Silver rose over 2% on Monday as the US Dollar gave back earlier gains. XAG/USD traded at $86.35 after rebounding from an intraday low of $79.65. Price action remains within an $80.00 to $96.50 range. The Relative Strength Index (RSI) points upward, but momentum is described as fragile. Resistance is at $90.00. A move above $90.00 would open $96.39, then $97.00, followed by $100.00 and the January 30 high at 118.47. Support is at the 50-day Simple Moving Average (SMA) of $85.51. Below that, levels to watch include $79.66 and the March 3 low of $77.98. Silver prices can shift with geopolitical risk, recession concerns, interest rates, and the US Dollar because silver is priced in dollars. Other drivers include demand, mining supply, and recycling flows. Industrial use in electronics and solar energy can affect prices, supported by silver’s high electrical conductivity, above copper and gold. Economic conditions in the US, China, and India, plus jewellery demand in India, can also move prices. Silver often tracks gold, and the gold/silver ratio is used to compare relative value. The ratio is the number of ounces of silver needed to match the value of one ounce of gold. Silver is currently trading at $86.35 after a strong bounce, but we see it consolidating in a wide $80.00 to $96.50 range. While momentum appears bullish, it remains fragile, suggesting that any positions should be carefully managed. The market is hesitating, and we need to be ready for a move in either direction. For those leaning bullish, a break above the $90.00 resistance level is the key trigger to watch. Call options with strike prices at $95 or even the psychological $100 level could offer significant leverage if this happens. We see this upside potential fueled by record industrial demand, which is on track to surpass 700 million ounces this year due to the accelerated build-out of solar and EV infrastructure we saw in 2025. Conversely, if silver fails to hold its ground, the first critical support is the 50-day moving average at $85.51. A break below this could see a rapid move toward $80.00, making protective puts with an $84 strike price a prudent hedge for existing long positions. This weakness could be triggered by any surprise rebound in the U.S. Dollar, which has been the primary driver of this recent rally. It’s worth noting that institutional sentiment supports the bulls, as recent data from the CFTC shows that managed money has increased its net long positions in silver futures by over 15% in the last month. Furthermore, the Gold/Silver ratio has tightened considerably since last year, falling from over 85:1 to near 70:1. This suggests silver continues to be undervalued relative to gold and has further room to catch up. Given the clear consolidation range and fragile momentum, we believe volatility is mispriced. Traders who are uncertain of the direction but expect a breakout could consider long strangles, buying both an out-of-the-money call and an out-of-the-money put. This strategy would profit from a significant price move above $96.50 or below $80.00 in the coming weeks.

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The US Dollar Index (DXY) fell about 0.20% on Monday after reaching a 15-week high near 99.70 early on. It opened with a gap up, then slipped back towards 99.00 by the close, following a rally from late-January lows near 95.56 of about four points in six weeks. The US Dollar has risen amid the Strait of Hormuz crisis, with markets assessing the US as less exposed to the supply shock due to energy independence. Expectations for Federal Reserve cuts have shifted to one 25 basis-point cut this year, likely in September, down from two previously priced.

Fed Policy And Key Inflation Data

The Federal Reserve is holding rates at 3.50% to 3.75%, and January FOMC minutes said several officials discussed possible rate rises if inflation stays above target. February CPI data is due on Wednesday, with forecasts of 0.3% month-on-month and 2.4% year-on-year. On Friday, January core PCE is expected at 0.4% month-on-month and 3% year-on-year. Preliminary fourth-quarter GDP is forecast at 1.4% annualised, and the University of Michigan March sentiment index is seen at 55, down from 56.6. We recall the market dynamics of early 2025, when the Strait of Hormuz crisis pushed the US Dollar Index toward a 15-week high near 99.70. That sharp rally was fueled by safe-haven demand and a rapid repricing of Federal Reserve expectations. Today, the DXY is trading in a more subdued range around 103, as the geopolitical risk premium has faded. Last year’s energy shock forced the Fed to hike rates through the summer of 2025 to fight the resulting inflation, which peaked at 4.2% according to Bureau of Labor Statistics data. Now, with the latest February 2026 CPI report showing inflation has cooled to 2.8% year-over-year, the market has shifted focus entirely. The Fed is holding its policy rate steady at 4.50-4.75%, and derivatives markets are now pricing in a 70% chance of a first rate cut by July. Given this backdrop, traders should consider strategies that benefit from a stable-to-weaker dollar and falling interest rate volatility. Selling out-of-the-money call options on the DXY or buying puts could offer favorable risk-reward profiles. With the VIX trading near a 12-month low of 14.5, selling volatility through options on interest rate futures like the 3-Month SOFR contract may also be an attractive play.

