In July, the University of Michigan reported that one-year consumer inflation expectations in the U.S. climbed to 4.5%, up from 4.4%. This indicates how consumers feel about inflation over the next year. The EUR/USD currency pair saw a boost, trading above 1.1550, following weak U.S. employment data and the ISM Manufacturing PMI. Likewise, GBP/USD turned positive, rising above 1.3250 after disappointing Nonfarm Payrolls and Manufacturing data in the U.S. Gold prices have reached new weekly highs around $3,350, supported by falling U.S. Treasury bond yields. This change reflects adjustments in what the market expects from the Federal Reserve’s interest rate policies. In the cryptocurrency market, Bitcoin declined to below $115,000 after a bullish trend in July. It may find support at $112,000 amid rising liquidations, highlighting ongoing volatility. The eurozone economy has shown resilience this summer, bolstered by a U.S.-EU agreement and spending plans in Germany. However, there’s still a possibility of a final interest rate cut from the European Central Bank as wage indicators weaken. With rising consumer inflation expectations in July 2025 and weak data on employment and manufacturing, we see a clear trend. The Federal Reserve may have less ability to raise interest rates aggressively. The latest Consumer Price Index (CPI) report for July confirmed this, showing core inflation at 3.1%, below the 3.3% forecast, indicating the Fed’s earlier tightening measures are taking effect. This situation is unfavorable for the U.S. dollar, as we’ve noticed in the rallies of EUR/USD and GBP/USD. We believe the dollar’s weakness has room to grow in the coming weeks. Therefore, we are considering buying call options on EUR/USD with strike prices above 1.1600 to capture potential gains while managing risk. However, the eurozone’s strength could be limited by its central bank. ECB President Lagarde mentioned on July 28, 2025, that the “disinflationary process is ongoing,” which keeps a potential rate cut in play for autumn. This difference in policies leads us to be optimistic about the euro against the dollar while being cautious about a substantial rally, prompting us to hedge our positions. The drop in U.S. Treasury yields has made gold appealing, driving it towards $3,350. This situation resembles the 2020 environment when falling real yields pushed gold to record highs. We should consider long positions in gold futures or options on gold-related ETFs to take advantage of this upward momentum. In the crypto market, Bitcoin’s drop below $115,000 after a strong July indicates that leverage is being cleansed. Data from Glassnode on July 30, 2025, revealed a rise in open interest for Bitcoin put options with strike prices near $110,000, as traders prepare for more volatility. We should explore using option straddles, which profit from significant price movements in either direction, to navigate this uncertainty.

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