US Hassett, a Senior Adviser at the White House, said that the economy is growing without inflation. He did not know of any Nvidia deal like the one Intel made and mentioned that rare earths could create economic challenges. European markets reacted well, with stock prices going up after the Fed’s decision, even as the Bank of England (BoE) kept rates at 4%. The BoE chose to maintain rates due to a persistent inflation rate of 3.8%. Future rate cuts are uncertain, and traders are focusing on UK economic reports.

Futures Rise on Fed’s Rate Cuts

Futures prices jumped at the news of possible Fed rate cuts, pushing the S&P 500 to target 6700. The VIX, which measures market volatility, fell by 6%. Intel’s stock surged in pre-market trading after news of its partnership with Nvidia to create a custom graphics chip. PENGU rose by 12% to $0.037, with a 67% chance of reaching $0.05, while NFT trading volume grew by 152%. A high-risk warning has been issued, highlighting the potential losses in foreign exchange trading. InvestingLive does not serve as an investment advisor and is paid by website advertisers based on user engagement. Readers should carefully reflect on the information provided and seek independent financial advice if needed.

Expect a Continued Rally in Equities

With the Federal Reserve hinting at a rate cut, we should expect stocks to keep rallying. This shift will likely increase investor risk appetite, making long positions in S&P 500 call options or futures appealing in the coming weeks. A similar pattern occurred after the Fed’s pivot in late 2023, which triggered a rally that continued into 2024. The 6% drop in the VIX reflects a return to market complacency, which we should leverage. As volatility decreases, selling premium becomes a smart strategy. This could mean selling puts on indices or shorting VIX futures. With the VIX expected to stay below 14, this environment rewards those betting on continued stability. The difference in policies between a rate-cutting Fed and a steady Bank of England creates clear opportunities in the currency market. This situation favors going long on GBPUSD, as the interest rate gap is likely to widen in favor of the pound. Previously, the dollar’s rise in 2022 was supported by the Fed raising rates ahead of other central banks; we may now be witnessing this trend reversing. The situation with EURUSD is trickier, given the renewed threat of tariffs on EU goods. While a weaker dollar due to Fed cuts may help, political risks from Washington could push the euro lower. Buying volatility through straddles on EURUSD could be a good strategy, allowing us to profit from significant price movements in either direction. Intel (INTC) jumped 28% in pre-market trading due to the Nvidia deal, suggesting that its options will have very high implied volatility. Instead of chasing the stock, we should consider selling the inflated premium using strategies like covered calls or credit spreads. A similar volatility spike happened with Nvidia after its strong earnings report in May 2023, providing a clear example for this trade. Create your live VT Markets account and start trading now.

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