South Korea’s GDP rose 1.7% quarter-on-quarter in 1Q26, supported by strong chip exports and AI-related investment. ING raised its 2026 GDP forecast from 2.0% year-on-year to 2.8%.

Growth is expected to slow in 2Q26 as energy supply disruptions affect petrochemicals and other manufacturing sectors. The government introduced a temporary export ban on naphtha, and firms increased oil and gas imports from outside the Middle East, but full-capacity output remains constrained.

Semiconductors And Ai Drive Divergence

Prolonged disruptions could reduce chip production and dampen AI investment, given the economy’s reliance on semiconductors. Monthly inflation is expected to stay lower than in other Asian energy-importing countries due to government measures.

The Consumer Price Index is forecast to rise by at least 0.7% month-on-month in April, driven by higher energy prices and “chipflation”. Rising inflation expectations and uneven sector performance may limit policy flexibility.

In 2H26, the Bank of Korea is expected to face increased pressure to raise rates if growth remains above potential and inflation expectations continue to increase. The article states it was produced using an AI tool and reviewed by an editor.

Based on the strong first-quarter GDP figures, we are seeing a clear divergence in the South Korean economy. The powerful performance of chip exports and AI investment is creating bullish momentum in the tech sector. This suggests opportunities in long positions on tech-heavy indices or specific semiconductor stocks in the coming weeks.

Rate Pressure And Targeted Trades

However, this strength is offset by looming headwinds from energy disruptions which will likely slow growth in the second quarter. This K-shaped recovery, with tech outperforming while other manufacturing suffers, points towards increased market volatility. Traders should consider strategies that benefit from this uncertainty, such as buying options on the KOSPI 200 index.

The most significant factor for derivative traders is the growing pressure on the Bank of Korea to raise interest rates. With March inflation holding firm at 3.1% and a projected monthly increase of at least 0.7% for April, rate hike expectations for the second half of the year are solidifying. This makes shorting Korean Treasury Bond futures an increasingly attractive position to hedge against or profit from rising yields.

This policy divergence is also key for currency traders, especially when we recall the global rate environment of 2025 where major central banks were holding steady. With the Bank of Korea now leaning towards hiking while others remain neutral, the Korean Won (KRW) is positioned to strengthen. We see potential in long KRW positions against currencies like the US dollar, anticipating capital inflows seeking higher yields.

Finally, the government’s temporary Naphtha export ban creates a specific, short-term trade opportunity. This directly impacts the petrochemical and plastics industries, which rely on Naphtha as a feedstock. We believe traders should look at bearish positions on exposed companies in these sectors, as they are likely to face compressed margins and production cuts.

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Key Points

• BTC traded near $78,431.70, up $554.88 or 0.71%, after touching $78,484.12.
• US spot Bitcoin ETFs drew around $1.93 billion in net inflows from April 14 to April 23.
• Strategy added 34,164 BTC for about $2.54 billion, lifting total holdings to 815,061 BTC.

Bitcoin is trying to turn a rebound into a lasting recovery. At the time of writing, BTCUSD traded near $78,431.70, up $554.88 or 0.71%, with the chart showing a high of $78,484.12, a low of $77,787.32, an open at $77,876.78, and a close reference of $77,876.82.

Market data also placed Bitcoin near $78,100, with market capitalisation around $1.56 trillion and 24-hour volume above $38 billion. That puts BTC well above its late-February lows, but close to a zone where profit-taking can return fast.

The rally has real support. ETF inflows have improved, corporate treasury buying remains active, and short sellers have had to adjust. Still, Bitcoin now needs to prove that demand can absorb selling near $80,000.

ETF Demand Lifts Markets

The strongest part of the bullish case comes from spot ETF demand. Farside Investors data cited by Brave New Coin showed positive daily net flows from April 14 through April 23, with the products drawing around $1.93 billion across that run.

