USD/CAD fell for a fourth day, trading near 1.3708, its lowest level since 23 March, as higher oil prices supported the Canadian Dollar. The US Dollar Index traded near 98.20, ending an eight-day losing run but staying close to six-week lows.

Oil prices stayed elevated amid ongoing disruption to supply through the Strait of Hormuz during a dual blockade by US forces and Iran. Iranian state media said any future transit tolls would be processed via Iranian banks, pointing to tighter control over the route.

West Texas Intermediate crude rebounded after a two-day decline, trading around $90.50. Canada’s currency often tracks oil because Canada is a major crude exporter.

Markets watched for confirmation of a second round of US-Iran talks after Donald Trump said negotiations could resume this week, following talks in Islamabad that did not produce a breakthrough. Higher energy costs kept inflation risks in view, with Canada’s inflation below the Bank of Canada’s 2% target.

US inflation stayed above the Federal Reserve’s 2% target, with March CPI at 3.3% year on year versus 2.4%. US initial jobless claims fell to 207K versus 215K expected, while industrial production fell 0.5% month on month against a 0.1% rise forecast.

We remember looking at this situation last year, in 2025, when disruptions in the Strait of Hormuz pushed WTI crude oil above $90 a barrel. This geopolitical tension was the primary driver strengthening the Canadian dollar and pushing the USD/CAD pair down towards 1.3700. The market’s focus was squarely on the US-Iran talks and the risk of a prolonged supply shock.

Fast forward to today, April 16, 2026, and the theme of elevated energy prices remains firmly in place. WTI crude is currently trading around $85 per barrel, supported by ongoing Middle East tensions and disciplined OPEC+ supply cuts that have kept inventories tight. Similar to last year, this has provided a floor for the Canadian dollar, keeping USD/CAD hovering near the same 1.3750 level.

The key difference now is the inflation picture, which has evolved since 2025. While US inflation remains persistent at 3.5% as of March, Canadian inflation has accelerated to 2.9%, much higher than the sub-2% levels seen last year. This reduces the policy divergence between the Fed and the Bank of Canada, making a straightforward short USD/CAD trade less compelling than it was in 2025.

For derivatives traders, this persistence of geopolitical risk premium in oil suggests volatility is undervalued. Buying straddles or strangles on crude oil futures or related ETFs could be a prudent way to position for a sharp price move in either direction if tensions escalate or de-escalate unexpectedly. The premium paid is the maximum risk for a potentially significant reward.

Given that both central banks are now grappling with sticky inflation, the USD/CAD pair may be more range-bound than it was last year. This environment makes selling options attractive, and traders might consider strategies like an iron condor on USD/CAD futures. This position would profit from the pair trading sideways and experiencing low volatility in the coming weeks.

We only need to look back to the energy price spike in 2022 to be reminded of how quickly geopolitical events can reshape the market. Therefore, a small allocation to cheap, out-of-the-money call options on WTI crude could serve as an effective, low-cost hedge. This provides upside exposure in case the situation in the Strait of Hormuz deteriorates suddenly, mirroring the fears we held this time last year.

Equity markets rose sharply from the end of March, but the rally has eased as there has been little new information on potential peace talks. Further movement is now linked to continued talks between the US and Iran.

Markets are also watching for any impact on the global economy if the Straits were to close. The risk of disruption remains a factor for traders.

Netflix shares held up ahead of its earnings report. The results are expected to draw attention away from Middle East developments.

The company’s update is being watched for progress after losses in the second half of last year. Wider consumer spending is under scrutiny due to rising inflation around the world, though it is not expected to have a major effect in this report.

The equity surge we saw from the end of March last year has become a distant memory, as the market now needs more than just headlines. A lack of substantive progress in US-Iran talks continues to create a ceiling for major indices. The CBOE Volatility Index (VIX), a key measure of market fear, has been elevated, hovering around 18 this month, reflecting this persistent unease.

