Financial markets are cautious on Friday, with participants avoiding risk while waiting for clarity on the next round of US-Iran negotiations. There are no top-tier economic data releases, keeping attention on geopolitics and central bank comments.
US President Donald Trump said on Thursday that Israel and Lebanon agreed to a 10-day ceasefire. Israeli Prime Minister Benjamin Netanyahu later said Israel has not agreed to withdraw from southern Lebanon, and the Israeli military said troops will stay in a 10-km deep security zone and warned residents not to return.
NBC News reported that a senior Iranian official said a permanent ceasefire would depend on adherence to Iran’s conditions and those of “the resistance”. The UK and France will chair a meeting on freedom of navigation in the Strait of Hormuz, with representatives from around 40 countries, and there are reports the second round of US-Iran talks could take place this weekend.
The US Dollar Index is steady above 98.00 in the European morning, after a marginal rise on Thursday, while US stock index futures are mixed. EUR/USD is near 1.1780 after a 0.15% fall, with Eurostat due to release February trade balance data.
GBP/USD fell 0.25% on Thursday and is slightly above 1.3500. USD/JPY dipped below 158.30 to a weekly low on Thursday, then ended slightly higher and is above 159.00, while gold is around $4,800 after little change.
Looking back to this time in 2025, we recall the cautious mood driven by US-Iran negotiations and a fragile ceasefire in Lebanon. That period of geopolitical tension served as a reminder of how quickly risk sentiment can shift. Today, while those specific headlines have faded, the underlying instability in the region remains a key factor.
The implied volatility from last year’s events stands in contrast to today’s market, where the VIX has been hovering near 15, well below its recent peaks. This suggests the market might be underpricing the risk of a sudden shock. We should consider buying cheap, out-of-the-money call options on the VIX as a hedge against complacency.
In 2025, we were watching the Strait of Hormuz, a critical chokepoint for global energy. Those tensions have eased, and Brent crude has since stabilized in a range between $85 and $90 per barrel. However, any renewed flare-up could cause a rapid spike, so using call spreads on oil futures could be a cost-effective way to position for upside risk.
The US Dollar Index was strong above 98 back then, acting as a clear safe-haven asset. The dollar’s dominance has only increased since, with the DXY recently pushing above 106 on the back of persistent inflation data from the first quarter of 2026. This trend suggests that being long the dollar against currencies with dovish central banks remains a viable strategy.
Gold’s behavior last year, holding steady at an extreme $4,800, showed its value during peak uncertainty. While it has retreated from those fictional highs, gold recently made new record highs above $2,400 per ounce in April 2026, driven more by central bank buying and inflation hedging. This shows the drivers for gold have shifted from acute crisis to chronic macro risk.
The pressure we saw on the Japanese Yen in 2025, with USD/JPY above 159, is a story we are seeing again today as the pair tests the 155 level. The risk of direct intervention from the Bank of Japan is now extremely high, a factor that was only a distant threat a year ago. Traders should be cautious with long positions and could use puts on USD/JPY to protect against a sharp, sudden reversal.
Written on April 17, 2026 at 12:36 pm, by josephine
Gold stayed under $4,800 for a third day on Friday in early European trading. Diplomatic activity on the Middle East conflict continued, while US-Iran friction remained due to an American naval blockade of Iranian ports, supporting the US dollar and weighing on gold.
A 10-day truce between Israel and Lebanon improved risk sentiment. US President Donald Trump said on Thursday that Iran was close to a deal, and the Wall Street Journal reported the two sides agreed in principle to hold fresh talks, with no time or venue set.
US PPI data earlier this week reduced inflation worries linked to higher energy prices. Traders are pricing about a 30% chance of a Federal Reserve rate cut by year-end, which has limited the dollar’s rebound from its lowest level since late February and helped gold recover from $4,768–$4,767.
No major US data is due on Friday, so attention turns to speeches from key FOMC members. Markets are also watching for possible US-Iran talks this weekend, and the pair is still on course for modest gains for a fourth straight week.
Technically, gold failed to clear the 200-period 4-hour SMA and needs follow-through selling below $4,765 to add downside pressure. RSI is near 50, MACD is below zero, resistance sits near $4,814 and $4,912, while support levels include $4,759, $4,606, and $4,416.
