Interest rate predictions for major central banks are stable. In June, UK mortgage approvals reached 64.17k, exceeding the expected 63.00k. Deutsche Bank in Germany now expects a rate increase from the ECB rather than further cuts. A recent ECB survey showed that inflation expectations for the coming year dropped to 2.6% from 2.8%. Spain’s GDP growth for Q2 came in at 0.7%, higher than the forecasted 0.6% for the quarter. The US dollar remains strong, while stock markets have slightly recovered from previous losses. Other market areas are moving slowly as investors await the FOMC’s decision and key US data releases like the NFP and CPI. Discussions between the US and China are ongoing in Stockholm, but no significant breakthroughs are anticipated. Both sides might agree to extend negotiations by 90 days to prevent further trade conflicts.

Key US Economic Releases

Today in the US, key data is set to be released: Job Openings and Consumer Confidence. Job Openings are expected to be 7.500M, down from 7.769M, reflecting a trend of ‘low hiring, low firing.’ Consumer Confidence is predicted to improve to 95.0, up from 93.0, as trade tensions ease. Heading into this week’s Federal Reserve meeting, the US dollar is expected to stay strong. The U.S. Dollar Index (DXY) has remained above 105 for the past month, suggesting little reason to bet against it. Traders should consider strategies that would benefit from ongoing dollar strength, particularly against the euro. We see the euro as at risk due to mixed messages from the European Central Bank. The decline in one-year inflation expectations to 2.6% undermines the hawkish outlook, creating uncertainty that could push EUR/USD below its recent support level of 1.0700. This makes selling euro call options or purchasing euro puts an appealing strategy for the upcoming weeks. Volatility in equity markets appears low, but we expect this to change. The CBOE Volatility Index (VIX) is near 14, which feels complacent given the major earnings reports and central bank decisions on the horizon. We believe that buying short-dated VIX calls or straddles on major indices could be an affordable way to profit from anticipated price swings.

Market Catalysts and Risks

The US jobs data will be crucial for market movement. A Job Openings number below the expected 7.5 million would back up the current “low hiring, low firing” trend. This outcome could challenge the strong dollar narrative and lead to quick changes in interest rate futures. Geopolitical risks are now focused on specific sectors rather than affecting the entire market. The delay in Nvidia’s export licenses poses risks for semiconductor stocks, making protective puts on the SOXX ETF a wise hedge. On the other hand, positive news like Bitmain’s opening of a factory in the U.S. could create opportunities in less-affected technology companies. Create your live VT Markets account and start trading now.

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