Japanese stocks jumped after the U.S. agreed to change a tariff order, promising refunds on excessive duties. The Bank of Japan’s meeting notes showed discussions about possible rate increases. The yen weakened, with USD/JPY surpassing 147.30, though the dollar’s overall gains remained limited. New U.S. tariffs on large gold bars could disrupt the bullion market and strengthen COMEX’s pricing power. Federal Reserve Bank of St. Louis President Alberto Musalem and Bank of England Chief Economist Huw Pill are set to speak. UBS warned that tariffs on gold bars could upset the market. Japan’s Nikkei 225 index rose by 2% thanks to these positive tariff developments. The People’s Bank of China (PBOC) set the USD/CNY reference rate at 7.1382, while China’s SMIC reported strong ongoing demand. The Reserve Bank of Australia (RBA) is likely to cut rates by the end of the year.

Bank Of Japan’s Meeting Summary

The Bank of Japan’s meeting summary revealed mixed opinions on rate hikes amid ongoing inflation and trade risks. Japan’s household spending rose by 1.3% year-on-year in June. A tariff shock has reduced the oil demand growth forecast for 2025. The Bank of England is experiencing tensions as split votes influence the pound. U.S. tariffs on gold bars could affect the bullion market and lead to funding issues. In geopolitical news, Israel intends to recapture Gaza City. New U.S. tariffs on large gold bars directly challenge the London-based bullion market’s funding system. This move is likely to make it harder and costlier for those shorting gold futures on COMEX to find physical metal for delivery. We believe this could lead to significant short covering in the coming weeks. Traders might want to consider buying call options on December gold futures to take advantage of potential price spikes caused by this supply squeeze. Recent data from the CME Group indicates a 15% increase in open interest this week, signaling growing momentum. A similar situation occurred in the nickel market in 2022, leading to a historic price rise.

Foreign Exchange Market Dynamics

In the foreign exchange market, the Bank of Japan’s division on rate hikes keeps the yen weak. While some members favor a hike, the overall uncertainty suggests they will likely lag behind other central banks for now. This difference in policy is pushing USD/JPY higher, and we expect this trend to continue approaching the 150 level. The latest Commitment of Traders report from the CFTC indicates that speculative net short positions against the yen are at their highest in over a year. This situation echoes the depreciation of the yen seen during the Bank of Japan’s slow approach between 2022 and 2023. Buying USD/JPY call options could be a smart way to capitalize on this ongoing policy gap. For equities, the resolution on tariffs is a clear boost for Japan, easing a major concern for exporters, particularly automakers. The 2% rise in the Nikkei 225 reflects significant investor relief. We anticipate further gains for Japanese stocks in the near term as this clarity settles in. The news that global oil demand growth for 2025 is now forecasted to be less than half of previous estimates is a strong negative indication. This “tariff shock” is expected to hamper economic activity. A look back at the U.S.-China trade war of 2018-2019 shows a comparable impact on energy consumption. Given this outlook, buying put options on WTI or Brent crude futures seems like a rational strategy. Weekly inventory reports from the Energy Information Administration revealed an unexpected increase in crude stockpiles, suggesting a slowdown in demand may already be happening. Create your live VT Markets account and start trading now.

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