ETF demand gives Bitcoin a more durable source of buying than crypto-native leverage alone. It reflects brokerage-account demand, institutional allocation demand, and wider access through regulated products.

This helps explain why Bitcoin has outperformed many parts of the crypto market. Capital is not moving evenly across all tokens. It is concentrating in the largest and most liquid crypto asset, where the institutional wrapper is clearest.

The cautious read is simple. A few strong inflow days can lift price, but a lasting uptrend needs repeat demand. If ETF inflows slow while Bitcoin is testing $80,000, momentum could fade quickly.

Buying Supports, Risk Concentrates

Strategy also added fuel to the rally. The company bought 34,164 BTC for about $2.54 billion, at an average price of roughly $74,395. Its total holdings now stand at 815,061 BTC, with an average purchase price of about $75,527.

That sends a clear message. Large balance-sheet buyers still see value near current levels, not just during market stress. It also helps anchor sentiment because Strategy has become one of the most visible corporate Bitcoin buyers.

But the same point cuts both ways. A market that leans too much on one corporate buyer, one ETF complex, and one macro narrative can look stronger than it is. Bitcoin still needs broader spot demand to confirm the move.

Technical Analysis

BTCUSD is trading near 78,400, extending its recovery and pressing toward the upper end of its recent range after rebounding from the 59,900 low. Price action shows a steady grind higher, with higher lows forming and momentum gradually building as buyers regain control.

From a technical standpoint, the bias is bullish in the near term. Price is holding above all key moving averages, with the 5-day (77,334) and 10-day (76,440) sloping upward and providing immediate support. The 20-day (74,007) sits further below and continues to trend higher, reinforcing the strength of the current recovery structure.

Key levels to watch:

• Support: 77,300 → 76,400 → 74,000
• Resistance: 79,800 → 82,000 → 90,000

The market is currently pushing toward the 79,800 resistance zone, which aligns with prior consolidation highs. A clean break above this level could open the door for a move toward 82,000, with further upside potential if momentum accelerates and broader sentiment remains supportive.

On the downside, 77,300 is acting as immediate support. A break below this level could lead to a pullback toward 76,400, though such a move would likely remain corrective as long as price holds above the rising 20-day average.

Overall, BTCUSD is building bullish momentum within a recovery trend, with price approaching a key breakout area. The near-term focus is on whether buyers can clear 79,800, or if the market pauses and consolidates before the next leg higher.

What Traders Should Watch Next

Bitcoin can extend the rally, but buyers now carry the burden of proof. A sustained break above $80,000, backed by steady ETF inflows and stronger spot volume, would point toward the mid-$80,000s.

Failure near $80,000 would not need a large bearish trigger. Profit-taking, weaker ETF flows, and crowded derivatives positioning could be enough to drag price back toward $75,000.

For now, BTCUSD remains in a transition phase. The rally deserves respect because real demand is present, but the next signal must come from price acceptance above $80,000, not just another intraday push.

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GBP/JPY was turned back near 216.00 again and slipped from about 215.70 to 215.00 on Thursday. It was trading at 215.06 at the time of writing, with attention on Middle East news and its effect on market mood.

The pair has consolidated for a second day and has not tested 216.00. Moves towards 216.00 have been rejected, while 214.00 has limited declines.

The Relative Strength Index (RSI) remains bullish but is moving towards the 50 neutral level. This suggests weakening upward momentum.

A daily close below 215.00 would increase the chance of a test of 214.00, the April 17 swing low. Further downside levels include the 20-day Simple Moving Average (SMA) at 213.35 and the 50-day SMA at 211.98.

If GBP/JPY makes a new yearly high above 215.91, it may push towards 216.00. The weekly currency table describes percentage changes for the Japanese Yen against major currencies, with JPY strongest against the Swiss Franc.

We are seeing a familiar pattern in GBP/JPY as it struggles to push higher. With bullish momentum fading, much like the RSI indicator showed when it drifted toward 50 in a similar stall we saw back in 2025, caution is warranted. The pair is currently finding significant resistance, making further gains difficult.

