BBH reported that higher crude oil prices and rising global bond yields have supported the US Dollar, leaving it firmer against major currencies. It said Brent crude was near $104 a barrel, the highest since April 7, but below the March triple top around $120.

It added that the energy supply shock remains due to the US-Iran war being unresolved. It said global bond yields are facing renewed upward pressure as higher oil prices lift expectations for central bank rates.

The update said the worst phase of the energy shock is likely past. It cited the US extending the ceasefire indefinitely and outlined a navigation stance described as “Open for All or Closed to All” for vessels using the Strait of Hormuz.

It said this approach could speed a reopening of the Strait of Hormuz by increasing shared economic costs and incentives for a diplomatic outcome. It expects interest rate differences between the US and other major economies to keep the US Dollar Index within the 96.00–100.00 range.

Higher crude oil prices and rising global bond yields are currently supporting the US dollar. Recent data shows Brent crude futures are hovering around $98 a barrel, pushing central bank rate expectations higher. Consequently, the dollar is showing firmness against other major currencies.

We are sticking to our view that the worst of the energy shock we experienced in 2025 is probably behind us. Prices remain well below the triple top of around $120 a barrel seen back in March of last year during the US-Iran conflict. The diplomatic channels that were opened then seem to be preventing a return to those extreme price levels.

As such, interest rate differentials should continue to keep the US Dollar Index, or DXY, anchored within its range of roughly 96.00 to 100.00, which has held for over a year now. While the Federal Reserve’s latest dot plot suggests a pause, key counterparts like the European Central Bank continue to signal caution, maintaining a favorable rate differential for the dollar. For derivative traders, this suggests that strategies built around the DXY remaining range-bound are attractive.

With the DXY currently trading near 98.50, selling volatility could be a primary strategy in the coming weeks. Traders might consider option strategies like iron condors or strangles centered within the 96.00-100.00 range. This approach profits from time decay and the expectation that the index will not make a significant move above resistance or below support.

Japan’s Finance Minister Satsuki Katayama said on Thursday that the government has a “free hand” to carry out stealth foreign exchange interventions against one-way speculative moves in the Japanese yen.

Katayama also said finance leaders are watching the Middle East situation cautiously. She added that the government is not fearing stagflation risks so much for the time being.

She said deputies in the US and Japan are in close contact on foreign exchange matters. She also said past FX interventions had an influence each time.

The yen showed no immediate reaction to the comments. USD/JPY was 0.16% higher at around 159.75, with the US dollar outperforming.

The government is again signaling it has a “free hand” to intervene as USD/JPY pushes towards the 170.00 level, a level unseen in decades. We remember similar verbal warnings throughout 2024 and 2025, which were often followed by sharp, sudden moves. This familiar rhetoric suggests that the risk of stealth intervention is now extremely high.

This situation presents a clear opportunity for options traders, even with the wide interest rate differential between the US and Japan still favoring a weaker yen. Looking back, the interventions of late 2024 only provided temporary relief for the JPY before the uptrend in USD/JPY resumed. Statistics from the Japan Foreign Exchange Market Committee show that daily turnover in USD/JPY derivatives has increased by 15% in the last quarter, indicating heightened hedging and speculative activity.

Given this backdrop, buying short-dated, out-of-the-money puts on USD/JPY appears to be a cost-effective way to hedge against a sudden drop. One-month implied volatility has already climbed to 12.5%, up from a low of 9% earlier this year, but it still likely undervalues the potential for a 5-7 yen drop in a single trading session. Such a move would mirror the sharp declines we saw after official action in the past.

Alternatively, any sharp drop caused by intervention could be viewed as a buying opportunity, as past actions have failed to reverse the long-term trend. The fundamental story of the attractive carry trade remains intact, with the Bank of Japan’s policy rate at just 0.5% while other central banks remain significantly higher. Therefore, traders might prepare to enter long positions if the pair dips back towards the 162-164 support zone.

While officials currently state they are not fearing stagflation, ongoing caution about the global economic outlook remains. Their close communication with US counterparts suggests any intervention would likely be coordinated or at least have tacit approval. This coordination might make any forthcoming action more impactful than the unilateral moves we observed previously.

TD Securities expects UK retail sales volumes to rise 0.1% month-on-month in March, compared with a market forecast of 0.0%. February fell -0.4% month-on-month, following January’s discount-led increase.

The March increase is linked to less distortion from promotions, rather than a change in underlying demand. Online and non-store retail may add support, while food and supermarket sales may weigh on the total.

