Canada’s core Consumer Price Index rose by 0.2% month on month in February. This measures the monthly change in core consumer inflation in Canada, excluding certain volatile items.

Core Inflation Remains Sticky

We’ve seen the February core CPI come in at 0.2%, which annualizes to a sticky 2.4%. This figure reinforces the idea that the Bank of Canada will remain cautious and is unlikely to cut rates at its next meeting in April. The path back to the 2% inflation target is proving to be slower than many anticipated. This data challenges the market’s current pricing, where Overnight Index Swaps still suggest a more than 40% chance of a rate cut by June. We believe this makes selling futures contracts tied to the CORRA rate, essentially betting against imminent rate cuts, an attractive strategy. Looking back at 2025, we recall how similar persistent inflation data delayed the Bank of Canada’s pivot for two consecutive quarters. A more hawkish central bank should provide a tailwind for the Canadian dollar, especially as recent jobs data also shows continued economic strength with unemployment holding at 5.5%. We see potential for the loonie to strengthen against the U.S. dollar as the interest rate differential narrative shifts. Options strategies that benefit from a move away from the current 1.35 level towards 1.33 should be considered. For equities, the prospect of borrowing costs remaining elevated could act as a headwind for the S&P/TSX 60 index. Rate-sensitive sectors like real estate and utilities will likely face the most pressure from this “higher for longer” environment. We think protective put options on the index offer a reasonable hedge against a potential market downturn in the coming weeks.

Equity Risks In Higher For Longer

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Canada’s Consumer Price Index (CPI) rose by 0.5% month-on-month in February. This was below the forecast of 0.6%. The February CPI monthly reading was 0.1 percentage points lower than expected. The update reports the actual figure (0.5%) against the forecast (0.6%). The February inflation number coming in at 0.5% instead of the expected 0.6% changes our outlook on the Bank of Canada’s path. This suggests that price pressures are cooling faster than the market anticipated. This miss puts less pressure on the central bank to keep rates high and increases the probability of an earlier interest rate cut. This new data strengthens the case for a weaker Canadian dollar in the short term. We should consider strategies that benefit from a declining CAD, such as buying put options on CAD futures or call options on the USD/CAD pair. This view is based on the interest rate differential between Canada and the U.S. likely narrowing in favor of the dollar. This inflation report follows last week’s data showing Canadian housing starts for February 2026 fell by 3% month-over-month, another sign of a cooling economy. Swaps markets are now pricing in a 65% chance of a rate cut by the Bank of Canada’s July meeting, a significant jump from the 40% probability priced in before this release. This shift in market sentiment supports our bearish view on the currency. For equities, this environment is generally positive, so we should look for upside in the S&P/TSX 60 Index. Lower interest rates reduce borrowing costs for companies and can stimulate economic activity. Buying call options on the index or related ETFs could provide leveraged exposure to a potential rally in Canadian stocks. Looking back, this is a notable departure from the trend we observed through much of 2025. We recall how stubbornly core inflation remained above 3% during the second half of last year, forcing the Bank to maintain a hawkish tone. This February 2026 reading is the most concrete evidence yet that the restrictive policies of 2025 are finally working. In the fixed-income market, we should anticipate Canadian government bond yields to continue their downward trend. This means bond prices are likely to rise. We see an opportunity in going long Canadian 10-year bond futures (CGB) to capitalize on this move.

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Canada’s Bank of Canada CPI core (year-on-year) eased to 2.3% in February, down from 2.6% previously. The figure shows core inflation slowed compared with the prior reading. It reports the annual change in core consumer prices for February.

Policy Rate Cut Path

With core inflation falling to 2.3%, we are now seeing a clear path for the Bank of Canada to cut its policy rate, which has been holding at 4.75% since mid-2025. This number is substantially below expectations and brings inflation within striking distance of the Bank’s 2% target. The market will now aggressively price in a rate cut for the second quarter. We should anticipate that positions benefiting from falling short-term interest rates will perform well. This includes going long on BAX futures contracts, as their value will rise when the market solidifies expectations for monetary easing. The probability of a cut at the June meeting has likely jumped from 50% to over 80% based on this single data point. This development will almost certainly put downward pressure on the Canadian dollar. We have seen our inflation cool more rapidly than in the United States, where their latest core CPI reading in 2026 was still trending closer to 2.8%. This divergence strengthens the case for buying call options on USD/CAD, betting that the exchange rate will move higher as Canadian interest rate expectations fall. For equity markets, this is a bullish signal, especially after the sluggish GDP growth we saw in the final quarter of 2025. Lower interest rates reduce borrowing costs for Canadian companies and make stocks more attractive relative to bonds. We can expect increased buying of call options on broad market indices like the S&P/TSX 60.

