The recent U.S.–China trade talks wrapped up, and Treasury Secretary Bessent called the meetings positive. The U.S. aims to improve its relationship with China. President Xi has invited President Trump for more discussions. U.S. Trade Representative Greer mentioned a possible $50 billion drop in the U.S. trade deficit with China this year. At the same time, the U.S.–EU trade deal was praised, allowing the U.S. access to the $20 trillion European market. The EU is also committed to energy purchases and adjusting tariff structures.

EU Trade Agreement

Commerce Secretary Lutnick highlighted the EU trade agreement as a major win for President Trump. The deal focuses on U.S. production needs in certain sectors while negotiations continue on digital services and other fields. In other economic news, U.S. home prices are falling, and the trade deficit is now $85.99 billion. Consumer confidence rose to 97.2, while job openings in June slightly missed expectations. The final estimate for Q2 GDP increased to 2.9%, with advanced GDP data coming soon. Major U.S. stock indices paused after recent gains, and U.S. Treasury yields dropped amid strong demand for seven-year notes. The market is awaiting the FOMC rate decision, expecting rates to stay the same due to ongoing inflation worries. Looking ahead to July 29, 2025, we anticipate significant market swings in the coming weeks. President Trump is about to make decisions on China tariffs, and the Federal Reserve will announce its rate decision tomorrow, leading to high uncertainty. We are considering options on the VIX index, which has been around a low of 15. This offers an affordable way to guard against or bet on major market changes.

Bond Market Signals

Today’s steep drop in Treasury yields, especially a 10.5 basis point fall in the 30-year bond, indicates anxiety in the bond market. Traders are preparing for a possible economic slowdown or a Federal Reserve that may be less aggressive than Chair Powell suggests. We’re monitoring futures on the Secured Overnight Financing Rate (SOFR), which show the market is anticipating at least one rate cut by year-end, making the lead-up to tomorrow’s FOMC announcement tense. The U.S. dollar is holding strong, supported by the new trade deal with the European Union, which an official called a “masterclass.” As the EU appears to be negotiating from a weaker position and faces a 15% tariff structure, the Euro might face further downward pressure. We think buying put options on the EUR/USD currency pair is a smart strategy given this shifting trade scenario. The situation with China remains precarious, affecting currency trades. The possibility of secondary sanctions if China keeps buying Russian oil gives the U.S. leverage, especially as China’s Russian crude imports recently hit over 2.6 million barrels a day. Any news from the Oval Office this week could lead to significant market movements, making options on the offshore yuan (USD/CNH) particularly intriguing. Crude oil prices are caught between rising due to sanction threats on Russian oil and a surprise inventory build shown in today’s private survey, which is bearish. With the official government inventory report (EIA) due tomorrow, we expect prices to change significantly. A straddle strategy—buying both call and put options—could be a good way to navigate the upcoming volatility. Recent domestic data, like the decline in Case-Shiller home prices for two consecutive months, points to possible issues in the U.S. economy. Although consumer confidence improved, the struggling housing market and slightly reduced job openings dampen the strong 2.9% GDPNow forecast. We are considering buying protective puts on homebuilder ETFs as a safeguard against a potential slowdown. Create your live VT Markets account and start trading now.

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