy Shift

The market is also reassessing the Federal Reserve’s direction, marking a shift from the neutral stance observed throughout most of 2025. While the Fed is maintaining its current approach for now, Fed Funds futures now show a 65% chance of at least one rate cut by the third quarter of this year. This makes interest rate swaps and options on futures contracts especially useful for hedging against a softer monetary policy. On a tactical note, there’s considerable demand for options that protect against further declines in the dollar. In the EUR/USD pair, currently testing the 1.1500 resistance level, buying call options presents a way to profit from ongoing dollar weakness while managing risk. On the other hand, put options on USD/JPY may be attractive, as that pair finds it hard to stay above 135 in current conditions. Create your live VT Markets account and start trading now.

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Impact of CPI on AUD/USD

Australia’s Consumer Price Index (CPI) increased by 3.8% year-over-year in December, beating the market expectation of 3.6%, as reported by the Australian Bureau of Statistics. On a quarterly basis, the CPI rose by 0.6%. The annualized rate stood at 3.6%. The Reserve Bank of Australia’s (RBA) Trimmed Mean CPI reported a 0.2% rise monthly and a yearly increase of 3.3%. December’s monthly CPI was 1.0%, up from 0% the previous month. After this inflation report, the AUD/USD currency pair rose, trading at 0.7010, marking a 0.04% daily increase. The Australian Dollar strengthened against major currencies, particularly the US Dollar, which fell by 1.18%. Before the CPI announcement, analysts expected the RBA to raise interest rates due to rising inflation. A strong labor market, highlighted by the addition of 62,500 jobs in December and an unemployment rate of 4.1%, supports this expectation. The Australian Dollar is also benefiting from high demand for iron ore exports and a positive trade balance, largely influenced by the Chinese economy. The RBA’s interest rate decisions play a crucial role in the strength of the AUD.

Positioning in the Derivatives Market

This morning’s updated inflation data significantly impacts the market, showing December’s annual CPI at 3.8%, higher than the expected 3.6%. This unexpected rise strongly suggests a rate hike from the Reserve Bank of Australia (RBA) in their upcoming meeting. The market’s pricing for a February rate increase has jumped from 63% to over 85%, creating a clear direction for us. We should quickly consider establishing bullish positions on the Australian Dollar in the derivatives market. Buying AUD/USD call options that expire in late February or March presents a direct opportunity to profit from the anticipated currency appreciation following the RBA meeting. Target strike prices around 0.7050 to 0.7100 appear particularly appealing. The CPI surprise has likely led to an increase in one-week implied volatility for AUD/USD, now estimated at about 11%, up from around 8% last week. This rise makes outright option purchases pricier, so we should look at bull call spreads to reduce entry costs. Selling a higher strike call, like 0.7150, while buying the 0.7050 call can help finance our position and limit our risk. Looking back at the aggressive global interest rate hikes in 2022 and 2023, we saw many currencies rally for weeks after their central banks unexpectedly shifted to a more aggressive stance. Australia’s strong labor market, with unemployment at a multi-month low of 4.1% last month, creates a solid foundation for a similar trend. This historical context suggests we should hold these bullish positions longer than just a few days. The fundamentals supporting the Aussie remain strong, enhancing the validity of this trade. Iron ore prices have proven resilient, staying above $130 a tonne throughout January, while recent manufacturing data from China indicates modest growth. These elements bolster Australia’s trade terms and, subsequently, its currency. This trade focuses not only on the strength of the Aussie but also on the ongoing weakness of the US dollar. Uncertainty around US trade policy and the upcoming leadership change at the Federal Reserve are pressuring the greenback. This combined situation makes long AUD/USD positions one of the most attractive trades in the upcoming weeks. Create your live VT Markets account and start trading now.

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Silver has been rising for five days straight, trading at around $115.10 per troy ounce during early European hours. It is getting closer to its record high of $117.74 set in January, as more people shift their investments toward safer assets. President Trump’s remarks about the falling U.S. dollar are driving interest in precious metals, including silver, which often benefits from a weaker dollar. Current policy uncertainty in Washington, including tariff threats and challenges faced by the Federal Reserve, is also fueling this momentum.