Given the conflicting signals, we see gold caught between a strong US Dollar and the possibility of de-escalation in the Middle East. The ongoing naval blockade of Iran keeps the dollar bid as a safe haven, which is a headwind for gold prices. However, the planned peace talks this weekend could sharply reverse that sentiment, making directional bets risky.
For derivative traders, this suggests focusing on volatility rather than direction over the next couple of weeks. The CBOE Gold Volatility Index (GVZ) has already ticked up to 21.5, reflecting the market’s nervousness ahead of the potential US-Iran talks. We believe options strategies like long straddles could be useful to capitalize on a significant price move, regardless of whether it’s up or down.
The softer Producer Price Index data we saw earlier in the week has reinforced our view that the Federal Reserve will remain on hold. Looking back at the latest CFTC data released last Tuesday, we noted that managed money accounts slightly reduced their net-long exposure for the first time in four weeks, indicating some profit-taking. This cautious positioning confirms that while geopolitical risk is high, the market is not yet willing to price out the supportive effect of a neutral Fed.
Technically, we should wait for confirmation before acting. We will watch the $4,759 level closely, as a sustained break below it could open the door for a deeper correction towards $4,606. We remember the whipsaw price action in oil markets during the initial Iran deal talks back in 2015, and we expect similar volatility for gold now.
Written on April 17, 2026 at 12:32 pm, by josephine
NZD/USD fell for a second day on Friday after pulling back from 0.5920–0.5925, its highest level since 11 March. The pair stayed below 0.5900 in early European trading, with limited momentum.
Market caution continued despite a 10-day truce between Israel and Lebanon, due to disruption risks in the Strait of Hormuz linked to a US naval blockade of Iranian ports. This supported the US Dollar after it recovered from its lowest level since late February, putting pressure on NZD/USD.
The US Dollar’s advance was limited by reports of renewed diplomatic contact with Iran. US President Donald Trump said on Thursday that Iran was close to making a deal, while the Wall Street Journal reported that Washington and Tehran have agreed in principle to hold fresh talks, with no time or venue set.
Lower expectations for tighter US monetary policy also restrained the US Dollar. Traders are pricing in roughly a 30% chance of a Fed rate cut by year-end, which reduced demand for the Dollar and helped limit NZD/USD losses.
Attention now turns to speeches from influential FOMC members and further updates on US-Iran talks. Despite the latest dip, NZD/USD remains on course for a second weekly gain in a row.
We remember looking back at 2025 when the NZD/USD was caught in a tug-of-war below the 0.5900 level. Geopolitical risks in the Strait of Hormuz provided support for the safe-haven US dollar. However, shifting expectations around Federal Reserve policy and hopes for diplomacy created a ceiling, leading to choppy price action.
Today, we are seeing a similar dynamic with rising tensions in the South China Sea, which is again boosting safe-haven demand for the US dollar. We saw the VIX, a key measure of market fear, spike over 20 during the Hormuz incident in 2025, and it is currently elevated at 18. This suggests traders are pricing in higher risk, which typically benefits the dollar and weighs on risk-sensitive currencies like the Kiwi.
The crucial difference for us now is the clearer policy divergence between the central banks. While New Zealand’s latest quarterly inflation figure was a sticky 3.1%, putting pressure on the RBNZ to remain hawkish, this month’s US Core CPI print of 2.8% keeps the Federal Reserve in a more patient stance. This fundamental conflict between a hawkish RBNZ and a data-dependent Fed is likely to cap any major moves in either direction.
For derivative traders, this suggests that buying volatility could be a prudent strategy in the coming weeks. With geopolitical headlines creating the potential for sharp but short-lived moves, options strategies like long straddles or strangles on the pair could be effective. The market is now pricing in only a 40% chance of a Fed rate cut by July, down from 65% last month, highlighting the policy uncertainty that will continue to fuel volatility.
Given the opposing forces, selling options premium with defined risk may also be an attractive approach. Strategies like iron condors could capitalize on the expectation that the pair will remain range-bound, caught between geopolitical fears and central bank policy differences. In this environment, using options to clearly define risk seems more sensible than holding an outright directional spot position.
Written on April 17, 2026 at 12:17 pm, by josephine
The US Dollar Index (DXY) traded near 98.30 during European hours on Friday, rising for a second day but staying below 98.50. On the daily chart it remains inside a descending channel, which points to a bearish bias.
The index is below short-term averages, with the nine-period and 50-period Exponential Moving Averages now acting as resistance after being broken. The 14-day Relative Strength Index is around 40, showing weaker downside momentum that is still dominant.