Positioning For Rate Cuts

The economic calendar is now less about upside inflation surprises and more about signs of a slowdown, a stark contrast to the inflation panic of 2025. We’ve seen this in the final Q4 2025 GDP reading, which was revised down to a sluggish 0.8% annualized growth. All eyes will be on this month’s Non-Farm Payrolls report for further evidence of a cooling labor market that would give the Fed a green light to ease policy. Therefore, positioning for lower interest rates appears to be the primary trade. Using options on Fed Funds futures to speculate on the timing and magnitude of rate cuts is a direct way to express this view. This is a significant pivot from early 2025, when the dominant strategy was hedging against persistent inflation and further Fed hawkishness. Create your live VT Markets account and start trading now.

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USD/JPY rose for a third day on Monday, up 0.07%, and was trading near 158.02. It earlier reached 158.90, with gains linked to demand for the US Dollar and expectations of a less dovish Federal Reserve. Price action eased after nearing 159.00, an area associated with intervention concerns around 159.00–160.00. The Relative Strength Index points upwards and is close to overbought levels.

Key Resistance Levels

Initial resistance is at 159.00. A move above that level could increase the risk of a reversal if the pair enters the 159.00–160.00 zone. On the downside, a fall below 157.97 would bring 156.45 into view. Further weakness would target the 50-day simple moving average at 156.15, then the 20 and 100-day SMAs at 155.49/51. The yen’s value is influenced by Japan’s economic performance, Bank of Japan policy, bond-yield differences, and risk sentiment. The BoJ’s ultra-loose policy from 2013 to 2024 supported yen depreciation, while a gradual policy unwind in 2024 has offered some support and narrowed the 10-year US–Japan yield gap. The US dollar continues to show strength against the yen, driven by a Federal Reserve that is signaling fewer rate cuts than we anticipated for 2026. US core inflation figures released last month for January came in at a stubborn 3.4%, reinforcing the idea that US rates will stay higher for longer. This keeps upward pressure on the dollar as its yield advantage remains attractive.

Intervention Risk Outlook

With USD/JPY now pushing past 161.00, the risk of direct intervention from Japanese authorities is extremely high. We remember the significant market moves after they stepped in during 2022, and the verbal warnings from the Ministry of Finance have become more frequent in recent weeks. This creates a tense standoff, as the fundamental reasons for a strong dollar clash with political pressure in Japan. For traders looking to ride the upward trend, buying near-term USD/JPY call options with strikes around 162 could be a smart move. This strategy allows for participation in any further gains if the pair breaks higher. It crucially limits the downside risk to the premium paid, which is essential if a sudden intervention sends the pair tumbling. On the other hand, the high probability of intervention makes buying puts a compelling strategy to profit from a sharp reversal. Looking back at 2025, we saw the US-Japan 10-year bond yield differential remain consistently wide, often above 400 basis points, which fueled the dollar’s rise. A surprise intervention would cause this to matter less in the short term, leading to a rapid strengthening of the yen. Given the uncertainty, we expect implied volatility to increase significantly in the coming weeks. This environment makes long volatility strategies, such as purchasing a straddle, particularly interesting. Such a position would be profitable from a large price swing in either direction, whether from a breakout to new highs or a sharp pullback triggered by the Bank of Japan. Create your live VT Markets account and start trading now.