This unresolved tension directly threatens the Strait of Hormuz, through which the U.S. Energy Information Administration confirms nearly 21 million barrels of oil pass daily. Derivative traders should therefore be looking at volatility in the energy sector, potentially through call options on oil ETFs. Correspondingly, downside protection on transport and airline stocks, which are highly sensitive to fuel price shocks, may be warranted.

The economic friction is already visible, as war risk premiums for maritime shipping in the Gulf have risen over 20% since the start of the year. This underlying instability suggests that holding long volatility positions through VIX futures or index options could be a prudent hedge. Without a diplomatic breakthrough, any escalation could trigger a sharp market reaction, rewarding those prepared for a spike in volatility.

Away from geopolitics, earnings season is providing a welcome distraction, and we are looking closely at consumer health. When we looked at Netflix last year, the focus was on recouping losses, but the landscape has shifted. While the company’s report yesterday showed a solid beat on subscriber additions, its weak forward guidance on advertising revenue has capped the stock’s momentum.

This mixed result from a streaming giant comes as the latest CPI report shows inflation remains stubbornly above 3%, keeping pressure on household budgets. For derivative traders, this suggests that instead of making large directional bets on consumer names, strategies like iron condors could be used to profit from a stock trading within a specific range. This captures the uncertainty between strong subscriber loyalty and weakening consumer purchasing power.

The concerns extend beyond just one company, as recent retail sales data for March came in softer than expected. We see this as a signal that cumulative inflation may finally be impacting non-essential spending. Traders could consider looking at put options on consumer discretionary ETFs as a way to position for a potential slowdown in the coming weeks.

US President Donald Trump said on Truth Social that Lebanon and Israel agreed a 10-day ceasefire. He said it will start on Thursday at 5 pm Eastern time.

He said he spoke with Lebanon’s President Joseph Aoun and Israel’s Prime Minister Benjamin Netanyahu. He added that the two countries met in Washington, D.C. on Tuesday for the first time in 34 years.

He said US Secretary of State Marco Rubio attended the meeting. He also said he directed Vice President JD Vance, Rubio, and Chairman of the Joint Chiefs of Staff Dan Razin’ Caine to work with both sides towards “lasting peace”.

In markets, the US Dollar was under mild selling pressure after the announcement. It still held most of its intraday gains across major currency pairs.

Trading moves were limited amid uncertainty over future US-Iran talks. The same update referred to negotiations aimed at pausing the Middle East war.

A correction issued at 15:50 GMT amended the date for the start of the 10-day ceasefire. The ceasefire start time remained 5 pm Eastern time.

This announcement signals a temporary drop in geopolitical tension in the Middle East, reducing the immediate risk premium in the market. We saw a similar pattern in late 2025 when initial reports of de-escalation talks caused the VIX to fall from 28 to below 22 in just a few sessions. Therefore, selling short-dated call options on market volatility indices appears to be a sound strategy to capitalize on this expected period of calm.

The most direct impact is on crude oil, with Brent futures already dropping nearly 4% to $106 a barrel in after-hours trading. We anticipate this weakness will continue, making buying put options on oil-related equities and ETFs a viable play for the next week. Given the ceasefire is only for 10 days, these should be short-term positions, as the underlying supply risk has not vanished.

We must remain cautious because a 10-day truce is notoriously fragile, and the broader uncertainty surrounding US-Iran negotiations continues to simmer. The U.S. Dollar Index holding firm above 107 reflects this skepticism, a lesson we learned from the brief market relief during the Strait of Hormuz tensions in 2025. It may be prudent to hedge any risk-on trades by holding some longer-dated call options on gold, which remains a key barometer of true regional stability.

The United States 4-week Treasury bill auction yield rose to 3.595% from 3.56%.

This is an increase of 0.035 percentage points.

We see the rise in the 4-week T-bill yield as a direct signal of the market’s expectations. This slight increase suggests that traders are bracing for the Federal Reserve to hold interest rates higher for a longer period. The era of cheap, short-term money appears to be firmly on pause.

