Annual core wholesale inflation has jumped from 2.6% to 3.7%, with the Trump administration’s tariffs being blamed for this increase. Following the inflation report, Dow Jones futures fell by 200 points. Just before markets opened, Dow Jones futures dropped after the Producer Price Index (PPI) showed inflation growth in the wholesale sector. The core PPI, which excludes food and energy, rose to 3.7% year-on-year, exceeding both the expected 2.9% and June’s 2.6%.

Impact of Tariffs on Wholesale Prices

The tariffs implemented by the Trump administration are starting to affect wholesale prices now that the stockpiles built before the tariffs are running low. Last week, the national tariffs were fully enacted after earlier measures on steel and aluminum. After the PPI release, the Dow Jones Industrial Average futures fell from a slight increase around 44,950 to 44,750, down 0.35%. The headline PPI rose to 3.3% year-on-year, surpassing both the expected 2.5% and June’s 2.4%. Both the core and headline PPI saw a monthly increase of 0.9%. This data suggests that inflationary pressures are rising due to policies affecting market prices. The rise in core wholesale inflation to 3.7% is a serious warning. This suggests that producer costs are increasing faster than expected, which may hurt corporate profit margins soon. We need to monitor if companies can pass these costs onto consumers in the upcoming inflation report.

Market Volatility and Strategic Positions

This situation resembles what we faced in the summer of 2018 during trade disputes from the Trump administration. Historical data shows that the Producer Price Index for final demand rose over 3% year-over-year, leading to sharp market sell-offs and increased uncertainty. During that time, the CBOE Volatility Index (VIX) often surged above 20, indicating trader anxiety over price shocks caused by policies. Given this uncertainty, we anticipate that market volatility will likely rise. We should consider buying call options on the VIX or using long straddles on major index ETFs. These strategies would allow us to benefit from the larger price movements we expect as the market adjusts to this inflation news. The immediate 200-point drop in Dow futures shows a bearish initial market reaction. To take advantage of this, we plan to buy put options on indices like the S&P 500 and the Dow Jones Industrial Average. This offers a defined-risk way to profit if rising costs lead to a broader market decline in the coming weeks. This inflation report will likely push the Federal Reserve toward a more aggressive approach. Online tracking of the Fed funds futures market now indicates that the probability of an interest rate hike at the next meeting has jumped from 25% to over 50% just this morning. We should consider shorting interest rate futures to prepare for a central bank that may need to act sooner than expected. It’s important to remember that these pressures won’t affect all companies the same way. Sectors like industrials and consumer discretionary, which rely heavily on international supply chains, are the most at risk. Therefore, we are looking into establishing bearish positions on specific sector ETFs that are most exposed to these rising wholesale costs. Create your live VT Markets account and start trading now.

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The US Treasury Department plans to establish a Strategic Bitcoin Reserve following an executive order from President Trump in March. Treasury Secretary Scott Bessant stated that Bitcoin seized by the federal government will form the basis of this reserve. The Treasury is also exploring ways to acquire more Bitcoin without straining the budget.

US Aims for Bitcoin Leadership

This initiative reflects the administration’s goal to position the US as a key player in the global Bitcoin market. The US wants to be a dominant force in Bitcoin. This announcement marks a major change in how the US government, the largest player in the market, will deal with Bitcoin. We can expect increased demand, as the Treasury is not just holding assets but also looking to buy more. This will create a new type of buyer that is not price-sensitive, which should help stabilize prices in the coming weeks. Implied volatility for near-term options will likely stay very high. Traders should consider strategies that take advantage of rising prices and high volatility, such as buying long-term call options. Already, the T3 BitVol Index, a gauge of Bitcoin’s expected 30-day volatility, jumped over 25 points to 98 after this news. We anticipate the futures market will move into a steep contango, meaning futures contracts will trade at a much higher price than the spot price. The gap between the December 2025 CME futures contract and the spot price has widened to an annualized rate of over 19%. This offers a chance for basis trading, allowing traders to profit as institutional investors seek future exposure.