Federal Reserve’s Rate Decision

The Federal Reserve is expected to maintain interest rates between 3.50% and 3.75% following recent cuts in 2025. Attention is on upcoming policy signals. Citi predicts silver will keep performing well and has raised its three-month price forecast from $100.00 to $150.00. A Chinese silver fund has paused trading due to high demand pushing up prices. More retail investors are showing interest in silver, leading manufacturers to focus on producing one-kilogram bars instead of jewelry. Silver is a valuable metal that investors seek for portfolio diversity and protection against inflation. Several factors influence silver prices, such as geopolitical tensions, the strength of the U.S. dollar, investment demand, and its industrial use in electronics and solar energy. Silver typically moves alongside gold. The gold/silver ratio helps investors evaluate the relative worth of these two metals, informing decisions based on differences in their values.

Trends and Trading Strategies

With the current trend, silver appears strong above the $115.00 threshold, largely due to a significant demand for safe-haven assets. The current administration’s apparent support for a weaker U.S. dollar is enhancing this rally. The market also considers ongoing policy uncertainty as a major driving force for precious metals. The U.S. Dollar Index (DXY) has mirrored this trend, falling from around 107 to about 103 in the last quarter of 2025. This 4% decline has made dollar-denominated assets like silver cheaper for foreign buyers. Additionally, the Federal Reserve’s three interest rate cuts in 2025 have significantly boosted interest in non-yielding metals. For those trading derivatives, this environment suggests a bullish outlook in the coming weeks. We recommend buying call options with expirations in March and April 2026 to take advantage of the upward trend, especially as institutional targets now aim for $150.00. This strategic move offers potential for further gains despite the prevailing sentiment to “Sell America.” However, the sharp price increase has raised implied volatility to levels not seen since the market turmoil of 2024, making outright call options expensive. It’s wise to consider the high premiums when entering new long positions. A more budget-friendly strategy is to use bull call spreads. By simultaneously buying a lower-strike call and selling a higher-strike call, traders can minimize their initial investment while still benefiting from potential price increases; this approach also limits both maximum profit and cost of entry. We’ve also observed that the gold/silver ratio is decreasing, dropping from a high of 85 in late 2025 to around 70 now. This pattern suggests that silver is outperforming gold, which often draws additional speculative interest. This relative strength strengthens our positive outlook on silver compared to other precious metals. A solid industrial demand underpins this speculative interest and provides a strong price foundation. Global installations of solar panels grew about 20% in 2025, and manufacturing trends show a clear shift toward producing investment-grade silver bars. This supports both industrial and retail demand. The primary short-term risk is the Federal Reserve’s press conference this Wednesday. Any hints of a more aggressive stance than expected could cause a rapid rebound in the dollar and a quick drop in silver prices. We recommend using stop-loss orders to manage exposure around this significant event. Create your live VT Markets account and start trading now.

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The Japanese Yen (JPY) faces challenges as the US Dollar recovers. However, many traders are cautious about pushing the Yen lower, expecting potential interventions to prevent further declines. Recent minutes from a Bank of Japan (BoJ) meeting indicate that interest rate hikes may continue, which contrasts with forecasts of cuts from the US Federal Reserve. Domestic political instability and worries about Japan’s financial health are further affecting the Yen. Prime Minister Sanae Takaichi has proposed spending and tax cuts ahead of a snap election on February 8. Japan’s public debt has been over 200% of its GDP for the past 15 years. Technical data show a negative sentiment for USD/JPY, with the pair falling below key support levels, including the 100-day Simple Moving Average. Despite an overall upward trend, bearish momentum increases with a declining Moving Average Convergence Divergence (MACD) line and a Relative Strength Index (RSI) indicating oversold conditions. The US Dollar gains strength ahead of the Federal Reserve’s upcoming rate decision, where Chair Jerome Powell’s comments will be closely watched for hints about future monetary policy. Traders expect possible US rate cuts, which might limit US Dollar gains due to differences in outlook between the BoJ and the Fed.

