The USD has gained strength at the start of the US trading session. Japan’s GDP data released overnight has increased their currency value, putting pressure on the USD. The EURUSD rose past the 100-hour moving average at 1.1662, approaching resistance at 1.1700. The GBPUSD saw a slight rise, facing resistance at 1.3561, with past rallies halted in the swing area between 1.3576 and 1.3591.

Scheduled Economic Data Release

Important economic data will be released at 8:30 AM ET, including NY Fed Manufacturing for August, Import and Export prices for July, and Retail Sales. For June, Canadian Manufacturing Sales are expected to be at 0.4%. Fed’s Goolsbee will speak today after a neutral tone in yesterday’s comments. The PPI report suggests core PCE increases around 0.26% expected later this month. The Fed is highly likely to cut interest rates by 25 basis points, with a 94% probability, and there’s a lower chance of further cuts this year. The Trump-Putin Summit on Ukraine today aims for a ceasefire and a follow-up meeting with Zelenskiy, with possible talks on arms control. Potential sanctions on Russia, especially regarding oil imports, may escalate.

Market Reactions and Opportunities

US stocks are mixed: the Dow is up 277 points, S&P is up 10.46 points, and Nasdaq is down 4.44 points. Yields in the US debt market show little change across different durations. With the Federal Reserve likely to lower rates by 25 basis points this year, we should focus on the pace of future cuts. Core inflation, like the PCE deflator, has decreased from over 3.5% in 2024 to 2.8% in Q2 of this year. Therefore, options on SOFR futures could be used to prepare for a slower rate-cutting pace than the market anticipates. Today’s Trump-Putin summit on Ukraine poses a significant risk for energy markets in the coming weeks. If talks collapse, severe sanctions on Russian oil exports could result, reminiscent of the volatility seen in 2022 when WTI crude futures surged past $120 per barrel. Buying call options on oil or energy shares is a strategy to hedge against price spikes if diplomacy fails. Though the S&P 500 is at a record high, there are signs of complacency that derivative traders should consider. The VIX, which measures expected market volatility, has stayed below 14 for most of the summer, a level not seen consistently since before the pandemic. This indicates that index put options are relatively inexpensive and could be an effective hedge against negative market shocks. In the currency market, the EURUSD is testing the 1.1700 resistance level again, supported by a European Central Bank that is more hawkish than the Fed. Eurozone services inflation remains stubbornly above 4% according to the latest July 2025 report, limiting the ECB’s potential for rate cuts. A strong breakout above this level could lead to further gains, making short-term call options on the euro an appealing option. We are also monitoring the GBPUSD, which is again struggling at the resistance area between 1.3576 and 1.3591, a pattern we have observed multiple times this month. The Bank of England has indicated that rates will remain steady through autumn, creating a clear range for the currency. This environment is suitable for traders looking to sell option premiums, such as through an iron condor strategy, to profit from the pound staying range-bound. Create your live VT Markets account and start trading now.

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