Currency markets are currently unstable, with the USD remaining nearly unchanged against the EUR and GBP. The USDJPY is bouncing back from previous losses, and attention is now on Fed Chair Powell’s upcoming speech. Other key topics today include initial jobless claims (estimated at 225K, up from 224K), continuing claims (1.960 million versus 1.953 million), and several economic indicators like the Philadelphia Fed business index, Canadian producer prices, and existing home sales. The PMI flash estimates from the EU and the UK showed mixed results. Positive news came from French and German manufacturing and services PMIs. However, expectations fell short for the German and Eurozone services PMIs, along with the UK manufacturing PMI.

Potential Tariff Relief

A joint trade statement from the US and EU hints at possible tariff relief on cars due to new EU legislation. The EU has agreed to remove tariffs on US goods and invest significantly in energy and agriculture. The US will keep some tariffs and reduce others based on EU actions; however, no formal trade deal has been finalized. Ukrainian President Zelensky is asking for clear security guarantees and expects a strong US response if Russia avoids negotiations. Plans include a $50 billion deal for US drones and advancements in Ukraine’s missile capabilities. Tensions with Russia are high as Kyiv tests a new missile. US stock indices are down in premarket trading, with declines in the Dow, S&P, and NASDAQ. Walmart’s earnings report showed lower earnings per share than expected, despite higher revenues, causing a 3.4% drop in premarket shares. US bond yields have risen by about 2 basis points across different maturities, reflecting shifts in the economic landscape. As Fed Chair’s speech approaches, market participants are on edge, evident in the tight trading ranges for currencies like EUR/USD. Implied volatility in options markets is rising, with the VIX index increasing to 19.5 from a monthly low of 15. This indicates that traders are actively seeking protection against sudden market moves, reminiscent of the situation leading up to major policy shifts in 2023.

Risk Management Strategies

For currency traders, the uncertain and volatile price movements in EUR/USD and GBP/USD make making directional bets challenging before the speech. A more effective approach is to use options to capitalize on possible breakouts. For example, buying a strangle on EUR/USD, which has been stuck in the narrow 1.0750-1.0900 range for weeks, could be profitable if the Fed’s tone prompts the pair to move outside of this range, regardless of which direction it takes. In the equity markets, today’s pre-market weakness and the negative response to Walmart’s mixed earnings indicate a fragile market sentiment. It would be wise to hedge existing long positions by purchasing put options on the S&P 500 or NASDAQ 100 indices. We recall how quickly markets adjusted after hawkish central bank comments during 2022-2024, so having some downside protection is prudent. The slight rise in US Treasury yields indicates that bond traders may be preparing for a hawkish surprise. The latest July 2025 inflation report was slightly higher than expected at 3.4%, raising the possibility that the Fed may signal maintaining elevated rates for a longer period. Traders might consider options on short-term rate futures, focusing on the 2-Year Note, which is particularly sensitive to the Fed’s immediate policy language. The mixed PMI data from Europe and the UK adds another layer of complexity, especially with weak UK manufacturing. While the US-EU trade framework is a long-term positive, it offers little assurance for the coming weeks. The ongoing conflict in Ukraine remains a background risk, suggesting traders should stay flexible and prepare for volatility in energy and agricultural commodities. Create your live VT Markets account and start trading now.

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Market Overview

US and EU talks suggest that auto tariffs may be eased soon. Walmart’s recent earnings report did not meet expectations, causing its shares to drop in pre-market trading. Comments from various Fed officials imply a careful approach to changing interest rates, while the Bank of Japan might raise rates to 0.75% by the end of the year. France’s August flash services PMI hit 49.7, beating the forecast of 48.5. Germany’s manufacturing PMI stood at 49.9, surpassing the expected 48.8. In the UK, the services PMI was also better than predicted at 53.6, compared to the expected 51.8, although its CBI trends total orders were lower than anticipated at -33. The USD remains stable, while the JPY is struggling. European stocks and S&P 500 futures both fell by 0.3%. US 10-year yields rose by 2 basis points to 4.316%. Gold decreased by 0.4%, now priced at $3,333.05, while WTI crude oil increased slightly by 0.5% to $63.01. Bitcoin dropped by 1.1%, now valued at $113,116. Despite positive PMI reports from key European countries, they have not significantly moved the markets. The euro and pound currencies are mostly unchanged against the dollar. USD/JPY had minor movements, reflecting comments from the Fed. Overall, major currencies are steady as investors await more US economic data and a speech from Fed Chair Powell. In the stock market, European shares remain down, mirroring US futures, while Walmart’s earnings miss has added to the decline. Gold and cryptocurrencies are continuing to fall, with previous gains fading.