Retail Sales Outlook

Weather effects on household goods are expected to ease as March brought warmer days and less rain. The expected rise is described as modest, in a period after the start of the Middle East conflict.

UK private sector activity rose in April, based on PMI readings for manufacturing and services. Manufacturing increased to 53.6 (TDS: 50.5; market: 50.3; prior: 51.0), while services rose to 52.0 (TDS/market: 50.0; prior: 50.5).

The manufacturing gain was linked to earlier ordering and stock-building amid higher raw material prices and supply chain concerns. The services reading was linked to technology spending and marketing activity, while demand and expectations were pressured by faster input cost inflation, global uncertainty, and higher transport costs.

We see a modest rise in retail sales, but this feels more like a return to normal after January’s sales events, not a sign of strong consumer demand. Online sales are helping, but food sales are still weak, which keeps a lid on any real growth. This suggests that betting on a significant rally in consumer-focused stocks may be premature.

Market Risks And Positioning

The rebound in UK business activity this April, with the manufacturing PMI hitting a recent high of 53.6, looks good on the surface. However, we believe this is driven by companies stockpiling materials due to fears of rising prices and supply chain problems, not by a surge in actual customer orders. This kind of activity is not sustainable and could reverse quickly in the coming weeks.

The main threat we see is the sharp acceleration in costs for fuel and raw materials, pushing recent UK inflation figures to 3.5%, well above the Bank of England’s target. This inflation pressure, combined with global uncertainty, is making businesses nervous and could force the Bank to keep interest rates higher for longer. This situation creates a challenging environment for corporate earnings and equity markets.

Looking back, this setup has echoes of the volatility we saw in 2025 when early signs of recovery were quickly erased by unexpected global supply shocks. Given the current geopolitical tensions, we should be prepared for a similar outcome where positive data can be misleading. Therefore, relying solely on these PMI figures to go long on the market feels risky.

In response, traders should consider buying protection against a potential market downturn. Purchasing put options on the FTSE 250 index could be a prudent way to hedge against the risk that this economic momentum falters. With implied volatility still relatively low, the cost of this insurance is not yet prohibitive.

For currency traders, the stubbornly high inflation puts the British Pound in a precarious position. The uncertainty around the Bank of England’s next move could lead to significant price swings in currency pairs like GBP/USD. Options strategies that profit from increased volatility, such as a long straddle, might be appropriate for navigating the choppy weeks ahead.

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USD/JPY rose for a fourth straight day to about 159.75 in European trading on Thursday, supported by a stronger US Dollar. The move followed higher oil prices linked to an extended closure of the Strait of Hormuz.

The US Dollar Index was up 0.2% near 98.80, its highest level in more than a week. Higher oil prices lifted US inflation expectations, which reduced the likelihood of Federal Reserve rate cuts.

Fed Policy Expectations

CME FedWatch showed a 76.8% chance the Fed keeps rates at 3.50%–3.75% at its December meeting. Markets are also awaiting preliminary US S&P Global PMI data for April at 13:45 GMT, with business activity expected to rise on stronger manufacturing and services output.

The Japanese Yen traded mixed as attention turned to the Bank of Japan policy decision due on Tuesday, 28 April. USD/JPY kept a bullish near-term bias after a Descending Triangle breakout, with the 20-day EMA at 159.11 and RSI near 57.

Resistance levels were cited at 160.46, then 161.00. Support was noted at 159.41, then 159.11, with further support near 157.64.

Given the strength in the US Dollar, we should anticipate the USD/JPY pair to continue its upward trend. The prolonged closure of the Strait of Hormuz is a significant factor, having pushed Brent crude oil prices up nearly 18% over the past month to over $115 a barrel. This is fueling inflation expectations and making a Federal Reserve rate cut less likely.

Market Pricing Shift

This situation has forced a major shift in market expectations for Fed policy over the coming months. Just last month, we saw fed funds futures implying a 60% chance of a rate cut by year-end, but now those odds have almost completely evaporated. The CME FedWatch tool now shows a dominant probability of rates holding steady in the current 3.50%-3.75% range through December.

The underlying US economy appears solid, which supports a strong dollar and gives the Fed room to stay hawkish. We saw this pressure building after the March core CPI came in at 3.1% year-over-year, surprising analysts who had forecast a dip below 3%. An strong S&P PMI report for April would only reinforce this view of economic resilience.

On the other side of the trade, the Japanese Yen remains weak as we wait for the Bank of Japan’s meeting on April 28. After the historic but small rate hike we saw back in 2024, the BoJ has been extremely cautious, creating a wide policy gap with the Fed. This divergence is the fundamental reason the yen continues to weaken against the dollar.