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USD/CAD pared earlier declines on Monday as a drop in oil prices weakened the Canadian Dollar, even while the US Dollar remained under pressure. The pair traded near 1.3584 after falling to about 1.3525. Canada is a major oil exporter, so oil price moves often affect the currency and growth outlook. Scotiabank estimates a lasting oil shock could lift Canadian GDP by about 0.5% over the next year, based on a $10 per barrel rise in WTI.

Oil Prices And The Canadian Dollar

WTI opened with a gap higher amid disruption risks in the Strait of Hormuz, briefly reaching about $113 per barrel before falling back. It later traded near $91.40 per barrel. The retreat followed reports that G7 countries are discussing a co-ordinated release of oil reserves via the International Energy Agency. Oil prices remain elevated, which can support Canada’s outlook but can also add to global inflation pressure. The Bank of Canada is expected to keep policy steady while assessing energy-driven inflation risks. In the US, markets have reduced expectations for near-term rate cuts, with CME FedWatch showing a 35.3% chance of a 25 bp cut in June and 41.2% by July. Focus shifts to Canada’s jobs data on Friday, US CPI on Wednesday, and US PCE inflation on Friday.

Rates And Volatility Outlook

Looking back at the situation in early 2025, we saw extreme volatility in oil, with WTI prices spiking to $113 per barrel before pulling back. As of today, March 10, 2026, the market has stabilized considerably, with WTI crude trading much lower, around $82 per barrel. This has removed a major source of support for the Canadian dollar that was present during the geopolitical tensions of last year. Last year, we were anticipating the Federal Reserve to remain on hold while the Bank of Canada adopted a wait-and-see approach. Now, the narrative has shifted to the pace of monetary easing, as both central banks have begun to cut rates from their cycle highs. With recent US inflation data from February 2026 showing core CPI still stubbornly above 3%, the Fed may be forced to proceed more cautiously than the Bank of Canada. This divergence in central bank policy creates opportunities in the options market for USD/CAD. Given that the pair has been trading in a relatively tight range, implied volatility has decreased, making long volatility strategies like straddles potentially underpriced. A surprise move from either central bank could cause a significant breakout, and options offer a defined-risk way to position for that. The key factor for the coming weeks will be the interest rate differential between the US and Canada, which currently stands at 25 basis points in favor of the US dollar. We must closely watch the forward guidance from the upcoming central bank meetings for any change in tone regarding the future pace of cuts. Any indication that the Bank of Canada will cut rates more aggressively than the Fed will likely push USD/CAD higher. Create your live VT Markets account and start trading now.

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Gold trimmed earlier losses on Monday but stayed more than 1.50% below its open, trading at $5,090. Shipping disruption in the Strait of Hormuz pushed WTI up over 30% to near $113 a barrel, with reports also placing crude near $120. Higher oil prices lifted the US Dollar and weighed on gold, as oil is priced in dollars. The dollar reached a near three-month high, last seen in late November 2025, while the US Dollar Index rose 0.26 to 99.11.

Geopolitical Tensions And Market Impact

Hostilities continued with Israel attacking central Iran and Beirut. The Strait of Hormuz remained shut, through which about a fifth of global oil is shipped. Tehran named Mojtaba Khamenei as Supreme Leader Ayatollah on Sunday. The Financial Times reported that G7 finance ministers plan to discuss releasing petroleum from reserves. Swaps markets priced 36 basis points of Federal Reserve rate cuts by end-2026, according to Prime Market Terminal. The New York Fed SCE showed one-year inflation expectations at 3% in February, down from 3.1% in January, with three- and five-year forecasts steady at 3%. Upcoming US data includes jobs, housing, consumer inflation, and Core PCE. Technically, gold traded within $5,000–$5,194, with resistance near $5,200 and support at $5,050, $5,000, the 50-day SMA near $4,868, and $4,841. Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, the highest yearly purchase on record.