Big Changes in Global Digital Asset Strategy

This action takes away a significant potential supply from the market. In the past, we expected government-held Bitcoin to be sold off, like during the Silk Road seizures in the early 2020s. Now, this supply is being kept permanently, which will create a supply shortage just as demand receives official support. The focus on “budget-neutral” methods for acquiring Bitcoin is important; this isn’t just about printing money. The Treasury could use seized assets from other countries or issue bonds partially backed by the new reserve. This strategy mirrors what MicroStrategy did starting in 2020, but on a national level, it validates Bitcoin for other countries and pension funds. This “superpower” approach challenges other nations and may spark a global race for strategic digital assets. Recently, reports showed that sovereign wealth funds in the United Arab Emirates and Singapore increased their digital asset investments by an estimated $5 billion. The US policy now pressures other central banks and finance ministries to develop their own Bitcoin strategies. Create your live VT Markets account and start trading now.

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UK GDP Exceeds Expectations

UK GDP grew by 0.4% in June, beating the expected 0.1%, following a 0.1% decline in May. For the second quarter, growth was 0.3%, higher than the forecast of 0.1%. On an annual basis, growth was 1.2%, slightly down from 1.3% previously. In the Eurozone, GDP grew by 0.1% in Q2, matching forecasts, while annual growth remained steady at 1.4%. Employment increased by 0.1% in Q2 and 0.7% year-on-year, slightly exceeding expectations. However, Eurozone industrial production fell by 1.3% in June, worse than the expected 1.0% drop, reversing a 1.1% gain in May. Yearly output growth dropped to 0.2%, falling short of the 1.7% forecast and down from 3.1% in May. The EUR/GBP is testing the 0.8600 support level, trading around 0.8605. This pressure comes from the UK’s growth figures, which are better than a slower Eurozone economy. Weak industrial production data from the Euro area also suggests a bearish trend for the Euro.

Divergence in Monetary Policy

This situation prompts us to consider strategies to profit from a potential decline in the EUR/GBP rate. Options include buying put options to bet on a decrease or shorting futures contracts. Current data indicates that the path of least resistance is down for this currency pair. This outlook is reinforced by the current differences in monetary policy as of August 2025. The latest UK inflation for July 2025 is stuck at 2.9%, prompting the Bank of England to keep its base rate at 4.5%. Meanwhile, the European Central Bank, facing a lower inflation rate of 2.2%, has cut its main rate to 3.0% to stimulate its sluggish economy. In 2024, we witnessed similar trends when the EUR/GBP dropped below 0.8500 due to rate differentials. Upcoming inflation figures for the UK and Eurozone, set to be released next Wednesday, will be crucial. If the UK reports unexpectedly high inflation, it could break the 0.8600 support level for good. We anticipate increased volatility leading up to that announcement. Using options can help manage risk, letting us prepare for a downward movement while limiting potential losses if the data surprises. This is especially crucial since the 0.8600 level has held strong for two months. Create your live VT Markets account and start trading now.

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On August 15, 2025, China will release important economic data for July. This information will help us understand various economic indicators and give a clearer view of the country’s economic condition during that time. The release times are set in GMT, based on the investingLive economic calendar. Each entry will show the results from the previous month and any median consensus expectations.

Tracking Economic Events

This calendar is a useful tool for monitoring significant economic events and expectations across Asia. China’s economic indicators are the primary focus. As we approach the release of July’s economic data tomorrow, we see an increase in implied volatility in related markets. In options on the Hang Seng China Enterprises Index, the cost of protection has risen as traders brace for potential market surprises. This surge in volatility offers an opportunity for traders who believe the actual market reaction will be less extreme than the current pricing suggests. The forecast indicates a slight slowdown, but market sentiment is still shaky due to ongoing issues in the property sector that have persisted since the 2023 crisis. If industrial production and retail sales fall short of expectations, we might see a rush to buy put options on Chinese equity ETFs and sell futures for commodities like copper and iron ore. On the other hand, a strong performance could lead to a short squeeze, as any sign of recovery would challenge the negative outlook that has built up over the past year.

Market Strategy and Implications

For volatility traders, the minutes after the 1:30 AM GMT release will be crucial. A strategy called selling a strangle—selling both an out-of-the-money call and put option—could prove beneficial if the data aligns with expectations and the market reaction is calm. This approach takes advantage of the “volatility crush,” where implied volatility drops sharply after the release. We should also pay attention to currency derivatives, especially in the Australian dollar, which often serves as a liquid proxy for the Chinese economy. One-week options on the AUD/USD pair are seeing increased demand, reflecting bets on a significant move following the data release. Historically, a 1% miss in China’s industrial production has resulted in a 30 to 50 basis point drop in the AUD/USD within the same trading day. In the coming weeks, this data will influence expectations for policies from the People’s Bank of China. If the numbers are particularly weak, it could spark speculation about an imminent interest rate cut or a decrease in the reserve requirement ratio for banks. This might lead traders to position for a steeper yield curve using interest rate futures or buy longer-dated call options, anticipating a market rally driven by policy changes later in the quarter. Create your live VT Markets account and start trading now.

