The dollar is bouncing back from losses after Fed Chair Powell’s dovish comments at Jackson Hole last week. The euro is down 0.5% at 1.1585 against the dollar, while the dollar is climbing against the yen, now over 148.00. Both GBP/USD and AUD/USD have dropped by 0.4%. The dollar is gaining strength as traders expect two rate cuts of 25 basis points from the Fed by the end of the year. European markets are mixed. French stocks are showing slight gains after recent declines. US futures remain stable following an uptick on Wall Street. In commodities, gold is down 0.5%, resting at $3,375.19, largely due to the stronger dollar. Bitcoin is also under pressure, falling 0.1% to $111,262 and staying below the 100-day moving average.

Eurozone And US Economic Divergence

The EU might consider removing US tariffs while the US plans to raise tariffs on India. Key data includes Germany’s GfK consumer sentiment, which stands at -23.6, and Switzerland’s UBS investor sentiment dropping to -53.8. US mortgage applications fell by 0.5% for the week ending August 22. As the month-end comes, market flows may change, especially as attention turns to the upcoming US jobs report. The market has fully expected two 25 basis point rate cuts by the Fed before the year ends. The dollar’s rebound suggests that traders might think last week’s dovish remarks were exaggerated. The focus is now on strategies that profit from a stronger dollar, particularly against currencies with weaker economic prospects. Options that bet on further declines in EUR/USD below its current level of 1.1585 are looking appealing. The economic gap between the US and Europe is widening, making short-euro positions attractive. Germany’s GfK consumer sentiment has reached a concerning -23.6. Recent S&P Global PMI data from August 2025 reveals that Eurozone manufacturing is contracting at 44.2, while the US ISM figure is at an expansionary 51.5. This data suggests selling into any rises in the EUR/USD pair.

Market Volatility And Strategic Positioning

As we approach month-end, unpredictable market flows can occur, followed by the important US jobs report next week. The CBOE Volatility Index (VIX) is currently low at around 14, making it a good time to buy straddles or strangles on the S&P 500, which could offer a cost-effective way to prepare for potential volatility spikes. Any surprises in the jobs data could unsettle the market’s current calm. Traders holding USD/JPY positions should be cautious as the pair nears 148.00. We recall that in late 2022 and 2023, the Ministry of Finance intervened around these levels to protect the yen. Using out-of-the-money puts to hedge long positions is a wise strategy to guard against unexpected interventions. Bitcoin’s situation has deteriorated significantly after it fell below its 100-day moving average for the first time since April 2025. The ongoing testing of the $110,000 support level suggests it may not last, and recent CME data shows institutional investors are taking net-short positions in Bitcoin futures. This indicates a possible decline towards the psychological $100,000 level. The traditional inverse relationship between gold, a rising dollar, and higher US 10-year yields is clearly evident. With gold stabilizing and waiting for a catalyst, selling covered calls on existing holdings or setting up range-bound iron condors could create income. This aligns with the broader market’s cautious approach as we await next week’s crucial economic data. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now