The Chief Economist of the Bank of England, Huw Pill, will share the central bank’s new forecasts and policy decisions online. This event will take place on Friday, August 8, 2025, at 11:15 GMT. In the August meeting, the Bank of England lowered the bank rate by 25 basis points to 4.00%. This news has given some support to the GBP due to a split decision and expectations of slower rate cuts in the future.

The Decision’s Impact

Governor Bailey explained that pay growth was lower than expected, emphasizing the importance of not reducing the bank rate too quickly or too much. The atmosphere surrounding the Bank of England is becoming tense, and the split vote could lead to further gains in the pound’s value. While the rate cut to 4.00% was anticipated, the split vote shows a significant disagreement within the bank’s committee. We believe this is a “hawkish cut,” meaning the commentary is more assertive than the action. This suggests that further rate cuts will come slowly and based on data, which is why the pound is strengthening today. This cautious approach makes sense given the inflation situation. Although the headline CPI for July stayed close to the 2.0% target, the stubborn services inflation is still high at 5.7%. This ongoing price pressure explains why some policymakers are reluctant to lower borrowing costs too quickly.

Market Strategy and Outlook

Governor Bailey pointed out that pay growth has moderated to an annual rate of 5.8%, justifying today’s cut. This gradual easing is a welcome change from the rapid wage pressures seen in 2023. It gives the Bank more flexibility, but complacency is not an option. For derivative traders, the split decision suggests increased volatility in the coming weeks. One-month implied volatility for GBP/USD options has already risen above 8.5%, indicating market uncertainty about the Bank’s next steps. In this environment, buying options for bigger price movements could be a wise strategy. Given the hawkish tone, we are preparing for potential strength in the sterling against currencies with clearer easing, like the US dollar. Buying GBP/USD call options or setting up bull call spreads provides a defined-risk way to benefit if the pound continues to rise. We should pay close attention to Huw Pill’s speech later today for any hints that could support this optimistic outlook. Create your live VT Markets account and start trading now.

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Gold prices have hit an all-time high due to a mix of economic trends and market signals. This surge confirms that gold will be one of the best-performing assets of 2025. Rising trade tensions, especially the doubling of U.S. tariffs on imports from India, have made gold more appealing as a safe investment. As a result, gold prices in India reached ₹1.02 lakh for 10 grams. In the U.S., disappointing economic data has increased the likelihood of a Federal Reserve rate cut in September, now over 90%. This has pushed gold prices to $3,418 per ounce. At the same time, China’s central bank is boosting its gold reserves, driving global demand even higher. As gold prices exceeded the $3,400 resistance level, they have moved into new territory.

Citi’s Revised Forecast

Citi has updated its gold forecast for the next three months to $3,500 per ounce. The new U.S. tariffs on gold bars have affected gold flows, which could raise costs for buyers and tighten global supply. This uncertainty enhances gold’s attractiveness. Gold’s recent increase shows potential for long-term growth, with significant gains over the past months. Current COMEX Gold Futures are at $3,488.7 per ounce, approaching new highs. This analysis highlights how macroeconomic factors and market trends are driving the current rise in gold prices. Proper risk management is essential in this environment. With gold breaking above $3,400, we suggest that derivative traders maintain a bullish outlook. This movement is supported by a strong combination of technical indicators and essential market factors, signaling a strong upward trend. This is not just a short-lived spike but a continuation of a trend that has already delivered over 31% gains this year.

Weak Jobs Report Impact

The weak jobs report for July, which showed only +95,000 jobs added compared to the expected +185,000, was a critical factor. This shortfall, along with an increase in unemployment to 4.1%, has led to strong expectations for a Fed rate cut in September. A similar trend occurred in late 2023, when changes in Fed language caused gold prices to rally for several months. Demand from central banks, especially China, has been a key support for the gold market. After a pause in mid-2024, the People’s Bank of China resumed buying, adding 1 million ounces in the second quarter of 2025. This steady buying helps stabilize the market and absorb minor dips. Trade tensions are intensifying, and the new tariffs on imports from India and on gold bars are particularly important. During the U.S.-China trade war of 2018-2019, gold rose by over 25% as investors sought safety amid uncertainty. The current tariffs on physical gold could restrict supply even more, leading to a potentially explosive market situation. To express a bullish view, traders might consider buying call options on COMEX futures to capitalize on further price increases with limited risk. Traders are eyeing $3,550 and $3,600 strike prices for September and October contracts. Bull call spreads can also reduce upfront costs in this rising volatility environment. However, managing risk is vital at these new highs. With prices climbing over 20% in the past six months, the market could experience sharp declines with unexpected news. Traders should think about using defined-risk option spreads or set strict stop-loss orders on long futures positions to safeguard their capital. Create your live VT Markets account and start trading now.

