US EIA data showed a natural gas storage withdrawal of 54 billion cubic feet for the week ending 20 March. Forecasts had been for a 49 billion cubic feet withdrawal. The larger-than-expected withdrawal of 54 billion cubic feet from natural gas storage is a bullish signal for the near term. It suggests that demand was stronger than we anticipated for the week ending March 20. This surprise tightening should provide immediate support for front-month futures contracts.

Inventory Levels And Near Term Price Impact

We must, however, view this within the larger context of our current inventory levels. As of this report, total working gas in storage stands at approximately 2,150 Bcf, which is still over 400 Bcf, or about 23%, above the five-year average for this time of year. This significant surplus will likely cap any major price rallies in the coming weeks. Looking forward, we are seeing production finally begin to decline, with recent rig counts from Baker Hughes showing a drop of 5% since the start of the year. This pullback, combined with consistently high demand from LNG export facilities now averaging over 14.5 Bcf per day, creates a supportive backdrop for prices later in the year. The market is weighing the immediate inventory glut against this future tightening. A key variable remains the weather as we exit the winter heating season. Forecasts pointing to a late-season cold snap in early April could trigger another significant storage draw and surprise the market again. We saw a brief price spike in similar shoulder-season conditions back in April of 2025, reminding us how sensitive this market is to weather surprises. Given these conflicting signals, we expect volatility to increase. Traders should consider purchasing options that benefit from price movement, such as straddles on the May and June contracts, as the market decides whether the high storage or the declining production will dominate price action. Implied volatility is still reasonable, offering a good entry point for these positions.

Calendar Spreads For Later Year Tightening

Another strategic play is to look at calendar spreads to capitalize on the tightening supply outlook for later in the year. We could establish positions that are short the May ’26 contract and long the January ’27 contract. This trade benefits if the market prices in a tighter supply-demand balance for next winter, causing the back end of the futures curve to rise more than the front. Create your live VT Markets account and start trading now.

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Markets continue to price two to three European Central Bank rate rises in 2026. For April, pricing still implies a 60% chance of a rise. The European Central Bank is weighing how to stay guided by incoming data while also steering rate expectations across the yield curve. Markets have reacted to US efforts to seek a deal, but pricing for two to three rises remains in place.

Oil Prices And Inflation Outlook

Oil prices are treated as a key input for the near-term inflation outlook, and they have changed little since the start of the week. President Christine Lagarde said on Wednesday morning that the ECB would not act until it had enough information, and could look through a short-lived price shock. Market pricing implies the possibility of a firmer ECB response to stop a price spiral. Longer-dated forward inflation swaps have been relatively stable, while Euribor futures show a hump that points to some later reversal. The ECB faces trade-offs in its messaging, as a more dovish tone could push up long-end yields if inflation expectations drift higher. A more hawkish tone could shift attention to weaker growth. We see the market is convinced the European Central Bank will deliver at least two rate hikes this year, with a strong 60% probability priced in for a move as early as April. With the latest flash estimate for Eurozone inflation ticking up to 2.8%, driven by energy, the pressure on the ECB is building. This aggressive pricing suggests traders should be positioned for hawkish action.

Trading The Euribor Curve

The main variable remains the price of oil, which is creating a serious dilemma for the central bank. Brent crude has been stubbornly holding above $92 a barrel, and any further supply disruption could force the ECB to act decisively to prevent a price spiral. This contrasts with President Lagarde’s recent comments about looking through short-term shocks, creating the exact uncertainty traders can exploit. This environment suggests playing the “hump” in the Euribor futures strip, which implies the market expects hikes soon but a partial reversal later on. One could consider shorting near-term futures contracts to bet on a hike while buying longer-dated contracts to position for an eventual easing. The key is to trade the expected shift in the curve, not just the outright direction. Given the ECB’s balancing act between managing inflation expectations and avoiding a recession, volatility is a crucial play. The difference between what the market is pricing and what the ECB is signaling creates an opportunity to buy volatility through options. A straddle on German Bund futures heading into the April meeting could prove profitable if the bank delivers a surprise in either direction. Long-term inflation swaps remain relatively stable, suggesting confidence that the ECB has the tools to manage inflation, a credibility earned during the aggressive hiking cycle we saw end back in 2025. However, this time is different, as recent PMI data shows a fragile manufacturing sector that could be damaged by overly aggressive policy. The ECB might ultimately be forced to hike simply to meet market expectations and buy itself more time. Create your live VT Markets account and start trading now.

