USD/CAD fell almost 1% this week, moving from about 1.3965 to near 1.3800 by Thursday. The decline sped up on Tuesday evening after the US and Iran agreed to a Pakistan-brokered two-week ceasefire.

Pakistan’s Prime Minister Shehbaz Sharif announced an immediate ceasefire shortly before President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz. Trump later confirmed the deal on Truth Social, describing Iran’s 10-point proposal as a “workable basis on which to negotiate”.

Dollar Weakness Broadens

Following the announcement, the Bloomberg Dollar Spot Index dropped as much as 1.1% on Wednesday, its biggest one-day fall since January. The US Dollar weakened against all 16 major peers as long-Dollar positions were reduced.

WTI crude fell more than 10% intraday on expectations linked to Hormuz, even though lower oil often weighs on the Canadian Dollar. Oil later rebounded above $97, while DXY steadied near 99.

Rate expectations also shifted, with oil back below $100 and futures pricing at least one 2026 cut. FOMC March minutes showed division between those considering a hike and those expecting a cut this year.

On charts, USD/CAD broke below 1.3900 and 1.3850, while hourly RSI dipped under 30 before recovering to the mid-40s. US March CPI is due Friday, and a softer outcome could open 1.3750–1.3700.

The dramatic slide in USD/CAD from above 1.3900 appears to have stalled around the 1.3800 level for now. Friday’s US Consumer Price Index report for March came in slightly hotter than expected, with core inflation rising 0.4%, preventing a further collapse in the dollar. The easy money from shorting the dollar on the ceasefire news has likely been made.

Options Volatility Resets

With the ceasefire’s survival still in question after the weekend talks in Islamabad, implied volatility has fallen sharply, making options cheaper. We see the one-month implied volatility on USD/CAD has dropped from over 10% to near 7.5%, a level not seen since before the conflict escalated in February. This presents an opportunity to buy straddles or strangles, positioning for a large move in either direction without betting on which way it will go.

The market has been quick to pull back on its Federal Reserve rate cut expectations following the inflation data. Fed funds futures, which had briefly priced in an 85% chance of a cut by year-end, now show those odds closer to 50/50. This renewed uncertainty about the Fed’s path puts a solid floor under the US dollar for the time being.

The oil market is also adding to the confusion, as the initial 10% price drop was a knee-jerk reaction. WTI crude has since stabilized above $97 a barrel, supported by the latest EIA report showing a surprise drawdown in US inventories and the reality that the Strait of Hormuz remains closed. This price resilience is a double-edged sword, supporting the Loonie but also feeding the global inflation fears that benefit the Greenback.

Looking back at the positioning data from late 2025, we know the long US dollar trade was extremely crowded, which explains the severity of the sell-off this past week. While much of that speculative length has been cleared out, the market is now waiting for a fresh catalyst. The key is to watch whether the ceasefire holds through the next week.

For now, the pair seems trapped between the fragile peace dividend and stubborn inflation. We are watching the 1.3750 level as key support, while any renewed geopolitical tension or hawkish Fed talk could easily send the pair back toward 1.3900. Using option spreads to define risk seems like the most prudent strategy until a clearer direction emerges.

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GBP/USD rose past 1.3400 on Thursday and traded at 1.3441, up 0.36%, as risk appetite weakened amid fresh tensions in the Middle East. Israel struck Lebanon during its conflict with Hezbollah, and the ceasefire was described as fragile.

US equities were little changed, while the US Dollar Index (DXY) edged up 0.01% to 99.01 after a 1% fall over the prior two days. Iran did not indicate it would open the Strait of Hormuz, and Israel’s renewed attacks were reported to have killed more than 250 people.

Inflation And Rates Backdrop

US inflation data showed the February PCE Price Index rose 0.4% month-on-month versus 0.3% previously, and held at 2.8% year-on-year. Core PCE was 0.4% month-on-month, and eased to 3% year-on-year from 3.1%.

Money markets priced about six basis points of Federal Reserve easing by year-end, per CME FedWatch. Initial Jobless Claims rose from 203K to 219K versus 210K forecast, while Continuing Claims fell 38K to 1.794K, the lowest since May 2024.

UK pricing showed a 21% chance of a Bank of England rise on 30 April and expectations of a June 18 move, with 39 basis points of tightening for the year. March US CPI is forecast at 3.3% headline (from 2.4%) and 2.7% core (from 2.5%).