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The U.S. has placed tariffs on large gold bars, specifically those weighing 1 kg and 100 oz, which affects gold from Switzerland and London. This move disrupts the gold market by making Swiss bars, accepted by COMEX for delivery, harder to access. This creates challenges for London’s bullion banking.

Supply Restrictions and Basel III Pressures

These tariffs limit the supply of gold available for delivery, creating more pressure on banks to hold physical gold according to Basel III standards. They also reduce how the LBMA can reuse gold bars as collateral and threaten Switzerland’s dominant position in refining, while boosting COMEX’s role in setting global gold prices. In London’s unallocated gold market, rehypothecation allows banks to use the same gold bar as collateral several times. The new tariffs complicate acquiring gold bars in the needed formats, essential for settlements, reducing leverage and liquidity in London. The London Bullion Market Association (LBMA) governs this market, establishing gold and silver standards for international trade. It oversees the clearing system for most wholesale gold trades, enabling major banks and traders to take on high leverage. However, with fewer deliverable bars available, its ability to provide liquidity and rehypothecate is weakened. The U.S. tariffs on specific gold bars are tightening the market. COMEX gold futures have surged past $2,550 an ounce, creating a significant gap between the London and New York markets.

Tariffs and Market Dynamics

For those trading derivatives, this indicates a bullish outlook in the upcoming weeks. The tariffs make it expensive for short sellers to deliver physical gold, pushing many to buy back at higher prices. Open interest in the front-month contract has dropped by 15% in the last two weeks, suggesting shorts are covering their positions. We are noticing a widening premium of COMEX futures over the London spot price, now exceeding $50. This spread shows the added cost and challenges of obtaining and shipping non-tariff-ed gold to New York. Trading this spread could be a smart strategy as logistical issues persist. The physical market data reflects this pressure. Since late July 2025, COMEX registered gold inventories have lost nearly 1.5 million ounces. This reduction in available supply gives buyers a stronger position to negotiate. This structural strain is causing a rise in implied volatility. The CBOE Gold Volatility Index (GVZ) is at its highest level since early 2023 during a banking crisis. Traders might want to buy call options for upside potential while minimizing downside risks. This situation mirrors the market disruptions of March 2020, when pandemic-related flight cancellations disrupted physical gold trading. Back then, the COMEX premium soared, benefiting those holding long futures. We may be witnessing the early stages of a similar scenario caused by these tariffs. Create your live VT Markets account and start trading now.

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Japan’s Nikkei 225 index went up by 2% after positive news from Akazawa regarding tariffs. Updates from Japan’s trade talks with the US are also boosting the market. Even with a drop on Wall Street, Japanese stocks are doing well. The Japanese yen has weakened to about 147.30, which is helping the Nikkei grow.

Opportunities in US Trade Talks

The good news from US trade talks presents a clear chance for us. A weaker yen paired with a rising stock market is a traditional recipe for success in Japan. This implies we should make trades that can profit if the Nikkei 225 keeps going up in the coming weeks. A simple strategy is to buy call options on the Nikkei 225. This lets us take advantage of potential gains while keeping our risk limited. Look for contracts that expire in September or October 2025 to take advantage of the current momentum. On the currency side, the yen’s drop to 147.30 is an important indicator. We should consider trades that bet on further yen weakness, such as buying USD/JPY call options. The large interest rate gap between the Bank of Japan and the US Federal Reserve, with the Fed Funds rate above 3%, supports this idea.

Trends in Japanese Equities

Recent data backs this optimistic view of Japanese stocks. The Nikkei 225 has risen over 15% this year, mainly because exporters are benefiting from the currency exchange rates. The Bank of Japan’s July 2025 Tankan survey also showed that manufacturers are feeling more positive thanks to the weak yen. If we look back to the 2022-2023 period when the yen dropped sharply against the dollar, we can see a similar pattern. The currency fell from around 115 to over 150 due to increasing interest rate differences. A similar situation could push the yen even lower in the coming weeks. It’s crucial to understand that these two trends are connected. A sudden halt in trade talks could reverse both the gains in the Nikkei and the drop in the yen. We need to keep a close eye on any new announcements from US or Japanese trade representatives. Create your live VT Markets account and start trading now.

