The United States saw a drop in personal consumption expenditure prices, falling from 3.7% last quarter to 2.1% in the second quarter. This indicates that the rate of increase in consumption prices is slowing down. The EUR/USD exchange rate fell below 1.1500 after strong US economic data on gross domestic product (GDP) and employment was released. Similarly, GBP/USD dropped to a two-month low below 1.3300 due to the strength of the US Dollar and other economic factors. Gold prices tested $3,300 as US Treasury bond yields rose, driven by strong economic data. The Federal Reserve is likely to keep interest rates steady, as they haven’t changed for five meetings since a reduction last December. Critics are questioning the Federal Reserve’s delay in cutting rates, despite ongoing tariff uncertainties and a strong economy. There’s concern that they may overlook the labor market conditions when deciding on rate adjustments amidst economic pressures. The US Dollar is showing strong performance, indicating a trend to watch in the coming weeks. The recent drops in EUR/USD and GBP/USD are supported by strong GDP numbers and a jobs report from early July 2025, which showed over 210,000 new jobs. We might consider buying call options on dollar-tracking ETFs or put options on the Euro to capitalize on this momentum. The Federal Reserve appears set in its current approach, having kept rates steady for five meetings since the cut last December 2024. The decline in personal consumption prices to 2.1% gives them little reason to change, as they are close to their target. The Fed funds futures market indicates a greater than 90% chance that rates will remain the same through the next meeting, suggesting low volatility strategies may be smart. Gold is struggling at the $3,300 level, facing challenges in moving higher. A key reason for this is the rise in US 10-year Treasury yields, currently around 4.5%, making interest-bearing government bonds more appealing than non-yielding gold. Buying put options on gold futures could be a direct way to profit if gold prices decline from this high point. Even with a calm market, we must stay aware of risks like ongoing tariff disputes. The market volatility during the 2018-2019 trade conflicts shows how quickly sentiment can change. With the VIX index, which measures volatility, currently low at 14, now is a good time to consider buying out-of-the-money call options on the VIX for some protection.

here to set up a live account on VT Markets now