China’s Consumer Price Index (CPI) for July showed no change compared to last year, recording a 0% year-on-year figure. This is better than the expected decline of -0.1%, indicating a shift away from the deflation that economists feared. In the currency market, EUR/USD has shown signs of recovery, trading above 1.1650. Traders are keeping an eye on upcoming US inflation data as the USD experiences slight fluctuations.

GBP/USD Market Update

In the GBP/USD market, the British Pound has gained strength, currently around 1.3450. This increase is due to new monetary policies from the Bank of England that have strengthened market confidence. Gold prices have stabilized at about $3,400 per troy ounce after hitting a recent high. The new U.S. tax on gold bars has also affected its price. In cryptocurrency, Bitcoin has seen a slight drop after nearing $118,000. Meanwhile, other digital currencies, like Ethereum and XRP, are performing well, showing positive market sentiment. The Bank of England lowered rates by 25 basis points to 4%, indicating ongoing worries about inflation. This move may signal a pause in the current rate-cutting cycle.

Analysis of China and Euro Market Reactions

China’s inflation data for July was flat at 0%, easing immediate deflation concerns. However, the producer price index (PPI) for July showed a 1.5% decrease year-on-year, highlighting challenges in the industrial sector. This mixed data suggests using options, such as a long strangle on the Hang Seng Index, for potential price movements. The Euro’s recovery above 1.1650 is fragile, especially after the U.S. CPI data for July was slightly higher than anticipated at 3.1%. This has boosted the US dollar, indicating that the recent EUR/USD rally may offer a chance to take bearish positions. Buying near-term put options on EUR/USD to target a move towards 1.1500 seems promising. The British Pound remains stable near 1.3450 after the Bank of England’s rate cut to 4%. This is the first rate cut since the end of an aggressive hiking cycle in 2024. However, recent retail sales data showed a 0.5% drop in July, suggesting economic slowdown. We expect this weakness to limit the pound’s gains, making it wise to sell out-of-the-money call options for premium income. Gold has established a firm base around $3,400 per ounce, a significant level after not surpassing its all-time high of about $3,550 set earlier this year. The new U.S. tax on physical gold bars has reduced retail demand, but central bank purchases have increased, similar to trends in 2022 and 2023. Therefore, selling cash-secured put options appears to be an appealing strategy for generating income from this stability. While Bitcoin faced rejection at $118,000, Ethereum and XRP continue to perform well, supported by ongoing investments in spot Ether ETFs, which have surpassed $30 billion globally. This performance gap creates an opportunity for a pairs trade, suggesting holding a long position in Ethereum futures and a short position in Bitcoin futures. Create your live VT Markets account and start trading now.

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