Technically, GBP/USD was near 1.3437, with resistance around 1.3439; support levels referenced 1.3137 and 1.3785.

Looking back to this time in 2025, we saw the pound rally past 1.3400, fueled by expectations of Bank of England rate hikes and Middle East tensions that weakened the dollar. The market was then pricing in nearly 40 basis points of tightening from the BoE for the remainder of that year. That entire narrative has since inverted over the last twelve months.

Today, the BoE is on an extended pause as UK inflation, while down from its peaks, has remained stubbornly above target and economic growth has stalled, with the latest Q1 2026 GDP figures showing a meager 0.1% expansion. In contrast, the US Federal Reserve has maintained a hawkish stance as core PCE has struggled to get below 2.8%, a figure that has been persistent for several quarters. This policy divergence is now the market’s primary focus.

Trade Ideas And Positioning

This shift has pushed GBP/USD down significantly from its 2025 highs, with the pair now consolidating around the 1.2550 mark. The key support level around 1.3137, which we watched last year, was broken decisively and now acts as a distant memory of prior strength. The path of least resistance for the currency pair currently appears to be lower.

Given this sustained downtrend, we should consider buying GBP/USD put options with expiries in the next 4 to 8 weeks. This provides a clear directional bet on further sterling weakness while capping our maximum potential loss to the premium paid. It also positions us to benefit from any sudden increase in market volatility.

For a more conservative approach, we can look at selling out-of-the-money call spreads with strike prices well above current levels, such as around the 1.2800 handle. This strategy allows us to collect premium income from the view that the pound is unlikely to stage a significant recovery in the near term. The trade profits from both a falling price and time decay.

The interest rate differential now strongly favors holding US dollars over pounds, a complete reversal from the sentiment in early 2025. We can use forward contracts to short GBP/USD, which allows us to benefit from this positive carry. This means we are effectively paid to hold the short position, adding a small but steady tailwind to the trade.

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Israeli Prime Minister Benjamin Netanyahu said on Thursday that he has ordered the start of direct negotiations with Lebanon “as soon as possible”. He said the talks are expected to focus on disarming Hezbollah and setting up formal peaceful relations between Israel and Lebanon.

The report was first published by Axios correspondent Barak Ravid on X. Direct talks would move away from past approaches that relied on indirect contacts and mediators.

Hezbollah is backed by Iran and has an armed wing and a role in Lebanon’s politics. A plan that puts disarmament at the centre is expected to face resistance from Hezbollah and from Iran, which supports the group.

Lebanon’s political system is divided, which could slow or block progress. Hezbollah’s role as both a militia and a political party, along with Iran’s interests, may also affect what can be agreed.

This announcement of direct negotiations introduces significant uncertainty, creating an ideal environment for volatility-based trades. While the headline might initially soothe markets and lower the geopolitical risk premium, we see this as a temporary calm before the inevitable challenges surface. We should anticipate sharp market swings based on headlines over the next few weeks, making long volatility positions through options attractive.

We remember how sensitive oil prices were to regional tensions throughout 2024 and 2025, and this news could cause a knee-jerk drop in Brent crude prices. However, given that any real disarmament of Hezbollah is a monumental task, this dip presents a buying opportunity for call options. A breakdown in talks could quickly send oil back towards last year’s highs, especially with global inventories remaining tight.

The core of the skepticism lies in the deep-seated realities on the ground, which have not changed. Hezbollah’s political power and arsenal, estimated to include well over 100,000 projectiles, make the goal of disarmament seem more aspirational than practical. Lebanon’s own political paralysis, which saw its inflation rate exceed 190% in 2023, means there is no single entity that can credibly enforce such a deal.

For traders, this means we should also watch safe-haven assets like gold and the U.S. dollar closely. Any sign of faltering negotiations would likely trigger a flight to safety, benefiting these assets while putting downward pressure on equity markets. A paired trade, such as going long VIX futures while selling short-dated puts on defense sector stocks, could be a prudent way to position for the likely turbulence ahead.

The United States held an auction for 4-week Treasury bills. The auction yield fell to 3.56% from 3.62% at the previous sale.

