US unit labor costs rose by 1.0% in the second quarter, which is lower than the expected 1.2% and the preliminary estimate of 1.6%. The ISM services PMI for August came in at 52.0, exceeding the forecast of 51.0. However, the final S&P Global services PMI for September was 54.5, slightly below the preliminary figure of 55.4.

S&P 500 Sees Minor Increase

The S&P 500 started the day with a small gain, as traders awaited the ISM services data. Current indicators show that the economy is slowing down, but not in crisis. Canada’s trade balance for July reported a deficit of -4.94 billion, higher than the anticipated -4.75 billion. Investors should be aware that foreign exchange trading carries high risk, which may not be suitable for all, particularly due to leverage that can increase risk and potential losses. Before trading in foreign exchange, it’s essential to evaluate your investment goals, experience, and risk tolerance. Only invest money that you can afford to lose. The latest data showing a 1.0% rise in unit labor costs is a key development. After the core Consumer Price Index (CPI) lingered around 3.1% through summer 2025, this disinflationary sign is something the Federal Reserve has wanted to see. As a result, interest rate futures are now indicating a higher chance of a rate cut in the first half of 2026.

Economic Strength Amid Political Risks

Despite this, the economy isn’t slowing significantly, as shown by the stronger-than-expected ISM services PMI of 52.0. This aligns with the recent Q2 2025 GDP reading, which showed a solid growth rate of 2.1% annually. The current “soft landing” scenario, with easing inflation and stable growth, generally supports a cautiously optimistic outlook for equity index futures. A major concern is the renewed proposal for a 15-20% minimum tariff on EU goods. This political uncertainty is a key factor behind the recent decline of the EUR/USD pair below 1.05. Traders are actively buying put options on the Euro to protect against further declines caused by trade tensions. This mix of positive domestic economic data and external political risks can lead to more market volatility. We remember the sharp market movements during the 2018-2019 trade disputes when the VIX index surged above 25 multiple times. Using options to manage risk, such as buying protective puts on the S&P 500, is becoming a wise strategy for the upcoming weeks. Create your live VT Markets account and start trading now.

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