Trading was cautious early Tuesday as markets reopened after the US holiday. The calendar includes Germany’s ZEW sentiment, the US weekly ADP Employment Change 4-week Average, and Canada’s January inflation report.
The UK ONS said the ILO Unemployment Rate rose to 5.2% in the three months to December. Employment Change increased 52K, while annual wage growth excluding bonuses eased to 4.2% from 4.4%, in line with forecasts.
Dollar Yield And Equity Signals
The US Dollar Index held near 97.00 after small gains on Monday. US stock index futures were down 0.3% to 0.7%, and the 10-year US Treasury yield fell to about 4.02%, its lowest since early December, down more than 0.5% on the day.
The New York Fed is due to publish the February Empire State Manufacturing Index, and several Fed officials are scheduled to speak. USD/CAD traded around 1.3650, with Canada’s CPI forecast at 2.4% year-on-year in January, matching December.
Gold closed below $5,000 on Monday and traded near $4,900 on Tuesday, down over 1.5%. GBP/USD was below 1.3600, EUR/USD below 1.1850, USD/JPY under 153.00 after a 0.5% rise on Monday, and NZD/USD held above 0.6000 ahead of an RBNZ decision on Wednesday.
We are seeing a clear risk-off move in the markets as the week begins. Investors are moving into safe havens, pushing down US stock futures and sending the 10-year Treasury yield to its lowest point since December. This market fear, reflected in the CBOE Volatility Index (VIX) climbing toward 20, suggests we should prioritize capital protection and strategies that benefit from falling asset prices.
The strength of the US dollar is the dominant theme, holding the DXY index firm around 97.00. We should consider buying call options on the dollar or selling puts on currencies like the Euro and British Pound, which are already showing weakness. This trend reminds us of the similar dollar rally we witnessed in the second half of 2025 when global growth fears last took hold.
Uk Data And Pound Pressure
In the UK, rising unemployment and cooling wage growth are weighing heavily on the pound. This weak data from the ONS, showing unemployment at 5.2%, increases the odds of the Bank of England cutting rates sooner than expected. Buying puts on GBP/USD below the 1.3600 level appears to be a well-supported trade for the coming weeks.
With US stock futures pointing lower, we should look to buy put options on the S&P 500 and Nasdaq 100 indices for downside protection. The upcoming speeches from Federal Reserve policymakers will be critical, as any hawkish talk could accelerate this equity sell-off. Last year, Fed speeches that affirmed a “higher for longer” stance often preceded periods of stock market weakness.
The Canadian inflation report is a major upcoming event risk. The market expects a 2.4% reading, but given the recent global trend, a lower number is possible and would likely weaken the Canadian dollar. We can position for this by purchasing USD/CAD call options ahead of the data release.
Interestingly, gold is not acting as a traditional safe haven, with prices falling below $4,900. This suggests the dollar’s strength is so overwhelming that it’s pressuring all commodities, forcing some to liquidate gold holdings. This presents an opportunity to treat gold as a dollar-sensitive asset rather than a haven, possibly by selling out-of-the-money call options to collect premium.