For derivatives traders, this points toward strategies that benefit from further USD/JPY upside in the coming weeks. We should look at buying call options with strike prices targeting the 160.50 and 161.00 levels. The technical momentum is strong but not yet overbought, suggesting there is still room for the pair to climb.

However, we must be cautious as the pair approaches these multi-decade highs. These levels bring back memories of the verbal warnings from Japan’s Ministry of Finance we heard last year when the pair crossed 155. Using the 20-day EMA near 159.11 as a key support level for our bullish positions is a prudent way to manage the risk of a sudden reversal.

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EUR/CAD fell for a seventh day and traded near 1.5980 in European hours on Thursday, staying below 1.6000 after new PMI releases. The move followed weaker April readings from Germany and the wider Eurozone.

The Eurozone’s preliminary HCOB Composite PMI dropped to 48.6 in April from 50.7 in March, versus a forecast of 50.2. Services PMI fell to 47.4 from 50.2, against 49.8 expected, while Manufacturing PMI rose to 52.2 from 51.6.

Germany’s flash Composite PMI declined to 48.3 in April from 51.9, versus 51.1 expected. Services PMI fell to 46.9 from 50.9, against 50.3 expected, and Manufacturing PMI eased to 51.2 from 52.2, versus 51.3 expected.

The Canadian Dollar found support as oil prices rose amid supply concerns linked to Middle East tensions and the Strait of Hormuz. WTI extended gains for a fourth day and traded near $93.40 a barrel.

The Wall Street Journal reported Iran fired on three ships in the Strait of Hormuz and escorted two into Iranian waters on Wednesday. Iranian media said the Revolutionary Guard was moving the vessels to Iran, and a correction on April 23 at 12:25 GMT stated Germany’s flash Manufacturing PMI fell to 51.2.

Looking back to this time in 2025, we saw the EUR/CAD pair break below 1.6000 due to surprisingly weak PMI data from the Eurozone and Germany. This economic slowdown in Europe contrasted sharply with a Canadian dollar strengthened by rising oil prices amid tensions in the Strait of Hormuz. The setup from last year provides a useful parallel for our current market environment.

Today, the Eurozone economy is still showing signs of fragility, with the latest flash Composite PMI for April 2026 coming in at a tepid 49.5, still hovering below the growth threshold. The European Central Bank has signaled it is in no hurry to raise rates, which caps the Euro’s potential. This persistent economic softness mirrors the weakness we observed last year.

Meanwhile, the Canadian Dollar continues to find support from a stable energy market, with West Texas Intermediate crude holding firm around $86 per barrel as of this week. Recent data from Statistics Canada showed unemployment holding at a low 5.2%, giving the Bank of Canada a reason to maintain its current interest rate policy. This policy divergence between a cautious ECB and a steady BoC favors the Canadian dollar.

Given this dynamic, we should position for continued weakness in the EUR/CAD cross over the next few weeks. Buying put options with strike prices below the current 1.4800 level would be a prudent way to capitalize on potential further declines. Alternatively, selling short-dated futures contracts on the pair could also be an effective strategy to benefit from this downward pressure.

Rabobank strategist Michael Every said conflict linked to Iran and disruption in the Strait of Hormuz could extend the energy normalisation timeline into Q4. He said clearing possible mines could take from weeks to months, depending on how many are present.

The report said Iran fired on ships in the Strait and seized two. It also said there were suspicions that speedboats were used to lay mines more widely in the waterway.

It said marine drones used for mine clearance are relatively untested compared with older methods. Based on past benchmarks, the estimate remains weeks to months to clear the Strait.

The report said oil and natural gas futures were materially under-pricing supply risk. It linked this to potential effects on prices into Q4.

It also said the Iran war pushed Panama Canal lane prices to a record high of up to five times the pre-war level. It said this was mainly due to Asian LNG importers bidding for access.

We are seeing escalating actions in the Strait of Hormuz, through which nearly 21 million barrels of oil pass daily. Recent intelligence reports this month have confirmed the presence of new marine drones and potential mines, which could take months to clear if deployed widely. This creates a direct and immediate threat to a significant portion of the world’s energy supply.

Futures markets seem to be overlooking the severity of this supply risk for both crude oil and natural gas. With Brent crude hovering around $95 per barrel, implied volatility remains surprisingly low, suggesting traders are not pricing in a major disruption. Looking back at 2019, we saw how a drone attack on Saudi facilities caused a nearly 20% intraday price spike, highlighting how quickly the market can react when it is caught off guard.