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The People’s Bank of China (PBOC) oversees the value of the yuan in a floating exchange rate system. The exchange rate is maintained within a range of +/- 2% of a central reference rate called the “midpoint.” The last closing value of the yuan was 7.1815. Additionally, the PBOC injected 122 billion yuan via 7-day reverse repos at an interest rate of 1.40%.

Today’s Economic Actions

Today, 126 billion yuan are set to mature, leading to a net liquidity drain of 4 billion yuan. Today’s activities show that the central bank aims to keep currency markets stable. The small net drain of 4 billion yuan indicates a neutral stance, meaning there isn’t an immediate plan to change the money supply significantly. We can expect continued management without sudden policy changes. The 7-day repo rate of 1.40% is low, supporting the accommodating policies seen over the past year to help the economy. Recent data shows that consumer inflation in July 2025 was just 0.5%, giving the PBOC room to keep borrowing costs low without triggering inflation.

Yuan Stabilization Strategy

For derivative traders, it looks like the yuan will stay within a tight range. With the last close at 7.1815 and the PBOC setting strong reference points, there’s a clear effort to keep the yuan from falling below 7.20-7.25 per dollar. This has led to lower implied volatility for USD/CNY options, which is much less than the peaks seen during the market chaos of 2022. The US Federal Reserve is a key external factor, having kept interest rates steady at its meeting last month in July 2025. This ongoing difference in policies between the US and China helps support the US dollar, limiting any potential strength of the yuan. Even though China’s exports for July 2025 unexpectedly rose by 3.2%, the interest rate gap is still the dominating factor. In the coming weeks, a potential strategy is to sell short-dated USD/CNH option strangles. This approach benefits from low volatility and keeps the currency pair within a stable channel, which matches the PBOC’s current goal. We expect the yuan to trade steadily between 7.15 and 7.25. Given the modest GDP growth of 4.8% in Q2 2025, we think authorities will continue to prefer a stable or slightly weaker yuan to support the economy. If there are sudden drops in the USD/CNY rate due to market sentiment, it could be a good opportunity to enter long positions. We view any dips toward the 7.15 level as chances to bet on a return to the upper end of the recent range. However, we must not forget the unexpected devaluation in August 2015, reminding us that the PBOC can act suddenly. Ongoing weakness in the property market poses a risk that could lead to a shift in this stability policy. Cautious traders should consider using stop-losses to safeguard their positions. Create your live VT Markets account and start trading now.

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The leader of Semiconductor Manufacturing International Corporation (SMIC) stated that the demand for products continues to outpace supply. He mentioned that the increase in rush orders and quicker shipments is expected to slow down in the fourth quarter. Recent tariff policies have not led to the anticipated “hard landing.” SMIC is successfully managing high customer demand despite changing trade and tariff situations.

About SMIC

SMIC is a partially state-owned semiconductor company in China. It is the largest contract chip manufacturer in mainland China, headquartered in Shanghai. As of August 8, 2025, the signals in the semiconductor sector are mixed but actionable. The current scenario of demand exceeding supply at SMIC indicates strong performance in the short term. This suggests that making sharp bets against the Chinese tech sector may be too early. The notion that a “hard landing” has been avoided is supported by recent economic data. For example, China’s official manufacturing PMI in July 2025 remained above 50 at 50.8, indicating growth. Additionally, global semiconductor sales increased by 4.9% year-over-year in June 2025. This context supports holding or starting short-term bullish investment positions.

Investment Strategy and Market Outlook

In the upcoming weeks, consider near-dated call options on SMIC and related tech indices to take advantage of the strong orders. With the positive outlook on tariffs, implied volatility might decrease, leading to better entry prices. This strategy aims to capitalize on current demand before the market shifts its focus. However, the clear warning about a slowdown in the fourth quarter provides a specific timeframe for us to adjust our strategy. We should plan for a potential market shift by late September, preparing for a downturn or increased volatility. This could include buying put options with expirations in November 2025 or later to protect against expected weaknesses. This situation resembles past industry cycles, like those in 2021-2022, where a surge in demand was followed by a major inventory correction. The CEO’s early warning gives us a unique chance to prepare for this change before it appears in earnings reports. Create your live VT Markets account and start trading now.

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Japanese trade envoy Ryosei Akazawa has announced that the U.S. will change a presidential order related to tariffs and refund any extra duties collected. During talks in Washington with Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent, Akazawa confirmed that both sides agree on the revised tariffs. In the updated deal, goods that were taxed above 15% will now have that rate capped. Goods previously taxed below 15% will now face a flat 15% duty, which includes current tariffs. Although Akazawa criticized the original order, he acknowledged U.S. officials’ regret and their promise to make timely corrections.

