European trading has been slow this week as market players wait for important news. The New Zealand dollar dropped after the Reserve Bank of New Zealand announced a cautious policy decision, bringing NZD/USD down by 1% to 0.5830. Meanwhile, major currencies like EUR/USD and USD/JPY have shown only slight changes, with each down by 0.1%.

GBP/USD’s Performance

GBP/USD has risen a bit by 0.1% to 1.3502, following the release of inflation data. However, there is pressure from large option expiries at the 1.3500 level. In the broader market, European stocks and US futures are down, reversing some of the previous day’s gains after a decline on Wall Street. Notable upcoming events include earnings reports from Target and Walmart. Traders are waiting for more key updates, including the upcoming Fed minutes and PMI data from both the Eurozone and the US. The weekly report on initial jobless claims in the US is also on the horizon. The most anticipated event is Fed Chair Powell’s speech at the Jackson Hole symposium on Friday. The current market calm indicates potential changes ahead. With the VIX index close to a low of 13, implied volatility is low, making it more affordable to enter options strategies. This offers a chance to prepare for a significant price movement before it occurs. Attention is focused on Fed Chair Powell’s speech this Friday, especially after the recent US inflation data for July 2025 showed a rise to 3.1%. Recall the market downturn following his hawkish remarks at last year’s event to understand the possibility of a sharp reaction. This week’s calm is likely the calm before a storm.

Market Expectations

The tight ranges in EUR/USD and USD/JPY reflect the hesitation as traders wait for signals about future interest rate changes. A long straddle on the dollar index or related currency pairs might be a savvy approach to trading the outcome of Friday’s speech. A clear message from Powell will likely shake these pairs out of their current stagnation. For GBP/USD, the large option expiries at the 1.3500 strike are providing temporary support, but this effect will decrease after today. Similarly, while Walmart’s retail earnings will offer insights into consumer strength, they are not as significant as Powell’s remarks on the economy, which will ultimately influence market direction into September. Create your live VT Markets account and start trading now.

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