This outlook is reinforced by recent economic data showing core inflation has been stubborn, hovering around 3.1% in the reports for the first quarter of 2026. This is still significantly above the Fed’s 2% target. We also saw a surprisingly robust jobs report in March, which removes any pressure on the Fed to consider cutting rates soon.

For those trading interest rate derivatives, this signals a need to protect against or profit from a hawkish Fed. We are positioning by selling Secured Overnight Financing Rate (SOFR) futures, which gain value as rate expectations rise. Options strategies that benefit from a stable-to-higher rate environment, such as selling puts on bond futures, are also becoming more appealing.

In the equity markets, we expect this to create headwinds, especially for growth and technology sectors sensitive to borrowing costs. Looking back at how these sectors reacted to the rate hikes in 2022 and 2023, we anticipate an increase in market volatility. This makes buying VIX call options or put options on tech-heavy indices like the Nasdaq 100 a prudent defensive play for the coming weeks.

This environment is also creating a bullish case for the U.S. dollar, as higher relative yields tend to attract international capital. We expect the Dollar Index (DXY) to test its recent highs. Therefore, we are considering long positions on the dollar through futures contracts or by purchasing call options on USD-centric currency pairs.

USD/JPY traded near 159.20, rising about 100 pips from its intraday low and showing modest daily gains. Price action was linked to ongoing Middle East developments and changing expectations for central bank policy.

The US Dollar stayed supported by safe-haven demand amid tensions involving Iran and uncertainty around the Strait of Hormuz. Reports from Qatari Al-Araby TV said US President Donald Trump told Lebanon’s President Aoun that a ceasefire would be announced within hours.

The Japanese Yen struggled to gain traction as the Bank of Japan kept a gradual approach to normalising policy. Officials reiterated a cautious, data-dependent stance and a focus on sustainable inflation.

On the four-hour chart, USD/JPY traded at 159.15 with a neutral near-term bias. It consolidated just below the 100-period SMA at 159.29, while the 20-period SMA stood at 159.06.

The RSI was 53, pointing to mild upward momentum without overbought conditions. Resistance was near 159.29 and 159.30, while support levels were 159.15, 158.94, and 158.85.

The key driver remains the policy gap between the Federal Reserve and the Bank of Japan. The recent US inflation report for March 2026 came in at a firm 3.1%, supporting the view that the Fed will not be cutting rates soon. This starkly contrasts with the Bank of Japan’s gradual approach, creating a powerful tailwind for USD/JPY.

Geopolitical risks are keeping the US dollar in demand as a safe haven. We see this reflected in energy markets, where persistent concerns over shipping in the Strait of Hormuz have helped push crude oil prices above $95 a barrel. This underlying tension continues to make traders favor the security of the dollar.

However, we must watch the 160 level very closely for potential intervention by Japanese authorities. Looking back at history, we saw finance ministry officials step into the market to strengthen the yen several times during 2024 as the rate approached these same heights. The risk of a sudden, sharp reversal orchestrated by officials is now extremely high.

This presents an opportunity for traders to use options to play the expected volatility. Given the tension between the strong upward trend and the imminent intervention threat, buying long-dated straddles could be a viable strategy. This allows us to profit from a large price move in either direction, whether it’s a breakout higher or a sharp drop from intervention.

For now, the pair is coiling in a tight range, with key resistance around 159.30 and initial support near 159.00. We are watching for a decisive break of this consolidation zone to signal the next major move. The current stability suggests pressure is building for a significant move in the coming weeks.

Stephen Miran said the Federal Reserve should remain cautious, with policy decisions guided by incoming data and inflation risks not yet fully resolved. He said he favours three, maybe four, interest rate cuts this year, though he also said it might only be three cuts for the rest of the year.

He said that a year from now 12-month PCE inflation could be around the 2% target. He also said there is no evidence of a wage-price spiral and that long-term inflation expectations are anchored.

Miran said it remains reasonable to expect core goods prices and housing inflation to keep easing. He said the recent energy shock has not changed his inflation outlook for 12 to 18 months ahead compared with before the war.