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The seasonally adjusted insured unemployment rate is currently at 1.3%. The US Dollar Index has bounced back to the 98.00 level after hitting low points for two weeks.

Importance of Employment Levels

Employment levels are vital for understanding the economy and currency value. When employment is high, consumer spending and economic growth rise, positively affecting the local currency. Wage growth plays a key role in economic decisions and can lead to higher prices for consumer goods. Central banks keep a close eye on wage growth when making monetary policies. Different central banks have varying priorities regarding labor market conditions. Some focus on both employment and inflation, while others, like the US Federal Reserve, strive to balance employment with stable prices. Recent data shows initial jobless claims at 224K, which is slightly better than expected. This report indicates a tight labor market and has helped the US Dollar Index rebound to 98.00. These figures suggest the American economy remains strong. This information contradicts earlier expectations from the first quarter of 2025, when some predicted a slowdown in employment could lead to earlier rate cuts. In early 2024, weekly claims were steady in the 210K to 230K range when the Fed was intent on keeping rates high. Today’s data indicates this trend is still in place.

Implications for Federal Reserve Policy

The Federal Reserve aims for stable prices and maximum employment, so the positive jobs data supports keeping interest rates higher for a longer time. We shouldn’t expect any changes in policy at the upcoming Jackson Hole symposium. The Fed is likely to stress that its battle against inflation, which resurfaced in late 2024, is ongoing. For interest rate derivatives, it’s wise to rethink positions betting on rate cuts in the fourth quarter. Options on SOFR and Fed Funds futures will likely experience changes in implied volatility as the market adjusts its expectations for an earlier rate cut. It looks like rates will stay stable through the end of the year. This situation is good for the U.S. dollar. We should consider adjusting our currency positions to favor holding onto the dollar, especially against currencies where central banks show signs of weakness. The dollar’s strength reflects high interest rates and a strong economy. In the realm of equity derivatives, a prolonged high-rate environment may limit stock market gains. It may be a good idea to buy downside protection, such as put options on the S&P 500 or Nasdaq 100 in the coming months. The VIX, currently around a low 14, may gradually rise as the market realizes that borrowing costs will stay elevated for a while. Create your live VT Markets account and start trading now.

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Intel’s CEO, Lip-Bu Tan, recently met with President Trump to address concerns about his possible resignation due to his ties with China. Bloomberg reports that the Trump administration is looking into the idea of the U.S. acquiring a stake in Intel, which could signal a shift in strategy. As a result of this news, Intel’s stock price rose by $1.48, up 6.53%, bringing it to $23.67. The impact of this possible ownership on defense contractors is yet to be determined.

Market Reaction and Stock Performance

The market is reacting positively to the idea of a U.S. government stake in Intel. This is seen as a potential safeguard for the company. Intel’s stock has rallied, and the volume of call options for upcoming expirations is more than five times the daily average. This reaction indicates that traders are betting on government support to stabilize the stock price. The key point here is the surge in uncertainty, which leads to higher option premiums. We have noticed that Intel’s 30-day implied volatility jumped from around 35% to over 60% in just one trading session. This environment offers opportunities for strategies that profit from volatility itself, not just from the stock’s direction. For those who expect the stock to rise, buying call options is a straightforward way to capitalize on that upside, although these options are now more expensive. An alternative is selling cash-secured puts. This strategy allows us to collect a higher premium while setting a lower purchase price for the stock, making it more attractive if the stock pulls back.

Potential Outcomes and Market Strategies

The outcome of government discussions is uncertain, which means a significant price change in either direction is very likely in the coming weeks. A long straddle—buying both a call and a put with the same strike price and expiration—is a viable strategy to profit from this expected volatility. Though this strategy can be costly, it directly bets on the high volatility we’re currently experiencing. We should also recall the government actions during the 2008 financial crisis, which caused extreme volatility in affected stocks for years. This news follows a July report from the Commerce Department highlighting serious vulnerabilities in the domestic semiconductor supply chain, providing context for the administration’s actions. The major risk is that these talks could lead to no changes, which might drop the high volatility and reverse the stock’s gains. It’s important to also keep an eye on the effects on defense contractors and the wider tech sector. Any government involvement could prioritize national security contracts, potentially benefiting companies like Lockheed Martin and Raytheon, which have seen increased options activity this week. This could create a trading opportunity by going long on Intel and selected defense firms to take advantage of the theme of national industrial policy. Create your live VT Markets account and start trading now.