Labor Market And Inflation Trend

This inflation report reinforces the trend we observed through 2025, where the unemployment rate gradually ticked up to 6.2%. The combination of cooling price pressures and a softer labor market gives the Bank of Canada a dual mandate to begin easing its policy. Traders should position for a more dovish monetary policy environment in the weeks ahead. Create your live VT Markets account and start trading now.

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The Australian dollar (AUD) is approaching a Reserve Bank of Australia (RBA) meeting with one of the most hawkish policy settings in the G10. Despite this, there has not been a surge of inflows into AUD. AUD/USD has performed better than broader measures of the currency. Last week it recorded three consecutive days of inflows above 1.0 in flow magnitude, the first such stretch this year.

Cross Currency Flows Driving Divergence

AUD’s wider performance has been weighed down by cross-currency flows, particularly in January. These flows have reduced the currency’s aggregate results compared with the AUD/USD pair. The report says AUD could rise if the RBA confirms current market pricing, even if expectations for US Federal Reserve easing continue to be removed from markets. It also notes that the piece was produced with the help of an AI tool and reviewed by an editor. With the Reserve Bank of Australia meeting tomorrow, March 17, 2026, we see them maintaining one of the most aggressive policy stances among major economies. Australian inflation has remained persistent, with the last quarterly reading from January showing a 3.8% annual rate, well above the RBA’s target. This makes it highly unlikely the central bank will signal a cut from its current 4.35% cash rate. Given this high interest rate, we find it surprising that a surge of capital isn’t flowing into the Australian dollar. This hesitation suggests traders are weighing the high yield against concerns over global economic conditions. We note that while AUD/USD saw some inflows last week, the broader trend has been muted.

Positioning Ideas For Relative Value Trades

The real divergence we saw through 2025 was the underperformance of the AUD against other currencies compared to its relative stability against the US dollar. As markets now price out significant US Federal Reserve rate cuts for this year, the simple AUD/USD yield play has become less compelling. This could keep the pair rangebound even if the RBA remains hawkish. The opportunity for derivative traders is likely in positioning for AUD strength against the currencies of economies facing stagflation. For example, with late 2025 Eurozone GDP growth near zero and inflation still elevated, the European Central Bank may be forced to consider easing policy, making long AUD/EUR positions attractive. Options strategies that benefit from a rise in AUD/EUR could hedge against this divergence. We should also consider that Australia is well-positioned to benefit from a positive terms-of-trade shock. The recent rebound in iron ore prices back above $120 per tonne is a clear example of this fundamental strength. This commodity tailwind provides another reason to structure trades that favor AUD strength against the currencies of major commodity importers. Create your live VT Markets account and start trading now.

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US Treasury Secretary Scott Bessent said the length of the conflict involving Iran would shape how the US responds to oil price pressures. He said any actions aimed at addressing prices would depend on how long the war lasts. Bessent said the oil supply shortfall was estimated at between 10 and 14 million barrels. He said Russia’s President Vladimir Putin would receive more revenue if oil rose to $150.

Conflict Duration Drives Market Response

On the Strait of Hormuz, Bessent said the US believed Chinese ships had left the area. He also said it was “very likely” there would be a successful completion of “301”. Bessent said the US has not intervened in oil markets. His comments were made during an interview with CNBC. The duration of this conflict is the main variable we must watch, creating significant uncertainty for oil prices. We are looking at a supply deficit between 10 and 14 million barrels, which is an unprecedented shortfall for the global economy. For context, the entire production of a major producer like the UAE is only around 4 million barrels per day. With this level of geopolitical risk, we have seen implied volatility on front-month crude options surge past 60, a level not seen since the market disruptions of early 2022. This suggests that buying long-dated call options to gain upside exposure is a primary strategy. Traders should be prepared for sharp price swings based on daily headlines from the region.