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Bundesbank President Joachim Nagel said the European Central Bank could raise interest rates as soon as April if higher energy prices increase inflation risks. He linked the risk to rising oil and gas prices and disruption tied to a closure of the Strait of Hormuz. Nagel said policymakers would have enough information by the ECB meeting on 29–30 April to decide whether to tighten policy or wait. He said that further tightening should not be ruled out too early.

Euro Area Money Supply Signals

Euro area monetary data showed weaker momentum in February. M3 growth slowed to 3.0% year on year from 3.2%, and M1 growth eased to 4.8% from 5.2%. The data point to more moderate liquidity conditions alongside steady but subdued credit growth across the euro area. The effect of the Middle East conflict on credit behaviour is not yet clear. The article states it was produced using an artificial intelligence tool and reviewed by an editor. The Euro is currently caught between two opposing forces, creating uncertainty for the coming weeks. We see hawkish talk from central bankers worried about Middle East energy prices, while key economic data shows slowing monetary momentum. This clash between words and numbers suggests a period of heightened volatility for the currency.

Trading For Volatility

For derivative traders, this environment is a classic signal to consider strategies that profit from price swings, regardless of the direction. Buying volatility on the Euro could be a prudent approach, as the market could react sharply to either an unexpected rate hike or a confirmation of economic weakness. The key is to be positioned for a decisive move rather than betting on a specific outcome. This view is strengthened by the latest inflation figures from earlier this month, which showed headline inflation ticking up to 2.8% on energy costs, while core inflation actually eased to 2.5%. This mixed data gives both hawks and doves at the ECB ammunition, adding to the market’s indecision. The uncertainty makes option strategies like straddles, which bet on a large price move, particularly relevant. The geopolitical risk is not just theoretical; we saw Brent crude futures jump last week after another tanker was briefly detained near the Strait of Hormuz. These real-time events give weight to Bundesbank President Nagel’s warning about a potential April rate hike to combat energy-driven inflation. This makes the hawkish scenario a tangible threat that the market must price in. We should also remember the ECB’s response to the energy shock back in 2022 and 2023, as viewed from our perspective in 2025. The central bank showed a clear willingness to hike rates aggressively to fight soaring energy inflation, even as the economy was slowing. This historical precedent suggests we should not underestimate their willingness to act again if they feel inflation is getting out of control. Looking at the interest rate markets, futures are currently pricing in only about a 35% probability of a 25-basis-point hike at the April meeting. This pricing offers a clear opportunity for traders to place bets based on their assessment of the situation. One could trade EURIBOR futures to speculate on whether the market is under- or overestimating the chances of the ECB acting next month. Create your live VT Markets account and start trading now.

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The US Dollar Index (DXY) held firm on Thursday, trading near 99.75 and rising for a third day. Support came as tensions linked to the US-Israel war with Iran continued. Uncertainty over US-Iran talks persisted after Iran rejected a proposed 15-point plan from Washington, according to Press TV. Iran set conditions including a halt to hostilities, guarantees against renewed conflict, war reparations, a broader ceasefire, and recognition of its authority over the Strait of Hormuz.

Dollar Strength And Geopolitical Tension

US officials said discussions with Iranian negotiators were ongoing, while Iranian officials denied that any talks were taking place. Reports of further US military deployments kept concerns about a longer conflict in focus. Axios reported that US officials were evaluating military options aimed at Iranian positions. Locations mentioned included Kharg Island, Iran’s main oil export hub, plus sites around the Strait of Hormuz such as Larak Island and Abu Musa. Higher Oil prices raised inflation concerns and reduced expectations for Federal Reserve rate cuts, pushing US Treasury yields higher. Markets now expect rates to stay on hold through 2026, instead of earlier expectations for at least two cuts. A Reuters poll found 61 of 82 economists expect no rate change next quarter. For end-2026, 28 expected one cut and 37 expected two cuts.