Trading Signals And Forward Views

The current market is being driven by a massive oil shock, not typical safe-haven flows. We are seeing the US Dollar strengthen significantly because oil is priced in dollars, and this strength is pushing gold prices down despite the geopolitical crisis. For now, traders should recognize that the dollar’s reaction to oil is the most important factor, overpowering gold’s traditional role. Volatility in the crude oil market is the main play for the coming weeks. With West Texas Intermediate oil surging over 30%, options pricing shows implied volatility has reached levels not seen since the initial conflict escalations in 2022. The potential for a strategic petroleum release from G7 nations creates a two-sided risk, making strategies that profit from large price swings, like straddles, more logical than betting on one direction. Gold is currently caught between a strong dollar pushing it down and geopolitical fear supporting it. The technical chart shows a clear range between $5,000 and the $5,200 resistance level, suggesting that range-bound strategies on derivatives could be effective. Open interest data shows a recent buildup in options contracts at these specific strike prices, indicating that many in the market are also positioning for this consolidation to continue. We believe the US Dollar will continue to show strength, especially against the currencies of major oil-importing regions like Japan and the Eurozone. The Dollar Index (DXY) has already climbed over 2% this month, and historical precedents from past oil shocks, like those in the 1970s, show an initial flight to the dollar. Long dollar positions against the yen (USD/JPY) or euro (EUR/USD) could be a primary macro trade. The Federal Reserve’s path is now highly uncertain, with swaps markets pricing out most of the rate cuts we had expected for 2026. The upcoming Core PCE inflation data is now the most critical economic release, as a high number could force the market to price in no cuts at all. This situation feels very similar to the persistent inflation we dealt with back in 2023, where bets on a Fed pivot were repeatedly proven wrong. Overall market fear is elevated and should be monitored through the VIX index. The index has jumped above 25, a level we last saw during the banking system stress in early 2025, signaling widespread uncertainty. Using VIX options or futures can provide a direct hedge against a further escalation of the conflict in the Middle East or a larger economic fallout from sustained high energy prices. Create your live VT Markets account and start trading now.

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MUFG analysis looks at how higher oil prices and a longer closure of the Strait of Hormuz could affect Bangko Sentral ng Pilipinas (BSP) policy. The base case remains two further rate cuts to 3.75% in 2026, assuming oil falls to US$70/bbl by 2Q2026 and the disruption ends by March 2026. The analysis sets out scenarios where sustained oil at US$90–100/bbl would lift inflation above the BSP’s 4% ceiling in 2026 and could extend into 2027. Under a US$90/bbl case, inflation is projected to breach 4% in 2026 before easing to 3.2% in 2027.

Oil Shock Scenarios And Inflation Path

With oil prices above US$100/bbl, inflation is expected to stay above 4% in both 2026 and likely 2027. The analysis links this to the risk of more persistent inflation and higher inflation expectations. It also draws a distinction between a temporary supply shock and a longer-lasting shift that may require a policy response. A rate rise is not assumed in the near term, but the risk increases if inflation persistence grows while economic growth weakens. The base case for two rate cuts this year is now under serious threat. With Brent crude trading stubbornly around US$95 per barrel this morning and the latest Philippine Statistics Authority report showing February inflation ticked up to 4.1%, the conditions for easing are quickly evaporating. The market is beginning to price out the probability of the June and October cuts we were expecting. This is no longer a distant risk, as the geopolitical crisis in the Strait of Hormuz has not been resolved by the March deadline we had hoped for. This persistence suggests the oil price shock may not be as temporary as the COVID-era supply disruptions were, raising the chance that higher inflation expectations become embedded. Traders should be wary of holding positions that are heavily reliant on lower interest rates in the second half of the year.

Trading Implications For Rates And Fx

In the derivatives market, this means unwinding receive-fixed positions in Philippine interest rate swaps, as the prospect of rate cuts fades. We see value in paying fixed rates on shorter-term swaps, positioning for the BSP to remain on hold for longer than previously anticipated. The odds are shifting from a rate-cutting cycle to a prolonged pause. We remember from the 2022 inflation shock, which pushed prices up over 8% in the Philippines, that the BSP is not afraid to hike aggressively to defend its mandate, even at the cost of growth. That historical precedent suggests the central bank’s pain threshold for inflation is lower than for economic weakness. Sustained oil prices above US$100 would make a rate hike, not a cut, a real possibility for late 2026. For currency traders, this changes the outlook for the Philippine Peso. A more hawkish BSP would provide a supportive floor for the currency, countering some of the negative sentiment from higher oil import costs. We should consider buying call options on the PHP or selling out-of-the-money call options on USD/PHP to position for a stronger-than-expected peso. The primary focus for the coming weeks should be on adjusting portfolios away from the rate cut narrative. The risk is now skewed towards the BSP maintaining its current policy rate of 4.25%, or even being forced to tighten if oil prices escalate further. Using options to hedge against a surprise hike later in the year would be a prudent strategy. Create your live VT Markets account and start trading now.