He said the war has widened the distribution of risks around the modal outlook, and that inflation was becoming more problematic even before the war. He rejected linking goods inflation to tariffs, and said it is irresponsible to blame tariffs for multiple forces pushing prices higher.

He said the labour market cooling trend appears to be continuing. He also said the Fed should move towards a neutral rate as low as 2.5%, with a neutral real rate of about 0.5%.

He said growth and unemployment have been less closely correlated than in the past, with causes uncertain and possibly related to AI. He said energy-price-driven shifts in consumer spending are a drag on growth, even though the US is an energy exporter.

Looking back at commentary from 2025, we were hearing a strong case for three, maybe even four, rate cuts. The view was that inflation was on a clear path back to the 2% target within a year. This was based on the expectation that goods prices and housing inflation would continue their decline.

However, the data through the first quarter of 2026 has challenged this outlook significantly. The latest Core PCE reading for March came in hotter than anticipated at a 3.1% annualized rate, showing inflation remains stubborn. This is a far cry from the 2% target we thought was within reach by now.

The labor market also failed to cool as expected, which we now see was a key misjudgment from last year’s analysis. The March 2026 jobs report showed another strong gain of over 240,000 jobs, with wage growth still hovering near 4.0%. This persistent strength provides the Federal Reserve with little reason to rush into cutting rates.

For derivative traders, this means the “higher for longer” theme is firmly back in play. The SOFR futures curve has aggressively repriced, with markets now only factoring in one potential cut by year-end, a dramatic shift from the multiple cuts expected in 2025. This suggests positioning for sustained high short-term rates remains the dominant strategy.

Options on Treasury futures are indicating heightened uncertainty, with implied volatility ticking up. Traders should consider strategies that benefit from either a prolonged period of stable but high rates or a sharp move if upcoming data forces the Fed’s hand. Selling out-of-the-money calls on Eurodollar or SOFR futures could be a way to capitalize on the market’s reduced expectations for rate cuts.

The idea that the neutral rate could be as low as 2.5%, or 0.5% in real terms, now seems highly unlikely. The resilience of the economy in the face of current rates suggests the true neutral rate is substantially higher. This structural shift supports the view that we will not be returning to the low-rate environment of the previous decade anytime soon.

While the primary trend points to sustained high rates, we must watch for any cracks in the economic foundation. Initial jobless claims have remained low, but any sustained move above the 230,000 mark could be an early signal of the labor market finally weakening. Such a development would quickly alter the current market dynamics and expectations for monetary policy.

EUR/USD slipped to about 1.1770 on Thursday, down 0.24%, ending an eight-day run of gains. The US Dollar rebounded modestly as risk sentiment stayed supported, easing recent selling pressure.

Revised Eurozone data showed HICP inflation rose 1.3% MoM in March, up from 0.6% in February and above the 1.2% estimate. Annual inflation was revised to 2.6% from 1.9%, the highest since July 2024, while core inflation eased to 2.3% YoY from 2.4%.

The rise in headline inflation was mainly linked to energy prices, pointing to upward pressure from commodities. The ECB’s next policy meeting is scheduled for 29–30 April.

ECB officials have kept a cautious stance on rates. Christine Lagarde said the ECB must remain “completely agile” and stated there is no bias towards tightening, while François Villeroy de Galhau said it is premature to focus on a rate rise in April and that more data are needed.

Reuters reported markets almost fully price a first 25-basis-point rate rise by June, with another possible later in the year. In the US, DXY traded near 98.25 after an intraday low of 97.83, close to six-week lows.

US Initial Jobless Claims fell to 207K versus 215K expected, while Industrial Production dropped 0.5% MoM in March versus a 0.1% rise forecast. The Philadelphia Fed index rose to 26.7 in April from 18.1.

Later, speeches from ECB officials Joachim Nagel and Philip Lane are due.