Support is near 97.50 at the lower edge of the channel. A break below the channel could push prices towards 95.56, the lowest level since February 2022, last reached on 27 January.
Resistance levels include the nine-day EMA at 98.58 and the 50-day EMA at 98.87, followed by the channel top near 99.10. A move above this area could shift price action towards 100.64, a nearly 10-month high set on 31 March.
We recall watching the dollar index struggle below 98.50 back in the spring of 2025, with a clear bearish bias dominating the charts. That descending channel held for a time, but the fundamental picture has since forced a major reversal. This presents a different set of opportunities for traders today.
Today, with the index trading firmly around 104.15, the landscape is entirely different. Recent data, such as the March core CPI coming in at a sticky 3.7%, has forced the market to reconsider the Federal Reserve’s path. We have seen expectations for 2026 rate cuts dwindle from three to just one, providing strong underlying support for the dollar.
For derivative traders, this sustained strength suggests buying call options on the dollar index for the coming weeks is a viable strategy. Look for expirations in May or June to capture continued momentum from this hawkish Fed repricing. Implied volatility has ticked up, so consider using bull call spreads to cheapen the entry and define risk.
The dollar’s strength is also a story of relative economic performance, a trend we’ve seen solidifying since late 2025. With the latest Eurozone manufacturing PMI remaining in contraction territory at 45.8, the divergence between the US and European economies is widening. This makes buying put options on currencies like the Euro a compelling parallel trade to a long dollar position.
Written on April 17, 2026 at 12:11 pm, by josephine
Global oil production has fallen more sharply than in any oil crisis of the past 50 years, due to the blockade of the Strait of Hormuz and attacks on oil production and loading sites in the Persian Gulf region. The IEA estimates daily crude output has dropped by at least 10 million barrels since the start of the Iran War, or about 12% of global production.
Oil prices have risen less than in the 1970s oil shocks. The annual average oil price in 1974 was 250% higher than in 1973, and in 1979 a barrel of crude oil was about 125% above the previous year’s average, while this year the price is forecast to be at most 60% higher than the prior year’s average.
Energy Intensity And Economic Impact
Developed countries now use less oil per unit of output than 50 years ago, which reduces the loss of purchasing power from higher prices. In the first oil crisis, Germany’s oil bill rose by 2.5% of GDP and Japan’s by nearly 4%, while a $40 per barrel rise is projected to lift oil bills by 0.5% to 1% of GDP in four countries examined.
The outlook remains uncertain due to possible supply chain disruption and long-lasting damage to Gulf energy infrastructure. The article was produced using an AI tool and reviewed by an editor.
Looking back at the analysis of the 2025 Iran War, we learned that even a massive supply disruption didn’t trigger the catastrophic price spirals seen in the 1970s. Advanced economies have become more resilient due to lower oil intensity and the use of strategic reserves. This reshapes our approach, as the old playbook for trading oil crises may now be outdated.
In the coming weeks, this suggests that implied volatility on oil options might be structurally overpriced during geopolitical scares. The 2025 crisis saw prices rise by only 60%, far less than historical events, meaning many out-of-the-money call options expired worthless. We are currently seeing the CBOE Crude Oil Volatility Index (OVX) sitting near 35, well below its 2025 peak of over 80, indicating the market is slowly learning this lesson.
Rates And Cross Asset Positioning
The smaller-than-expected hit to GDP also has implications for interest rate derivatives. We recall that in late 2025, markets priced in aggressive central bank rate cuts that never fully materialized because the economic damage was contained. This suggests that during the next energy shock, there may be an opportunity in positioning against excessive dovish expectations in the Eurodollar or Fed Funds futures markets.
However, we must consider the warning about lasting damage to energy infrastructure, which creates a higher floor for prices. Recent reports from April 2026 indicate that several Persian Gulf loading facilities are still operating below pre-2025 capacity, keeping a risk premium in the market. This makes holding some long-dated oil futures or call options a prudent hedge against the slow pace of repairs.
Given that economies are less oil-intensive, we can look at relative value trades. In 2025, we observed that futures on consumer discretionary and technology indices recovered much faster than those tied to heavy industry or transportation. This pattern suggests that in periods of energy uncertainty, a pairs trade that is long a tech-focused index and short an industrial-focused index could perform well.