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Central and Eastern European (CEE) markets are described as highly exposed to the US–Iran conflict and rising oil prices, with geopolitics expected to outweigh scheduled local data from Hungary, Turkey and Poland. Following a sharp sell-off in rates on Friday, regional currencies are expected to face renewed pressure, with attention on EUR/HUF and the unwinding of long HUF positions. Hungary is due to publish February inflation on Tuesday, expected at 1.5% year-on-year, which would be the lowest level this year and below both market and National Bank of Hungary expectations. Turkey’s central bank meets on Thursday, with higher-than-expected inflation and geopolitical risks pointing to a pause in its easing cycle at 37%.

Oil Driven Volatility In CEE

Poland is set to release February inflation on Friday, expected to be unchanged at 2.2% year-on-year. CEE assets are presented as sensitive to higher energy costs, with oil-price moves feeding into inflation concerns and currency performance, especially for the forint. We saw this exact scenario play out in early 2025, when tensions in the Middle East drove a significant sell-off in regional rates and currencies. The Hungarian forint was under the most pressure as rising oil prices forced a rapid unwind of what was then a very crowded long position. This memory should guide our actions today as similar pressures are re-emerging. With Brent crude futures having climbed back over $95 a barrel in the last two weeks, we are seeing history repeat itself. February’s inflation figures from Hungary just last week showed an unexpected acceleration to 4.1%, highlighting how vulnerable the economy is to energy shocks. This renewed price pressure will almost certainly halt any further rate cuts from the National Bank of Hungary. For derivative traders, this is a clear signal to hedge against or speculate on further forint weakness. Buying EUR/HUF call options with one- to two-month expiries is a direct way to position for a move higher in the currency pair. Implied volatility in the forint has already jumped by 20% since late February, indicating the market is bracing for significant swings. We must also watch Poland, which released inflation data showing a stubborn hold above 3.5% last month. While the zloty is generally considered more resilient than the forint, it is not immune to regional sentiment driven by energy costs. A relative value trade, being long the Polish zloty against the Hungarian forint (long PLN/HUF), could offer a way to isolate the differing vulnerabilities within the CEE region.

Geopolitics Over Local Data

Ultimately, we have to put the local economic calendars aside for now. The primary driver for CEE assets in the coming weeks will be the price of oil and its impact on inflation expectations. Our attention should be focused on global geopolitical developments, as they will continue to dominate regional market performance. Create your live VT Markets account and start trading now.

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Gold fell early on Monday, then steadied near $5,109 after a low around $5,014. Prices were down about 0.95%, with weaker US Treasury yields and a softer US Dollar limiting further falls. The US-Iran conflict has kept gold volatile, while disruption to Oil flows through the Strait of Hormuz pushed crude higher. WTI reached about $113, the highest since June 2022, then pulled back after reports of G7 talks on an IEA-led reserves release, and later traded near $91.40, up nearly 3%.

Rate Cut Expectations Shift

Higher Oil prices have lifted inflation concerns and reduced expectations of near-term rate cuts. The CME FedWatch Tool puts the chance of a 25 bps Fed cut in June at around 30%, down from roughly 50% a month ago, with July near 40%. US jobs data added to uncertainty, with payrolls down 92K in February versus a 59K rise expected, after a 126K gain in January. Unemployment rose to 4.4% from 4.3%, while CPI is seen at 2.4% YoY and core PCE at 3.0% YoY. Technically, XAU/USD is ranging between $5,000 and $5,200, with the 100-period SMA near $5,118 and the 50-period SMA around $5,189. A break below could bring $5,000, then $4,850 and $4,650, while above $5,200 opens $5,400-$5,500; RSI is near 43 and MACD sits just below zero. The current consolidation of gold around the $5,100 level presents a complex picture for us. While geopolitical tensions from the ongoing US-Iran conflict provide a floor of safe-haven support, the resulting surge in oil prices is creating significant headwinds. This dynamic is pinning the metal within a tight range, as inflation fears boost the US Dollar and Treasury yields.