Looking back to this time in 2025, we recall the EUR/USD rally stalling around 1.1770 as markets began anticipating a shift from the European Central Bank. The market was correctly pricing in a rate hike for June 2025, which the ECB delivered as it began its tightening cycle to combat rising inflation. That initial move was the start of a trend that has brought us to where we are today.

As of April 2026, the situation has evolved, with the ECB’s deposit rate now at 3.50% after several hikes through late 2025 and early 2026. While headline inflation in the Eurozone has cooled slightly to 2.8% for March 2026, the focus has shifted to stubbornly high core inflation, which printed at 3.1%. This stickiness in core prices suggests the ECB’s job is not finished, creating uncertainty and opportunity.

In contrast, the US Federal Reserve has held its policy rate steady at 5.25% for the last two quarters, as US core PCE inflation has shown more consistent signs of cooling, recently hitting 2.9%. This policy divergence, where the ECB may still need to tighten while the Fed is on a prolonged pause, creates a supportive backdrop for the Euro. Given this dynamic, the EUR/USD has already climbed and is now trading near 1.2150.

For traders, this suggests that long volatility strategies on the EUR/USD could be beneficial. The uncertainty surrounding the ECB’s next move, contrasted with the Fed’s steady stance, could lead to sharp movements around key data releases. Buying options, such as straddles or strangles, could capitalize on any surprising hawkishness from ECB officials in the coming weeks.

We must also consider the risk of a slowdown in the Eurozone economy, which could force the ECB to pause its hiking cycle prematurely. Recent data, such as the 0.8% fall in German industrial production for February 2026, indicate that economic activity is fragile. Therefore, traders might consider using bull call spreads on the EUR/USD, which offer a defined-risk way to bet on further upside while limiting losses if economic weakness suddenly alters the ECB’s path.

An ING economist said recent UK GDP strength may be overstated and that growth may slow into the summer. Inflation is expected to rise towards 4% beyond July while private sector wage growth is closer to 3%, which would reduce real wages.

Higher energy prices are expected to add to recent increases in unemployment. Weaker corporate pricing power is also described as a drag on the economy.

ING expects the Bank of England to keep Bank Rate unchanged at 3.75% throughout 2026. The decision is described as a close call, including ahead of the June meeting.

The article notes it was created with the help of an artificial intelligence tool and reviewed by an editor.

We believe the market is mispricing the probability of a Bank of England rate hike in the coming months. The underlying economic picture is deteriorating despite some recent positive headlines. Traders should therefore position for a more dovish stance from the central bank than is currently expected.

The latest data from early April supports this view of a slowdown, with the ONS reporting that CPI inflation has reached 3.9%, while average weekly earnings growth has slowed to just 3.1%. This confirms that real wages are falling, putting a significant strain on household budgets. With March retail sales figures also showing a 0.5% decline, the pressure on the consumer is becoming undeniable.

This growing weakness is why we see the Bank of England holding rates at 3.75% through its June and subsequent meetings this year. Rising unemployment, which recently ticked up to 4.4%, and weakening corporate pricing power make a rate hike a significant policy risk. The Bank will not want to tighten monetary policy into a potential recession.

For derivatives traders, this suggests buying December 2026 SONIA futures could be a prudent move. This position would profit as the market unwinds its expectations for a rate hike, aligning with our view of a steady Bank Rate. The current forward curve appears too aggressive given the challenging economic headwinds.

We also see potential for Sterling to weaken, particularly against the US Dollar, as policy divergence grows. Buying GBP/USD put options offers a way to position for a decline in the pound if the Bank of England’s inaction contrasts with a more hawkish Federal Reserve. This trade benefits from the UK’s weaker growth and inflation dynamic.

This situation is reminiscent of the caution the Bank showed in late 2025 when it paused its cycle despite a temporary inflation scare. Looking back, that proved to be the correct decision as growth faltered. We expect a similar data-dependent and cautious approach this summer.

The key risk to this strategy would be an unexpected acceleration in services inflation or a surprise jump in the next wage growth report. Traders should therefore monitor the upcoming May labour market data very closely. Any figure above 3.5% could cause the market to quickly re-price the odds of a summer hike.