Looking back at the price action from 2025, we recall how repeated rejections near the 216.00 level preceded a deeper pullback below 215.00. This historical precedent suggests that a failure to break the current resistance could trigger a sharp downside move. Traders should watch for a decisive daily close below current support to confirm this weakness.

The Bank of Japan’s policy remains a critical factor, and their historic but cautious move away from negative rates in 2024 has done little to stop yen weakness so far. However, with the yen hovering near multi-decade lows against the dollar, the risk of intervention is a constant threat. Any sudden shift in tone from the BoJ could quickly strengthen the yen and push GBP/JPY lower.

On the pound side, we’re seeing UK inflation proving sticky, with the latest figures showing it remains above the Bank of England’s 2% target. While the market is still pricing in rate cuts this year, persistent inflation could delay that timeline, providing underlying support for sterling. This policy divergence is what has kept the pair elevated, but it also makes it sensitive to shifts in interest rate expectations.

Given this stalling momentum, traders could consider buying put options to hedge against a potential drop below key support levels. This strategy provides downside protection while limiting risk to the premium paid. Alternatively, for those who believe the range will hold, selling call options with a strike price well above the current resistance could be a viable strategy to collect premium.

Conversely, if we see a decisive break and hold above the current highs, it would signal a continuation of the uptrend. In this scenario, buying call options would allow traders to participate in the potential upside with a defined risk. A bull call spread could also be used to lower the cost of entry while still profiting from a move toward the next major psychological level.

The Bangko Sentral ng Pilipinas (BSP) raised the Target Reverse Repurchase (RRP) rate to 4.50% on 23 Apr and pointed to further increases. UOB expects the policy rate to reach 5.00% by end-2026, after two 25bps hikes in Jun and 3Q26.

The BSP said the move aims to anchor inflation expectations and limit second-round effects. It also said that tightening would be measured and data-dependent, while keeping inflation aligned with the 3.0% target.

Inflation Outlook And Policy Path

The BSP forecasts headline inflation above the 4% upper limit in 2026 and 2027. It now sees 2026 inflation at 6.3% (from 5.1% in Mar; UOB estimate 5.5%) and 2027 inflation at 4.3% (from 3.8%; UOB estimate 3.5%).

Core inflation is also expected to rise towards the 4% ceiling. The article links the inflation outlook to Middle East-related uncertainty and continued fiscal support for growth.

The article says it was produced with the help of an AI tool and reviewed by an editor.

The Bangko Sentral ng Pilipinas has started a new tightening cycle, raising its key policy rate to 4.50% in a clear move to fight inflation. This decision is intended to manage inflation expectations as price pressures build from global events and ongoing fiscal support. The latest data from the Philippine Statistics Authority showed March inflation accelerated to 6.1%, a seven-month high that keeps pressure on the central bank.

Market Implications For Rates And FX

We see this shift creating clear opportunities in the interest rate swap market, as the forward curve will continue to price in higher rates. With expectations for another 25 basis point hike in June and one more in the third quarter, positioning to pay the fixed leg on peso swaps seems like a logical move. This strategy benefits directly from the central bank’s stated path toward a 5.00% policy rate by year-end.

For currency traders, the BSP’s decisive action should provide support for the Philippine peso. Higher yields tend to attract foreign capital, which could help reverse the peso’s recent weakness against the dollar. After touching 57.80 last week, the peso has already firmed towards 57.25, and we expect further strength, making selling USD/PHP forwards an attractive strategy.

We saw a similar dynamic back in 2022 and 2023, when the BSP aggressively hiked rates by over 400 basis points to combat post-pandemic inflation. During that period, the peso eventually found a footing after an initial lag, showing that consistent tightening can indeed stabilize the currency. The central bank’s emphasis on a “measured pace” suggests a similar, albeit less aggressive, playbook this time around.