BNY said US dollar moves are shaping Q2 diversification choices, as the Rest of World (ROW) equity index has shown a strong correlation with the USD index over the past year. It said markets outside the US have recovered to pre-war levels, alongside the USD, during a risk rally and renewed USD selling.
Since “liberation day”, the S&P 500 rose 26% and the ROW top 20 companies rose 13%. It also noted a sharp divergence in trends between the S&P 500 and the ROW index.
Dollar Direction Drives Allocation
BNY said central bank policy is affecting currencies, with European Central Bank expectations of two 25bp hikes in 2026 priced in. It said the Fed has a 40% chance of one cut, and this gap moved EUR from 1.15 to 1.18 this week.
It said emerging markets are facing a feedback loop linked to USD moves and central bank intervention risk. It added that further intervention could keep front-end rates tighter across global markets.
The article was produced using an AI tool and reviewed by an editor.
The path of the U.S. dollar is the most important factor for our diversification choices this quarter, as its direction will likely determine whether international or domestic stocks lead. We’ve seen US stocks outperform the Rest of World (ROW) index significantly since the market rally began. This relationship is clear, as the ROW index has shown a strong inverse correlation to the dollar index over the last year.
Trade The Divergence With Options
This divergence is being driven by central bank policy expectations. The market is now pricing in two 25 basis point hikes from the European Central Bank in 2026, while the odds of a Federal Reserve rate cut have fallen to around 30% following last week’s slightly higher-than-expected US inflation report. This policy split has pushed the EUR/USD pair from 1.15 towards 1.18.
For derivative traders, this means options on the U.S. Dollar Index (DXY), currently hovering around 105.5, could be a direct way to position for a move. A weaker dollar would likely benefit international equity ETFs, making calls on those instruments attractive. Conversely, a stronger dollar would favor continued US outperformance.
We should also consider options strategies that play on the gap between the S&P 500 and ROW indices. As we move deeper into the Q2 earnings season, CEO guidance on managing supply shocks and protecting margins will be crucial for market direction. Any sign of weakening US corporate outlooks could accelerate a rotation into international markets.
Emerging markets present a more complex picture due to the risk of central bank interventions to support their currencies. This keeps their local interest rates tight, creating a headwind for equities. Historically, we have seen that a strong dollar, like the one we observed for much of 2025, tends to weigh heavily on emerging market ETFs.
China’s electric vehicles are charging ahead, threatening to dominate global markets with a mix of unbeatable prices and cutting-edge tech.
Chinese automakers are increasingly making their mark in the global electric vehicle (EV) market. With rising exports to Europe, Southeast Asia, and Latin America, China’s EV sector is becoming a major player, not just because of its cost advantage but also due to significant technological progress. The introduction of faster charging and advanced battery technologies is changing how the world views Chinese EVs. But while cost remains a key strength, technological advancements are starting to set Chinese manufacturers apart.
Can Chinese Automakers Lead the EV Revolution Globally?
The growing momentum of China’s EV exports is exciting, but the industry still faces hurdles. While Chinese automakers are making impressive technological strides and are well-positioned on cost, they have yet to fully overcome market perceptions of being “cheap” and the pressures of entering premium markets in North America and Europe. In addition, trade tensions and rising lithium prices could impact growth. For China’s EV brands to succeed on the global stage, they’ll need to address these obstacles head-on.
Chinese EV Exports: Strong Demand, Rising Growth
One of the key drivers behind China’s growing dominance in the global EV market is the rapid expansion of EV exports. Over the past year, Chinese EV exports have jumped by 50%, particularly to Europe and Southeast Asia. This has helped sustain industry growth as Chinese brands carve out their share in markets previously dominated by Western and Japanese automakers. Even as EV and new energy vehicle (NEV) shipments rise, gasoline‑engine cars still account for a big slice of China’s export volumes.
But it’s not just about quantity. The vehicles China is exporting are becoming more technologically advanced, offering more than just low cost. This shift is evident in the growing demand for EVs in markets like Europe, where Chinese automakers such as BYD and NIO are gaining traction with value-driven, high-tech models that offer better features, including ultra-fast charging and long-range batteries.
