European markets showed mixed results as investors awaited key US data. The Bank of Japan’s policies pushed the USD/JPY to its lowest in three weeks. The IMF stated there is no immediate need for a major US interest rate cut. In the UK, Q2 GDP rose by 0.3%, better than the expected 0.1%, and June’s GDP grew by 0.4%. The Eurozone’s Q2 GDP also increased by 0.1%, in line with expectations. France’s CPI remained steady at 1.0% year-on-year, while Switzerland’s producer and import prices dropped by 0.2% from the previous month. In market movements, the Japanese yen was strong, while the New Zealand dollar underperformed. European stocks made gains, but S&P 500 futures held steady. The US 10-year yield fell by 3.2 basis points to 4.207%. Gold remained stable at $3,353.96, and WTI crude oil rose by 0.4% to $62.91. Bitcoin decreased by 1.7%, now at $120,805.

Muted Movements in US Futures

US futures saw little movement as investors awaited new data, including retail sales figures. European stocks gained from Wall Street’s positive vibes, though other markets remained cautious. Gold stayed steady, while cryptocurrencies like Bitcoin and Ethereum faced slight declines from their recent peaks. The Fed appears hesitant about a September rate cut, leaning towards minor adjustments rather than big changes. This uncertainty suggests we should brace for possible market volatility with upcoming US PPI and retail sales data. The VIX index is creeping up from its summer lows, now around 17, signaling traders are preparing for movements. The US dollar is fluctuating, creating opportunities in currency options. The yen’s strength stems from speculation about a potential shift in the Bank of Japan’s policy, supported by strong wage growth data from Japan last week. A surprising rise in US inflation could quickly reverse the dollar’s slide against the yen, making USD/JPY call options appealing.

Diverging Global Economies

The Eurozone economy is barely growing, with the latest 0.1% GDP figure keeping EUR/USD close to 1.1700 due to significant option contracts. Meanwhile, the UK’s unexpected 0.3% GDP growth marks a notable recovery, as it narrowly avoided a recession in late 2024. This divergence could benefit the pound over the euro in the coming weeks. In equity markets, activity has stalled, with US index futures flat ahead of economic data. This atmosphere, where the market anticipates a rate cut not yet confirmed by officials, resembles the situation in late 2018 before the Fed shifted in 2019. For now, using options to manage risk, such as purchasing puts on the S&P 500, may be a wise strategy against potential hawkish surprises. Create your live VT Markets account and start trading now.

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