In the European morning on August 8, 2025, financial markets remained steady as they approached the end of the week. Major currencies showed little movement; the dollar was consistent yet slightly soft throughout the week. The EUR/USD decreased by 0.15% to 1.1647, the USD/JPY increased by 0.45% to 147.76, and the GBP/USD as well as AUD/USD saw minimal changes. European stocks made slight gains, recovering from losses experienced the previous week. S&P 500 futures climbed 0.3%, driven by strong tech shares. In the commodities market, gold spot prices held steady, but gold futures on COMEX jumped. WTI crude rose by 0.6% to $64.27, while Bitcoin fell 0.3% to $116,864.

Upcoming Economic Data

Market participants are now focused on the upcoming US CPI report, which is expected to impact the Federal Reserve’s outlook. The debate over interest rates continues, with JP Morgan predicting that the Fed may cut rates several times before the year’s end. Other important events include the Canadian labor market report and potential updates on gold tariffs. With markets quiet ahead of the US CPI report next week, implied volatility on major equity indexes is at multi-month lows. This situation echoes late 2023 when one inflation report changed rate expectations and caused the VIX to spike over 20% in a few days. Purchasing inexpensive VIX calls or out-of-the-money options on the SPX could be a smart approach to prepare for the upcoming volatility. The belief in consecutive Fed rate cuts until the year’s end is now key. This expectation points to positioning for lower short-term interest rates through derivatives like SOFR futures. There has also been a notable increase in options trades betting on a steeper yield curve, which is currently inverted, as the 2-year yield is higher than the 10-year yield.

Currency and Stock Market Dynamics

In the currency market, the EUR/USD is affected by substantial option expirations at 1.1650, creating a potential for significant price movement ahead of the CPI data. A long strangle strategy, where an out-of-the-money call and put option are purchased, could profit from major price swings in either direction. For the USD/JPY, which is facing resistance, buying puts could serve as a hedge against a dovish Fed surprise that could weaken the dollar. The strength of tech stocks suggests that the market expects future Fed cuts to stem from falling inflation rather than a struggling economy. This viewpoint supports utilizing call spreads on the Nasdaq 100 to capture potential gains while minimizing trade costs. Rate-sensitive sectors like utilities and real estate should also be considered for optimistic option strategies. Gold’s high price, exceeding $3,300 an ounce, is backed by strong demand and the potential for lower interest rates. Data from the World Gold Council earlier this quarter confirmed that central bank purchases in 2025 are on track to meet 2024’s record levels. Buying call options on gold futures or ETFs remains a key strategy to capitalize on this momentum. Create your live VT Markets account and start trading now.

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