Canada’s Consumer Price Index rose 0.9% month on month in March. This was below the 1.1% forecast.

The release shows price levels increased at a slower pace than expected for that month. No further breakdown was provided in the data shared here.

The March inflation data, coming in at 0.9% month-over-month, was softer than the 1.1% we were all watching for. This suggests that the price pressures we saw building late last year may be easing faster than anticipated. This print is the first significant miss in three months and gives the Bank of Canada a reason to reconsider its hawkish tone.

Given this, we should look at interest rate derivatives that would profit from a more dovish central bank. Overnight index swaps are already reacting, with the market now pricing in a 55% chance of a rate cut by the Bank of Canada’s July meeting, a sharp increase from the 30% chance priced in yesterday. We should consider positioning for lower rates in the coming months as this data challenges the narrative for keeping rates elevated through the summer.

This shift in rate expectations makes the Canadian dollar less appealing. The loonie has already weakened against the U.S. dollar, falling below the 1.3600 level this morning on the news. We see an opportunity to use options to bet on further downside for the CAD, especially if upcoming employment data also shows signs of a cooling economy.

For equities, this environment is constructive as the prospect of lower borrowing costs can boost corporate earnings. We are looking at bullish strategies on the S&P/TSX 60, such as buying call options on rate-sensitive sectors like technology and real estate. This is similar to the pattern we observed in late 2024, when a slowdown in inflation preceded a strong rally in the stock market.

Canada’s Bank of Canada core Consumer Price Index (CPI) rose to 2.5% year on year in March. This was up from 2.3% in the previous reading.

The change shows core inflation increased by 0.2 percentage points from the prior month. The data refers to the Bank of Canada’s core CPI measure.

This jump in core inflation to 2.5% signals that underlying price pressures are proving stubborn. This moves the Bank of Canada further away from its 2% target, making an interest rate cut in the near term highly unlikely. We should be positioning for a more hawkish tone from the central bank in the coming weeks.

Given this, we see opportunities in selling interest rate futures, such as the three-month CORRA contracts, as the market prices out imminent rate cuts. In fact, overnight swaps now imply less than a 10% chance of a rate cut by the June meeting, a sharp drop from last week. The Canadian 2-year bond yield has already jumped 15 basis points, reflecting this new reality.

This revised outlook should provide a tailwind for the Canadian dollar, particularly against currencies with more dovish central banks. We are looking at buying CAD futures or using options to establish long positions on the loonie. This move comes as recent data shows Canadian average hourly wages grew by 4.8% year-over-year, adding fuel to inflationary concerns.

This is a notable shift from the disinflationary trend we observed for much of 2025. During that time, we saw the Bank of Canada hold rates steady with the expectation that inflation would continue its path downward. This recent data now questions the narrative that the fight against inflation is over.

For equity derivatives, this environment is a negative, as higher borrowing costs can pressure corporate earnings. We should consider buying put options on the S&P/TSX 60 index as a hedge or a speculative short position. The increased uncertainty also suggests that implied volatility may rise, making long volatility strategies potentially attractive.

Canada’s Bank of Canada CPI core (month-on-month) eased to 0.2% in March, down from 0.4% in the previous reading.

The data shows a slower pace of core price growth compared with the prior month.

With the March core inflation figure coming in at 0.2%, we see a clear signal that underlying price pressures are easing faster than anticipated. This sharp deceleration from the previous month puts a Bank of Canada rate cut firmly on the table for the coming meetings. Traders are now recalibrating expectations for a summer move, possibly as early as June.

We are seeing this shift reflected in derivatives pricing, with CORRA overnight index swaps now indicating a greater than 70% probability of a 25 basis point cut by the July policy meeting. This suggests traders should consider positioning for lower rates ahead. Receiving fixed on interest rate swaps or buying BAX futures are direct ways to act on this view.

This outlook for lower Canadian rates is already weakening the loonie, especially against the U.S. dollar where inflation remains more persistent. The USD/CAD exchange rate has pushed above 1.3750, a key technical level, as the policy paths of the two central banks diverge. Long positions in USD/CAD, either through spot or call options, appear increasingly favorable.

When we look back at the market chop throughout 2025, we recall how traders were waiting for a definitive break in the data to confirm the end of the tightening cycle. This March inflation report is a more powerful signal than any of the mixed readings we saw last year. It provides the confirmation the market has been seeking to position for an easing cycle.

This perspective is strengthened by Canada’s latest labour market data, which showed the national unemployment rate creeping up to 6.2%. With headline year-over-year inflation now down to 2.5%, the Bank of Canada has a clear runway to begin cutting rates before the US Federal Reserve. This reinforces the case for a weaker Canadian dollar and lower domestic bond yields in the weeks ahead.