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The US Dollar Index (DXY) rose on Thursday and stayed near 98.70, supported by firm US data and ongoing geopolitical uncertainty. Weekly Initial Jobless Claims increased to 214K from 212K, while April S&P Global PMIs came in at 54 for Manufacturing and 51.3 for Services, which lifted US yields.

A report from Israel N12 News said Iranian Parliament speaker Mohammad Bagher Ghalibaf resigned from negotiations with the US. Other Iranian journalists denied the report, adding to mixed messaging around Middle East talks.

Major Currencies Under Dollar Pressure

EUR/USD traded near 1.1690 and GBP/USD moved towards 1.3480 amid broad US Dollar strength. UK S&P Global Composite PMI rose to 52 from 50.3, with manufacturing and services above the expansion line.

USD/JPY climbed towards 159.50 as US yields rose, with attention on intervention risks. AUD/USD eased towards 0.7140 as higher yields and the US Dollar weighed, alongside a firmer stance from the RBA.

WTI oil rose to near $96.00 per barrel on Middle East tensions, while gold slipped towards $4,710 on higher yields and a stronger Dollar. Upcoming data includes UK Retail Sales (March), Germany IFO (April), Canada Retail Sales (February), and US Michigan data and inflation expectations (April).

WTI is a US crude benchmark traded via Cushing, with pricing shaped by supply and demand, geopolitical risks, OPEC decisions, the US Dollar, and inventory data from API and EIA, which match within 1% about 75% of the time. OPEC has 12 members, meets twice yearly, and OPEC+ includes 10 additional non-OPEC countries.

Looking back at the data from this time in 2025, we see a familiar story of a strong US dollar driven by solid economic performance. Today, on April 24, 2026, the Dollar Index (DXY) remains elevated around 105.50, as persistent inflation above 3% keeps the Federal Reserve from cutting rates. This suggests that continuing to use options to bet on dollar strength against other major currencies remains a viable strategy.

2026 Market Themes And Trade Ideas

The geopolitical tensions noted last year have unfortunately continued, keeping energy markets on edge. While West Texas Intermediate (WTI) crude is no longer at $96, it has been volatile, recently trading near $85 a barrel following new OPEC+ production discipline and ongoing supply chain risks. We believe using derivatives like straddles on oil futures could be an effective way to trade this expected volatility in the coming weeks.

Last year, rising US yields were putting pressure on assets like gold. That dynamic is still in play, with the 10-year Treasury yield currently hovering around a firm 4.6%, reflecting sticky inflation reports. However, gold has shown surprising resilience, now trading near $2,350 an ounce, supported by central bank buying and its status as a geopolitical hedge.

The pressure on the Japanese Yen has only intensified since we saw USD/JPY near 159.50 in 2025. The pair is now testing the 160 level, and while Japanese officials continue to issue warnings, the market remembers that past interventions provided only temporary relief. Buying put options on USD/JPY could serve as a valuable hedge against a sudden, sharp move if authorities finally decide to act decisively.

Overall, the core themes from 2025 of US economic outperformance and global uncertainty persist into 2026. The most recent US jobless claims figures, holding steady around 215,000, confirm the labor market’s resilience and support the Fed’s higher-for-longer stance. Therefore, we should structure our derivative positions to capitalize on continued dollar strength and volatility in commodity and currency markets tied to these themes.

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Currency markets have moved into a consolidation phase ahead of the April 28 War Powers Resolution deadline. USD/CNY has levelled off after an earlier relief rally.

Trading has become more cautious, with fewer firm directional positions following the rally earlier in the month. Focus has shifted to the upcoming deadline and the risk of further geopolitical shocks.

Central Banks And Geopolitical Risk

Tensions between the US and Iran are affecting the outlook for central banks, many of which meet next week. Expectations are for policy rates to stay unchanged, while officials watch for stagflation risks.

In Asia, oil-sensitive currencies such as INR, KRW and PHP are expected to keep moving with oil prices. Local authorities are likely to remain ready to deter one-way moves towards depreciation.