This tension is already creating global ripples, with Asian LNG importers driving up Panama Canal transit prices to record highs to secure passage. This scramble for LNG is happening as European natural gas storage sits at 55%, slightly below the five-year average and leaving little cushion for a supply shock from the Middle East. Any disruption in Hormuz would put extreme pressure on an already tight global gas market.

Given these conditions, traders should consider positioning for a sharp rise in energy prices in the coming weeks. Buying longer-dated call options on Brent crude and Henry Hub natural gas futures for Q3 and Q4 2026 could be a prudent strategy. This allows for participation in a potential price surge while capping the maximum loss at the premium paid.

The current market complacency suggests that options are not fully pricing in the potential for a sudden supply shock. This makes buying volatility an attractive proposition. The key is to act before the broader market wakes up to the timeline for energy normalization being pushed well into the end of the year.

Gold and silver rose again after two sessions of falls. Support came from a weaker US Dollar and lower geopolitical tensions.

Gold ETF flows were positive for three straight weeks. Holdings increased by 10koz on 21 April, which was the sixth daily inflow in a row.

Total ETF holdings reached 99.3 moz. The move followed the March sell-off.

The article was produced with help from an Artificial Intelligence tool and checked by an editor.

We are seeing gold and silver recover from recent losses, supported by a weaker dollar and an easing of geopolitical tensions. The renewed interest from investors is becoming clearer now. This shift suggests a change in market sentiment is underway.

The flow of money into gold-backed ETFs has been positive for the last three weeks, a strong signal that conviction is returning. We have seen six straight days of inflows, lifting total holdings to nearly 100 million ounces. This points to renewed investor interest after the sell-off we experienced earlier this year.

This pattern is familiar, as we saw a similar setup in 2025 when a sharp March sell-off was followed by a sustained period of ETF buying in April. That period marked the beginning of a significant price recovery. Recognizing this historical parallel is key to understanding the current opportunity.

The U.S. Dollar Index (DXY) has recently fallen from a peak of 106 to around 104.2, which directly supports higher gold prices. This dollar weakness is tied to recent inflation data coming in slightly softer than expected, leading markets to price in a pause from the Federal Reserve. A less aggressive Fed is historically bullish for gold.

In the derivatives market, we are observing a notable increase in open interest for call options, particularly for strikes 5% above the current spot price. The call-to-put ratio has climbed to its highest level in three months, showing that traders are positioning for more upside. This indicates a growing consensus that the path of least resistance is higher.

Given these signals, traders should consider strategies that benefit from this upward momentum. The consistent ETF inflows and bullish options activity suggest that buying on dips may be a sound approach in the coming weeks. Watch the dollar’s movement closely, as continued weakness would likely fuel this rally further.

Japan’s national March CPI was due overnight, with no sharp rise expected compared with global inflation trends. Consensus forecast CPI excluding fresh food at 1.8%.

Tokyo headline inflation pointed to a modest fall, linked to government subsidies keeping petrol prices near USD1 per litre. The April Composite PMI eased to 52.4 from 53.0.

Manufacturing PMI rose to 54.9 from 51.6, while Services PMI slowed to 51.2 from 53.4. Factory output posted its strongest increase since February 2014.

In markets, US Treasuries rose as risk mood weakened amid Middle East tensions. The article was produced using an AI tool and checked by an editor.

We see a clear divergence forming between Japan and other major economies. While global inflation remains a concern, Japan’s CPI is expected to be modest, with the consensus for core inflation at just 1.8%. This suggests the Bank of Japan will have little reason to tighten monetary policy aggressively in the near future.

This policy difference makes currency derivatives on the yen particularly interesting. With the US Federal Reserve holding rates firm to combat core inflation, which recent data from the Bureau of Labor Statistics puts at 2.7%, the interest rate gap with Japan is set to remain wide. Therefore, we should consider strategies that benefit from a stronger US dollar against the yen, such as buying USD/JPY call options.

At the same time, Japan’s manufacturing sector is showing its strongest output growth since 2014. This, combined with a central bank that is likely to keep conditions loose, creates a positive environment for Japanese stocks, especially exporters who benefit from a weaker yen. We remember the powerful Nikkei rally in 2024 and early 2025 under similar conditions, suggesting long positions in Nikkei 225 futures or calls could be profitable.

However, the underlying reason for this activity is geopolitical risk, which is causing a flight to safe assets like US Treasuries. The CBOE Volatility Index (VIX) has already risen from 14 to over 18 in the past month, reflecting growing market anxiety over Middle East tensions. Traders should therefore consider buying volatility or using put options on broad market indices like the S&P 500 as a hedge against a sudden downturn.

