The session has been calm, with little data or news. Japan has asked the US to change its executive orders on tariffs, agreeing that the 15% tariff rate should be the maximum and not applied in addition to existing tariffs. Most focus is now on potential cuts by the Federal Reserve. Preparations are starting for a Trump-Putin summit, which will be the first meeting of the US and Russian presidents since June 2021. Bitcoin prices rose after an executive order was announced, allowing private equity, real estate, cryptocurrencies, and alternative assets in 401(k) accounts.

Bank Of England Rate Cut

The Bank of England has made a 25 basis points cut, marking a rare second round of voting that resulted in a majority for the bank rate. The cut was made by just one vote, with inflation forecasts being raised. There is now a 50% chance of another rate cut by the end of the year. In the financial markets, the US dollar was weak during the session but recovered some of its losses later. Stock markets have steadily gone up, while bond markets are stable as they wait for US jobless claims and CPI data. Currently, all eyes are on the Federal Reserve. The bond markets are quiet ahead of upcoming US inflation data. The VIX, which measures expected stock market volatility, is near yearly lows around 13.5, indicating a sense of calm before this important announcement. Traders should think about buying inexpensive, short-term options to prepare for a possible increase in volatility, as any surprise with CPI numbers could significantly affect the markets. The new executive order allowing alternative assets in 401(k) plans could change the game for cryptocurrencies. The US 401(k) market has over $7.5 trillion in assets, meaning even a 1% allocation could bring in $75 billion. Given this potential, we suggest traders consider buying long-dated call options on Bitcoin or stocks related to crypto to take advantage of the long-term growth.

Impact On British Pound

The Bank of England’s “hawkish cut” brings uncertainty for the British pound. With UK inflation rising to 2.8% in the second quarter of 2025, the central bank is hesitant to ease policies further. The market’s expectation for a 50% chance of another cut this year might be too optimistic, so traders could consider selling GBP puts, anticipating that sterling will stabilize. Next week’s summit between the US and Russian presidents is the first since their tense meeting in June 2021. Such high-stakes geopolitical events can lead to sharp, unexpected changes in risk assets and oil prices. It is wise to buy some downside protection, such as cheap puts on the S&P 500, to guard against any negative surprises. The recent weakness of the US dollar may not last as the market waits for clarity. Its future direction will likely depend on US CPI data compared to expectations for other central banks. If US inflation remains stubborn, it could challenge the narrative of Fed cuts and lead to a sharp increase in the dollar. Create your live VT Markets account and start trading now.

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