Federal Reserve Decision Expectations

The Federal Reserve’s decision is set for later today, and we anticipate some volatility in the USD/JPY pair. Markets expect two more rate cuts this year, so any change in Jerome Powell’s tone could lead to significant price moves. It’s wise to avoid holding large unhedged positions before the press conference. The Bank of Japan’s aggressive stance offers strong support for the Yen. Their December meeting minutes indicated a clear intention to keep raising rates, backed by January’s Tokyo Core CPI data showing 2.8%, well above the central bank’s target. This difference in monetary policy between the US and Japan is a key reason for a lower USD/JPY in the medium term. Nevertheless, we cannot ignore the political uncertainty ahead of the February 8 snap election. Takaichi’s proposed tax cuts and spending may worsen Japan’s fiscal situation, especially as government debt surpassed 265% of GDP last year. This could pose a significant challenge for the Yen if her party receives strong support.

Past Interventions and Future Plans

Recall the Ministry of Finance’s direct interventions in late 2022 when the USD/JPY climbed above 150. Although we are trading above that level now, the possibility of official actions to support the Yen is very real, potentially limiting aggressive upward moves. This past intervention highlights authorities’ discomfort with sharp Yen depreciation. Given this uncertainty, using options is a smart strategy in the coming weeks. We recommend buying puts on the USD/JPY for downside protection and as a cost-effective way to express a bearish outlook. Alternatively, strategies like long straddles could effectively capture price swings around today’s Fed announcement and the upcoming election. Once the Fed meeting concludes, our attention will shift fully to the Japanese election. The result will be crucial in shaping the country’s fiscal future and its impact on the currency. We should take advantage of any post-Fed volatility to position ourselves for this significant upcoming event. Create your live VT Markets account and start trading now.

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US stock indices had mixed results on Tuesday. The S&P 500 rose by 0.4%, boosted by strong technology stocks, while the Dow Jones Industrial Average dipped by 0.8%. In the bond market, the US Treasury yield curve steepened ahead of the Federal Reserve’s policy decision. The yield on 10-year Treasuries increased by 3 basis points to 4.24%, while the yield on 2-year Treasuries fell by 2 basis points to 3.57%.

European Stock Performance

Most European stocks went up on Tuesday, thanks to positive corporate earnings. The Euro Stoxx 50 gained 0.6%, and the French CAC rose by 0.3%. However, the German DAX slipped by 0.2%. In the UK, the FTSE 100 also increased by 0.6%, reflecting similar trends in Europe. The changes in stock and bond markets show various economic influences, including recent consumer confidence data. There’s a clear divide in the market: technology stocks are pushing the S&P 500 higher, while industrial and financial sectors are dragging down the Dow. This divergence is a significant change from the broader market patterns we saw in most of 2025. Mixed earnings reports are creating opportunities for traders who can identify the right sectors. Recent economic data indicates a slowdown, which is significantly affecting the bond market. The latest report from the Conference Board revealed that the Consumer Confidence Index dropped to 99.2, its lowest level in over a year. This decline has raised concerns among investors about future spending, contributing to expectations of a more cautious stance from the Federal Reserve.

Market Implications

The bond market is signaling that we might see lower interest rates soon. The steepening yield curve—where short-term 2-year yields are falling and 10-year yields are rising—suggests traders are anticipating Fed rate cuts. Currently, Fed funds futures indicate a greater than 65% likelihood of a rate cut by the March meeting, a sharp rise from a few weeks ago. This uncertainty leading up to the Fed decision could lead to increased market volatility. The VIX index has already risen to around 17. Traders might consider options strategies like straddles on the SPY ETF to profit from significant price swings, no matter the direction. Buying volatility now could be a smart move before the Fed’s announcement potentially disrupts the market. Given the strong performance of technology, our bullish strategies should focus there. Buying call options on semiconductor or software ETFs could take advantage of the current momentum from strong earnings. At the same time, it’s wise to hedge by purchasing put options on industrial or regional bank ETFs, which are showing weaknesses. Create your live VT Markets account and start trading now.

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The US Dollar (USD) increased to over 96.00 as the European trading session kicked off. Traders are waiting for the US Federal Reserve’s interest rate decision, which is expected to stay the same. Much attention is on Fed Chair Jerome Powell’s comments about future policies. The Australian Dollar climbed to a three-year high above 0.7000, thanks to stronger inflation data. Australia’s Consumer Price Index (CPI) rose to 3.8% year-over-year in December, beating expectations and raising hopes for a rate hike from the Reserve Bank of Australia.