Fed Chair Speech

With a cautious market atmosphere, there’s an increased risk heading into Fed Chair Powell’s speech tomorrow. This suggests that buying short-term volatility via options like straddles on the S&P 500 could be a strategic move, as any unexpected hawkish or dovish remarks might lead to notable market shifts. We anticipate that after Powell speaks, implied volatility will drop, making this a critical trading moment. Comments from Fed officials, along with the US 10-year yield staying above 4.3%, strengthen the narrative of “higher for longer” interest rates. This trend supports a strong US dollar, notably against the Japanese yen, as the Bank of Japan is slow in raising rates. We might consider buying USD/JPY call options, but we should proceed with caution as the pair nears the 150 level, where the Ministry of Finance has intervened before, particularly in late 2022. In the equity markets, Walmart’s earnings miss raises serious concerns about the state of the US consumer. This worry grows as recent data shows US credit card delinquencies reached a 15-year high in the second quarter of 2025. It may be wise to take bearish positions on consumer discretionary ETFs using put options or put spreads. On the positive side, the possible easing of US-EU auto tariffs offers a unique opportunity in a sluggish market. We might explore buying longer-term call options on European car manufacturers, as a formal announcement in the coming weeks could significantly boost their stock prices. We witnessed similar trade uncertainties impact these companies during 2018-2019, and a resolution would be a big relief. The improved PMI figures from France and Germany support the idea that the European Central Bank will hold steady on rates, likely keeping the euro stable against the dollar. This steady environment is perfect for options strategies that benefit from low volatility, such as selling iron condors on the EUR/USD pair. This strategy would profit as the currency pair remains in a tight range while we collect the premium. Create your live VT Markets account and start trading now.

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The Federal Reserve wants to lower inflation to its 2% goal, but current rates are still much higher. The unemployment rate suggests we are close to full employment, with about 50,000 to 75,000 jobs being replaced each month. There are worries about job trends, and it is still uncertain whether there will be one rate cut this year. Although business costs are rising, their impact on prices is unpredictable, and the Fed’s current policy is somewhat restrictive.

Economic Fundamentals Are Strong

Many believe that economic fundamentals are solid, and by the end of the year, there should be enough clarity for businesses to make important decisions. The plan is to adjust monetary policy to a more neutral stance by 2026, but changes may happen due to ongoing data updates. Bostic, who does not vote at the Fed, prefers one rate cut by the end of the year while keeping a mostly neutral but slightly hawkish view. Consistency in policy is crucial, but flexibility is also important. The Federal Reserve appears to be cautious, which contrasts with the market’s hopeful outlook on rate cuts. Inflation data from July 2025 still shows a stubborn 3.4% year-over-year, meaning the idea of only one cut this year should lead traders to rethink positions that rely on quick rate relief. This creates opportunities in options for SOFR futures, especially for betting against the large cuts anticipated in early 2026. Concerns about a “potentially troubling” employment situation and frequent data changes will likely increase market volatility. The latest jobs report indicated payrolls increased by only 85,000, aligning with the slower replacement rate and confirming this trend. This unpredictability suggests we should consider buying protection or setting up trades that take advantage of sharp market movements, making VIX derivatives and straddles on major indices appealing in the coming weeks.

Current Market Outlook

Since the Fed paused its interest rate hikes in late 2023, we’ve been in a holding pattern, and the market is anxious for easing. Officials have made it clear that the bar for a first rate cut remains high to ensure it aligns with a “consistent” policy direction. This long period of restrictive policy intends to cool demand gradually, and we are beginning to see the effects on the job market. For our positions, this suggests we should sell out-of-the-money calls on interest rate futures, as the path to lowering rates seems to be taking longer than expected. The S&P 500 has been trading within a narrow range, and while fundamentals are considered strong, the restrictive policy may keep this sideways behavior going. Strategies like iron condors on major indices could help us profit from the anticipated lack of strong trends as we move into autumn. Create your live VT Markets account and start trading now.

