Brazil’s industrial output in February fell by 0.1%, below the forecast which anticipated a 0.5% increase. This decline may indicate potential challenges in the country’s manufacturing sector.
Meanwhile, US President Donald Trump is set to announce his reciprocal tariffs, raising concerns over their impact on economic growth and inflation. The announcement is anticipated to increase market volatility.
Currency Market Reactions
In currency markets, EUR/USD rose to multi-day highs, driven by weakness in the US dollar and potential EU actions to mitigate the tariffs.
Gold prices also recovered, climbing above $3,120, assisted by falling US yields ahead of the tariff announcement. Grayscale has introduced Bitcoin options-based ETFs, contributing to the evolving cryptocurrency market.
The latest data out of Brazil shows a softening in industrial output for February, with a mild 0.1% dip rather than the expected rise. While the headline figure appears restrained, it’s the miss versus forecasts that offers a hint at soft demand or possible inventory corrections within the domestic supply chain. It tells us that manufacturers might be holding back, either due to a slowing global appetite or rising input costs, both of which merit watching, especially for those with exposure tied to major commodities or the broader EM complex.
Trade Policy And Market Volatility
Across the Atlantic, Washington’s trade rhetoric continues to take shape. The focus remains on reciprocal tariffs, with President Trump expected to set forth measures in response to perceived trade imbalances. These tariffs are more than political posturing—they fundamentally stir inflation expectations and could weigh on business investment decisions. That uptick in economic friction is typically enough to rattle implied vols and widen bid-offer spreads across rate and FX spaces, particularly in front-end tenors. We’ve already seen short-dated options price in some of that unease, especially in dollar pairs and metals.
The euro has benefited materially. EUR/USD edged higher to levels last seen several sessions back, not on the back of anything hawkish from the ECB, but largely because the dollar is trading with a heavy tone. Markets seem to be preemptively adjusting positions, wary of any aggressive response from European officials should US tariffs target EU exports. Any suggestion of coordination out of Brussels could create a short window of relative strength for the common currency, which in turn presents pricing opportunities at-the-money and slightly out-the-money for speculators or hedgers.
On the metals side, gold clawed back above $3,120 after dropping earlier in the month. This bounce aligns closely with a retreat in US yields, particularly on the 10-year, ahead of the expected tariff detail. Falling real rates have historically provided a tailwind for gold, and this time is no exception. More telling, though, is how skew remains positively loaded in out-of-the-money calls, hinting at continued buyer interest in topside protection against geopolitical shocks or further dollar erosion.
Turning to crypto-linked products, there’s a noticeable shift in institutional engagement. A new options-based ETF by Grayscale points squarely at a growing appetite for volatility harvesting in digital assets, not just directional plays. Options volumes have ticked upwards since the announcement, and while liquidity remains thinner than in traditional equities, it’s the structure of these strategies—particularly spreads and straddles—that are drawing attention. The drive is towards instruments that dampen outright beta risk, signalling grown-up interest, not retail speculation.
Derivatives traders should take the week as a cue to stay adaptive, but deliberate. Implied vols are pushing wider, but there’s time to calibrate. Just avoid assuming that earlier drivers will persist linearly. There’s a fair chance that some of the current price action is front-loaded. Have gamma where visibility is low, but be selective with vega—carry may turn negative well before clarity returns.