Risks And Triggers For Price Reversal

The report that Chinese ships are avoiding the Strait of Hormuz signals that the physical market is already seizing up. This is causing a severe backwardation in the futures market, where the price for immediate delivery is much higher than for delivery in several months. We saw a similar, though less extreme, spread blowout back in 2025 during the initial Red Sea shipping disruptions. While the fundamental picture points to much higher prices, possibly reaching $150, two key risks exist for long positions. The possibility of strategic petroleum reserve releases or other government intervention, though not yet acted upon, could create a sudden drop in prices. Furthermore, any news hinting at the “successful completion of 301” could resolve the conflict faster than expected, triggering a sharp reversal for those over-leveraged on the long side. Create your live VT Markets account and start trading now.

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Canada’s seasonally adjusted housing starts in February were 250.9K. The forecast was 252.5K. This result was 1.6K below the forecast. The figures are reported on a year-on-year basis. The slight miss in February’s housing starts, coming in at 250.9K against a 252.5K forecast, suggests a subtle cooling in the construction sector. While not a dramatic drop, it is a data point that nudges the needle towards a less aggressive monetary policy outlook. For us, this challenges the view that the economy is running too hot. We must view this in the context of recent inflation figures, which clocked in at 2.8% for January, still above the Bank of Canada’s target. However, with the latest jobs report also showing a slowdown, adding only 15,000 jobs, this housing data adds to a growing narrative of a softening economy. The Bank will find it harder to justify any further rate hikes with this trend emerging. Looking back at 2025, the housing market showed remarkable strength, consistently beating expectations as interest rates stabilized. This makes the February 2026 miss, though minor, more significant as it could be the first sign that the momentum from last year is waning. It signals a potential shift that we have been watching for. In response, we see an opportunity in interest rate derivatives that anticipate the Bank of Canada holding its policy rate steady. Traders should consider positions that benefit from rates remaining stable or declining over the next quarter. This could involve using options on CORRA futures to bet against a rate hike this summer. This dovish data point also puts downward pressure on the Canadian dollar. Consequently, speculating on a weaker loonie appears prudent in the coming weeks. Options strategies that favour a higher USD/CAD exchange rate could offer value as rate expectations between the U.S. and Canada diverge. Sectors sensitive to housing, such as Canadian banks and real estate investment trusts, may face headwinds. We believe buying protective put options on ETFs that track these sectors could be a wise move. This allows for managing risk from a potential slowdown in the housing-related economy.

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Nomura economists expect Sweden’s Riksbank to keep the policy rate at 1.75% at the 19 March meeting, and to leave it unchanged through 2026. They see weak CPIF ex-energy inflation and soft GDP indicators, but also inflation risks from the Middle East conflict and higher energy prices. They expect the Riksbank to repeat guidance that the rate is expected to remain at this level for some time. In new forecasts, CPIF ex-energy inflation may be revised down slightly, while CPIF may be revised slightly higher.

Inflation Risks Versus Weak Growth

The analysis notes concerns about second-round effects from higher energy costs, alongside more uncertainty for inflation and economic activity. It also points to possible demand impacts, with uncertainty affecting confidence to spend and invest. Sweden is described as having a fragile recovery after slow or negative GDP growth in 2022 and 2023. Monthly GDP data suggest output fell in both December and January. Nomura expects no rate change this year and a hike at the end of 2027, taking the rate closer to the middle of the neutral range of 1.50%–3.00%. It adds that a quick end to the conflict and weaker inflation could bring a cut this year, while a longer conflict could bring faster inflation and an earlier hike. With the Riksbank widely expected to hold its policy rate at 1.75% this week on March 19, short-term rate volatility should remain low. Given this stability, traders could consider strategies that profit from a lack of movement, such as selling short-dated options on Swedish interest rate futures. This stance is supported by the Riksbank’s likely guidance that rates will stay at this level for some time.