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Federal Reserve official Schmid mentioned that there is no hurry to lower interest rates. He believes current policies are moderately restrictive and fit for the economy. Officials are closely watching inflation data from August and September, while the job market stays strong. Despite a slow start earlier this year, Schmid is hopeful about future economic growth.

Inflation Challenges and Labour Market Balance

He pointed out a balance between the supply and demand for workers, even with immigration factors in play. He also recognized how tough it is to lower inflation. Schmid suggested that inflation may be closer to 3% than 2%, indicating that more efforts are needed. Current market conditions are stable. However, Schmid emphasized that clear data is required before changing interest rates. As a hawk, Schmid confirmed his viewpoint with these remarks. With a Federal Reserve official indicating no rush to cut rates, we can expect short-term interest rates to stay high. The July 2025 CPI report showed inflation steady at 2.9%, which supports this hawkish stance. Therefore, cuts in September and October appear less likely. This suggests we should consider strategies that perform well with a stable or slightly rising yield curve, like selling near-term SOFR futures contracts.

Market Reaction and Investment Strategies

The focus on the upcoming August and September inflation data indicates that we might see increased market volatility around those times. We could consider buying options on the VIX, especially those expiring in October and November, to prepare for potential market turbulence if the data is worse than expected. This situation resembles the data-driven environment of 2023, where each inflation report led to significant intraday price movements. The “higher for longer” policy could hinder equities, particularly growth and tech stocks sensitive to borrowing costs. Given the strong July jobs report, showing the economy added 195,000 jobs while unemployment remained at 3.8%, the Fed feels little pressure to support the stock market. Therefore, we may want to look into protective put options on indices like the Nasdaq 100 or S&P 500. As the economy slows down but does not collapse, we could explore income-generating strategies that align with this outlook. Selling out-of-the-money call spreads on major stock indices could allow us to profit if the market stays flat or drifts slightly lower. This approach takes advantage of high option premiums from uncertainty without needing a major market drop to succeed. Create your live VT Markets account and start trading now.

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Walmart’s shares fell by 2.3% after the company reported earnings that were below expectations. They announced earnings per share (EPS) of $0.68, missing the forecast of $0.74. However, revenue came in higher than expected at $177.4 billion, compared to the projected $176.2 billion. Operating income dropped by $0.7 billion, or 8.2%, mainly due to costs from legal issues and restructuring. Despite these setbacks, Walmart has increased its forecast for the next fiscal year. They expect revenue growth of 3.75% to 4.25% and anticipate EPS to rise from $2.52 to $2.62. Walmart’s earnings announcement did not mention tariffs, but more information was expected from CEO Doug McMillon during a conference call set for 1200 GMT. The initial 2.3% drop in Walmart’s stock seems like an overreaction to the EPS miss. The company reported strong revenue, and importantly, their positive outlook for the year indicates that the business is in good shape. The decline in operating income seems to be due to temporary charges for legal and restructuring costs, not because of a slowdown in core business. This might be a chance to consider bull put spreads or buying calls, especially since recent government data shows retail sales grew by a steady 0.4% last month. We saw a similar situation in late 2023 when optimistic guidance led to a rally after a mixed earnings report. Implied volatility is probably high right now, but the real test will come during the upcoming conference call. The CBOE Volatility Index (VIX) is currently around a calm 16, which suggests that buying straddles might be wise if we think CEO Doug McMillon will share unexpected news about supply chains or consumer behavior. This strategy benefits from significant price movements in either direction, which might not be fully accounted for in current options pricing. For more cautious investors, the EPS miss shouldn’t be overlooked, as it could indicate pressure on profit margins. The latest consumer confidence index dropped slightly to 101.5, suggesting that consumers are still being careful with their spending. Buying puts with a short-term expiration could serve as a low-cost hedge against any negative surprises from the conference call.