Rates Outlook And Market Positioning

US Initial Jobless Claims were 210K versus 205K previously, with a four-week average of 210.5K versus 210.75K. Looking back at the analysis from 2025, we see the foundation for the dollar’s strength was already being laid. The expectation then for the Fed to hold rates proved correct, keeping the US Dollar Index elevated. The index currently sits near 104.50, reflecting that sustained policy tightness which has defined the last year. However, the landscape is now shifting, and we must position for a potential pivot later this year. The softer Non-Farm Payrolls report for February 2026, which came in at 175,000, suggests the labor market is finally cooling under the weight of high rates. This data, combined with a core CPI that has stubbornly hovered just above 3%, creates significant uncertainty about the timing of the first rate cut. This environment is ideal for traders looking to buy volatility in US interest rate futures. We are seeing increased interest in options on the Fed Funds futures, particularly strategies that will profit from a sharp move once the central bank finally signals its intentions. Long straddles on major currency pairs like EUR/USD could also prove profitable, positioned to capture a breakout from the recent tight ranges. The geopolitical risks mentioned back in 2025, while less acute, have not disappeared. With WTI crude oil having stabilized around $85 a barrel, any renewed tension in the Strait of Hormuz could quickly reignite inflation fears and complicate the Fed’s easing timeline. Therefore, using derivatives to hedge against a sudden spike in energy prices remains a prudent strategy for the coming weeks. Create your live VT Markets account and start trading now.

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TD Securities said Commodity Trading Advisors (CTAs) are likely to sell gold unless prices rebound strongly in the coming week. It said a large price rise is needed to stop algorithms from selling most remaining long positions. The note said gold is trading more like a risk asset, linked to US dollar diversification flows. It also linked the move to war-related pressure on official-sector surpluses.

Official Sector Demand Weakens

It said the war in the Middle East has damaged Gulf economies and reduced surpluses in East Asia, affecting official-sector demand for now. It added that broad institutional participation has become more exposed, with fewer buyers during sell-offs. TD Securities said some market participants blame the fall on deleveraging, but its estimates show quant fund leverage has not changed since Day 2 of the war. It said this points to a weakening in market structure. It said liquidations have been large, but the market is still far from capitulation. It suggested waiting for CTA long capitulation before buying dips, and noted possible further unwinds of the “debasement trade”, including a Supreme Court decision linked to Lisa Cook’s trial. Commodity Trading Advisors (CTAs) will likely begin selling their gold holdings in most market scenarios. A significant price rally is needed over the next week to prevent these systematic funds from liquidating the majority of their long positions. This indicates that without strong buying, the market is positioned for a move lower.

Potential Catalysts Ahead

Gold is currently behaving more like a risk asset than a traditional safe haven. We’ve seen its correlation to equity markets increase since the Mideast conflict of 2025, which damaged the economies of key commodity-producing nations. This has disrupted the usual U.S. dollar diversification flows that typically support gold during uncertain times. A major source of demand has also weakened for the time being. The economic hit from last year’s war has significantly reduced the trade surpluses of major central bank buyers in the Gulf and East Asia. Looking back, we saw official sector purchases fall sharply in late 2025 from the record pace set in 2023 and 2024, leaving institutional investors exposed without that key support. The scale of liquidations has been large, but we are a long way from a full capitulation event. For derivative traders, this means buying this dip is premature until we see a washout from the CTA crowd. Watch for a sharp increase in selling volume as a sign that the last of these trend-following longs have been forced out. Upcoming events could also trigger a further unwind of the fear-based “debasement trade.” The pending Supreme Court decision on the Lisa Cook matter is creating uncertainty about the future of monetary policy. This is a key catalyst that could prompt more selling if the outcome is seen as reducing long-term financial risks. Create your live VT Markets account and start trading now.

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HSBC Global Research expects the New Zealand dollar (NZD) to stay under pressure against the US dollar (USD) in the coming weeks. Markets are still pricing further Reserve Bank of New Zealand (RBNZ) tightening over the next 12 months. The RBNZ is due to meet on 8 April, with the policy rate expected to remain at 2.25% (Bloomberg, 25 March 2026). Higher oil and gas prices linked to the Middle East conflict have pushed up local yields and added to projected rate rises.

