The ISM Manufacturing Employment Index in the United States dropped to 43.4 in July, down from 45. This drop indicates that job conditions in manufacturing are weakening. The EUR/USD exchange rate rose above 1.1550 after disappointing US Nonfarm Payrolls and ISM Manufacturing PMI data. Similarly, GBP/USD increased, climbing above 1.3250, recovering from losses incurred over the past six days.

Gold Hits New High

Gold reached about $3,350 this week as US Treasury bond yields fell. This decline in yields has led markets to rethink the Federal Reserve’s interest rate plans following underwhelming employment data. At the same time, the cryptocurrency market is struggling, with Bitcoin dropping below $115,000 due to rising liquidations. However, the euro area economy remains strong, helped by a recent agreement between the EU and US and higher spending in Germany. Forex traders interested in trading EUR/USD in 2025 should look for brokers that offer competitive spreads, quick execution, and strong platforms. This support can help both new and experienced traders navigate the Forex market effectively. Today’s weak US jobs report clearly signals economic slowing. The addition of only 95,000 jobs in July 2025, far below the expected 180,000, confirms the trend reflected in the falling ISM Manufacturing Employment Index. This reinforces our belief that the Federal Reserve will pause its rate hikes, and we think markets now see a 65% chance of a rate cut before the year ends.

Interest Rate Derivatives Outlook

This situation makes interest rate derivatives notably intriguing in the coming weeks. We are looking to buy Secured Overnight Financing Rate (SOFR) futures, which become more valuable as future interest rate expectations decline. A similar trend occurred in 2019 when the Fed shifted to rate cuts amid declining manufacturing, benefiting those positioned well in rate futures. The differences between the US and European economies are becoming clearer. The euro area, strengthened by unexpected 0.8% growth in German industrial production, makes the euro appealing against the weakening dollar. We believe buying EUR/USD call options is a smart strategy to gain potential upside beyond the current 1.1550 level while managing our risk. We are also witnessing a common shift toward safety, with money moving from riskier assets to traditional safe havens. Gold’s surge towards $3,350 an ounce, driven by lower US Treasury yields, prompts us to consider increasing long positions through futures contracts. In contrast, Bitcoin’s decline below $115,000 indicates that traders are cutting back on speculative investments, making put options a smart way to hedge or profit from further price falls. This overall economic weakness is likely to impact corporate earnings and equity markets. The decline in manufacturing and jobs serves as a leading indicator for the broader S&P 500. Therefore, we are looking into buying put options on major US indices to protect our portfolios against a possible market correction soon. Create your live VT Markets account and start trading now.

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