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

As we approach the April 28 deadline, currency markets have entered a tense consolidation phase, which we see in the flattening of the USD/CNY exchange rate. The hesitation follows the short-lived relief rally earlier this month. Traders are clearly reluctant to make any significant directional moves until the geopolitical situation becomes clearer.

Trading Volatility Over Direction

Given this paralysis, we believe the best approach is to trade volatility rather than direction. While realized volatility is low, the J.P. Morgan Global FX Volatility Index remains elevated near 8.5%, suggesting the market is pricing in a potential shock. Using options strategies like straddles or strangles allows traders to profit from a large price swing in either direction once the deadline passes.

The complex standoff between the U.S. and Iran is also expected to keep central banks on the sidelines next week. We see in the futures market that traders are pricing in a more than 90% probability that major central banks will hold interest rates steady. This reinforces the current state of market uncertainty and the risk of stagflation.

We are paying special attention to Asian currencies that are dependent on oil imports, such as the Indian Rupee and the Korean Won. With Brent crude holding stubbornly above $95 a barrel, these currencies are exposed to sudden shocks. Buying out-of-the-money call options on pairs like USD/INR can provide a cheap and effective hedge against a spike in energy prices.

Looking back at the sharp market dislocations in 2025 that followed the escalation in trade disputes, we learned that periods of low volatility can end abruptly. That experience informs our current view to prioritize defined-risk strategies. It is wiser to pay a small premium for protection now than to be caught in a sudden, unhedged move.

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Gold fell 0.48% to $4,716, after touching $4,664, as higher US Treasury yields weighed on prices and trading hovered near $4,700. The US 10-year yield rose nearly 4.5 basis points to 4.349%, pushing gold to an eight-day low.

Middle East developments continued, including reports that Iran’s Parliament Speaker Mohammad Bagher Ghalibaf resigned from the negotiating team, and that Israel was on alert for a possible restart of fighting by the end of the week. The Strait of Hormuz remained shut, with the US and Iran continuing to seize ships, while WTI crude rose on the Ghalibaf headline.

Us Data And Yield Pressure

US data showed jobless claims rose by 214K versus 212K expected. S&P Global’s April flash PMIs strengthened, with Manufacturing up from 52.3 to 54 and Services up from 49.8 to 51.3, both above forecasts.

Market pricing shifted, with the swaps market moving from expecting at least two 25-basis-point Federal Reserve cuts in early 2026 to forecasting rates held steady, with a first cut seen at the July 2027 meeting. Friday’s focus is the final April University of Michigan consumer sentiment reading.

Technically, gold traded near the 100- and 20-day SMAs at $4,723 and $4,706, with potential support levels at $4,650, $4,600, and $4,549, and resistance at $4,800, the 50-day SMA at $4,876, and $4,900.

Given the jump in Treasury yields to over 4.3%, the immediate pressure on gold is clearly to the downside. Last week’s stronger-than-expected S&P Global PMIs show the US economy remains resilient, reducing the immediate need for safe-haven assets. This economic strength is currently outweighing the persistent geopolitical tensions in the Middle East.

We see that the market has aggressively pushed back expectations for a Federal Reserve rate cut until mid-2027, a dramatic shift. This move was solidified after the March 2026 CPI report came in hot at 3.8%, reminding the Fed of the inflation battle we saw back in 2022 and 2023. Derivative traders should therefore consider positioning for further weakness in gold, as the high opportunity cost of holding a non-yielding asset will likely persist.

Technical And Positioning Outlook

The technical picture supports a bearish stance, with gold now trading below its key 20- and 100-day moving averages. Last week’s Commitment of Traders report already showed a reduction in net-long positions from hedge funds for the first time in six weeks, suggesting some professional money is starting to take profits. A decisive break below the $4,650 level could trigger a new wave of selling toward the $4,600 mark.