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The US and EU have announced a new trade agreement. The EU will eliminate tariffs on all US industrial goods and provide special access for US seafood and agricultural products. Furthermore, the EU will buy $750 billion worth of US liquefied natural gas (LNG), oil, and nuclear products. Additionally, EU companies plan to invest $600 billion in key US industries by 2028.

US Tariff Implementation and EU Legislation

At the same time, the US will impose a 15% tariff on many EU imports, including cars, pharmaceuticals, and semiconductor chips. If the EU enacts laws to lower tariffs, the US will cut tariffs on cars and related parts. A senior US official mentioned that relief on automobile tariffs might happen in a few weeks if the EU introduces the necessary legislation. This agreement is a basic framework and not a final deal, allowing for further talks in the months ahead. This deal offers a clear chance to boost US energy and industry while impacting specific EU exporters. It’s wise to consider investing in US energy companies, especially in the LNG sector, using call options to take advantage of the $750 billion procurement plan. This demand builds on a rising trend we’ve seen since late 2023, with US LNG exports to Europe hitting record highs of over 12 billion cubic feet daily.

Opportunity in Auto Sector Volatility

The new 15% tariff on European cars creates immediate excitement in the market. We anticipate significant pressure on automakers like Volkswagen and BMW, making put options appealing to profit from a potential drop in their stock prices. We’ve seen this strategy work before, during the 2018-2019 period, when similar tariff threats caused big declines and increased volatility in these same stocks. A key short-term event to watch is the EU’s potential introduction of tariff reduction legislation, which could happen in a matter of weeks. We should be ready to quickly adjust our positions, either closing bearish ones or opening short-term bullish positions on EU car stocks when that news arrives. This is a trade driven by specific events, where timing your moves will be crucial. We should also assess the negative effects on other sectors, such as EU pharmaceuticals and semiconductors. Buying puts on major EU chipmakers like ASML could serve as a good hedge, as a 15% tariff will hurt their competitiveness in the vital US market. These companies already faced challenges in 2025, and this news will likely heighten investor concerns. From a currency standpoint, this agreement is favorable for the US dollar and unfavorable for the euro. The combination of large energy purchases and investments flowing into the US, along with tariffs on EU goods, should strengthen the dollar. We anticipate that the EUR/USD pair, currently around 1.08, may break below important support levels in the coming weeks. Create your live VT Markets account and start trading now.

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This week, the EURUSD pair fell as traders took a cautious approach ahead of Powell’s upcoming speech. The USD started the week on a strong note due to worries about Powell’s hawkish stance. At the same time, equities dipped a bit, possibly because of profit-taking and hedging before the Jackson Hole event. Recent data does not support a commitment to a rate cut for September. Improving Jobless Claims and rising inflation suggest caution. Market expectations have settled at about 52 basis points of easing by the end of the year. The EUR side remains steady after the US-EU trade deal, which has set tariffs at 15%. Many ECB members are holding a neutral stance on rate cuts, waiting for negative data. The market’s expectation of a 10 basis point easing by year-end seems unrealistic given the latest PMIs.

Technical Analysis

On the daily chart, the EURUSD trades between a major trendline at 1.1750 and key support at 1.1572. This suggests there are no strong buying or selling signals. The 4-hour chart shows a minor downward trendline, hinting at ongoing bearish momentum. Sellers are targeting around the 1.16 support level, while buyers will look for a rally if the trendline breaks. The 1-hour chart supports these trends, highlighting the current trading ranges. Upcoming events include US Jobless Claims figures and US Flash PMIs, with Powell’s Jackson Hole speech wrapping up the week’s trading. The US dollar is finding support as traders prepare for Powell’s remarks at Jackson Hole. This caution is reflected in the EUR/USD pair, which has been declining all week. Many traders are reducing risk and hedging portfolios, expecting a hawkish stance from the Fed. The data reinforces this cautious outlook. Recent initial jobless claims in the US are low at 215,000, and the last CPI report reveals inflation is sticky at 3.4%. This leaves the Fed little reason to commit to a rate cut, leading the market to scale back expectations to about two rate cuts by year-end. A strong dollar appears to be the likely trend unless we hear otherwise.