How China’s Battery Makers Are Leading the Charge
A significant reason for China’s success in the EV market is its control over the global battery supply chain. Contemporary Amperex Technology Co. Limited (CATL), the world’s largest EV battery manufacturer, is at the forefront of this. CATL’s innovations in battery technology, such as ultra-fast charging and energy storage systems, are driving China’s technological push. The company’s recent performance exceeded expectations, despite slower EV sales in China, thanks to the success of its energy storage systems business.
Battery prices, which account for a significant portion of EV costs, have continued to fall, even as raw material prices rise. Battery prices have fallen significantly over the past decade, with prices dropping from over $400 per kWh to around $108–$115 per kWh in recent years. Approximately 14% year-over-year, thanks to improvements in manufacturing scale and chemistry optimisation.
While lithium remains an important factor, the increasing efficiency in battery production is enabling Chinese automakers to maintain cost-competitiveness despite the volatility in raw material prices.
Lithium Price Volatility and its Impact on Battery Costs:
Lithium prices have experienced significant volatility in recent years, with prices doubling in early 2026, adding pressure to battery production costs. This directly impacts battery production, but Chinese manufacturers are mitigating these costs by optimising battery chemistries and pursuing vertical integration. CATL’s investment in raw material sources ensures it is less exposed to price fluctuations. Moreover, lithium price hikes have prompted increased investment into alternative battery chemistries, like LFP (Lithium Iron Phosphate), which are less sensitive to lithium price volatility. These developments demonstrate China’s adaptability in navigating price pressures while pushing technological innovation forward.
The Risks: Perception, Competition, and Geopolitics
Despite these advancements, the Chinese EV industry faces significant hurdles that could constrain its global aspirations.
Brand Perception and Trust in Premium Markets: Chinese EVs are often seen as inexpensive alternatives rather than premium products. This perception can make it harder for Chinese brands to break into more established markets, like the U.S. and Western Europe, where consumers place a higher value on the marketing of brand trust and luxury appeal. The challenge for Chinese automakers lies in overcoming this perception to successfully penetrate premium segments. Unlike Tesla, which has successfully positioned itself as a premium brand, for Chinese automakers to succeed in these markets, they will need to demonstrate that their EVs are not only cost-effective but also of the highest quality and innovation.
Geopolitical Tensions and Trade Barriers: As Chinese automakers push to expand into foreign markets, they face mounting geopolitical tensions and trade barriers. Both the U.S. and the European Union have voiced concerns about the influx of Chinese-made EVs, leading to the imposition of tariffs and protectionist policies. These trade restrictions could limit Chinese EV manufacturers’ growth prospects, particularly in premium markets.
Raw Material Supply and Battery Cost Pressures: Lithium, a key raw material in EV batteries, has been subject to price volatility. While Chinese battery manufacturers have managed to counteract some of the effects of rising lithium prices, increasing costs for raw materials could eventually limit the ability to lower EV prices. This could also lead to higher costs for consumers and possibly reduce demand in more price-sensitive markets.
What Investors and Traders Should Watch
The future of China’s EV industry looks promising, thanks to rising exports, cutting-edge battery technology, and cost advantages. However, Chinese automakers face significant hurdles. Brand perception, competition in premium markets, geopolitical challenges, and the rising cost of raw materials all pose risks to their global ambitions.
For investors and traders, there are a few key factors to monitor moving forward:
CATL’s expansion and its ability to manage raw material volatility
Chinese EV export growth to international markets, particularly in Europe and Southeast Asia
Geopolitical developments and their potential impact on market access
Battery price trends and the potential for cost-passing to consumers
Key Stocks to Watch with VT Markets
As the dynamics of the EV market evolve, certain stocks are poised to benefit or face challenges from these shifts. Automakers are at the centre of this evolving landscape, with Tesla, BYD, Ford, and GM standing out as companies to watch as they navigate the rising costs and competition in the global EV market.
VT Markets provides access to some of these opportunities across our full suite of trading platforms supported by advanced trading tools designed for every trading style.The EV market is still evolving rapidly, and China’s role in this transformation will continue to shape the future of electric transportation. The next few years will determine whether Chinese automakers can overcome their challenges and secure a dominant position in the global EV market. For now, investors should remain focused on brand evolution, export trends, and the broader geopolitical landscape that will determine how fast Chinese brands can expand and compete in the West.
Why are Chinese EVs gaining popularity in international markets? Chinese EVs are becoming more popular internationally due to their cost-effectiveness, advanced technology, and growing exports to regions like Europe and Southeast Asia. These vehicles offer a strong mix of affordability and high-tech features, which have made them competitive against traditional brands.
