Today, we expect a quiet day with little news or data to influence the markets. The US Richmond Fed Manufacturing index will be released, but it’s often seen as unreliable and doesn’t usually affect market movements. Fed Chair Powell and Fed’s Bowman are set to speak, but they likely won’t discuss monetary policy during this blackout period. ECB President Lagarde will also speak at 17:00 GMT/13:00 ET, though no significant announcements are expected, as the ECB is waiting for summer data to inform future interest rate decisions.

Calm Before The Storm

This lull in market activity seems like the classic “calm before the storm.” The CBOE Volatility Index (VIX), known as the market’s fear gauge, has dropped to around 13, much lower than its average. This suggests that options, which traders use to bet on future price fluctuations, are currently affordable. Traders should look beyond today’s calm and get ready for important economic reports coming in early July, especially the Consumer Price Index and the jobs report. These events usually lead to significant market changes, with the VIX often rising 15-20% when unexpected inflation data is released. We believe preparing for this anticipated surge in volatility is essential in the upcoming weeks. With low implied volatility, now is a great time to buy longer-term call or put options on major indices. These strategies offer defined-risk bets on potential major market moves after the next round of key economic data. Purchasing options now could save money compared to waiting, as uncertainty—and option prices—will likely increase closer to the event.

Economic Insights And Market Strategy

While Mr. Powell can’t discuss policy, his comments will be closely observed for any subtle changes in his economic views. The Richmond Fed index unexpectedly fell to -10 in June, raising concerns about manufacturing that the market seems to overlook. We’ll also pay attention to Ms. Lagarde for any clues about Eurozone wage growth, which is critical for her next decision. In summary, this quiet time is an opportunity to plan trades that take advantage of the return of market volatility. We’re focused on the upcoming inflation reports and the late-July FOMC meeting, rather than daily market noise. This calm period is a strategic opportunity, not a reason to be inactive. Create your live VT Markets account and start trading now.

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