European equities show light gains, with the UK FTSE rising 0.2% and Italy’s FTSE MIB up 0.3%
by VT Markets
/
Aug 11, 2025
Market Steady Before US CPI Release
European markets and US futures are calm ahead of a key data release. This quiet phase often leads to significant market movements, so traders should brace for a sharp change after tomorrow’s US Consumer Price Index (CPI) report. The market feels like a coiled spring, ready to react to this important inflation data.
Analysts estimate tomorrow’s CPI will show a 3.0% year-over-year increase. This is a slight drop from July 2025’s 3.1%. The Federal Reserve wants more evidence of declining inflation before making decisions, so any difference from this estimate could lead to strong market reactions. The CBOE Volatility Index (VIX) is currently around 17, indicating heightened anticipation of shifts in the market.
Given the uncertainty, buying volatility through options can be a smart strategy. A long straddle or strangle on an index like the S&P 500 allows traders to benefit from large price swings in either direction after the CPI announcement. This way, you don’t need to guess which way the market will move.
In 2022 and 2023, we saw how CPI reports could lead to significant one-day swings. For example, on November 10, 2022, a lower-than-expected inflation report caused the S&P 500 to jump more than 5.5%. This shows just how influential these data points can be on market movements.
Hedging Strategies For Long Equity Portfolios
For those with long equity portfolios, now is a crucial time to think about hedging strategies. Buying put options on SPY or QQQ ETFs can serve as short-term insurance, protecting portfolios from potential losses if inflation is higher than expected.
Looking ahead, after tomorrow’s report, the market will quickly focus on the Federal Reserve’s upcoming meeting in September. The inflation data will impact options pricing for that event. Traders should be prepared to adjust their positions as the market responds to the CPI number and reassesses the likelihood of future Fed actions.
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by VT Markets
Aug 11, 2025
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