How are rising lithium prices affecting the EV industry? Rising lithium prices directly impact the cost of EV batteries, which account for a significant portion of an EV’s total cost. As lithium prices increase, automakers may pass the costs onto consumers, which could limit demand, especially in price-sensitive markets.
What role does CATL play in the global EV market? CATL, the world’s largest battery maker, plays a crucial role in supplying batteries to EV manufacturers worldwide. The company’s ability to innovate in battery technology and manage raw material costs is vital for the continued growth of the EV sector.
How will geopolitical tensions affect Chinese EV exports? Geopolitical tensions, such as trade barriers and tariffs, could limit Chinese automakers’ ability to expand into key international markets. These trade restrictions might make it more difficult for Chinese EVs to reach consumers in regions like the U.S. and Europe.
Can Chinese automakers compete in the premium EV market? While Chinese automakers excel in cost-efficiency, they face challenges in penetrating the premium EV market, where brand trust and luxury appeal are key. Overcoming perceptions of being “cheap” and proving the quality of their products will be crucial to their success in high-end markets.
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GBP/JPY gave up a small rise after moving up to 215.65–215.70 in early European trading on Friday. It slipped back towards 215.30–215.25 and stayed within a three-day range, near flat on the day.
Sterling remained under pressure despite better-than-expected monthly UK GDP data released on Thursday. IMF forecasts dated April 2026 cut the UK’s 2026 growth outlook to 0.8%, down from 1.3% in October 2025, and described the UK as the most exposed G7 economy to effects linked to the Iran war.
The yen stayed weak amid concern about economic strain from disruption to shipping through the Strait of Hormuz. Reduced market pricing for a Bank of Japan rate rise in April also weighed on the yen, limiting downside in GBP/JPY.
The pair’s pullback has so far not confirmed a near-term peak. Earlier this week it reached around 216.00, its highest level since July 2008.
We see the GBP/JPY cross struggling near multi-year highs, indicating a potential stalemate that derivative traders can exploit. The recent price action is trapped in a tight range around 215.00, as conflicting economic pressures on both the Pound and the Yen prevent a clear breakout. This has pushed one-month implied volatility for the pair up to 13.5%, its highest level in over a year, suggesting the market is bracing for a significant move.
The drag on Sterling is significant following the IMF’s recent growth downgrade for the UK, cutting the 2026 forecast to just 0.8% from the 1.3% we saw in October 2025. This highlights the UK’s exposure to the conflict in the Middle East and the resulting supply chain issues. Traders anticipating further GBP weakness could consider buying put options with a strike price below the 214.50 support level.
However, pronounced weakness in the Japanese Yen is limiting any major downside for the pair. With the Strait of Hormuz seeing shipping disruptions, a key channel for roughly 25% of the world’s oil supply, Japan’s energy-import-dependent economy is under severe strain. This pressure, combined with signals that the Bank of Japan will likely delay a follow-up interest rate hike, keeps the Yen unattractive.
Given these opposing forces, a non-directional strategy seems prudent in the coming weeks. We believe buying a one-month straddle, which involves purchasing both a call and a put option at the same strike price, could be effective. This position would profit from a sharp price movement in either direction once the current consolidation breaks.
For those with a higher risk tolerance who believe the stalemate will persist, selling options premium is an alternative. An iron condor, with short strikes set outside the recent 214.00-216.50 range, could generate income from the elevated volatility. This strategy benefits if GBP/JPY remains range-bound as we approach option expiry dates in May.
Written on April 17, 2026 at 11:05 am, by josephine
The S&P 500 closed at another record high, rising 0.26%, while the NASDAQ gained 0.36% and extended its winning run to 12 sessions, its longest streak since 2009.
Brent crude rose 4.70% to $99.39 per barrel, yet US equities continued to move higher despite the jump in oil prices.
Deutsche Bank noted that the current S&P 500 advance over 11 business days is one of the strongest in recent years, with a 10.7% rise since 30 March used as a reference point.
The bank also pointed to March 2022 as the last time there was a larger 11-day move in the index, when gains were linked to expectations of an early ceasefire in the Russia-Ukraine war, before equities later weakened.
The piece says it was produced using an artificial intelligence tool and reviewed by an editor.
