In June, U.S. core PCE inflation rose by 0.3% from the previous month. This was expected and marked the biggest monthly increase since February. The annual rate stayed at 2.8%, which is slightly above the predicted 2.7%. This data raises concerns for the Federal Reserve as inflation nears 3%. Price increases from tariffs are driving this inflation. Inflation in services, especially financial services, adds more pressure. Although the Fed sees tariff-related inflation as temporary, the ongoing 0.3% monthly increases show continued inflation volatility, which could affect future rate cuts. The chances of a rate cut in September have dropped from 65% to 39%, with rates expected to stay between 4.25% and 4.50%.

US Jobs and Stock Market Data

U.S. jobs data showed mixed results. Claims data was better than expected, but layoffs are rising. U.S. stock markets started higher, helped by gains in Meta and Microsoft, but closed lower. The NASDAQ fell by 7.23 points, the Dow dropped by 333.30 points, and the S&P declined by 23.51 points. Copper prices fell sharply after new tariffs on semi-finished copper products were announced, but refined copper wasn’t affected. The price dropped by $1.23, or 22.05%. Crude oil fell by $0.64 to $69.35, gold rose by $13.89 to $3,289.71, and Bitcoin dropped by $1,336 to $116,499. President Trump announced plans for a trade deal with Mexico, a possible 35% tariff on Canadian imports, secondary tariffs on Russian oil, and urged 17 pharmaceutical companies to lower their prices. With core inflation stubbornly at 2.8%, the market is moving away from expecting a rate cut in September. Looking back at the 2022-2023 cycle, the Fed remained cautious longer than many thought, and this could happen again. This suggests preparing for higher rates for an extended period through options on Treasury ETFs or selling short-term futures before tomorrow’s jobs report.

Volatility and Market Strategy

The NASDAQ’s drop after gaining 327 points is a warning sign for stocks. The VIX, a key measure of market fear, has jumped from the mid-teens to over 22 in the last two weeks, indicating increased uncertainty. Traders should think about buying puts on major indices like the S&P 500 to protect against further losses, as tech earnings alone aren’t enough to keep the market stable. The 22% plunge in copper prices comes from new 50% tariffs on semi-finished products. However, raw copper, like cathodes traded on the LME, only fell by 3% yesterday, highlighting a potential opportunity. This suggests a spread trade: go long on raw copper futures while buying puts on industrial companies that rely heavily on finished copper imports. Increased trade tensions, like the threat of a 35% tariff on Canada, boost the risk of currency volatility. This makes buying call options on the USD/CAD pair a smart hedge against a weakening Canadian dollar. Additionally, the plan for secondary sanctions on Russian oil importers could tighten global supply, implying that the recent dip in crude prices may be temporary. Considering call options on oil is now worth evaluating. Create your live VT Markets account and start trading now.

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