Eurozone Economy

In contrast, the Eurozone economy appears weaker. Recent flash manufacturing PMI data fell to 45.8, indicating a deeper contraction. This weakness makes the market’s expectation of just one 10 basis point cut from the ECB seem overly optimistic. This situation is especially significant given the 15% tariffs set in the US-EU trade deal from early 2025. From a technical view, EUR/USD is trading between a major trendline near 1.1750 and a key support level around 1.1572. For traders using futures, the logical strategy is to consider short positions if the price approaches the 1.1750 resistance level. The risk-to-reward ratio favors sellers at this point. Considering the uncertainty around the speech, buying put options on the Euro provides a clear and defined way to prepare for a hawkish surprise from Powell. The market’s strong reaction to Powell’s hawkish speech at Jackson Hole in 2022 underscores the significance of this event. Traders expecting a considerable move but unsure of the direction might also explore volatility strategies. For now, the downward trendline on the four-hour chart is crucial for short-term momentum. Sellers are likely to use any approach to that trendline as a chance to add to bearish positions. A drop toward the minor support around the 1.1600 level appears likely before we gain more clarity tomorrow. Create your live VT Markets account and start trading now.

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Finance Magnates has been a top online source for financial news and insights since 2009, focusing on Online Trading, Fintech, Payments, and Cryptocurrency. In 2024, they introduced the Finance Magnates Awards to recognize innovation and impact among finance sector companies and leaders. Winning one of these awards shows trust and credibility, setting apart brands like B2C brokerages and B2B fintech providers. If you want to join the 2025 Awards, you can easily nominate candidates until September 12, 2025. Categories include Global, Regional, and National for brokers, and Institutional Trading, Services for Brokers, and Tech for Brokers for fintech firms. Voting runs from September 27 to October 17, 2025. It combines community votes with evaluations from expert panels to ensure fairness. Judges come from well-known financial institutions and assess candidates objectively. Notable judges include CEO Javier Hertfelder and Nikolai Isayev. Nominees get increased exposure through PR articles and social media, with winners enjoying even more visibility. Among the confirmed nominees for 2025 are recognized names like 4XC, Blueberry, and CMC, all competing for industry accolades at the Gala Dinner in Cyprus on November 6, 2025—a key event celebrating financial excellence. As we near the end of August 2025, the Finance Magnates Awards are an important sentiment indicator for the brokerage and fintech sectors. With nominations ending on September 12, increased marketing from nominated firms is likely to enhance their visibility. Traders should pay attention to changes in retail trading activity, as these campaigns aim to attract new clients and energize current ones. Some confirmed nominees, like CMC Markets, are publicly traded companies, providing direct trading chances. We should keep an eye on the options market for these stocks, as implied volatility may rise leading up to the voting period that starts on September 27. Looking at similar events from 2024, winning companies saw a short-term positive boost in stock performance after announcements. Recent data for Q2 2025 revealed a slight increase in retail forex volumes, following a period of lower volatility in major pairs. The promotional activities from nominated brokers like Vantage, Tickmill, and Axi could enhance this trend, potentially causing short-term liquidity spikes in popular pairs like EUR/USD and XAU/USD. This suggests that volume-sensitive strategies might be more effective soon. Strong participation from B2B technology providers, including OneZero and Centroid Solutions, indicates solid health in the sector’s infrastructure. This foundational stability is reassuring, lowering the risk of platform disruptions that could affect trading. Traders can feel more confident using platforms supported by these leading fintech firms during a likely busier period. Key dates to remember are the nomination deadline on September 12 and the voting start on September 27. The time between these dates may bring more news and activity from nominated brands. This period is crucial for gauging market sentiment and preparing for possible volatility shifts as the industry’s focus tightens on these awards.

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UK manufacturers faced a setback in August, as per the latest CBI data. Total orders fell to -33, lower than the expected -28, marking the lowest since June. The output forecast for the next three months also declined, dropping from -6 to -13, the lowest since May. Rising costs are affecting profit margins and making customers more cautious, which negatively impacts orders and output.