Near Term Nz Usd Outlook

New Zealand interest rates have increased relative to Australian rates, which has supported NZD strength against the Australian dollar (AUD). Even so, NZD/USD is expected to remain weak unless the RBNZ delivers a more hawkish result than markets expect. The New Zealand dollar is likely to stay weak against the US dollar in the next few weeks. We’ve seen NZD/USD drift down to around 0.6150 this month, largely because recent US data, like last week’s non-farm payrolls which added a strong 250,000 jobs, is supporting the greenback. This trend looks set to continue ahead of the Reserve Bank of New Zealand’s meeting. While markets are expecting more RBNZ rate hikes over the next year, this is already baked into the price. With Brent crude oil holding firm around $95 a barrel and our own Q4 2025 inflation data coming in at a stubborn 3.8%, the path for future tightening is no secret. Therefore, the upcoming April 8th meeting, where rates are expected to hold at 2.25%, is unlikely to offer any new support. For us, this suggests a strategy of buying NZD/USD put options with expiries after the April meeting to position for further downside. Given that the market has already priced in the RBNZ’s likely moves, implied volatility on these options might be overstated. Selling volatility through strategies like short strangles could be profitable if the RBNZ delivers the expected steady outcome.

Relative Value Versus Australian Dollar

We saw a similar setup back in 2024 when the RBNZ maintained a hawkish stance but global growth concerns kept the kiwi pinned down. The market’s focus can easily remain on broader themes like US interest rate policy or risk sentiment, rather than just local rate expectations. This historical pattern supports the view that the NZD can weaken even when our own central bank is talking tough. In contrast, the kiwi looks much stronger against the Australian dollar. The rise in New Zealand’s two-year swap rates has outpaced Australia’s, widening the yield differential in our favor. This makes a long NZD/AUD position, perhaps using forward contracts, an attractive pair trade to isolate New Zealand’s relative rate advantage. Create your live VT Markets account and start trading now.

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South Africa’s central bank, the South African Reserve Bank (SARB), kept its main interest rate unchanged at 6.75%. This outcome was in line with expectations. The decision leaves borrowing costs steady for households and businesses. It also keeps the policy setting unchanged for the period ahead.

Market Reaction And Volatility Outlook

With the South African Reserve Bank holding rates as expected at 6.75%, the element of surprise is gone for now. We see this decision causing a drop in implied volatility for USD/ZAR currency pairs in the short term. This makes strategies like selling options attractive as markets have already priced in this stability. The rand should find support around current levels, as the high interest rate continues to attract carry traders. However, the market’s focus will now pivot entirely to when the first rate cut might happen later this year. With February 2026’s inflation print still firm at 5.8%, we believe a cut before the third quarter is unlikely. For those trading interest rate swaps, the forward curve likely overestimates the speed of future rate cuts. We are positioning for a flatter yield curve in the coming months, as short-term rates remain anchored by the SARB’s cautious stance. Looking back at 2025, we saw several false starts where the market priced in premature cuts, only to be disappointed. On the equity side, the JSE All-Share Index may see a relief rally now that this decision is out of the way. While the continued high rates are a headwind for growth, evidenced by the sluggish 0.9% GDP figure from late 2025, they benefit banking stocks’ net interest margins. We anticipate outperformance from financials relative to rate-sensitive sectors like retail or property.

Equities And Sector Positioning

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NYMEX WTI and ICE Brent rose by about 2% after sharp swings around $100 a barrel, as markets reacted to conflicting signals on a possible US‑Iran ceasefire. Middle East disruptions have kept European gas prices high and tightened seaborne crude flows to Asia. US crude inventories continued to rise, with EIA data showing stocks up 6.9m barrels last week, the fifth straight build. Total crude stocks reached 456.2m barrels, the highest since June 2024.

Inventory Builds Versus Geopolitical Risk

Cushing inventories increased by 3.4m barrels to 30.9m barrels, the biggest weekly gain since January 2023. Crude imports fell to 6.5m b/d, while exports dropped to 3.3m b/d, the lowest since November 2025. Product data were mixed, with gasoline inventories down 2.6m barrels and distillate stocks up 3m barrels. Refinery utilisation rose by 1.5pp week on week to 92.9%. Saudi Aramco is reported to supply about 40m barrels to China in April and around 23m barrels to India, slightly below last month. Disruptions in the Strait of Hormuz have led to rerouting via the Yanbu pipeline on the Red Sea, where export capacity is around 5m bbls/d. We are seeing a classic battle between bearish fundamentals and bullish geopolitical risk, keeping oil prices volatile around the $100 mark. This suggests that buying options to play swings in either direction, such as through straddles, could be more prudent than taking a simple directional bet. The market is waiting for a clear signal to break out of this range.

