China reported new loans of -50 billion in July, which is much lower than the expected 300 billion. This dip might affect the country’s financial markets and economic plans in the next few months. EUR/USD climbed to two-week highs over 1.1700, as the US Dollar weakened with rising expectations for a Federal Reserve rate cut in September. Traders are closely watching German inflation data and Fed communications for more insights.

Focus on GBP/USD Movements

GBP/USD rose above 1.3550, driven by a weaker US Dollar and positive market sentiment. Traders are paying attention to upcoming Fed speeches for hints about future economic policies. Gold faced challenges reaching higher prices, despite a generally positive outlook. The decrease in safe-haven demand outweighed hopes for a Fed rate cut. The Bank of England lowered rates by 25 basis points to 4%, indicating an end to the easing cycle. They expressed concern about persistently high inflation. Interest in AI tokens surged after Perplexity made a $34.5 billion offer for Google Chrome. Bittensor (TAO), Near Protocol (NEAR), and Render (RNDR) saw significant gains among AI tokens.

Global Economic Indicators

The unexpected drop in Chinese loans signals trouble for global growth. This is the first time we’ve seen negative monthly loan growth on record, suggesting a serious loss of economic confidence. Derivative traders might want to consider buying puts on mining and industrial stocks, as well as on the Australian dollar, which is sensitive to Chinese demand. The rise in EUR/USD above 1.1700 is largely due to expectations for a weaker US Dollar. We think this trend still has potential, especially since recent data from August 11th shows German inflation increasing to 2.9%, making it less likely that the European Central Bank will follow the Fed’s dovish stance. We are looking into bull call spreads on EUR/USD to capture potential gains while managing costs. While GBP/USD has also benefitted from US dollar weakness, reaching 1.3550, we are proceeding with caution. The Bank of England’s rate cut to 4% last week may dampen the pound’s strength. This creates a mixed picture, suggesting more volatility. We’re considering long straddle strategies using options to profit from large price moves in either direction. Gold is caught between the potential for a Fed rate cut and a strong risk appetite. Investor positions reflect this, as data from early August 2025 shows a net reduction in long gold contracts for the third consecutive week. We believe selling out-of-the-money call options on gold is a smart way to collect premium while the metal struggles for direction. The Bank of England’s accompanying statement was more hawkish than expected, highlighting ongoing inflation concerns. Interest rate futures suggest traders are pricing in two more cuts by February 2026. We think this is overly dovish and recommend using interest rate swaps to bet that the BOE will hold rates steady longer than the market expects. The surge in speculative AI tokens like TAO and NEAR is creating high volatility, which presents an opportunity. Open interest in perpetual futures for these tokens has more than doubled in the last week, signaling a wave of leveraged bets. Since implied volatility on related options has surpassed 120%, we prefer to sell cash-secured puts at key support levels instead of buying expensive calls. Create your live VT Markets account and start trading now.

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