Colombia’s retail sales rose 10.9% year on year in February. This was above the expected 9.8%.

The result indicates stronger than forecast annual growth in retail sales for that month. The report compares February’s sales with the same month a year earlier.

We are seeing that the strong retail sales data for February, coming in at 10.9% year-over-year, confirms that domestic consumer demand in Colombia is more resilient than we initially thought. This upside surprise suggests the economy has strong underlying momentum early in the year. It forces us to reconsider the possibility of a faster-than-expected economic expansion for 2026.

This report will likely put pressure on the Banco de la República to maintain its hawkish stance on interest rates. We have already seen recent March inflation data for 2026 come in at 4.7%, remaining stubbornly above the central bank’s target range. Therefore, derivatives traders should look at positions that benefit from a stronger Colombian Peso, such as buying call options on COP or selling USD/COP futures, as the case for rate cuts weakens.

For the equity market, this is a clear positive signal for the MSCI COLCAP index, particularly for consumer discretionary and financial sector stocks. After a period of uncertainty we saw in late 2025 related to global commodity prices, this domestic strength provides a solid foundation for corporate earnings. We should consider using call spreads on the COLCAP to capitalize on potential upside over the next several weeks.

This consumer strength is causing major banks to update their economic models, with recent consensus forecasts for Colombia’s 2026 GDP growth being revised upward from 2.8% to over 3.1%. This is a significant shift from the more cautious outlook we held throughout much of 2025, which was heavily dependent on export performance. The data implies the domestic economy can offset potential weakness from abroad.

The market is now quickly pricing out the probability of interest rate cuts in the second half of the year. Historically, the central bank has acted decisively when demand-driven inflation appears, as we saw in the 2021-2022 tightening cycle. We believe positioning in short-term interest rate swaps to hedge against the central bank holding rates steady for longer than anticipated could be a prudent move.

Early post-conflict data for India points to firmer wholesale inflation and a modest rise in CPI. The Wholesale Price Index is described as more exposed to commodity and imported cost changes, and is expected to move higher due to base effects and external pressures.

Near-term price effects are expected to outweigh growth effects, depending on how long geopolitical tensions persist. For FY26, a wider trade deficit was offset by steady services exports, keeping the full-year current account deficit near -0.6–0.7% of GDP.

Bond Yields Outlook

Indian bond yields are expected to remain range-bound, with offsetting forces in play. In the absence of fresh escalation in Middle East tensions, yields are projected to stay within 6.8–7.0%.

Banking-system liquidity is described as ample. The RBI has used administrative measures to slow one-way rupee depreciation, with USD/INR holding above 93.00 mid-week after being near a record 95.0 in March, alongside reported effects on portfolio flows.

The immediate concern is that wholesale price inflation will climb faster than consumer prices, a trend confirmed by the latest March 2026 data showing WPI at 5.8%. We saw a similar pattern with the commodity shocks in early 2025, which suggests this upward pressure is real. Therefore, positioning for higher short-term interest rates through overnight index swaps (OIS) could be a prudent hedge against a more hawkish central bank.

We expect Indian government bond yields to remain stuck in a narrow 6.8% to 7.0% channel in the near term. The 10-year yield currently sits near the top of this range at 6.95%, a situation reminiscent of the tight consolidation we witnessed through the final quarter of 2025. This environment is ideal for strategies that profit from low volatility, such as selling strangles on 10-year bond futures to collect premium.

Currency And Reserves

On the currency front, the Reserve Bank of India is actively capping USD/INR strength, preventing a runaway depreciation of the rupee. With the pair having been pushed down to 93.00 from its record high near 95.00 last month, implied volatility has decreased, making options cheaper. India’s foreign exchange reserves hitting a new record of $655 billion in February 2026 gives the RBI plenty of ammunition to continue this policy, suggesting that buying USD/INR put options offers a good risk-reward profile.

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