In July, the US ISM Manufacturing PMI was at 48, lower than the expected 49.5. This suggests the manufacturing sector is contracting. The EUR/USD jumped above 1.1550 after weak US employment and PMI numbers. Poor job data and a weaker dollar allowed the GBP/USD to rise above 1.3250. Gold reached a new weekly high of about $3,350 due to a drop in US Treasury bond yields. This change hints that the Federal Reserve may rethink its rate outlook after disappointing Nonfarm Payrolls data. In the cryptocurrency market, July was bullish, with Bitcoin (BTC) and some altcoins hitting all-time highs. However, Bitcoin declined below $115,000, with bears aiming for a support level at $112,000. The euro area shows some economic strength, helped by EU-US agreements and increased spending in Germany. While there are risks of further cuts, those may come later this year or early in 2026. Given the contraction in US manufacturing and soft job data, further weakness in the US dollar seems likely. Initial jobless claims for the week ending July 26, 2025, were 245,000, slightly above expectations, reinforcing this outlook. In the coming weeks, we should explore strategies that benefit from a declining dollar, like buying call options on the EUR/USD and GBP/USD. The euro’s strength is backed by solid fundamentals in the euro area. Germany’s IFO Business Climate index for July exceeded expectations, coming in at 91.5. This resilience supports the EUR/USD’s climb above 1.1550, so we should be cautious about betting against the euro soon. The drop in US Treasury bond yields is currently driving the markets, with the 10-year yield falling below 3.4% for the first time in over a year. This reaction to the disappointing Nonfarm Payrolls report suggests that the market is now pricing out future Federal Reserve rate hikes in 2025. We can look to interest rate futures to position for a more dovish Fed stance through the end of the year. Gold’s rise to $3,350 is a direct result of these lower real yields, which make the non-yielding metal more appealing. With persistent inflation, the environment is favorable for precious metals. We recommend holding long positions in gold futures (GC) or buying call spreads on gold ETFs. We’ve seen this scenario before, such as during the policy shift in late 2018 when weak economic data halted Fed tightening. Today’s market actions reflect that period, rewarding those who prepared for a less aggressive central bank. History indicates that this trend of dollar weakness and rising safe-haven assets might last for several months. In cryptocurrency, Bitcoin’s drop below $115,000 shows that even major assets can be affected by changing market sentiment. Open interest in Bitcoin put options with an $110,000 strike price rose by over 30% this past week, signaling that traders are hedging against further declines. Although the long-term outlook remains positive, we should use derivatives to safeguard our crypto portfolios against short-term bearish pressure.

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