Amendment Implementation Timeline

A new order will implement the agreed tariff rates starting in July. This will reduce U.S. auto tariffs from 27.5% to 15%. With U.S. auto tariffs on Japanese cars nearly cut in half, from 27.5% to 15%, we can expect a boost in Japanese automaker stocks. Companies like Toyota and Honda will benefit, making call options on their stocks appealing in the coming weeks. This resolution eases a major uncertainty affecting the sector. The news should also help the Japanese yen, as a stronger export outlook will improve the country’s trade balance. The USD/JPY pair, which has fluctuated around 155 recently, may now experience downward pressure. Traders might consider shorting USD/JPY futures or buying call options on yen-tracking currency funds. This agreement lessens a crucial risk, likely leading to a drop in implied volatility for affected assets. Previously, implied volatility for major Japanese exporter stocks had increased over the past month as traders hedged against possible negativity. Selling puts or using credit spreads on these stocks could be a strategy to profit from falling volatility.

Market Implications and Outlook

In the broader market, this news is a clear positive for Japan’s Nikkei 225 index. A similar pattern was seen back in 2019 when easing trade tensions led to market relief and a rally. This creates a favorable environment for buying call options on Japanese market ETFs like EWJ. The impact is significant because the U.S. is a key market, accounting for over a third of total vehicle exports from major Japanese manufacturers, according to last year’s data. The refund of excess duties collected will also provide a direct cash boost for these companies, reinforcing a positive outlook on their near-term earnings potential. Create your live VT Markets account and start trading now.

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The Reserve Bank of Australia (RBA) is likely to lower its cash rate by 25 basis points to 3.60% at its meeting on August 12. This expected change follows weaker inflation and labor market data, according to all 40 economists surveyed in a Reuters poll.

Inflation and Unemployment Indicators

Recent data shows that headline inflation dropped to 2.1% last quarter, close to the RBA’s target range of 2–3%. The unemployment rate rose to 4.3% in June, reaching its highest level in three and a half years. Weak domestic demand and lower household spending, which accounts for over half of the GDP, back the case for easing monetary policy. Among economists, 35 out of 38 predict another 25 basis point cut in the fourth quarter, which would lower the cash rate to 3.35% by the end of the year. All major banks support this view. The median forecasts suggest one more reduction by March 2026 down to 3.10%, with rates expected to remain steady for the rest of that year. With a rate cut almost certain for August 12, we should prepare for lower yields. This means buying interest rate futures, as their prices will rise when the RBA cuts the cash rate to 3.60%. The strong expectation of another cut to 3.35% by year-end indicates that holding these long positions could be profitable through the fourth quarter. This policy change follows an aggressive tightening cycle that raised rates to a peak of 4.35% in late 2023. Now, we see the impact: headline inflation has plummeted to 2.1%, and the unemployment rate has hit a three-and-a-half-year high of 4.3%. These figures confirm that the economy has cooled enough for the RBA to ease monetary policy.

Exchange and Equity Market Implications

The widening interest rate gap with other central banks should keep pressure on the Australian dollar. We may consider shorting the AUD, either through futures or by buying put options, as it currently hovers around 0.6650 against the US dollar. A drop below recent support could lead to a test of the 0.6400 level seen during times of global economic uncertainty in 2023. For equity derivatives, lower borrowing costs signal a positive outlook for the Australian market. We might look at long positions in ASX 200 futures, expecting that cheaper credit will enhance corporate earnings and boost investor sentiment. A continued easing cycle could give the momentum needed to push the index past recent resistance levels. Create your live VT Markets account and start trading now.

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The People’s Bank of China (PBOC) is expected to set the USD/CNY reference rate at 7.1742, according to estimates from Reuters. This decision will be made around 0115 GMT, as the PBOC determines the daily midpoint for the yuan. The PBOC uses a managed floating exchange rate system, allowing the yuan to move within +/- 2% of the reference rate. This daily midpoint helps regulate the yuan’s value against other currencies, especially the US dollar.