Key Catalysts To Watch

The primary trigger for a major price move remains the US-Iran ceasefire talks, which appear to have stalled again according to the latest reports from Vienna. We should position ourselves for a sharp drop below $95 on any credible de-escalation news, or a push toward $110 if the conflict intensifies. Until then, uncertainty will fuel this choppy price action. The build in US inventories is a significant headwind for prices, with the latest EIA report showing domestic crude stocks are now 8% above the five-year average for this time of year. The sharp drop in exports to levels we last saw in November 2025 confirms that barrels are getting trapped stateside. This inventory surplus puts a cap on any sustained rally in WTI. While gasoline demand appears seasonally healthy, the surprise build in distillates is a warning sign about underlying economic activity. Forward curves for diesel futures have recently flipped into a slight contango, signaling expectations of near-term oversupply. We see this as a bearish indicator for broader global growth. The disruptions in the Strait of Hormuz are creating a clear divide in the market, making seaborne crude more expensive for Asian buyers. This is reflected in the Brent-WTI spread, which has widened to over $7 this week, its largest gap in months. This logistical bottleneck supports trades that favor Brent over WTI. Create your live VT Markets account and start trading now.

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Russia’s central bank reserves fell to $776.8bn. The prior level was $803.2bn. This is a drop of $26.4bn. The figures compare the latest total with the previous total.

Reserve Drawdown And Ruble Pressure

We are seeing a significant drawdown in Russia’s foreign exchange reserves, the first major dip of this size since late 2024. This drop to $776.8 billion suggests the central bank is actively spending its dollars and euros, likely to defend a weakening Ruble. Derivative traders should anticipate heightened volatility in the USD/RUB pair, which has already breached the 110 mark this month for the first time in over a year. This level of reserve spending could force the Central Bank of Russia to take more aggressive action on interest rates to stabilize the currency. With the key rate already at 16% since the hikes we saw through 2025, any further increases will impact the cost of borrowing significantly. We should be pricing in a higher probability of another rate hike, making positions in forward rate agreements a key area of focus. The decline also points to growing stress on Russia’s balance of payments, a situation worsened by Brent crude prices hovering around $72 a barrel, well below the levels needed for their budget. This pressure increases sovereign credit risk, meaning we should watch for a widening in Russia’s credit default swap (CDS) spreads. Traders should consider buying protection as a hedge against any further economic deterioration. Remembering how a large portion of these reserves were frozen back in 2022, this use of the remaining accessible funds is a critical signal. The drawdown reverses a slow and steady accumulation trend we observed throughout most of 2025. This shift implies that underlying economic pressures, likely from sanctions and lower export revenues, are beginning to bite harder than they have in previous quarters.

Implications For Hedging And Risk Positioning

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Norges Bank indicates that it plans to raise Norway’s policy rate to 4.25% at one of its upcoming monetary policy meetings. The updated rate path points to 4.25% to 4.50% by the end of the year. The new guidance suggests the central bank is focusing on inflation and may apply tighter policy than it previously expected. This implies a rate rise could take place before summer, even if current conflict-related pressures ease quickly.

Norway Rate Outlook

Nordea expects the key policy rate to reach 4.25% in June. It also sees a higher likelihood of 4.50% than 4.00% by year-end. The article notes it was produced with the help of an Artificial Intelligence tool and reviewed by an editor. Looking back at 2025, we recall the signals that Norges Bank would hike its policy rate aggressively to support the Krone. The bank followed through on this guidance, lifting the key rate to a peak of 4.50% by December 2025 to fight inflation. This demonstrated a clear commitment to their mandate, which strengthened their credibility in the markets. Today, with the policy rate holding at that 4.50% peak, we are seeing the effects on the economy. Norway’s core inflation has fallen from last year’s highs but remains sticky, registering at 3.6% in the latest figures from February 2026. This persistence suggests the central bank will likely hold rates steady through the summer.

Market Implications For Traders

For traders in the currency markets, this creates opportunities in the Norwegian Krone. The wide interest rate differential makes holding the NOK attractive, and the EUR/NOK exchange rate has found stability, hovering near 11.25 for most of this quarter. Selling EUR/NOK call options could be a viable strategy to earn premium while betting that the central bank’s hawkish stance will cap any significant upside. In the interest rate derivatives space, attention is now shifting to how long this peak will last. Forward Rate Agreements are pricing in the first potential rate cut for late in the fourth quarter of this year, a shift from earlier expectations of a cut by September. We see value in positioning for this “higher-for-longer” scenario, as any surprisingly strong economic data in the coming weeks could push those expectations even further out. Create your live VT Markets account and start trading now.

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