However, we must remain vigilant about the situation in the Strait of Hormuz, which has pushed WTI crude oil prices above $115 a barrel. An escalation there could quickly shift the narrative back to inflation hedging and safe-haven demand, causing a sharp reversal. Therefore, using put options to define risk or employing bearish credit spreads might be more prudent than outright shorting futures.

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Reports from Israel’s N12 News said Iranian Parliament speaker Mohammad Bagher Ghalibaf resigned from Iran’s negotiating team. The headline triggered risk aversion in Thursday’s US session, pushing crude oil prices sharply higher and supporting the US Dollar.

The report implied lower odds of a deal between the United States and Iran. Several Iranian journalists then denied the claim, including Mohammad Ghaderi on X, who said the report was false.

US President Donald Trump wrote on Truth Social: “I have all the time in the World, but Iran doesn’t — The clock is ticking!.” Earlier, he said: “Iran is having a very hard time figuring out who their leader is!”.

Iran’s President Masoud Pezeshkian responded by saying Iran has no hardliners or moderates, and described unity under the Supreme Leader. He added: “One God, one nation, one leader, one path; victory for Iran, dearer than life.”

In markets, uncertainty kept the US Dollar supported across foreign exchange. West Texas Intermediate held its intraday gains and traded at around $94.

We are seeing a familiar pattern of uncertainty building in the market, reminiscent of the events in 2025. Last year, we saw how a single, quickly denied headline about an Iranian negotiator sent West Texas Intermediate crude soaring towards $94 a barrel. That price spike showed just how sensitive energy markets are to any hint of escalating tensions between the US and Iran.

Given that similar rhetoric is now resurfacing ahead of planned talks in Vienna, traders should anticipate heightened volatility. The market is already on edge, with WTI currently trading around $88 a barrel. Recent statistics from the Energy Information Administration (EIA) confirm a surprise drawdown in crude inventories of 3.1 million barrels last week, leaving little buffer for any potential supply disruptions.

Therefore, buying near-term call options on crude oil futures offers a strategy with defined risk to profit from a potential price surge. This approach allows traders to capitalize on upward momentum if headlines turn negative, without exposing them to unlimited losses. We’ve seen a notable increase in open interest for the June $95 WTI call options, suggesting this sentiment is gaining traction.

Beyond energy, this geopolitical risk calls for defensive positioning in broader equity portfolios. We recommend hedging by purchasing put options on major indices like the S&P 500. The CBOE Volatility Index (VIX), often called the market’s “fear gauge,” has already crept up from a low of 14 to over 19 in the past two weeks, indicating growing anxiety among investors.

For those expecting a significant price move in oil but are uncertain of the direction, long strangles could be an effective strategy. This involves buying both an out-of-the-money call and an out-of-the-money put option, profiting from a large price swing either up or down. Implied volatility on WTI options has already increased to 42%, reflecting the market’s expectation of a sharp move following the Vienna meetings.

WTI crude rose on Thursday for a fourth day, amid concerns over oil supply flows through the Strait of Hormuz. It traded near $94.56 a barrel after an intraday high close to $97, up 2.8% on the day.

Reports said Mohammad Bagher Ghalibaf, Iran’s Parliament Speaker and lead negotiator, resigned from the negotiating team after alleged interference by the Islamic Revolutionary Guard Corps, according to Israel’s N12 News. The report described divisions within Iran’s leadership and less prospect of near-term progress in US-Iran talks.

The Strait of Hormuz was described as under a dual blockade by US forces and Iran. US President Donald Trump said on Truth Social that the US has “total control” of the strait and that “no ship can enter or leave” without US Navy approval.

Trump also said he ordered the Navy to “shoot and kill any boat” placing mines in the waterway, and that the route is “sealed up tight” until Iran agrees to a deal. Iranian officials said the US must lift the naval blockade, which Tehran calls a ceasefire breach.