EUR/USD recovered from an early dip and returned to around 1.1760 after falling below 1.1730. Gains stayed capped under 1.1770, which matches lows from late last week.

Market mood stayed cautious after US authorities seized an Iranian vessel and doubts grew about the ceasefire. Iran’s foreign ministry said Tehran might not attend a second round of peace talks due to start next Tuesday.

In Europe, Germany’s Producer Price Index rose 2.5% month on month in March, the strongest reading since August 2022. The data followed stronger wholesale prices and higher consumer inflation in several EU countries last week, adding to expectations of higher ECB rates in coming months.

EUR/USD traded just above 1.1750, with former support near 1.1770 now acting as resistance. On the 4-hour chart, the RSI eased to around 50 and the MACD histogram stayed negative.

Support held between 1.1720 and 1.1740, with further levels at 1.1680 (April 13 low) and 1.1660 (late March trendline). Resistance sits at 1.1770, then 1.1825 (April 16 high) and 1.1850.

We are seeing a familiar pattern of risk-off sentiment emerge, similar to what we observed around this time in 2025. The current tensions in the South China Sea are creating market anxiety, much like the US-Iran peace talk failures did last year. The US Dollar is gaining strength as a result, pushing EUR/USD down toward the 1.0700 level.

Last year’s concerns about European inflation, driven by events like the 2.5% jump in the March 2025 German PPI, have now faded. The European Central Bank is currently signaling potential rate cuts, with April 2026 inflation data showing a core rate of just 1.9%, below the bank’s target. This contrasts sharply with the hawkish pressure the ECB faced in 2025, adding further downward pressure on the Euro.

Given this environment, buying EUR/USD put options with a strike price below the key 1.0750 support level is a strategy to consider for the next few weeks. The Deutsche Bank Currency Volatility Index has risen 12% this month, suggesting options are pricing in larger moves, which could make this a profitable trade if the Euro weakens further. We are watching for a decisive break of that support, much like the 1.1680 level we monitored last April.

This risk-off tone also makes short positions against commodity-linked currencies attractive. The Australian dollar is particularly vulnerable, as iron ore prices have fallen 9% in the last month due to revised global growth forecasts from the World Bank. A long USD/AUD futures position or buying call options on the pair could benefit from this divergence.

It is important to remain cautious, as geopolitical headlines can reverse market sentiment quickly. Using option spreads can help define risk in this volatile environment. We only need to look back to the market reversal in late 2024 to see how rapidly capital can flow out of safe-haven assets on positive news.

Renewed tension around the Strait of Hormuz lifted Brent crude by nearly $10 from Friday’s low of $86 a barrel and weakened global risk assets. The US Dollar was slightly firmer.

Market moves followed reports of renewed blockade concerns, with the US Navy seizing an Iranian ship in the Gulf of Oman and Iran stating it would retaliate soon. The energy shock was described as not necessarily over, but with the worst likely already passed.

The US Dollar Index (DXY) was expected to remain within its nearly one-year 96.00–100.00 range. Interest rate differentials between the US and other major economies were cited as a factor supporting that range.

The Wall Street Journal reported that the United Arab Emirates is exploring a currency swap line with the US Federal Reserve or the US Treasury. The aim was described as hedging against a more severe economic shock linked to the Iran war.

The article said it was created with AI assistance and reviewed by an editor. It was attributed to the FXStreet Insights Team, which selects and publishes market observations from experts and analysts.

Looking back at the analysis from last year, the view was that the US Dollar Index (DXY) would stay within a 96.00-100.00 range despite the energy shock. While that held through much of 2025, the market dynamic has clearly changed. The dollar has since broken decisively above that range, forcing us to re-evaluate our positions.

The primary driver has been the persistence of interest rate differentials, a factor noted last year but one that has since become more pronounced. While the Federal Reserve has held rates steady in the face of stubborn inflation data through early 2026, other central banks like the ECB have signaled a more dovish path. The Fed funds rate remaining above 5% while European rates are falling has made holding dollars too attractive to ignore.

This changes the calculus for derivative traders who may have been selling volatility based on the old range-bound expectations. With the DXY now trading near 104.75, strategies should shift towards buying dips or using options to position for further upside. The period of low volatility in the dollar that we saw last year appears to be over for now.