The Eurozone’s preliminary HCOB Composite PMI fell to 48.6 in April, against forecasts of 50.2 and down from 50.7 in March. A reading below 50.0 indicates contraction in activity.

The Services PMI dropped to 47.4, versus estimates of 49.8 and 50.2 in March. The Manufacturing PMI rose to 52.2, above forecasts of 50.8 and up from 51.6 previously.

After the release, EUR/USD was little changed near 1.1700. Later German flash figures also weakened, with the Composite PMI at 48.3 versus expectations of 51.1 and 51.9 in March.

Germany’s Services PMI fell to 46.9, below estimates of 50.3 and 50.9 in March. Germany’s Manufacturing PMI was 51.2, compared with forecasts of 51.3 and 52.2 previously.

The PMI releases were scheduled for 07:30 GMT for Germany and 08:00 GMT for the Eurozone. After the German data, EUR/USD traded marginally lower near 1.1700.

In foreign exchange, the euro accounted for 31% of all transactions in 2022, with average daily turnover above $2.2 trillion. EUR/USD makes up about 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

Looking back a year ago to April 2025, we saw a surprise slump in the Eurozone’s economy, with the composite PMI contracting to 48.6. This downturn was primarily driven by a sharp fall in the services sector, which was attributed to a conflict in the Middle East causing supply chain issues and price spikes. Despite this negative data, the EUR/USD pair showed resilience, holding steady around the 1.1700 level.

The situation today in April 2026 presents a starkly different picture. The latest flash HCOB Composite PMI for the Eurozone has shown a modest recovery, rising to 51.7, marking the second consecutive month of growth. This improvement is almost entirely thanks to the services sector, which posted a strong 52.9, while manufacturing continues to struggle in contraction territory at 45.6.

This economic divergence is happening as inflation pressures have eased considerably from the shock we saw in 2025. The Harmonized Index of Consumer Prices (HICP) for March 2026 came in at 2.4%, allowing the European Central Bank to begin an easing cycle with its first rate cut last month. This dovish pivot from the ECB stands in contrast to the US Federal Reserve, which is holding rates steady amid more persistent inflation.

For derivative traders, this creates a clear setup. With the Euro’s strength entirely dependent on the services sector, we should consider buying put options on the EUR/USD to hedge against any potential disappointment in upcoming services data. The significant weakness in manufacturing suggests the economic recovery is fragile and lopsided, making the Euro vulnerable to negative shocks.

The EUR/USD is currently trading near 1.07, a full ten cents lower than this time last year, reflecting the widening interest rate differential between the ECB and the Fed. We should therefore view any short-term strength in the Euro not as a sign of a reversal, but as a better entry point to short the currency. The path of least resistance for the pair appears to be downwards as long as the ECB continues its cutting cycle ahead of its peers.

The eurozone HCOB Manufacturing PMI came in at 52.2 in April. This was above the forecast of 50.8.

A reading above 50.0 shows an expansion in manufacturing activity. April’s result indicates manufacturing growth across the eurozone.

This stronger-than-expected manufacturing data suggests the Eurozone economy has more momentum than we previously thought. The reading of 52.2 is not just expansionary but indicates accelerating growth, which should be positive for corporate earnings. We see this as a clear signal to consider buying call options on broad European indices like the EURO STOXX 50.

This is a significant shift from the sentiment we saw through most of 2025, when the manufacturing sector was consistently showing signs of weakness. With core inflation figures from earlier this month already proving sticky at around 2.6%, this robust economic activity could force the European Central Bank to reconsider its dovish stance. We should therefore look at positions that would benefit from interest rates remaining higher for longer, such as selling Euribor futures contracts.

A strengthening economy will almost certainly translate to a stronger currency. The Euro has been struggling to gain ground against the dollar, but this data provides a fundamental reason for a rally. We anticipate the EUR/USD pair, which has been hovering near 1.08, could test higher resistance levels in the coming weeks.

Germany’s economy, being the manufacturing core of the Eurozone, stands to benefit the most from this trend. Looking back, the last time German factory orders saw a significant surprise jump in late 2025, the DAX index outperformed for the following month by nearly 2%. We believe call options on the DAX or on exchange-traded funds tracking German industrial companies are now particularly attractive.

The surprise nature of this data release may also increase market volatility. We can use this by selling out-of-the-money put options on major indices. This strategy allows us to collect premium while expressing a moderately bullish view on the market’s direction.