The S&P 500 is currently pushing record highs near 6200, and this market strength feels very familiar. We are looking back at analysis from mid-2025, which warned that a sharp rally then looked just like the false one in March 2022 that quickly reversed. The current environment presents a similar warning sign for us today.
Complacency seems to be setting in, as the CBOE Volatility Index (VIX) is sitting at a low 13.5, indicating very little fear among investors. The equity put-to-call ratio has also dipped to 0.65, showing that traders are buying far fewer protective puts compared to bullish calls. This lack of demand for insurance often appears just before the market sentiment shifts.
Underneath the surface, the latest Consumer Price Index (CPI) report came in slightly hotter than expected at 3.4%, a reminder that inflationary pressures have not been fully extinguished. This makes the foundation of the current rally feel fragile, much like the 2022 rally that was built on ultimately hollow hopes of a ceasefire. We saw a similar dynamic in 2025 when strong market gains ignored rising oil prices, a risk that was quickly repriced.
Therefore, we should consider using the current low volatility to buy downside protection before it gets more expensive. Purchasing out-of-the-money puts on the SPY or QQQ ETFs could provide an effective hedge against a sudden drop. This is a moment to be cautious, as history suggests such rapid, complacent rallies can reverse just as quickly.
Written on April 17, 2026 at 11:01 am, by josephine
USD/CAD fell to around 1.3685 in early European trading on Friday. Reports of a 10-day ceasefire between Israel and Lebanon reduced demand for the US Dollar as a safe-haven, while Canada’s March CPI data is due later on Friday.
On Thursday, US President Donald Trump said the US and Iran are “very close” to a deal, and that talks could resume as early as this weekend. Markets are also watching for a second round of US-Iran talks this weekend, with any progress linked to lower support for the US Dollar.
Rising crude oil prices and supply issues tied to the Middle East conflict are expected to lift petrol prices in Canada’s March inflation report. BMO Capital Markets said higher energy costs could push headline inflation back towards 3% in the coming months.
Bank of Canada Governor Tiff Macklem said the BoC will “look through” near-term inflation spikes from higher energy prices. He added that the central bank is prepared to respond if price pressures spread more widely through the economy.
The Canadian Dollar is influenced by BoC interest rates, oil prices, domestic growth, inflation, and the trade balance. The BoC targets inflation of 1–3% and can also use quantitative easing or tightening to affect credit conditions.
With the USD/CAD pair trending down to 1.3685, we see the immediate impact of easing geopolitical tensions. The ceasefire reports and potential for new US-Iran talks are weakening the US Dollar’s safe-haven appeal, a trend confirmed by the Dollar Index (DXY) which has fallen over 1% in the last week to near 104.20. Derivative traders should consider that further positive news from the Middle East could extend this downside pressure on the pair.
The Canadian March CPI data, due later today, is the main event we are watching this week. With WTI crude oil prices now trading firmly above $90 a barrel, a significant jump from the low $80s we saw this time in 2025, a high inflation print is widely expected. The options market reflects this, with one-week implied volatility on USD/CAD rising to over 8%, suggesting traders are braced for a sharp move following the announcement.
However, we must weigh a high inflation number against the Bank of Canada’s stated position. Governor Macklem’s intention to “look through” an energy-driven spike suggests the central bank will not be rushed into a hawkish policy shift. The swaps market agrees, pricing in less than a 25% chance of a rate hike at the next meeting, so a hot CPI print may not provide the lift to the Canadian Dollar that it normally would.
The strength in crude oil remains the most significant tailwind for the Canadian Dollar. With petroleum being Canada’s top export, the current high prices directly support the currency’s value. We should consider strategies that benefit from this correlation, as sustained high energy prices will continue to be a positive factor for the CAD against the USD, irrespective of short-term inflation data noise.
Given these conflicting signals, we see an opportunity in using defined-risk option strategies. For those anticipating a stronger Canadian Dollar, a put spread on USD/CAD could be effective, allowing us to profit from a move down while limiting our maximum loss if the pair reverses higher. This strategy capitalizes on both the weakening US dollar sentiment and the supportive oil price environment.
The current environment, with a major data release and sensitive geopolitical news, creates significant uncertainty about direction. This suggests that buying options to position for a large price swing, rather than a specific direction, could be a prudent approach. The elevated volatility means any major surprise in the CPI data or geopolitical headlines could lead to an outsized move that a simple long call or long put position could capture.
Written on April 17, 2026 at 10:42 am, by josephine