Japan’s Fiscal Health

Japan’s financial situation is under the spotlight as USD/JPY stays above 152.70. Recent Bank of Japan meeting minutes reveal a plan to increase interest rates if the economy supports it. Gold prices soared above $5,200, marking its eighth straight day of gains, driven by geopolitical uncertainties and potential US interest rate cuts. The Canadian Dollar remained steady around 1.3575, supported by rising crude oil prices, ahead of the Bank of Canada’s stable interest rate decision. US President Trump highlighted the strong USD and expected lower interest rates with new Fed leadership. EUR/USD dropped below 1.1200 after reaching a five-year high, due to renewed demand for the USD. Quantitative tightening (QT) by the Federal Reserve usually strengthens the USD and contrasts with Quantitative Easing (QE), which tends to weaken it.

Focus on the Fed’s Statement

Today’s main focus is on the Fed’s statement and Jerome Powell’s press conference. We don’t anticipate a rate change today, but any indication of future cuts could lead to significant market fluctuations. Options traders might consider straddles on major USD pairs like EUR/USD to capitalize on this potential movement. Gold’s rise above $5,200 suggests a flight to safety, a trend evident since the geopolitical tensions began in 2025. Open interest in COMEX Gold futures has reached levels last seen during the global uncertainty of 2024, making long call options an appealing strategy. Any dovish comments from the Fed could push prices toward the next key level of $5,300. The unexpectedly high Australian inflation at 3.8% positions the Reserve Bank of Australia as one of the most aggressive central banks. The swaps market now indicates a strong chance of a rate hike at the next RBA meeting, creating a noticeable policy difference with a potentially dovish Fed. This supports buying AUD/USD call options for further growth beyond the 0.7000 mark. The pullback in EUR/USD below 1.1200 appears to be a temporary dip ahead of the Fed’s decision. Eurozone data has shown resilience throughout 2025, and with inflation still above the ECB’s target according to recent Eurostat numbers, there seems to be limited downside for the euro. Traders might see this decline as a chance to buy long positions through futures contracts, aiming for a rebound to previous highs. Sterling is also in a similar situation, with its pullback to 1.3810 presenting a possible entry point for buyers. Strong UK economic data from the last quarter, especially the notable wage growth in late 2025, suggests that the Bank of England is unlikely to cut rates soon. This support could make selling short-dated GBP/USD put options a good way to gain premium. The tension in USD/JPY near 152.70 reflects the clash between Japan’s fiscal policy and the Bank of Japan’s aggressive stance. The BoJ’s recent minutes confirm their plan to keep raising rates, marking a significant change since early 2025. This implies that any weakness in the USD after the Fed meeting may result in a sharp decline in this currency pair. Create your live VT Markets account and start trading now.