A 4-week Treasury bill is a short-term government security that matures in about one month. The reported change shows a 0.06 percentage point drop in the auction yield.

The recent dip in the 4-week bill auction signals a clear flight to safety among investors. This move suggests that big money is becoming more nervous about the near-term economic outlook and is willing to accept lower returns for the security of government debt. Last week’s Non-Farm Payrolls report, which showed job growth of only 95,000 against an expected 180,000, is likely fueling this defensive positioning.

We believe this is the market starting to aggressively price in a Federal Reserve rate cut sooner than previously expected. This contrasts sharply with the mood back in mid-2025, when the focus was still on rates staying higher for longer to combat stubborn services inflation. With the latest core CPI now down to 2.8%, the argument for the Fed to ease policy is growing stronger.

For us, this means it is time to look at buying volatility. The VIX has been hovering near multi-year lows, but this kind of uncertainty in the bond market often precedes a spike in equity volatility. We should consider buying call options on the VIX or VIX-related ETFs to position for a potential market downturn in the coming weeks.

This is also a clear signal to position for lower short-term interest rates. We should be evaluating trades like buying SOFR futures, which will profit if the Fed does indeed cut its target rate by summer. This is a far cry from the environment in 2025, when we were more concerned with hedging against further rate hikes.

Historically, we’ve seen similar patterns where the short end of the yield curve leads the Fed’s actions, such as during the summer of 2019 before the Fed began its cutting cycle. The bond market is often ahead of the curve, and ignoring these early warnings can be a costly mistake. It indicates that the smart money is already making its move.

In the equity options market, this environment suggests a more defensive posture. We should consider buying put options on cyclical indices like the Nasdaq 100 to hedge against a slowdown that would hit growth stocks hardest. Simultaneously, it might be wise to look at call options on traditionally defensive sectors like utilities and consumer staples.

European rate markets lowered late-2026 policy rate expectations after a temporary US–Iran ceasefire and a sharp fall in energy prices. The move was seen in December 2026 futures for the ECB, BoE and SNB as European markets opened.

Even after the adjustment, futures pricing stayed well above the start-of-year levels. The gap was up to 80bp for the BoE and over 50bp for the ECB.

European Rate Markets Mispricing

Swiss pricing still implied rates moving above zero by year-end. Rate expectations were described as being out of line with stated policy aims.

Within the ECB, members remain divided, with some warning action may be needed before second-round effects appear. Despite different policy positions, BoE and ECB pricing fell by almost the same amount as the ceasefire news reached markets.

The item was produced using an AI tool and reviewed by an editor.

Trade Ideas For The Weeks Ahead

Following the U.S.–Iran ceasefire, we see a major disconnect in European rate markets that presents an opportunity. Futures markets are still pricing in far too many interest rate hikes for the ECB, BoE, and SNB, ignoring signs of slowing economic activity. This hawkishness seems to be a hangover from the aggressive tightening we saw through much of 2025.

For the Bank of England, the market is factoring in almost 80 basis points of hikes, which seems excessive. Recent data showed UK Q1 2026 GDP growth was a sluggish 0.1%, and March retail sales unexpectedly fell, suggesting the consumer is weakening. We believe traders should consider positions that bet against this aggressive hiking path.

The European Central Bank is in a similar situation, with over 50 basis points of tightening priced in. This seems to ignore the latest Eurozone HICP inflation figure for March, which fell to 2.1%, and a composite PMI that dipped to 49.8, indicating a slight economic contraction. The split within the ECB suggests the more dovish members will gain influence as this weak data continues to surface.

The Swiss National Bank provides the clearest mispricing, with markets still expecting rates to move above zero this year. Given the slowing growth in the neighboring Eurozone and the franc’s recent strength, the SNB has little reason to hike and may even be forced to consider cuts. We see excellent risk-reward in positioning for Swiss rates to remain flat or move lower.

In the coming weeks, traders could look to enter interest rate swaps where they receive the fixed rate, betting that floating rates will not rise as much as the market expects. This is particularly relevant for longer-dated BoE and ECB contracts. Additionally, buying options that would profit from SNB rate cuts later in the year could be an effective strategy.

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Gold (XAU/USD) traded near $4,750 on Thursday, after rising above $4,800 to a three-week high the day before. Price action stayed range-bound as markets tracked strain around the US-Iran ceasefire.