Market Positioning Implications

We are seeing a clear conflict between weak domestic data and external inflation risks. Recent statistics showed that Sweden’s GDP contracted by 0.2% in the final quarter of 2025, and CPIF ex-energy inflation for February came in just under the 2.0% target. However, with Brent crude oil recently trading around $95 per barrel due to Middle East tensions, the Riksbank cannot risk cutting rates yet. This paralysis suggests that the yield curve might steepen, as short-term rates remain anchored while longer-term rates reflect future inflation and growth possibilities. The fragile recovery we have seen since the slowdown of 2023 and 2024 is being hampered by this uncertainty, making long-dated rate hike expectations a key area to watch. Traders might look at instruments betting on higher rates further out, perhaps in late 2027. The primary divergence will be driven by geopolitics, creating a binary outcome for traders to position for. A de-escalation in the Middle East could quickly bring rate cuts back into play, while a wider conflict would almost certainly force the Riksbank to hike sooner than planned. This makes buying longer-dated, out-of-the-money options a viable strategy to position for a significant policy shift in either direction. Create your live VT Markets account and start trading now.

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WTI futures on NYMEX traded slightly lower near $98.00 in the European session on Monday, after a four-day rise stalled above $100. The pause followed US President Donald Trump urging countries that import Gulf oil to join operations against Iranian actions near the Strait of Hormuz. Trump said nations affected by Iran’s attempted closure of the strait would send warships with the United States to keep it open. He named China, France, Japan, South Korea and the UK as countries he expected to send ships.

Geopolitical Risk And Oil Prices

Trump warned NATO would face a “very bad” future if European countries do not support his action in Iran. The Strait of Hormuz carries 20% of the world’s oil supply. At the same time, oil loadings at Fujairah port in the UAE stopped after a drone strike. Fujairah is described as the only UAE export route outside the Strait of Hormuz, raising concerns about further supply disruption. WTI stands for West Texas Intermediate, a US-sourced crude benchmark traded via the Cushing hub. Its price is driven by supply and demand, the US dollar, inventory data from API and EIA, and OPEC production quotas. Looking back at the events of 2025, we saw how quickly WTI crude prices could approach $100 a barrel when the Strait of Hormuz was threatened. The market’s reaction last year serves as a critical playbook for the current environment. This historical price action underscores how sensitive oil is to direct threats against major supply chokepoints. The key takeaway for us is that geopolitical risk in the Middle East creates extreme price volatility, making it essential to prepare for sudden upward spikes. Today, the Strait of Hormuz remains the world’s most important oil transit chokepoint, with recent figures from the U.S. Energy Information Administration (EIA) showing that over 20 million barrels per day passed through it in the last quarter. Any renewed tension in that region could easily send prices soaring past last year’s highs.

Strategy And Risk Management

Given this latent risk, we should consider buying long-dated call options on WTI futures to hedge against or profit from a sudden supply shock. Implied volatility is currently moderate compared to the peaks seen during the 2025 crisis, making premiums relatively affordable. This strategy offers a defined-risk way to capture significant upside if history repeats itself. Fundamentally, the market is already tight, which would amplify the impact of any disruption. Last week’s EIA report showed a surprise crude inventory draw of 2.5 million barrels, against analyst expectations of a small build, which is already supporting prices above $85. We saw last year how the drone attack on Fujairah port demonstrated that even infrastructure outside the Strait is not immune, adding another layer of risk. We should also monitor the WTI-Brent spread closely, as it widened dramatically during the 2025 Hormuz incident. Since Brent crude is more directly exposed to disruptions in Middle Eastern supply, a widening spread can act as an early warning signal of rising regional tensions. Setting up trades that profit from this spread widening could be a shrewd move in the coming weeks. Create your live VT Markets account and start trading now.

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EUR/JPY traded near 182.40 on Monday, little changed after two days of falls. The cross steadied as the Euro found support against major peers. The Euro gained from improved geopolitical sentiment after The Guardian reported that US Energy Secretary Chris Wright expects the war involving the US, Israel and Iran to end within “the next few weeks”. An end could help Oil supplies normalise and reduce pressure on global energy prices.

Euro Outlook And Ecb Expectations

The Euro outlook remains mixed as higher energy prices can strain the Eurozone trade balance. Money markets now price in two European Central Bank (ECB) rate hikes this year, compared with none expected last month. Focus is on the ECB meeting on March 19, with markets pricing two 25-basis-point hikes, possibly in June and September. Christine Lagarde is expected to address inflation pressures linked to the Middle East conflict. French President Emmanuel Macron said freedom of navigation through the Strait of Hormuz must be restored quickly. He also called on Iran’s president to stop attacks he cited in countries including Lebanon and Iraq. The Japanese Yen may gain support as Japan warned about sharp currency moves. Finance Minister Satsuki Katayama said the government is monitoring markets and may take strong action.

