Trump has extended the suspension of tariffs on China for another 90 days by signing an executive order. This move keeps all other parts of the agreement the same. In other news, Japan’s Nikkei and Topix indexes have hit all-time highs. Singapore’s GDP for Q2 grew by 4.4% year-on-year and 1.4% quarter-on-quarter.

Monetary Policies and Market Responses

The Bank of England may cut interest rates several times, which could affect the British Pound against the Euro and the US Dollar. July saw an increase in UK retail sales, thanks to warm weather and rising food prices. Financial markets were relieved by the halt in tariff increases, but some concerns remain. Nvidia and AMD might face a new 15% export tax on AI chips to China, which could hit their profit margins. UPS shares are down 31% for the year but offer a 7.56% yield after missing expectations in Q2. The stock trades at 13.1 times forward P/E, below the sector average, with analysts seeing a 24% potential upside. Signs of economic weakness are evident in the US, with a Moody’s economist noting job cuts in 53% of industries. Upcoming US CPI data could challenge the Federal Reserve’s strategies. With the China tariff pause extended for another 90 days, we expect market volatility to temporarily drop. This calm could be a chance to sell near-term options on major market indices. However, the trade dispute is still unresolved, suggesting we should consider buying volatility later, possibly with VIX calls or index puts set for late November 2025. The US economy is showing clear signs of weakness, reinforcing recession warnings. Last week’s jobs report indicated non-farm payrolls grew by just 95,000, missing expectations and marking the third consecutive month of slow growth. With over half of industries now cutting jobs, there’s a risk of broader market declines that a temporary trade truce can’t mask.

US CPI Data and Its Implications

All attention is on the US CPI data set to be released today, August 12th. Last month, the core CPI reading for July 2025 was stubbornly at 3.9%. Another high number may force the Fed to ignore recession signals and maintain a tough stance. To prepare for a potential sharp market movement, we’re considering straddles on the SPY ETF to profit from significant swings in either direction after the release. The new 15% export tax on AI chips poses a direct threat to Nvidia and AMD’s profit margins. We’ve seen how their stocks reacted to earlier export controls in late 2023, and this new tax adds more financial pressure. This situation signals a good time to buy puts on these companies or on the broader semiconductor ETF (SOXX). For currency traders, the British Pound appears to be on a downward path. The UK’s Q2 2025 GDP showed a slight contraction of 0.1%, and with inflation above 3%, the Bank of England is in a tight spot. We believe the BoE will need to cut rates to spur growth, making short positions via puts on GBP/USD or calls on EUR/GBP attractive. While Japanese stocks have reached all-time highs, we are becoming cautious. The rally has been driven by a weak yen and the Bank of Japan’s slow rate normalization, with a policy rate still only at 0.25%. This might be a good time to purchase inexpensive, out-of-the-money puts on the Nikkei 225 as protection against a possible pullback. Create your live VT Markets account and start trading now.

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