The United States Redbook Index rose to 6.5% year-on-year as of August 1, up from 4.9% previously. This indicates an increase in retail sales over the past year. In market news, the EUR/USD has climbed back toward the 1.1600 level. This recovery is driven by a weakening US dollar and ongoing trade assessments.

GBP/USD Gains Momentum

GBP/USD is gaining ground, crossing the 1.3300 level. This rise coincides with the US dollar losing strength, as focus shifts to an upcoming Bank of England event. Gold remains strong, hovering near $3,400 per ounce. Even though it pulled back to about $3,380, this precious metal benefits from the uncertain state of the US dollar and fluctuating US yields. Decentralized finance (DeFi) continues to grow, with Total Value Locked (TVL) increasing and more users joining. We are seeing capital being shifted from Bitcoin to other cryptocurrencies like Ethereum and Solana. The euro area economy is resilient, supported by an EU-US agreement and rising spending in Germany. However, there are still risks of a further interest rate cut, potentially in late 2025 or early 2026.

Continued Consumer Strength

The strong US retail sales reported by the Redbook Index suggest ongoing consumer strength. However, the July 2025 Non-Farm Payroll report showed an increase of 195,000 jobs, slightly below expectations, contributing to the recent decline of the dollar. It might be wise to use options to guard against possible, but likely volatile, dollar weakness in the coming weeks. The euro has demonstrated notable strength, pushing the EUR/USD closer to 1.1600. This is supported by recent positive data showing German industrial production rose by 0.5% in June, exceeding forecasts. We think buying call options on the euro for September is a smart way to take advantage of this upward trend. Sterling is also gaining from the dollar’s decline, with GBP/USD now above 1.3300 ahead of the next Bank of England meeting. UK inflation recently increased to 2.8%, suggesting a hawkish stance from the central bank, similar to its approach during the 2022-2023 tightening cycle. This indicates more potential for the pound, making call options on the currency appealing. Gold’s position near $3,400 an ounce remains solid, helped by a weaker dollar and varying US bond yields. The latest US Producer Price Index (PPI) data shows inflation is moderating, reducing pressure on the Federal Reserve to act aggressively and supporting non-yielding assets. This might be a good time to hold or add to bullish positions using call options on gold futures. In the cryptocurrency space, we see a clear shift of capital away from Bitcoin. DeFi platforms on Ethereum and Solana are capturing much of this investment, with Ethereum’s share of the total crypto market cap recently surpassing 25%. Traders should consider buying call options on Ether (ETH) to take advantage of this trend, as it has been outperforming Bitcoin. While the Eurozone economy seems stable for now, we should keep an eye on the long-term risk of a potential interest rate cut in late 2025 or early 2026. While we are optimistic about the euro for the next few weeks, it may be prudent to consider longer-term strategies to hedge against a downturn next year. This could mean buying puts that expire in early 2026. Create your live VT Markets account and start trading now.

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