Options Positioning Considerations

We see the market’s reaction to last year’s stagflation concerns as a critical factor moving forward. The surprisingly weak Nonfarm Payrolls report from February 2025, which showed a loss of 92,000 jobs, is still weighing on sentiment, especially as recent inflation data proves sticky. For example, the latest Consumer Price Index (CPI) reading for January 2026 showed headline inflation at 2.9%, still stubbornly above the Federal Reserve’s target. This situation makes it difficult for the Fed to consider easing policy, which is why rate cut expectations have been pushed out. We’ve seen this play out before; looking back at the 2022-2023 period, gold struggled to sustain rallies as long as the Fed was committed to a hawkish, anti-inflationary stance. This historical context suggests that any significant upside for gold is capped until there is a clear pivot from the central bank. For the coming weeks, the defined range between $5,000 and $5,200 is the most likely playground. This makes selling volatility an attractive strategy, such as setting up an iron condor with strikes placed outside this expected range to collect premium. However, implied volatility remains elevated due to the geopolitical risks, so positions must be managed carefully. Given the potential for a sharp move on any new developments, either from the conflict or upcoming US inflation data, holding long volatility positions is also a prudent hedge. Buying a straddle or strangle could profit from a significant price breakout, regardless of the direction. This strategy is particularly relevant ahead of the February CPI release, which could easily force a break of the current technical boundaries. We are closely monitoring the key moving averages for our directional cues. The 50-period SMA around $5,189 is acting as firm resistance, and a decisive break above it could trigger a move toward $5,400. Conversely, a sustained drop below the 100-period SMA near $5,118 would signal a retest of the critical $5,000 psychological support level. Create your live VT Markets account and start trading now.

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WTI rose about 5% on Monday after jumping above $110.00 in Asian trading and reaching above $113.00, the highest since 2022, before falling back towards $93.00 and below $95.00. It still ended above last week’s close, after a roughly 36% weekly gain in WTI futures. The Strait of Hormuz has been shut since 2 March, following confirmation by the Islamic Revolutionary Guard Corps, after joint US-Israeli strikes on Iran began on 28 February. The disruption has stopped the transit of roughly 20% of global daily oil supply.

Supply Shock Drives Crude Volatility

Iraq has cut about 1.5 million barrels per day as storage fills, Kuwait has reduced output, and Saudi Arabia began cuts on Monday. Goldman Sachs said crude could reach $140.00 to $150.00 per barrel if disruption lasts beyond 30 days. US February CPI is due Wednesday after January headline inflation of 2.4% year-on-year, with higher energy costs a potential factor. EIA crude inventories are also due Wednesday, after a 3.5 million-barrel build in the prior report. WTI traded near $93.15, with support near $88.50 and resistance around $95.00, then $98.00 and $100.00. The 50-day EMA was about $66.35 and the 200-day EMA near $63.55. The massive price swing from over $113 down to $93 in a single session signals extreme volatility is now the primary market feature. Implied volatility on crude oil options has surged, with the OVX (CBOE Crude Oil Volatility Index) now trading above 70, its highest level since 2022. This makes buying outright puts or calls exceptionally expensive, demanding more sophisticated strategies to manage risk.

