Market Overview

US and EU talks suggest that auto tariffs may be eased soon. Walmart’s recent earnings report did not meet expectations, causing its shares to drop in pre-market trading. Comments from various Fed officials imply a careful approach to changing interest rates, while the Bank of Japan might raise rates to 0.75% by the end of the year. France’s August flash services PMI hit 49.7, beating the forecast of 48.5. Germany’s manufacturing PMI stood at 49.9, surpassing the expected 48.8. In the UK, the services PMI was also better than predicted at 53.6, compared to the expected 51.8, although its CBI trends total orders were lower than anticipated at -33. The USD remains stable, while the JPY is struggling. European stocks and S&P 500 futures both fell by 0.3%. US 10-year yields rose by 2 basis points to 4.316%. Gold decreased by 0.4%, now priced at $3,333.05, while WTI crude oil increased slightly by 0.5% to $63.01. Bitcoin dropped by 1.1%, now valued at $113,116. Despite positive PMI reports from key European countries, they have not significantly moved the markets. The euro and pound currencies are mostly unchanged against the dollar. USD/JPY had minor movements, reflecting comments from the Fed. Overall, major currencies are steady as investors await more US economic data and a speech from Fed Chair Powell. In the stock market, European shares remain down, mirroring US futures, while Walmart’s earnings miss has added to the decline. Gold and cryptocurrencies are continuing to fall, with previous gains fading.

Fed Chair Speech

With a cautious market atmosphere, there’s an increased risk heading into Fed Chair Powell’s speech tomorrow. This suggests that buying short-term volatility via options like straddles on the S&P 500 could be a strategic move, as any unexpected hawkish or dovish remarks might lead to notable market shifts. We anticipate that after Powell speaks, implied volatility will drop, making this a critical trading moment. Comments from Fed officials, along with the US 10-year yield staying above 4.3%, strengthen the narrative of “higher for longer” interest rates. This trend supports a strong US dollar, notably against the Japanese yen, as the Bank of Japan is slow in raising rates. We might consider buying USD/JPY call options, but we should proceed with caution as the pair nears the 150 level, where the Ministry of Finance has intervened before, particularly in late 2022. In the equity markets, Walmart’s earnings miss raises serious concerns about the state of the US consumer. This worry grows as recent data shows US credit card delinquencies reached a 15-year high in the second quarter of 2025. It may be wise to take bearish positions on consumer discretionary ETFs using put options or put spreads. On the positive side, the possible easing of US-EU auto tariffs offers a unique opportunity in a sluggish market. We might explore buying longer-term call options on European car manufacturers, as a formal announcement in the coming weeks could significantly boost their stock prices. We witnessed similar trade uncertainties impact these companies during 2018-2019, and a resolution would be a big relief. The improved PMI figures from France and Germany support the idea that the European Central Bank will hold steady on rates, likely keeping the euro stable against the dollar. This steady environment is perfect for options strategies that benefit from low volatility, such as selling iron condors on the EUR/USD pair. This strategy would profit as the currency pair remains in a tight range while we collect the premium. Create your live VT Markets account and start trading now.

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