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David Zervos, the chief market strategist at Jefferies, has suggested that the Federal Reserve should think about lowering interest rates. He believes that taking bold steps now could prevent a slowdown in the job market and potentially create up to 1 million jobs. Zervos is in favor of a 50 basis point rate cut, arguing that current monetary policies are too strict. He also thinks that trends in disinflation, possibly driven by AI and technology, could justify cuts of up to 200 basis points.

PPI Data And Inflation Pressures

Recent Producer Price Index (PPI) data shows rising inflation pressures, but Zervos believes this does not change his view. He stresses that decisions should be based on facts and Congressional mandates, regardless of criticism from people like former President Trump. The list of candidates for the Federal Reserve chair position has grown, with Zervos among those who favor market-focused viewpoints over traditional economic theories. Rick Rieder from BlackRock and Marc Sumerlin also suggest a 50 basis point cut, believing the Fed’s approach is too cautious. Zervos has a long-standing relationship with Treasury Secretary Bessent, who is leading the search for the new Fed chair. This search highlights a desire for diversity among policymakers, which may shift away from traditional central banking ideas. There are tensions between Trump and former Treasury Secretary Mnuchin over appointments, but the President will ultimately make the final decision. The ongoing conversation about a potential 50 basis point rate cut poses a direct challenge to current market expectations. As of now, the CME FedWatch Tool shows only a 12% chance of any cut in September, making dovish positions relatively cheap. This notable gap creates opportunities for traders who believe a more aggressive policy change is possible.

Market Implications Of A Rate Cut

We should prepare for a possible steepening of the yield curve, as an unexpected cut would likely decrease short-term rates more than long-term rates. Using options on SOFR futures or implementing curve-steepener trades with Treasury futures could be profitable. This perspective stands in contrast to the flatter curve we’ve seen develop throughout the summer of 2025. For equity indices, which have been stagnant since a slightly weaker jobs report in July, this discussion serves as a strong bullish signal. The S&P 500 has been trading within a tight 2% range for three weeks, making call options appealing for those anticipating a breakout. Additionally, the VIX is close to its yearly low of 13, indicating that market volatility may be underpriced if this policy debate heats up. The U.S. dollar, which recently reached a five-month high of 106.50 on the DXY index, seems particularly at risk. A significant rate cut could reduce the dollar’s yield advantage, likely causing a sharp decline against other major currencies. In the past easing cycle of 2019, the dollar weakened substantially, suggesting we could see a similar outcome now. It’s important to note that this outlook relies on looking beyond recent inflation data, such as the July Producer Price Index, which rose more than expected by 0.4%. Any policy that disregards immediate inflation to focus solely on the job market is risky. This means that upcoming inflation reports will be crucial, as they could either support or completely overturn the argument for aggressive rate cuts. Create your live VT Markets account and start trading now.

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Producer inflation in the US increased significantly in July, moving faster than expected. The Producer Price Index (PPI) for final demand rose by 3.3% compared to last year, exceeding the forecast of 2.5%. This spike followed a 2.4% increase in June. Meanwhile, the core PPI also climbed to 3.7% annually, up from 2.6% in June.

Monthly Producer Price Changes

Monthly, both the PPI and core PPI increased by 0.9%. Consequently, the US Dollar Index stayed positive at 98.04, up by 0.25% on the day. This surprising producer inflation report alters our short-term view. We now need to prepare for a firmer stance from the Federal Reserve, as this data suggests that inflation isn’t fully under control. Hopes for interest rate cuts in late 2025 or early 2026 now seem less likely. We are purchasing put options on major stock indices like the S&P 500 for the upcoming weeks. The CBOE Volatility Index (VIX), which has stayed low around 14 for much of July, is a primary focus for us as we expect increased market uncertainty. This situation mirrors the volatile markets of 2022 when similar inflation surprises caused sharp declines in stocks.