Factors Influencing the Midpoint

This midpoint is influenced by market supply and demand, economic indicators, and changes in international currency markets. The allowed trading band permits the yuan to rise or fall by up to 2% from the midpoint in a single trading day. If the yuan nears these limits or shows high volatility, the PBOC might step in to stabilize the currency. This intervention can involve buying or selling the yuan to keep its value steady. The expected fix of 7.1742 indicates the central bank’s continued effort to prevent rapid yuan depreciation. Throughout mid-2025, the central bank has consistently set a stronger reference rate than market forecasts. For traders, this suggests that betting on a sudden jump in USD/CNY is a risky move, given state policy. This management comes as China’s economy shows signs of slowing, with GDP growth for Q2 2025 at 4.8%, slightly below expectations. Additionally, July’s export data revealed a 1.5% year-over-year decline, indicating that weaker global demand is impacting the domestic economy. These issues put downward pressure on the yuan, which the PBOC is trying to balance out.

Derivative Strategies for Traders

With the central bank actively involved, implied volatility for USD/CNY options may be higher than usual in the coming weeks. The PBOC’s control, similar to what we saw in 2023-2024, creates a ceiling for this currency pair. This makes selling volatility, like using covered calls on USD/CNY, an appealing strategy. Traders should anticipate that the currency pair will stay within a clear range defined by the daily reference rate. The +/- 2% trading band is more of a theoretical limit than an actual target since intervention happens before reaching those extremes. Thus, traders may consider range-bound strategies, such as iron condors, to take advantage of this stability. Create your live VT Markets account and start trading now.

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The Bank of Japan’s summary from its July meeting revealed differing views among policymakers about when and how quickly to raise interest rates. Members are weighing ongoing inflation, trade policies, and global economic uncertainties. Some believe rate increases are justified if economic conditions meet expectations, while others think delaying action might require quick adjustments later. A few members are in favor of keeping the current supportive stance due to uncertain economic conditions.

Inflationary Concerns

Inflation is a major issue for the Bank of Japan (BoJ). It has been above their 2% target for over three years. Rising food and gas prices are making households more sensitive to price changes. Policymakers suggested that the bank should focus its communications on current inflation trends, future outlooks, the output gap, and inflation expectations. Trade and geopolitical risks are also part of the discussion. Concerns remain about the possible negative effects of U.S. tariffs on Japan’s exports. Some members recommended waiting two to three months to evaluate the impacts of these tariffs, while better trade agreements could help ease uncertainties. Global economic risks are mixed, with some warning that expansionary policies could lead to unexpected global growth. Japan’s economy is improving, but risks related to rising prices still exist. The Cabinet Office has expressed concerns over these ongoing challenges. The Bank of Japan is currently experiencing a divide, creating uncertainty in the market. Some policymakers want to raise rates to combat inflation, while others worry that global trade risks, particularly from the U.S., may harm the economy. This divide is likely to result in notable fluctuations in the yen and Japanese bonds in the coming weeks. Inflation pressures are a major driver behind the calls for higher rates. Japan’s core consumer price index has stayed above the 2% target for more than three years. The most recent figures for July 2025 show a 2.8% increase, largely due to energy and food costs. This sustained price pressure, which hasn’t been seen in decades, supports the argument for tightening policy.

Market Movement and Economic Indicators

A crucial area to monitor is the yields on Japanese Government Bonds (JGB). As traders anticipate a higher chance of a rate hike, the 10-year JGB yield has risen to about 1.15%, its highest since 2013. Any further rise in yields could indicate that a rate hike is nearing. However, concerns over U.S. tariffs make the Bank of Japan cautious. Recent discussions in Washington about potential tariffs on Japanese cars could significantly threaten Japan’s export-dependent economy. This uncertainty is a key reason some policymakers prefer to keep rates low for now. This stalemate has contributed to a weak yen, with the USD/JPY exchange rate recently reaching 168, reminiscent of the interventions by Japan’s Ministry of Finance back in 2024. As long as the Bank of Japan remains inactive, the yen is likely to weaken further. Traders should be alert to currency fluctuations based on any indications regarding trade policy. Given this uncertainty, the options market may present the best trading opportunities. The division within the Bank suggests a significant market movement is ahead, but the direction remains uncertain. Buying volatility through strategies like a USD/JPY straddle for the next few policy meetings may be a smart way to navigate this situation. The timeline indicates a possible decision later this year. Several policymakers have suggested waiting two to three months to assess the impact of U.S. policy changes, putting a spotlight on the BoJ meetings in October and November 2025. In the upcoming weeks, we need to focus on incoming economic data. Key insights will come from the next national Consumer Price Index (CPI) release and the forthcoming Tankan business survey. Any evidence of rising inflation or strong business confidence could push the decision toward a rate hike sooner than expected. Create your live VT Markets account and start trading now.

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