The economic calendar in Asia for Monday, August 25, 2025, has few data releases. New Zealand will share some information, but the main focus is on the impact of Powell’s comments from Jackson Hole last Friday. Powell’s statements have sparked interest in riskier assets, drawing attention to the economic shifts in the region.

Trading on Risk Sentiment

With a light data calendar in Asia, we will trade based on the positive sentiment from the Jackson Hole speech. The market sees the Fed Chair’s remarks as indicating the end of the tightening cycle. This suggests that, in the coming weeks, stocks are likely to trend upward. The background for these comments has been building, giving them trustworthiness that has been missing for some time. July’s core CPI data, released in August, was at 2.5%, which is closer to the Fed’s goal. Additionally, a recent non-farm payrolls report showed job growth slowing to below 150,000, allowing the Fed to take a more balanced approach. In this context, selling volatility seems like a smart strategy. After Friday’s rise, the VIX likely dropped below 15, which means we can expect fewer price swings in the S&P 500. We might consider selling out-of-the-money puts or using put credit spreads on major indices to earn premium. The comments have also weakened the US dollar, with the DXY index falling below 100 on Friday. This opens up chances in the foreign exchange markets, especially for risk-sensitive currencies. We see value in buying call options on the Australian Dollar and the Euro against the dollar, preparing for further gains.

Interest Rate Implications

This shift towards a softer stance has important effects on interest rate markets. We can expect government bond yields to keep declining as the market anticipates potential rate cuts in late 2025 or early 2026. Using options on Secured Overnight Financing Rate (SOFR) futures or purchasing calls on treasury bond ETFs can effectively position us for lower rates. However, we should be wary of the market’s previous excitement for rate cuts back in late 2023, which quickly changed due to stubborn inflation data in early 2024. While the current data is more positive, any unexpected strength in upcoming reports could quickly reverse this softer positioning. Therefore, we should remain cautious with our investments. Create your live VT Markets account and start trading now.

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