Bond Market Response

In the bond market, we are shorting 2-year Treasury futures, anticipating further increases in short-term yields due to expected Fed tightening. The CME FedWatch Tool shows that the likelihood of a rate hike at the September FOMC meeting jumped from 15% yesterday to over 45% this morning. This swift shift indicates that bond prices, especially at the front end of the curve, could fall further. The strong US Dollar Index signals us to add long positions against other major currencies. A hawkish Fed makes the dollar more appealing, similar to the trend we saw during the aggressive rate hikes that began in 2022. We are particularly focused on shorting the euro and the yen, as their central banks are unlikely to match the Fed’s renewed determination. Now, we are closely watching the upcoming Consumer Price Index (CPI) data. If the CPI report confirms rising prices, it will strengthen the argument for the Fed to keep a tight policy for a longer period. We will use options to safeguard our portfolios against a significant market drop if that data comes in strong. Create your live VT Markets account and start trading now.

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**Gold Prices and US Treasury Yields** The job market is strong, with jobless claims staying below two million—levels we haven’t seen consistently since before the pandemic. This robust outlook, along with ongoing inflation, suggests the Federal Reserve may take a tough stance at the upcoming September meeting. Consequently, assets sensitive to interest rates may face challenges. Gold is having a tough time gaining traction, even with high inflation, because the 10-year Treasury yield is approaching 5.0%. As long as the US Dollar and yields remain strong, we believe gold’s potential will be capped around $3,350. Selling call options above $3,400 might be an effective way to generate income in this fluctuating market. **Cryptocurrency Market Volatility** The cryptocurrency market is experiencing major ups and downs following Bitcoin’s recent peak. The implied volatility on Bitcoin options has surged to nearly 85%, showing the uncertainty following its correction from an all-time high. We should explore options straddles, which can profit from large price movements in either direction, rather than relying on a specific trend. Rising trade tensions pose additional risks to the entire market. A potential drop of 0.7 percentage points in global output could lead to a sell-off in stocks. We might consider purchasing protective put options on key indices like the S&P 500 to safeguard our portfolios. Given these mixed signals, we must use leverage wisely. The current environment offers both opportunities and risks of sudden reversals. It’s best to concentrate on defined-risk strategies, like buying puts or calls, to avoid risking more capital than we can afford to lose. Create your live VT Markets account and start trading now.

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The US Producer Price Index, which excludes food and energy, increased by 3.7% year-on-year in July. This is higher than the expected 2.9%, indicating stronger-than-expected wholesale inflation. In currency news, the AUD/USD dropped below 0.6500 due to a strong US Dollar and talks about potential Federal Reserve rate changes. On the other hand, EUR/USD seeks to gain more ground because of the Dollar’s strength and rising US wholesale inflation.

Gold And Commodity Markets

As of Thursday, gold prices are under pressure, trading around $3,330 per troy ounce. This is linked to rising US yields and a strong Dollar. Ripple’s price has been very volatile, significantly impacting cryptocurrencies. XRP is down about 5% at $3.12. Moreover, discussions about Trump’s trade policies could further influence global economic growth. For those interested in trading EUR/USD, several brokers offer competitive spreads and quick execution. Keep in mind, currency trading carries substantial risks, including the possibility of losing all your invested capital. It’s vital to understand these risks before diving into the forex market.

Inflation And Interest Rates

The July 2025 US Producer Price Index indicates that inflation is still a concern. The core increase of 3.7% year-on-year is much higher than the 2.9% predicted, showing that price pressures remain strong. This situation is reminiscent of what we saw during the 2022-2023 period, which led to significant actions by the central bank. Given this persistent inflation, it’s likely that the Federal Reserve may need to keep interest rates high or raise them again. The derivatives market is already showing this shift, with the chance of a rate hike in September 2025 rising to over 60%, up from around 35% a week ago. We expect to see more activity and price changes in interest rate swaps and Treasury futures options as traders adjust their strategies. The strong US Dollar is also affecting foreign exchange markets, particularly as the Australian Dollar drops below the crucial 0.6500 mark against the US Dollar. This has acted as a key support level several times since late 2023. For both EUR/USD and AUD/USD, we are looking at buying put options to profit if the US Dollar continues to strengthen. Gold is losing its appeal as US government bond yields rise, with the 10-year Treasury yield reaching 4.8%, its highest this year. Holding gold, which offers no interest, is becoming less attractive, as reflected in its current price near $3,330 per ounce. We anticipate that derivative traders will continue using futures contracts to bet on lower prices or to hedge their physical gold holdings. This market shift is also affecting riskier assets such as cryptocurrencies. Ripple’s 5% drop to $3.12 contributes to a broader trend where the overall crypto market has lost over $100 billion in value in just one day. This indicates a move away from risk, prompting traders to bet against crypto assets or use options for portfolio protection. Create your live VT Markets account and start trading now.

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