Iran’s Parliament Speaker Mohammad Bagher Ghalibaf said three parts of the ceasefire had been violated after Israeli strikes on Lebanon. Iran says Lebanon is covered by the ceasefire, while the US and Israel say it is not, and Tehran warned it could leave the deal if attacks continue.

Ceasefire Tensions And Market Focus

The first round of US-Iran talks is scheduled for Saturday in Pakistan, aimed at a permanent ceasefire and reopening the Strait of Hormuz. Donald Trump said US forces would remain “in place, and around, Iran” until compliance with a “REAL AGREEMENT”.

Oil prices rebounded, keeping inflation worries in view and complicating the Federal Reserve’s rate outlook. March meeting minutes said “most participants” saw conflict risks weakening labour markets and supporting more cuts, while “many” warned higher oil could keep inflation elevated and support hikes.

Core PCE rose 0.4% MoM in February, with the annual rate at 3.0% versus 3.1%, while Q4 GDP was revised to 0.5% from 0.7%. Friday’s CPI is forecast at 0.9% MoM versus 0.3%, with annual inflation seen at 3.3% versus 2.4%.

Technically, XAU/USD sat above the 100-day SMA at $4,673.84 and below the 50-day SMA at $4,914.57, with RSI at 49.33 and ADX at 29.46. A close above $4,914.57 points higher, while a drop below $4,673.84 points lower.

Options Strategy For Volatility

The current standoff over the US-Iran ceasefire places us in a period of high alert, with gold trading in a tight range ahead of crucial negotiations this Saturday. We see the market coiling for a significant move, as a breakdown in talks could easily send gold surging, while a durable peace agreement would likely see prices fall. This binary outcome makes directional bets risky in the immediate term.

Given this uncertainty, we believe the best approach is to trade the expected volatility itself. The CBOE Gold Volatility Index (GVZ) has already climbed to 17.8 from 15.2 over the last week, showing market tension is building, yet options are not prohibitively expensive. Strategies like long straddles or strangles, which profit from a large price move in either direction, seem particularly well-suited for the coming weeks.

We see the risk as being skewed toward a price spike, especially with Friday’s US CPI report expected to show inflation accelerating to 3.3%. This is compounded by the fact that WTI crude has already reclaimed $112 a barrel this week, putting renewed pressure on the Federal Reserve. We have noted a significant increase in open interest for gold call options with strike prices above $4,950, indicating traders are positioning for a bullish breakout.

Conversely, any surprisingly positive news from the negotiations in Pakistan could quickly deflate gold’s geopolitical risk premium. A confirmed reopening of the Strait of Hormuz would be a major catalyst for a move down, targeting the 100-day moving average support near $4,674. Traders could consider buying puts as a hedge or a speculative bet on a lasting peace agreement.

We must remember the price action from early 2022, when geopolitical events caused sudden and dramatic spikes in gold that were difficult to capture without being pre-positioned. That historical precedent suggests that waiting for confirmation after a headline breaks will be too late. Using options now allows us to define our risk while gaining exposure to the potential for a powerful move driven by either the ceasefire status or inflation data.

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The US dollar steadied after Iran said a ceasefire had been violated, which helped reverse a small part of earlier losses. The episode points to ongoing uncertainty and the risk of brief flare-ups even if the conflict moves towards wider resolution.

Federal Reserve minutes prompted a mild hawkish shift in market pricing. Swap rates now imply 7bp of easing by year-end, down from 15bp earlier the same day.

Fed Minutes Shift Dollar Narrative

The minutes also referred to two-way risks linked to the war, including the option of faster rate cuts if job losses rise faster than inflation. This leaves room for further changes in expectations towards lower rates.

Market moves remain driven by news headlines. Evidence that shipping traffic through the Strait of Hormuz is increasing could weigh on the dollar.

A more sustained move may depend on whether the ceasefire becomes longer-lasting. If not, market nerves may rise again as the two-week ceasefire approaches expiry.

The article was produced using an artificial intelligence tool and checked by an editor.

Derivatives Traders Reassess Summer Cut Risks

Looking back at the situation in early 2025, we were dealing with significant dollar volatility tied to a ceasefire in the Gulf. This reminds us that geopolitical headlines can create short-term trading opportunities, even when the broader trend is driven by macroeconomics. The market was trying to decipher if the Federal Reserve would pivot dovishly due to a weakening job market.