The energy shock from the Strait of Hormuz in 2025 did eventually de-escalate as cooler heads prevailed, proving that the worst of that specific crisis was indeed contained. However, Brent crude has found a new floor, holding consistently above $90 per barrel throughout this year due to resilient global demand and tighter supply discipline from producers. This persistent price level continues to feed into global inflation concerns and supports the Fed’s hawkish stance.

The dollar’s dominant role, which we saw underscored last year when the UAE explored a Fed swap line, has only become more entrenched in the current environment. Global uncertainty continues to fuel a flight to safety, benefiting the dollar as the world’s primary reserve currency. For the coming weeks, we should consider using call spreads on the DXY to position for a potential test of the 106.00 level last seen in late 2024.

Gold (XAU/USD) was near-flat at $4,790 on Monday, supported by demand for the US Dollar amid threats to the US-Iran peace process. Over the past two weeks, it has traded in a horizontal channel, with resistance at $4,850.

Iran’s foreign ministry said it may skip the peace process after the US seized an Iranian cargo on Sunday, which Tehran called an “aggressive act” and a ceasefire violation. Markets still price in a chance of talks resuming on Tuesday, limiting further US Dollar gains.

Technically, gold remains neutral to slightly bearish below $4,850. On the 4-hour chart, the MACD is negative and the RSI is near 50, suggesting weaker upward momentum.

Support has held around $4,730, with the channel base near $4,600. A break above $4,850 (April 8, 14, and 15 highs) would point towards resistance just above $5,000.

Central banks are the largest holders of gold and often buy it to diversify reserves. They added 1,136 tonnes worth about $70 billion in 2022, the highest yearly purchase on record, with China, India, and Turkey among buyers.

Gold often moves inversely to the US Dollar and US Treasuries and can also be inversely linked to risk assets. Its price can react to geopolitical tension, recession fears, and interest-rate changes, while remaining sensitive to US Dollar moves because it is priced in dollars.

We remember looking at gold trading sideways around $4,790 in April 2025, caught between geopolitical jitters and a strong dollar. That tight range between $4,600 and $4,850 feels like a distant memory from today’s vantage point. Now, with the price consolidating well above the $5,200 mark, the market dynamics have clearly shifted.

The trend of central bank accumulation has only accelerated since we saw those reports from 2022. The World Gold Council’s final numbers for 2025 showed another record year of net purchases, easily surpassing the 1,082 tonnes bought in 2023. This persistent demand from official sectors continues to build a solid floor under the market, absorbing any significant dips.

Unlike last year, the primary concern now is stubbornly high inflation, with the latest March 2026 CPI data coming in at a sticky 3.8%. This environment has traders pricing in a pause from the Federal Reserve, with a potential rate cut now being considered for the third quarter. A pivot away from higher interest rates reduces the opportunity cost of holding non-yielding gold.

Given this supportive backdrop, we see traders moving away from the flat or bearish bias some held in 2025. A viable strategy for the coming weeks is purchasing call options to capture potential upside beyond the current consolidation range. For those wanting to reduce costs, a bull call spread could limit premium outlay while still profiting from a measured move towards the $5,400 level.

However, complacency is a risk, as geopolitical tensions in new hotspots could flare up unexpectedly, causing sharp, volatile swings. To prepare for this, some are considering long straddles, which would profit from a large price move in either direction. More cautious traders are simply buying out-of-the-money puts to hedge their long positions against a sudden reversal.

Brent futures have moved sharply on US–Iran conflict news and recently rebounded to $95/bbl. Physical supply remains tight, with shipping through the Strait of Hormuz severely constrained.

OPEC supply is estimated to have fallen by about 42% in March, with a similar drop expected in April. The base case assumes output starts to recover in May but does not fully return to normal for around nine months.

Across five major Middle East energy crises since 1956, supply normalisation took close to eight months on average. Expectations for Persian Gulf flows have shifted to slower improvement by mid‑May rather than late April.

The end‑2026 Brent forecast has been revised from $79/bbl to $85/bbl based on the slower path for supply to recover. Full normalisation is assumed only towards the end of 2026.

Even if hostilities end by late April, global inventories are not expected to start a sustained move back towards normal until late May at the earliest. Factors cited include shut‑ins, shipping limits, insurance constraints, port damage, and debris clearance.

We should look past the daily price swings driven by conflict headlines, which recently pushed Brent to $95 per barrel. The physical market is extremely tight due to severe logistical constraints in the Strait of Hormuz, with shipping insurance premiums reportedly tripling in the last month alone. This underlying tightness suggests that any price dips may be short-lived opportunities.

