US initial jobless claims were reported at 217,000 for the week ending July 18, which is lower than the expected 227,000. This figure gives us a glimpse into the current state of the U.S. job market. The EUR/USD exchange rate is around 1.1770 as the market processes the European Central Bank’s strong position and mixed data reports. In addition, talks of a potential US-EU trade deal are gaining momentum. GBP/USD fell to 1.3520, reversing earlier gains due to disappointing UK data. This currency pair faces growing pressures amid shifting market feelings.

Gold and the Economy

Gold prices bounced back from a low of $3,350 but struggled to rise above $3,400 on Thursday. The current strength of the dollar and increasing US yields are affecting the metal’s prices. Bitcoin rose to $118,000, changing market sentiment, while Ethereum and XRP faced challenges. Amid rising volatility, Ethereum settled around $3,630, down from earlier highs. Trump’s second term is characterized by significant policy changes affecting trade, tax, and national defense. The economy’s resilience in this environment continues to be closely watched. Recently, initial jobless claims increased to 229,000, just above expectations and the highest in a month. This may suggest a softening U.S. labor market, which could affect future Federal Reserve decisions. Therefore, we recommend traders consider options that would benefit from a possible interest rate cut later this year.

European Economic Developments

The EUR/USD is trading at approximately 1.0880 after the European Central Bank cut interest rates for the first time since 2019. However, future moves appear uncertain due to ongoing inflation, resulting in a mixed outlook for the currency. This uncertainty presents a trading opportunity; we suggest using straddles to take advantage of significant price moves in either direction. GBP/USD is near 1.2750, but the upcoming UK general election on July 4th is the primary concern for traders. Recent inflation data showed a decrease to 2.3%, moving closer to the Bank of England’s target, but the political outcome remains a significant risk. We recommend buying put options on the pound as a cost-effective hedge against potential market surprises stemming from the election. Gold prices are stabilizing around $2,370 per ounce but are struggling to increase significantly. The metal is facing challenges from the high 10-year U.S. Treasury yield, which is over 4.2%, raising the cost of holding non-yielding assets. We advise strategies that benefit from range-bound trading, like selling out-of-the-money calls and puts. Bitcoin has surged past $71,000 due to substantial inflows into U.S. spot ETFs, which have gained over $15 billion since their launch in January. While Ethereum is also gaining ground following its own ETF approval, other digital assets are not seeing the same institutional interest. We suggest focusing on call options for Bitcoin, as it shows the most relative strength. The possibility of a second term for the former president is prompting markets to anticipate significant policy changes, particularly in trade. Historically, his use of tariffs has led to market volatility, and new tariff proposals could spark inflation. To prepare, we recommend traders consider buying long-dated call options on the VIX index to hedge against future instability. Create your live VT Markets account and start trading now.

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