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**GBP/USD Eyes Bearish Reversal** **The Federal Reserve’s Anticipated Rate Decision** GBP/USD dropped after four days of gains, trading close to 1.3800 during Friday’s Asian session. Technical analysis shows a potential bearish reversal, suggesting that buyer momentum is weakening within a rising wedge pattern. The pair is still above the nine-day and 50-day Exponential Moving Averages (EMA), which indicates a positive outlook. The short-term average rising above the medium-term one strengthens the trend, suggesting that any price dips might be temporary as long as it respects the rising averages. GBP/USD is on track for a second week of gains as the US Dollar weakens due to trade war talks. The Pound Sterling could end the month with gains for the third consecutive time against the US Dollar, hitting multi-year highs. The Federal Reserve will announce its first rate decision of the year on Wednesday, and no changes are expected. Attention will focus on possible future rate cuts, with futures markets predicting two quarter-point cuts by the end of 2026. Currently, GBP/USD is at 1.3776, up 0.76% after reaching a four-year high of 1.3791. The US Dollar is losing appeal as positive sentiment grows, with President Trump expected to increase tariff threats against South Korea. With GBP/USD testing four-year highs around 1.3800, the current momentum suggests a bullish outlook. The main driver is the weakness of the US Dollar, fueled by renewed trade rhetoric. We may consider buying near-term call options to take advantage of a possible breakout toward 1.3900 or higher. The dollar’s decline is backed by recent fundamentals. Late 2025 data revealed an unexpected widening of the US trade deficit. These trade tensions, particularly threats of increased tariffs on South Korea, are likely to keep the dollar under pressure as we approach the Federal Reserve meeting. Past trade disputes in 2025 have led to significant dollar underperformance against other major currencies. All eyes will be on the Fed’s forward guidance this Wednesday, as markets are already anticipating future easing. The CME FedWatch Tool currently indicates over a 75% chance of the first rate cut by June 2026. This outlook contrasts sharply with the Bank of England, which, in its December 2025 meeting, signaled it would maintain rates steady with UK inflation at 3.1%. This difference in policy makes long Pound positions appealing against the dollar. We see it as a chance to sell out-of-the-money put options on GBP/USD, earning premium based on the expectation that the pair will remain supported above levels like the 50-day EMA. The strong trend suggests that price dips may be quickly bought. However, we should consider technical warnings from the rising wedge pattern that may indicate buyer exhaustion. This means buying put options with a strike price below 1.3700 could be a smart hedge against a quick reversal, especially if the Fed gives a surprisingly hawkish statement. A drop below the nine-day EMA would signal that upward momentum is weakening. Due to the high-impact nature of the Fed meeting, implied volatility is expected to rise. This creates an opportunity for a long volatility strategy, such as a straddle, which involves buying both a call and a put option at the same strike price. This strategy would profit from a significant price movement in either direction after the central bank’s announcement. Create your live VT Markets account and start trading now.

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Gold prices in Saudi Arabia rose on Wednesday. According to FXStreet, the price increased to 632.26 Saudi Riyals (SAR) per gram, up from SAR 624.15. The price per tola also went up, reaching SAR 7,374.61 from SAR 7,279.98 the day before. FXStreet calculates gold prices in local currency by adjusting international rates and measurement units. They update these figures daily based on market conditions. These prices serve as a guide and can vary locally. Gold is often seen as a secure investment, especially during unstable economic times.

Central Banks Buying Gold

Central banks, especially from emerging markets like China, India, and Turkey, are expanding their gold reserves. In 2022, they bought 1,136 tonnes, worth around $70 billion, which was the highest ever recorded in a year. The price of gold is influenced by various factors, including geopolitical issues, the strength of the US Dollar, and interest rate changes. When the Dollar weakens or interest rates drop, gold prices usually rise. Because gold does not yield interest, it is a popular choice for investors looking to protect against inflation and currency loss. As a result, many investors turn to gold when they want to diversify their portfolios during economic uncertainty. Gold prices are trending upward today, January 28th, 2026. This suggests strong buying interest from major players, especially as the market awaits new policy announcements from the Federal Reserve.

Factors Driving Gold Prices

The current strength in gold prices is not surprising, given the consistent buying over the past year. After the record purchases in 2022, central banks, especially in emerging markets, continued to build their gold reserves throughout 2025. This steady demand led to an increase of over 800 tonnes in total global central bank holdings last year, creating a solid foundation for current prices. Additionally, a weakening U.S. Dollar over the last year has boosted gold prices. Following the Federal Reserve’s cautious easing efforts in mid-2025 to support a slowing economy, lower interest rates have made holding gold more appealing. The inflation that occurred from 2022 to 2024 has left investors cautious about currency devaluation. We also need to consider ongoing geopolitical tensions that keep demand for safe-haven investments like gold strong. This uncertainty can protect gold prices during potential market drops. For derivative traders, this support reduces the likelihood of sharp declines in gold prices. In the coming weeks, traders may want to adopt strategies that take advantage of the current strength. Buying call options or creating bull call spreads could be smart moves for a potential price breakout, especially if the Fed leans towards a more dovish approach. Given the solid fundamental support, selling out-of-the-money puts could also be a good strategy to earn premiums while betting on price stability. Create your live VT Markets account and start trading now.

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Gold prices in the Philippines increased on Wednesday, according to FXStreet. The price per gram of gold rose to 9,921.75 Philippine Pesos, up from 9,791.70 PHP on Tuesday. Currently, gold costs 115,725.40 PHP per tola, an increase from 114,208.50 PHP the day before. The price for a troy ounce is now 308,596.80 PHP.