We are seeing a significant supply shock, with an estimated 42% drop in OPEC supply last month and a similar decline expected for April. Recent tanker tracking data confirms this, showing OPEC seaborne exports are down by over 4 million barrels per day so far this month. This is not a theoretical problem; barrels are actively being removed from the market right now.

History shows that unwinding these disruptions is a slow process, with past Middle East energy crises taking an average of eight months to normalize supply. Our base case is now a nine-month recovery period, meaning we won’t see full production return until early 2027. This suggests that betting on a quick return to lower prices is a high-risk strategy.

Global inventories are unlikely to start rebuilding until late May at the earliest, and recent data supports this view. For instance, the latest government reports show U.S. commercial crude inventories have drawn down by over 15 million barrels in the past four weeks, a rate far exceeding the seasonal average. These draws confirm that demand is outpacing the currently constrained supply.

Given the revised end-of-year forecast towards $85 per barrel, traders should consider positioning for sustained or higher prices. The current environment favors strategies that benefit from this upward price pressure, such as buying call options or establishing bull call spreads. These positions can capitalize on the slow supply normalization expected through the second half of the year.

The US Dollar rose from 0.7775 against the Swiss Franc on Friday, but it stayed below 0.7845 on Monday. This keeps the short-term downward trend in place.

Market mood turned cautious on Monday as expectations of a quick end to the Middle East war eased. The Dollar got slight support after the US seized an Iranian cargo vessel in the Gulf of Oman on Sunday, and Iran threatened to miss peace talks due on Tuesday.

Most Dollar pairs stayed near last week’s peaks as markets continued to expect talks between Washington and Tehran to resume this week. USD/CHF has fallen from around 0.8050 since late March and found support near 0.7775 at the 61.8% Fibonacci retracement from the 27 January low to the 31 March high.

On the 4-hour chart, the RSI moved from oversold levels to the low-40s. The MACD sits just above zero with a mild upward slope, pointing to weaker selling pressure rather than a clear rise.

A break above 0.7845 (16 April high) could shift focus to about 0.7930 (8 and 10 April highs) and a falling trendline near 0.7950. Below 0.7775, targets include 0.7700 (78.2% retracement) and 0.7670 (27 February low).

Looking back at the analysis from April 2025, we can see the market was balancing on a knife’s edge. The cautious optimism that Washington and Tehran would return to the negotiating table proved to be misplaced. The talks officially collapsed in the final week of that month, triggering a significant safe-haven flow that pushed USD/CHF decisively through the 0.7700 support level we were monitoring.

The immediate aftermath saw a surge in market uncertainty, which was clearly reflected in the derivatives market. In May 2025, one-month implied volatility on USD/CHF options jumped from around 7% to over 12% as traders scrambled to hedge against further downside. This flight to safety was so pronounced that the Swiss National Bank’s foreign currency reserves grew by over CHF 40 billion in the second quarter of 2025, signaling heavy intervention to weaken the franc.

That geopolitical breakdown set the bearish tone for the last twelve months, establishing a new, lower trading range for the pair. The persistently strong Franc has had a tangible economic impact, with Swiss manufacturing PMI dipping below the 50-point growth threshold for two consecutive quarters in late 2025. We now see the pair consolidating around the 0.7550 level, well below the action from last year.

For the coming weeks, traders should consider selling out-of-the-money puts to collect premium, as the 0.7500 level has proven to be a durable floor supported by central bank vigilance. However, given the recent whispers of renewed back-channel communications between US and Iranian officials, buying long-dated, low-cost call options is a prudent strategy. This offers exposure to a potential sharp upward reversal should a diplomatic surprise emerge, without risking significant capital in the current sideways grind.

OCBC strategists Sim Moh Siong and Christopher Wong report that the Japanese government bond (JGB) yield curve has steepened since the energy shock linked to the US–Iran war. They say this has raised questions about Bank of Japan (BoJ) policy credibility, contrasting with JGB curve flattening seen across other G10 markets after February.

They expect the BoJ to raise rates by 25 bp on 28 April, though market pricing still allows for a hawkish hold. They add that concern is growing that the BoJ is not keeping pace with current conditions, which increases pressure for a move in April.

They warn that if the BoJ does not hike, USD/JPY could rise into the 160s. They say this could lead the Ministry of Finance to intervene, aiming to bring the pair back towards 155.

They also reference recent messaging from Finance Minister Katayama as indicating readiness to act. They keep an end-2026 USD/JPY target of 155.

The Bank of Japan is facing a growing credibility challenge, as the sharp steepening in the JGB curve shows. Following the energy shock from the US-Iran war, the spread between Japan’s 2- and 10-year government bonds has widened to over 120 basis points, a stark contrast to the curve flattening we saw across other major economies in late 2025. This signals that the market believes the BoJ is not acting fast enough to control inflation.

