On September 8, 2025, French Prime Minister Bayrou lost a confidence vote in the national assembly, impacting market activities. In the US, August consumer inflation expectations rose slightly to 3.2%, while the employment trends indicator decreased to 106.41 from 107.55. In market news, gold hit a new high, rising $5 to $3636. WTI crude oil also increased by $0.50, reaching $62.38. US 10-year yields fell by 3.9 basis points to 4.05%, and the S&P 500 saw a modest gain of 0.2%. The New Zealand dollar showed the best performance, while the Japanese yen lagged.

Market Dynamics

Market dynamics were complex. Initially, the yen weakened due to the Japanese Prime Minister’s resignation, but this effect faded quickly. Political instability in France caused turbulence for the euro, but it later recovered. The US dollar weakness stemmed from declining yields and the possibility of rate cuts. Later, the euro rose above Friday’s high of 1.1765, and the pound gained strength. Analysts pointed out that a New York Fed survey revealed that optimism about job prospects reached its lowest level since the survey began in 2013. Meanwhile, gold achieved its fifth gain in six trading days. The drop in US Treasury yields signals a weakening job market. Last Friday’s Non-Farm Payroll report showed only a gain of 95,000 jobs, significantly below the expected 150,000. It may be wise to consider options on SOFR or Fed Funds futures to prepare for a Federal Reserve interest rate cut at its meeting on September 17. This expectation of Fed easing is leading to a weaker US dollar against other currencies. Data from the CME FedWatch tool now shows an 85% probability of at least a 25 basis point rate cut, leaving the dollar with little support. Buying call options on the euro or British pound could be a smart way to benefit from this trend, especially since the euro is trading above recent highs.

Gold’s Ascent

Gold is benefiting significantly, reaching another record high as the dollar declines and traders look for safety. The rise to $3636 is part of a consistent trend, evidenced by recent CFTC reports showing large speculators increasing their bullish bets for six weeks straight. We believe that buying gold futures or call options remains a key strategy to protect against uncertainty and a weakening dollar. Although the S&P 500 is slightly higher, the expected rate cut reflects a slowing economy, which poses risks for stocks. This tension between Fed support and poor economic data often leads to increased market volatility. Purchasing VIX futures or call options could be a smart hedge against a potential stock market decline in the coming weeks. Political uncertainty in France and Japan is currently less pressing but shouldn’t be overlooked. We saw similar stress in Europe during the sovereign debt crisis of the early 2010s, which often weakened the euro. For now, we are monitoring the spread between French and German 10-year government bond yields; if it widens significantly beyond 60 basis points, it could indicate growing risk for European assets. Create your live VT Markets account and start trading now.

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