The dovish repricing mentioned in the report did eventually happen, but not as quickly as some had anticipated. We recall that the Fed held rates at a peak of 5.50% before finally beginning its easing cycle in the second half of 2025. This historical hesitation is important, as it shows the Fed’s reluctance to cut rates prematurely while inflation remains a concern.

Today, with the Fed funds rate sitting lower, derivative traders should be cautious about pricing in aggressive new cuts. Recent data shows US inflation remains persistent, with the latest CPI figure at 2.9%, while the last jobs report added a robust 215,000 positions. This suggests the Fed may pause its easing cycle, creating opportunities to use options to bet against overly dovish market expectations for the summer.

We are also seeing echoes of the geopolitical risks from 2025. Tensions surrounding the Strait of Hormuz are resurfacing, which has already pushed WTI crude prices back above $80 a barrel in recent weeks. The CBOE Crude Oil Volatility Index (OVX) has ticked up nearly 15% in the last month, indicating that the energy market is bracing for potential disruption.

This renewed uncertainty makes long volatility strategies on the US dollar attractive again. Traders should consider using options on currency pairs like USD/JPY, as its sensitivity to both interest rate differentials and risk sentiment is high. Buying straddles or strangles could be an effective way to profit from a significant move, regardless of whether it’s driven by a Fed surprise or a flare-up in the Gulf.

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The Euro rose against the US Dollar on Thursday, with EUR/USD near 1.1676 and posting a fourth straight daily gain. The move came as the Dollar stayed weak after a US-Iran ceasefire and hopes of de-escalation.

Trading was cautious due to doubts about how long the ceasefire will hold. The US Dollar Index (DXY) was around 98.93 after falling to a one-month low near 98.50 on Wednesday.

Key Data And Market Reaction

US data drew limited market reaction. Core PCE inflation rose 0.4% month-on-month in February, while the annual rate eased to 3% from 3.1%.

Final Q4 GDP growth was revised down to 0.5% from 0.7%. Initial Jobless Claims were 219K versus forecasts of 210K.

Markets are now focused on US CPI due on Friday. Economists expect headline CPI at 0.9% month-on-month, up from 0.3% in February, and annual inflation at 3.3% versus 2.4%.

Attention is also on US-Iran talks due on Saturday in Pakistan. Uncertainty persists after Iran said three points of the agreement were violated following Israeli strikes on Lebanon.

Strategy And Risk Management

Looking back to early 2025, we saw the Euro push towards 1.1676 against the dollar, driven mostly by a fragile US-Iran ceasefire. That geopolitical risk was the main story, overriding economic data and pressuring the dollar. Today, the market’s focus has shifted decisively from those temporary geopolitical fears to more persistent economic realities.

The slow disinflation process we watched in 2025 has stalled, with the latest March data showing US CPI is stubbornly high at 3.5%, well above the Fed’s target. This persistent inflation has solidified the Federal Reserve’s “higher for longer” interest rate policy. Consequently, expectations for rate cuts this year have been drastically reduced.

This has strengthened the US dollar, pushing the EUR/USD pair down to around 1.0850 from those highs we saw last year. The interest rate differential is now firmly in the dollar’s favor, as the European Central Bank appears more likely to cut rates sooner than the Fed. For the coming weeks, this suggests selling into any Euro strength remains the dominant strategy.

Given this, we should be looking at options to manage risk around key US data releases, especially inflation reports. Implied volatility for the EUR/USD pair tends to rise ahead of these events, creating opportunities to buy straddles or strangles to profit from a large price move in either direction. This allows us to capitalize on the market’s reaction without betting on the specific outcome of the data.

While the focus is on economics, the geopolitical tensions of 2025 serve as a reminder of background risks. Any unexpected flare-up in the Middle East could trigger a rapid flight to safety, causing a sharp, albeit likely temporary, reversal in the dollar’s strength. This tail risk is worth considering when structuring positions, perhaps by holding some out-of-the-money call options on the Euro as a cheap hedge.

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Meta Platforms Inc. ($META) was reviewed after reaching previously marked blue box support zones. Price rebounded from these zones, keeping the bullish wave sequence in place while the stock stays above the invalidation level.

