Deutsche Bank is focused on tariff developments as the August 12 deadline for US-China tariffs approaches. This date is crucial for trade relations and could impact market sentiment significantly, depending on whether the tariffs are paused or lifted. The bank is also watching the US Consumer Price Index (CPI) report for July, set to be released on Tuesday. Economists anticipate a +0.1% increase in the headline CPI from June, which experienced a +0.3% rise. They also expect a slowdown in the year-over-year inflation rate.

July CPI Expectations

Core CPI is predicted to rise by +0.21% month-on-month, matching June’s increase of +0.2%. Analysts will closely examine these numbers for hints about future inflation and the Federal Reserve’s possible policy adjustments. The US CPI report will be published on Tuesday at 12:30 GMT, or 08:30 US Eastern time. As we approach two key events tomorrow, August 12, 2025, traders should be prepared. The deadline for the US-China tariff pause and the release of July’s inflation data could lead to major market movements. Derivative traders should brace for possible spikes in volatility. We are monitoring the US CPI report for signs of slowing inflation. Expectations are for a modest 0.1% monthly increase, with core inflation forecasted at 0.21%. After core inflation hovered around 3.1% in the second quarter of 2025, a lower number could indicate that the Federal Reserve’s policies are having an effect.

Potential Market Reactions

With these two significant events happening close together, traders may prepare for large price changes in either direction. The VIX, a key indicator of market fear, recently rose to 18.5, showing increased nervousness ahead of these developments. Strategies that benefit from volatility, like straddles on the SPX, are gaining popularity. The outcome of the tariff discussions remains uncertain and could overshadow the inflation data. We recall how market volatility surged during the 2018-2019 trade disputes, where unexpected tariff announcements led to sharp declines in equity futures. If the current pause is not extended, we may see a similar risk-averse reaction. As a result, traders might consider buying put options in trade-sensitive sectors like semiconductors or industrials as a way to hedge their positions. These options could provide protection if trade negotiations break down and new tariffs are introduced. On the other hand, a positive outcome could lead to a significant rally, making short-term call options appealing for those willing to take that risk. Create your live VT Markets account and start trading now.

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