How Gold Prices Are Determined

FXStreet calculates local gold prices using the international gold price and the USD/PHP exchange rate. These prices are updated daily, but local rates may vary slightly. Gold has always been valued as a store of value and a medium of exchange. It is considered a safe asset, especially during market turmoil, and it helps protect against inflation. Central banks are major gold buyers. They added 1,136 tonnes to their reserves in 2022, worth about $70 billion. This marks the highest annual purchase ever recorded. Gold often moves in the opposite direction of the US Dollar and US Treasuries. It typically increases when the Dollar weakens and interest rates are low. Conversely, a stronger Dollar or higher interest rates can lower its price.

Gold’s Recent Market Performance

The recent increase in gold to PHP 9,921.75 shows rising market anxiety. This change comes as we await the Federal Reserve’s interest rate decision next week. The market is anticipating considerable uncertainty, leading to opportunities for derivative strategies. Recent inflation data indicates that the 2025 US Consumer Price Index ended at a steady 3.4%. This persistent inflation keeps gold appealing, as it traditionally serves as a hedge against declining currency values. Traders are positioning themselves for this by considering longer-dated call options. Institutional support remains strong. Central banks continued buying aggressively throughout 2025, adding over 1,080 tonnes to their reserves, according to the World Gold Council’s final report. This ongoing demand sets a solid price floor, making short positions risky. The US Dollar Index (DXY) is rising, currently around 104.50, which usually challenges gold prices. Nevertheless, the upcoming Fed meeting has led to an increase in implied volatility for gold options, rising over 18%, significantly above last quarter’s average. This indicates traders expect a sharp price movement following the announcement. Given the high volatility, buying options to manage risk appears wise. Bullish traders might consider call spreads to reduce entry costs, while those anticipating a downturn could look at put options. A straddle, purchasing both a call and a put, could be an effective way to trade the expected price swings, although it may be more expensive. Create your live VT Markets account and start trading now.

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The USD Index Update

The USD Index has bounced back from its lowest level since February 2022, despite expectations for a dovish Federal Reserve limiting its recovery. A rate cut is expected twice this year, and there will soon be a new Fed Chair. Concerns about the independence of the central bank are rising, especially with attempts to dismiss Fed Governor Lisa Cook. Economic and geopolitical risks are increasing, and the rise in Crude Oil prices since October 2025 may support the Loonie, putting a cap on USD/CAD gains. We await a clear buying trend to confirm that spot prices have hit a bottom. With significant events today from both the Bank of Canada and the Fed, we face major risk. The market is trying to navigate a weak US dollar while the Canadian economy sends mixed signals that might influence the Bank of Canada. This creates a challenging situation where the easiest path forward isn’t clear right now. In the coming weeks, we should look for strategies that benefit from increased volatility, as surprises from either central bank could cause sudden shifts. The one-week implied volatility for USD/CAD options has risen to 9.8%, indicating market nerves about these announcements. Buying a simple straddle or strangle could be a good move to take advantage of a breakout from the current narrow range.

Potential USD/CAD Strategies

If we think the recent rise in oil, with WTI crude over $92 a barrel, will outweigh a dovish Bank of Canada, then the bounce to 1.3600 may present a selling opportunity. We could implement a bear call spread by selling the 1.3650 calls and buying the 1.3700 calls for protection, allowing us to collect a premium. This strategy would profit if the pair stays flat or continues its downward trend due to a weak US dollar outlook. On the other hand, a dovish surprise from the Bank of Canada is still a possibility. Last week’s jobs report showed a surprising drop of 5,000 positions in December 2025. If that happens, we might see USD/CAD surge as the Canadian dollar weakens. In this case, a bull put spread by selling puts at the 1.3550 strike could be used to bet that recent lows will hold as support. This situation echoes the central bank policy divergence we saw in 2024, which led to sharp currency movements. With a 75% chance of another rate cut by June in the Fed funds futures market, and uncertainty surrounding the next Fed Chair, it’s crucial to hedge existing exposures. Even simple puts against long USD/CAD positions should be considered to protect capital from an unexpectedly dovish Fed outcome. Create your live VT Markets account and start trading now.

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