The earlier outlook identified the blue box area as a likely end point for the correction. Subsequent price action showed a firm reaction there, followed by a rally.

Blue box areas are used in Elliott Wave analysis to mark extreme levels where corrections often end. In this case, selling pressure eased after support was tested, and price turned higher rather than breaking down.

The update states that $META completed a corrective leg into the blue box zone at 528.43–394.14. The bounce from that area is presented as evidence that wave (II) may have ended and a new upward leg may be starting.

The key level referenced is the March 30 low at 520.26. The outlook allows for short-term pullbacks, but treats them as corrective as long as price holds above 520.26.

The technical summary reiterates that support held in the blue box zones, resulting in a rebound. It adds that further upside remains possible while 520.26 is not broken.

The recent bounce in Meta confirms the bullish sequence we were tracking. This suggests initiating bullish derivative positions is now timely, using the March 30th low of 520.26 as a clear line in the sand. As long as the stock holds this level, the path of least resistance appears to be upward.

For those looking to collect premium, selling out-of-the-money put credit spreads is an attractive strategy. We are seeing implied volatility settle, with IV rank now near 35%, making selling premium a reasonable approach. A short strike placed below the critical 520 support level would align directly with this technical outlook.

Alternatively, traders anticipating a stronger move higher could consider buying call debit spreads to define risk and lower costs. Recent options data supports this, showing a surge in call buying for the May and June 2026 expirations over the past week. This indicates growing market conviction in a continued rally following the successful test of support.

This technical strength is supported by a strong fundamental backdrop, as preliminary reports for Q1 2026 show digital ad spending rebounding from the slowdown we saw in 2025. Furthermore, continued positive sentiment around the company’s AI initiatives is providing a persistent tailwind for the stock. This aligns with the idea that the recent dip was a consolidation rather than the start of a new downtrend.

This price action is reminiscent of the pattern observed in late 2024, when the stock also completed a corrective pullback before resuming its primary uptrend. In that instance, the subsequent rally was both swift and significant. Therefore, we should view any minor pullbacks in the coming days as buying opportunities, provided the 520.26 low remains intact.

Scotiabank strategists Shaun Osborne and Eric Theoret said the Pound (GBP) is consolidating after Wednesday’s rebound against the US Dollar (USD). They said domestic risk looks limited ahead of upcoming Bank of England speeches and data.

GBP was up 0.1% versus USD, pointing to consolidation after the prior day’s recovery. They linked recent moves to a geopolitical risk premium affecting the pound, and said improved market tone could support further gains.

Momentum Signals Favor The Pound

They said fundamentals and sentiment measures support GBP strength and suggest reduced downside risk. The RSI moved into bullish territory after breaking above 50.

GBP reached a one-month high in the upper 1.34s, but they noted resistance above 1.3480. They said the 50-day and 200-day moving averages at 1.3439 and 1.3414 were broken, with upside targets at 1.35 and 1.3580.

They set a near-term range of 1.3350 to 1.3450. The article was produced with an AI tool and reviewed by an editor.

Looking back, we see the bullish calls for the Pound were directionally correct, though the targets around 1.35 now seem modest from our April 2026 perspective. The fundamental picture that was just starting to improve then has since accelerated dramatically. The old resistance near 1.3480 has now become a distant floor in the market’s memory.

Policy Divergence Drives Sterling

The Bank of England’s unexpected rate hike in February 2026 completely changed the game, a direct response to stubborn services inflation which remains a key concern. The most recent data confirmed this move, with March’s CPI print coming in hot at 3.5%, forcing the market to price out any rate cuts for the remainder of the year. This monetary policy divergence is now the primary driver for the pound.

Meanwhile, we have seen the Federal Reserve’s tone shift considerably, with recent weak payroll numbers raising expectations for a rate cut later this year. The market is now pricing in over a 60% chance of a cut by the third quarter, a stark contrast to the BoE’s hawkish stance. This policy gap between the two central banks continues to heavily favor the pound over the dollar.

Given the pound is now trading strongly above 1.38, we believe traders should consider strategies that benefit from further upside and elevated volatility. Buying call options or implementing bull call spreads with strike prices targeting the 1.40 psychological level could capture the next leg of this trend. Implied volatility has climbed to 8.5%, suggesting the options market is pricing in significant moves in the coming weeks.

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