The Washington Post cited a Pentagon assessment saying it could take up to six months to fully clear mines from the strait. Tasnim and shipping companies reported the IRGC seized two vessels on Wednesday.

We recall the intense market conditions in 2025 when escalating tensions in the Strait of Hormuz pushed WTI crude prices toward $97 per barrel. The dual blockade and the breakdown in US-Iran negotiations created a significant supply disruption risk that kept the market on edge for months. That period of extreme uncertainty has set the stage for our current trading environment.

As of today, April 24, 2026, WTI is trading at a more subdued $88.50, but the geopolitical risk premium from last year’s crisis has not fully disappeared. Lingering distrust and occasional naval posturing in the region continue to influence prices. This sustained tension creates an environment where sharp price movements can be triggered by seemingly minor headlines.

For derivatives traders, this means implied volatility in crude options remains elevated compared to historical norms before the 2025 crisis. The CBOE Crude Oil ETF Volatility Index (OVX), which spiked to nearly 60 during the blockade, now hovers around 35, well above the 25-30 range we saw in calmer periods. This suggests the market is still pricing in a significant chance of future supply disruptions.

Given this backdrop, we should consider strategies that benefit from potential price spikes while managing the high cost of options. Buying long-dated call spreads on WTI is an attractive approach. This allows us to capture upside from any renewed conflict in the Gulf but caps our initial cost in this high-volatility setting.

The supply situation also supports this cautious but bullish bias. Following last year’s disruption, OPEC+ increased production, and recent data from the EIA shows their collective spare capacity is now down to just 2.5 million barrels per day, a multi-year low. This leaves the global market with a much thinner buffer to absorb any new shocks.

Furthermore, while the Strait of Hormuz is open, shipping insurance premiums for tankers transiting the waterway remain about 40% higher than they were prior to the 2025 events. This added cost is a constant reminder of the underlying risk that still affects the physical transport of nearly a fifth of the world’s oil supply. We should watch for any new rhetoric or minor naval incidents, as they could cause a rapid repricing of this risk.

Standard Chartered’s Dan Pan expects Banco Central do Brasil (BCB) to keep a cautious easing cycle, with a 25bps policy rate cut at the 29 April meeting. Inflation risks are described as still high.

The note says tight monetary policy, softer growth and a strong Brazilian Real (BRL) could allow further cuts. It adds there may be room for a 50bps cut, but resilient growth and a solid labour market could reduce the chance of a larger move.

Policy Outlook And Inflation Risks

BCB may keep the option of more easing, but future steps may not be set out clearly because of uncertainty around energy prices. The year’s easing expectations are said to have been reduced to about 100bps since the start of the war.

The end-2026 policy rate forecast is kept at 12.5%. The forecast includes upside risk if domestic demand remains resilient.

We expect the Banco Central do Brasil to deliver a cautious 25 basis point rate cut at its meeting next week on April 29th. Recent data supports this slow approach, with the latest mid-month inflation figure for April coming in at a sticky 4.1% year-over-year. This should keep the central bank from moving too quickly.

Traders should consider positioning for a steeper cutting cycle than the market is currently pricing. The market has factored in about 100 basis points of easing for the rest of 2026, but after the aggressive rate hikes we saw through 2025, there is room for more significant easing. This suggests opportunities in receiving fixed rates on interest rate swaps for longer-dated tenors.

Implications For Brl And Positioning

This expected cautiousness is supportive for the Brazilian Real, which has shown strength, holding below 4.95 against the US dollar. A small cut maintains the high-rate differential that attracts foreign capital, making long BRL positions attractive. The risk of a surprise 50 basis point cut seems low, given the national unemployment rate fell to 7.6% last quarter.

Uncertainty around global energy prices means the central bank will likely avoid giving clear guidance on future moves. We see the end-of-year policy rate at 12.5%, but if domestic demand continues to surprise to the upside, rates could finish the year higher. Therefore, any positions should be managed carefully around key inflation and retail sales data releases.

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