With the crucial policy meeting on April 28 just days away, traders should prepare for a significant spike in currency volatility. One-week implied volatility for USD/JPY has already surged to 16%, well above the year’s average, reflecting the market’s nervousness about a binary outcome. A straddle or strangle option strategy could be effective, as it profits from a large price movement in either direction without betting on the specific outcome of the meeting.

If the BoJ fails to deliver the expected 25 basis point hike, we could see USD/JPY quickly push into the 160-162 range. Traders might consider buying short-dated call options with strike prices around 159 to capitalize on this potential overshoot. This “hawkish hold” scenario would be interpreted as a policy failure, likely triggering a rapid sell-off in the yen.

However, any move above 160 would almost certainly trigger intervention from the Ministry of Finance. We saw forceful action back in 2022 when the ministry spent over ¥9 trillion to defend the yen as it approached 152. Recent warnings from Finance Minister Katayama suggest a similar playbook, creating a significant risk that any gains on USD/JPY call options could be abruptly erased as the pair is pushed back toward 155.

Alternatively, if the BoJ follows through with a 25 basis point hike, the yen is likely to strengthen immediately. In this case, USD/JPY put options would be the appropriate tool, with traders targeting a move back towards the 155 level. This outcome would help restore some of the central bank’s damaged credibility.

Even with a potential rate hike, we remain cautious on the yen’s long-term prospects. Our end-of-year target for USD/JPY remains at 155, suggesting that any post-hike yen strength may be limited. This implies that selling longer-dated yen calls on dips in the currency pair could be a prudent strategy over the coming months.

Sterling traded unevenly against major currencies in Monday’s European session. The currency may stay volatile as the UK releases employment, inflation and retail sales data this week.

Employment figures for the three months to February are due on Tuesday. Average Earnings Excluding Bonuses are forecast at 3.5% year on year, down from 3.8%, while the ILO unemployment rate is seen at 5.2%.

Wednesday’s CPI report is expected to show headline inflation at 3% year on year, unchanged from February. Retail sales for March, due Friday, are forecast to rise 0.2% month on month after a 0.4% fall in February.

Markets will also watch the preliminary UK S&P Global PMI data for April on Thursday. Recent remarks from Bank of England Governor Andrew Bailey at the IMF indicated rates may be kept steady at the 30 April policy meeting.

Against the US dollar, GBP/USD recovered most early losses and rose to about 1.3515. The pair remained uncertain amid questions over further US–Iran talks, after Iran’s foreign ministry spokesperson Esmail Baghaei said there is “no plan for a second round of negotiations with the United States for now.”

The Pound is facing a familiar period of volatility, driven by a heavy schedule of economic data releases. We saw a similar setup around this time in 2025 when uncertainty over inflation and wage growth kept the Bank of England on hold. This week’s data on jobs, inflation, and retail spending will be critical in shaping the BoE’s next move.

Looking back to last year, the April 2025 data showed wage growth slowing to 3.5% while inflation remained stubbornly high at 3%, which created choppy conditions for the currency. The Bank of England ultimately held interest rates steady at its April 30 meeting, just as Governor Bailey had hinted. This rewarded traders who were positioned for volatility rather than a clear directional move.

The situation today in April 2026 has parallels, though the numbers have shifted. We have seen inflation fall significantly over the past year, but the latest reading for March 2026 came in at 2.8%, still stubbornly above the Bank’s 2% target. Meanwhile, wage growth has moderated to 4.5%, which is lower but still a key concern for policymakers fearing a second wave of inflation.

Given the expected swings following the data releases this week, using options strategies to trade the volatility itself appears prudent. A long straddle, which involves buying both a call and a put option with the same strike price and expiry, could profit from a significant price move in either direction. This avoids the risk of betting on whether the economic news will be positive or negative for the Pound.

For those with existing exposure to the Pound Sterling, the uncertainty surrounding the BoE’s interest rate path makes hedging a sensible approach. Locking in an exchange rate using forward contracts can protect against adverse currency movements in the coming weeks. The BoE is currently not expected to cut rates at its next meeting, but a surprisingly weak inflation or jobs report could change that outlook very quickly.

Against the US Dollar, the Pound Sterling is trading near 1.2850, with its direction influenced by both UK data and global risk sentiment. Last year we saw tensions between the US and Iran weighing on the pair. Today, ongoing global trade negotiations and fluctuating energy prices are creating a similarly uncertain backdrop, reinforcing the case for cautious positioning.