The United States Core Personal Consumption Expenditures (PCE) rose by 2.5% in the second quarter, beating the expected 2.4%. This information adds to the mixed economic signals affecting the market. In currency trading, the EUR/USD fell below 1.1500 after strong US GDP figures boosted the US Dollar. The GBP/USD also lost some ground, dropping to around 1.3340 as the Dollar remained strong. In the commodities market, gold faced selling pressure and fell to $3,320. Traders reacted to recent US data while waiting for the Federal Reserve’s upcoming interest rate decision. Meanwhile, the Bank of Canada is expected to keep its interest rate at 2.75%, with attention on US tariffs during Governor Macklem’s press conference. The Federal Reserve is under scrutiny for delaying rate cuts. While the economy shows resilience and tariff uncertainties persist, concerns about weakness in the labor market are rising. The stronger-than-expected Core PCE reading suggests that the Federal Reserve will likely hold off on rate cuts for now. A similar situation occurred in 2023 when persistent inflation kept interest rates high, leading to market volatility. Serious discussions about easing policies may be pushed into the fourth quarter. Although the overall economy seems stable, we are noticing early signs of a weakening labor market. The latest Non-Farm Payrolls for July 2025 showed just 185,000 jobs added, below the 200,000 estimate. This clash between ongoing inflation and a softening job market increases uncertainty. The VIX index has risen from its lows to around 17, indicating that traders might want to buy protection against potential declines in stocks. Given the strong dollar, we believe that shorting the EUR/USD has room to grow, especially since the yield difference between 10-year US Treasuries and German Bunds is now over 200 basis points. Traders might consider buying put options on the EUR/USD pair, aiming for a drop to 1.1400 in the upcoming weeks. The same strategy could apply to the GBP/USD, which remains sensitive to continued dollar strength. For gold, a strong dollar and the Fed’s cautious approach pose challenges for this non-yielding asset. With gold dropping below $3,320, it might test a major support level from earlier this year. Selling out-of-the-money call options on gold futures could be a smart move to earn income, betting that a significant price rally isn’t likely in this environment. During the Bank of Canada’s press conference, US tariffs will be a crucial factor that could cause volatility. Any unexpected tariff news could lead to sharp movements in pairs like USD/CAD, regardless of broader economic trends. Holding positions, such as long straddles, could allow traders to profit from sudden spikes in volatility, providing a valuable hedge against geopolitical surprises.

here to set up a live account on VT Markets now