UK Economy Losing Momentum

Today’s manufacturing data signals that the UK economy is losing momentum faster than expected. The significant drop in total orders suggests that businesses are cutting back on spending, confirming a trend seen since the second quarter. This report is particularly alarming when combined with recent economic stats. July’s inflation rate was stubbornly high at 3.4%, and Q2 GDP growth was nearly flat at just 0.1%. This mix of slowing activity and ongoing cost pressures hints at a tough stagflationary environment. The Bank of England is in a difficult position ahead of its September meeting. With clear signs of weakened demand, we believe the likelihood of another interest rate hike is virtually zero. The market will likely start considering rate cuts in early 2026.

Bearish Outlook on British Pound

Our analysis supports a bearish outlook on the British pound. We see potential in buying GBP/USD puts with strike prices below 1.2350, as a breakdown of this support seems likely in the coming weeks. Selling sterling futures is another direct way to express this opinion. The outlook for UK-focused equities, particularly the FTSE 250 index, has also worsened. Squeezed margins and reduced output will lead to weaker corporate earnings reports later this year. We should think about buying put options on this index to protect against or speculate on a drop toward its year-to-date lows. We also expect market volatility to rise as economic uncertainty continues. This situation is favorable for purchasing options to profit from larger price swings. The current market setup reminds us of late 2022, when similar stagflation fears caused significant declines in both the currency and domestic stock markets. Create your live VT Markets account and start trading now.

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The GBPUSD pair is declining as traders prepare for the Jackson Hole event. The US dollar started the week strong due to speculation that Powell may take a hawkish approach. Meanwhile, a drop in stocks indicates profit-taking and hedging. Recent US data shows improved jobless claims and rising inflation, suggesting there won’t be an immediate rate cut in September. Expectations now predict around 52 basis points of easing by year-end. In the UK, the Bank of England’s last meeting was also hawkish, with rising UK CPI and Flash PMIs indicating strength and inflation pressures.

Inflation Concerns and Technical Analysis

Inflation is still a major concern for central banks, even with signs of weakness in the labor market. Core inflation remains above 3%, making it tough to reach the 2% target. On the technical side, GBPUSD is trading lower, with sellers focusing on the 1.3368 level, while buyers may aim to push back to 1.3590. The 4-hour chart shows a slight downward trend that supports ongoing bearish momentum. The 1-hour chart doesn’t provide much new information, but traders are looking for rejections or breaks to determine the next direction. Important upcoming data includes US Jobless Claims, Flash PMIs, and Powell’s speech at the Jackson Hole Symposium. With a cautious mood leading into the Jackson Hole event, the US dollar is gaining strength. Recent data hasn’t prompted Federal Reserve Chair Powell to indicate a rate cut. We expect this careful sentiment to persist until his speech offers more clarity. The latest economic data supports a patient Federal Reserve, leading to increased interest in the dollar. For example, last week’s US jobless claims were solid at 215,000, and July’s CPI showed inflation rise to 3.6%. Consequently, market expectations for year-end rate cuts have decreased.

Divergent Inflation Stories

In the UK, inflation remains persistently high, with July’s CPI surprising at 4.2%, significantly above the Bank of England’s target. This ongoing inflation, particularly with core figures above 3% since 2021, prevents the BoE from adopting a dovish stance. This difference in inflation narratives is crucial for the currency pair. For derivative traders, the high uncertainty leading up to tomorrow’s speech suggests elevated implied volatility. This makes buying options a smart strategy to manage risk while preparing for a significant move. We might consider buying puts with strikes near the 1.3368 support level, speculating that a hawkish Powell could push the pair lower. If Powell’s tone is more aggressive than expected and confirms market concerns, the path toward the 1.3368 level could become clearer in the coming weeks. On the other hand, if hints of dovish surprises arise, it could break the current downward trend on the four-hour chart. In that case, call options targeting a rebound towards 1.3590 would become appealing. Remember that Powell’s hawkish speech at Jackson Hole last year caused significant market changes, so the risk of sharp movements is real. Therefore, it’s wise to use strategies that limit potential losses. The key technical levels of 1.3368 and 1.3590 provide excellent guidance for setting option strike prices around this critical event. Create your live VT Markets account and start trading now.

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