China published its Manufacturing PMI for August 2025 over the weekend, reporting a figure of 49.4, which is slightly lower than the expected 49.5. The Services PMI met expectations at 50.3. Today, attention turns to the private manufacturing PMI survey from S&P Global, which is expected to show further contraction.

US Tariffs and Economic Calendar

In other news, a US Federal Appeals court has ruled that most of Trump’s tariffs are illegal, although the legal battle is still ongoing. This coincides with today’s economic calendar in Asia, which features several important events and consensus expectations. Monday’s agenda includes updates from the investingLive economic data calendar, with all times shown in GMT. The calendar outlines past results and consensus expectations for economic indicators from the previous month or quarter. A general risk warning notes the high-risk nature of foreign exchange trading, highlighting the potential to lose more than the initial investment. Investors are encouraged to think about their investment goals and seek independent advice. investingLive clarifies it does not provide investment advice and is not responsible for any potential losses from reliance on its content. With China’s manufacturing data dipping into contraction at 49.4, we should expect ongoing weakness in commodity-linked assets. For derivative traders, this means considering buying put options on the Australian Dollar or selling copper futures. Historically, when China’s PMI stays below 50 for consecutive months, industrial metal prices often drop by 5-8% in the following quarter.

Impact of Tariff News

The US court ruling against Trump’s tariffs is a significant development that introduces uncertainty into the market. Although the legal battle isn’t over, the possibility of tariffs being lifted could lower inflation and increase corporate profits for importers. We recommend buying call options on retail sector ETFs, as these companies would benefit immediately from reduced import costs. This tariff news complicates the outlook for the US dollar and Fed policy. If tariffs are ultimately eliminated, it could alleviate inflation, granting the Fed more flexibility and potentially impacting the dollar negatively. Based on analysis from the early 2020s, these tariffs added about 0.5% to overall inflation, so their removal would be significant for bond markets and currency traders. The political pressure on Fed Chair Powell, combined with the critical tariff news, signals that volatility may rise in the coming weeks. We suggest buying protection through S&P 500 put options or purchasing VIX call options to hedge existing long positions. This strategy allows us to stay in the market while managing downside risks from sudden policy changes or legal outcomes. With the important US Non-Farm Payrolls report set for release this week, expect sharp movements, especially in currency pairs like USD/JPY. The mix of weak global manufacturing data from China and possible policy changes in the US creates a challenging environment for determining a clear direction. Therefore, using options strategies like straddles on major indices to trade the expected surge in volatility around the data release may be more effective than making a straightforward directional bet. Create your live VT Markets account and start trading now.

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