Yen Policy And Volatility Signals

Japan and South Korea issued a joint statement on the rapid falls in the Yen and the Korean Won. The Bank of Japan is expected to keep its rate at 0.75%, with attention on Kazuo Ueda’s comments. Looking back at the analysis from this time last year, in March 2025, we were watching a tense EUR/JPY cross stuck between a hawkish European Central Bank and a Japanese government threatening intervention. That tension has now resolved into a clearer, divergent path for the two central banks. As a result, traders should be positioned for decisive moves rather than sideways stabilization. The ECB did follow through with the two rate hikes priced in during 2025 as energy costs fueled inflation. However, with the latest Eurozone Harmonised Index of Consumer Prices (HICP) data showing core inflation has fallen to 2.5%, we believe the ECB’s next move will be a rate cut. This contrasts sharply with last year’s view and places downward pressure on the Euro. On the other side of the cross, the warnings from Japanese authorities in 2025 were not just talk, as we saw direct currency market intervention in the second half of last year. The Bank of Japan also followed through on its hawkish signals, and its policy rate now stands at 0.75%. This fundamental support for the Yen is a major shift from the dynamic we were analysing twelve months ago. This growing policy divergence has kept option markets on alert, and we are seeing this reflected in pricing. Three-month implied volatility for EUR/JPY is now hovering around 10.2%, a significant increase from the sub-8% levels seen in early 2025. This suggests the market is expecting larger price swings in the quarter ahead. The geopolitical optimism from last year about a swift end to the conflict in the Middle East proved to be premature. With Brent crude oil prices remaining stubbornly above $85 per barrel, these sustained high energy costs continue to weigh more heavily on the import-dependent Eurozone than on Japan. This factor reinforces the negative outlook for the Euro half of the pair. Given this environment, we see value in purchasing EUR/JPY put options with expirations in the next three to six months to profit from a potential decline. These options provide a defined-risk way to position for a stronger Yen, driven by either further BoJ tightening or intervention. For those anticipating continued sharp movements, establishing long volatility positions through straddles could also prove profitable. Create your live VT Markets account and start trading now.

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Analysts expect Ford (F) shares to trade in a tight range during Q2, with moderate upside if margins stabilise. Most firms keep a Hold rating, citing tariffs and EV losses, while strong cash flow is seen as a support factor. Ford Pro growth is noted as a value support, and some forecasts point to a slow recovery if cost controls improve. Weak pricing and wider industry uncertainty are seen as limits on any rebound towards consensus targets. A prior technical update said wave B rose fast and formed a double correction, with scope to move above 13.97. Sellers defended the 14.88 high, and the bearish case requires price to stay below 14.88 and fall towards 7.79–6.05. In the latest update, wave B did not break the wave (X) high and peaked at 14.80 before falling. The outlook now expects an impulse wave C towards the blue-box zone at 8.28–4.26, while a break above 14.88 would suggest wave II ended at 8.36 and shift the structure to a bullish bias. With the price failing at 14.80 and turning sharply lower, we believe the path of least resistance is down. Derivative traders should now position for a decline in the coming weeks, targeting the 8.28–4.26 area. This aligns with the technical expectation of a powerful wave C impulse to the downside. This bearish sentiment is amplified by fundamental pressures we saw solidify last year. Looking back at the full-year 2025 results, the Model e division posted another significant operating loss of over $5 billion, weighing heavily on the stock. While the Ford Pro commercial business remains a bright spot, posting a record EBIT, it isn’t enough to offset the EV drag. Given this outlook, buying put options offers a direct way to capitalize on the expected drop. For traders wanting to mitigate costs and volatility, establishing bear put spreads could be a more prudent approach. These positions would benefit from a steady decline toward our lower targets while defining risk. All bearish strategies must respect the key technical level of 14.88 from last year as an invalidation point. A sustained move above this price would negate the current downward thesis and force a re-evaluation. For now, this level acts as a firm ceiling and a logical point for placing stop-losses. While the overall structure points down, recent data from February 2026 showed a notable 35% year-over-year surge in hybrid sales, which could create temporary support. We should therefore consider options with expirations in late Q2 2026. This allows enough time for the larger bearish pattern to override any short-term strength from the hybrid segment.

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