In July, the Rightmove House Price Index in the United Kingdom dropped by 1.2% from the previous month, a shift from a smaller decline of 0.3% earlier. This trend highlights changes in the housing market during that time. In the financial markets, the AUD/USD pair hovered around 0.6505 as investors awaited the People’s Bank of China’s interest rate decision. The rising tariffs between the US and China pressured the Australian dollar.

Uncertainty in the Euro Market

The EUR/USD market is facing uncertainty due to the upcoming interest rate decision from the European Central Bank. Additionally, ongoing trade tensions between the US and China are causing market fluctuations. Gold is showing mixed signals as a consolidation channel forms, anticipating future market activities. Without significant data, traders are closely watching developments regarding US tariffs. China’s growth for the first half of the year stands at 5.2% year-on-year, but there’s caution as investment and retail sales data are weaker than expected. Even though growth exceeded forecasts, worries about falling property prices persist. The recent 1.9% drop in the Rightmove index for August marks the largest decrease for that month since 2018, indicating a cooling market. With UK inflation stubbornly high at 6.8% in July, the Bank of England is likely to continue raising interest rates. This scenario leads us to consider buying put options on UK-focused real estate ETFs, expecting further price declines due to stricter monetary policy.

Weakness of the Australian Dollar

The Australian dollar’s decline is connected to disappointing news from China, its biggest trading partner. The recent rate cut by the People’s Bank of China was less than anticipated, suggesting that the stimulus may not be enough to boost struggling growth. With the AUD/USD trading near two-year lows around 0.64, buying put options on this currency pair seems reasonable to anticipate further decline. There’s high uncertainty around the EUR/USD as markets balance stubborn Eurozone inflation against slowing economic data. For instance, Germany’s manufacturing PMI recently fell to 39.1. This conflict between rising prices and recession fears creates a ripe opportunity for volatility trades. We are considering strategies like straddles, which could profit from significant price changes in either direction before the next European Central Bank meeting. We see gold’s consolidation as a pause before a possible downturn, particularly after Federal Reserve officials reiterated a hawkish anti-inflation stance at the recent Jackson Hole symposium. Generally, periods with high real interest rates pose challenges for non-yielding assets like gold. Thus, we are avoiding new long positions since a strong dollar and high interest rates limit gold’s potential for growth. The reported 5.2% growth in China is overshadowed by a major crisis in its property sector, where companies like Country Garden face defaults and Evergrande has filed for bankruptcy protection. These issues confirm our belief that the economic weakness in China is much worse than headline figures suggest, reinforcing our bearish view on industrial commodities and currencies that rely on Chinese demand. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now