Options Strategy Under Elevated Volatility

The fundamental picture remains incredibly bullish given the ongoing closure of the Strait of Hormuz, which chokes off nearly 20 million barrels of daily transit. Recent reports from OPEC+ delegates suggest that the cartel’s real spare capacity is below 2 million barrels per day, making it impossible to offset the current disruption. This supply deficit is not a forecast but a current reality, which supports the idea that the path of least resistance for prices is higher. Given the high cost of options, we should consider strategies like bull call spreads to bet on further upside while defining our risk and lowering our entry cost. Waiting for a potential dip toward the technical support area around $88.50 could provide a more favorable entry point for these positions. Selling naked puts is extremely risky in this environment and should be avoided. We saw a similar, though less acute, energy shock in 2022 following the conflict in Ukraine, where WTI prices also briefly traded above $100. However, the current blockade of a critical global chokepoint represents a far more significant physical supply disruption than the sanctions regime we saw implemented in the past. History suggests that such direct supply removals, like those in the 1970s, can lead to a sustained period of much higher prices. The upcoming US CPI report on Wednesday is a major event risk, as the recent energy spike will undoubtedly put upward pressure on inflation. The Cleveland Fed’s Inflation Nowcasting model is already projecting the February headline number to jump above 3.0%, which could force the Federal Reserve into a more hawkish stance. This creates a potential headwind for oil prices down the line as it raises concerns about demand destruction from either high prices or higher interest rates. The plan for US naval escorts introduces a binary outcome that derivative traders must watch closely. A successful operation could temporarily ease fears and cause a sharp price drop, while any military engagement with Iranian forces would likely send crude prices soaring past the recent $113 high. This massive uncertainty makes long straddles or strangles an attractive, albeit expensive, way to trade the potential for an explosive move in either direction. Create your live VT Markets account and start trading now.

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National Bank of Canada economists expect Canada’s February Labour Force Survey to show employment rising by 10K after a decline in January. They project the unemployment rate at 6.7%, up by 0.2 percentage points. They expect the participation rate to edge up to 65.2% from 65.0%. This follows a 0.4 percentage point fall in January.

Labour Market Expectations

The January merchandise trade balance is expected to improve as exports rise and imports fall. The trade deficit is forecast to narrow to C$0.25 billion. Exports are expected to be supported by higher prices for some raw materials, including gold. Separately, manufacturing sales are forecast to drop 3.3% month on month in January. The decline in manufacturing sales is linked to falls in transportation equipment and machinery. The article notes it was produced using an AI tool and reviewed by an editor. We are seeing a familiar pattern develop when we look back at the economic forecasts from early 2025. At that time, we were anticipating a modest job gain for February but a rising unemployment rate due to more people looking for work. This dynamic of a softening labour market is intensifying today.

Market Implications For Rates

The latest Labour Force Survey data for February 2026 showed a net loss of 5,000 jobs, which was a significant miss from expectations of a small gain. This pushed the unemployment rate up to 6.9%, a full two-year high, as the participation rate climbed to 65.4%. This confirms the trend of underlying weakness that was becoming apparent this time last year. This sustained labour market cooling significantly increases the probability of a Bank of Canada rate cut within the next quarter. We are now seeing the market price in a greater than 70% chance of a 25 basis point cut by the July meeting, a sharp increase from just a month ago. Therefore, positions that benefit from falling short-term interest rates, such as buying call options on BAX futures, should be considered. Consequently, the outlook for the Canadian dollar has weakened, with rate differentials poised to favour the US dollar. The USD/CAD exchange rate has already broken above 1.37, and a move towards 1.39 now seems likely if economic data continues to disappoint. Traders should look at buying put options on the Canadian dollar to hedge or speculate on further downside. The sharp drop in manufacturing sales seen in January 2025 also serves as a cautionary tale for our equity markets today. We have just seen preliminary January 2026 manufacturing sales data point to a 2.8% contraction, led by weakness in the auto sector. Hedging broad market exposure by purchasing puts on the S&P/TSX 60 index may be a prudent strategy against a potential slowdown in corporate earnings. However, the strength in gold-linked exports noted in the 2025 forecast highlights a potential area of opportunity. With ongoing global uncertainty and the prospect of lower interest rates, gold prices have remained firm, recently trading above $2,150 per ounce. Traders could explore call options on gold mining stocks as a potential hedge against broader market weakness. Create your live VT Markets account and start trading now.

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