Market Reactions Before and After the Announcement

Before the announcement, the USD/JPY rate was at 146.29. The two-year yields were 3.543%, and the 30-year yields were 4.65%. The S&P 500 index was at 6599, gold was priced at $3689, and bitcoin was at $116,092. After the announcement, the USD/JPY dropped to 145.65. The two-year yields fell to 3.476%, and the 30-year yields dropped to 4.61%. The S&P 500 decreased to 6603, gold rose to $3700, and bitcoin fell to $115,877. The Federal Reserve has begun its easing cycle, confirming what many expected from recent economic reports. The August 2025 jobs report showed just 95,000 job gains, which allowed the Fed to respond to their new belief that job growth “has slowed.” This change implies that short-term interest rates may continue to decline in the upcoming weeks. Pay attention to the yield curve: the two-year yield fell more than the 30-year yield right after the announcement. This suggests a “bull steepener” trade, where investors bet that short-term rates will drop faster than long-term rates, anticipating two more cuts this year. Traders can take this position by buying 2-year Treasury notes and shorting 10-year or 30-year notes.

Opportunities in a Volatile Market

The S&P 500’s inability to maintain its initial rally indicates uncertainty about whether this is a “soft landing” or the start of a more significant economic downturn. Given that Q2 2025 GDP growth was only 0.8%, this caution is understandable and may lead to increased volatility. This environment is perfect for options traders who can use strategies like straddles to take advantage of price fluctuations in either direction. As the Fed cuts rates and predicts more cuts, the US dollar’s yield advantage is decreasing, evident from the sharp drop of USD/JPY below 146.00. We should expect more dollar weakness, making long positions in gold futures or call options on gold ETFs appealing. Gold reaching a new high of $3700 highlights this trend of moving towards a weaker dollar, similar to what we observed during the 2019 easing cycle. Create your live VT Markets account and start trading now.

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