Spain’s Consumer Price Index (CPI) for July showed a 2.7% increase year-on-year, matching earlier estimates. This follows a 2.3% rise in the previous month. The Harmonised Index of Consumer Prices (HICP) also reported a 2.7% increase year-on-year, consistent with preliminary figures. June’s increase had been 2.3%.

Core Inflation Trends

In July, core annual inflation in Spain ticked up slightly to 2.3%, up from 2.2% in June. This small rise supports the European Central Bank’s strategy to maintain current policies during the summer. The latest inflation numbers confirm what many expected: the ECB is likely to keep interest rates steady for the rest of the summer. With core inflation now at 2.3%, it’s clear that the battle against rising prices is far from over. Spain’s inflation rate is notably higher than the average of 2.5% for the Eurozone in the latest July estimate. This difference indicates that inflation pressures are not uniform across the region, making it harder for the ECB to decide on future policy. The steady decrease in inflation we saw in late 2024 and early 2025 seems to be losing momentum.

Market Implications

In the coming weeks, we should see lower volatility in interest rate markets. Since the ECB plans to hold rates steady at least until their next meeting, traders might find value in selling short-dated options on Euribor futures to benefit from the decay of option premiums. The certainty of this pause should minimize significant price changes until the next decision approaches. Attention will turn to the ECB’s governing council meeting on September 11, 2025. This persistent inflation rate increases the likelihood that ECB officials will be more hawkish, possibly pushing back against expectations of rate cuts later this year. A similar situation occurred in late 2023 when the market anticipated cuts that the ECB wasn’t ready to implement. While short-term volatility may remain low, forward volatility might be underestimated. Positioning for a spike in volatility around the September meeting seems wise. Buying longer-dated options or calendar spreads that cover this event could be profitable if the ECB hints at maintaining higher rates for a longer period. In the bond market, this data is a negative sign, especially for peripheral government debt. The gap between Spanish government bonds and German Bunds, which had been narrowing, could begin to widen again. We see a chance to take positions that bet on Spanish yields increasing faster than those in Germany. Create your live VT Markets account and start trading now.

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The cryptocurrency market kicked off on a strong footing as a wave of inflows into spot Ether ETFs coincided with an improved appetite for risk. Daily net inflows reached $1.01 billion, while Ethereum’s total value locked has surpassed the $90 billion threshold, signalling robust institutional interest alongside supportive cross-asset positioning.

With Bitcoin trading at $119,335 and prominent forecasts pointing to $150,000 by year-end, traders expect ETH to follow suit as its price correlation with BTC strengthens.

At present, ETH/USD is holding at $4,622.06, up $3.36 or 0.07%, keeping it within touching distance of the $4,878 peak set in November 2021. This climb extends from the April low of $1,399.39 and builds on the early-August breakout above the $4,300 consolidation band.

Market sentiment was further buoyed by news that BitMine Immersion Technologies intends to raise as much as $20 billion to acquire ETH. Looking ahead, analysts note that in previous bull runs, ETH often traded at 30%–35% of Bitcoin’s market capitalisation. If BTC achieves $150,000, that would translate to roughly $8,656 for ETH. A more restrained estimate, based on a 21.70%–30% ratio, suggests a range of $5,376–$7,420.

Technical Analysis

Ethereum (ETH/USD) has staged a sharp recovery since its April trough near 1,399, clearing a series of resistance levels and recently advancing to 4,622.

The move has been supported by consistently higher highs and higher lows, with price action staying well above the short- and medium-term moving averages.

The MACD shows a solid bullish momentum with a widening gap between the MACD and signal lines, suggesting buying pressure remains intact.

In the near term, the key level to watch is the current high around 4,620–4,650. A decisive breakout above could set the stage for a push toward the psychological 5,000 level. However, if momentum stalls, initial support lies near 4,200, with stronger backing around 3,800. Overall bias remains bullish while ETH holds above its rising 30-day moving average.

Measured Outlook

A sustained daily close above $4,878 would likely encourage further momentum towards $5,000, with potential to extend into the $5,376–$7,420 bracket if Bitcoin continues its climb and ETF inflows remain solid. Conversely, failure to reclaim the previous high, or a slowdown in ETF demand, could spark a retreat towards $4,480 and subsequently $4,300 as the uptrend consolidates.

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The latest US Consumer Price Index (CPI) report met expectations, showing that tariffs have had a small impact on inflation. Although tariffs have influenced prices, the effect is smaller than expected, even months after they were first implemented. As a result, traders are almost all on the same page, with about 98% predicting a 25 basis point rate cut in the next month, up from about 89% before the inflation data was released. They are also forecasting about 60 basis points of rate cuts for the year, which is a slight increase from the previous estimate of 57 basis points. Traders were already looking for a rate cut due to weak US job data, and this data reinforces that anticipation for September.

Divergent Views Among Policymakers

There are differing opinions among Federal Reserve (Fed) policymakers about rate cuts. Kansas City Fed president Schmid opposes a cut in September despite the inflation figures. Meanwhile, Richmond Fed president Barkin has taken a neutral stance, mentioning the unclear balance between inflation and unemployment. The Fed’s decisions are becoming more politicized, with some members influenced by political appointments. The upcoming Fed meeting on September 17 coincides with several economic events, such as the Jackson Hole symposium and CPI reports. This timing offers little chance for policymakers to shape market opinions, especially with UBS and Goldman Sachs noting potential rising price pressures. With the market now seeing a 98% chance of a rate cut next month, the straightforward trade has already occurred. A similar situation happened in 2024 when the market acted ahead of the Fed, delaying actual cuts. The real opportunity now lies in trading against the consensus, not simply following the trend. Since pricing is almost certain, there’s a chance to buy cheap protection against a hawkish surprise from the Fed at Jackson Hole this month. Out-of-the-money puts on Treasury futures or calls on the VIX could yield significant gains if policymakers push back against market expectations.

Opportunities in the Yield Curve

The most direct way to bet on the rate cut is through the yield curve. We can set up a steepener trade that profits if short-term rates drop more than long-term rates. This can be achieved by buying 2-year note futures (/ZT) while selling 10-year note futures (/ZN). This position benefits not only from the cut but also if concerns about future inflation push long-term yields higher. For equities, a rate cut due to economic weakness—such as the recent report showing only a gain of 95,000 jobs—doesn’t signal a clear go-ahead to invest heavily. While sectors sensitive to rates, like technology and real estate, may see a boost, we should employ defined-risk strategies like call spreads. This strategy allows us to benefit from potential gains while limiting our risk if the weak economy negatively impacts earnings. We should be cautious about dissenting views from voting members like Schmid and warnings from banks about future inflation. The next CPI report on September 11 will be released during the Fed’s blackout period, meaning they cannot comment on the market’s response. If this report shows higher inflation, it could lead to significant market volatility and quickly reverse the current dovish outlook. Create your live VT Markets account and start trading now.

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Today’s news is expected to be calm, with no big events likely to move the markets. The final CPI reading for Spain and US MBA Mortgage Applications data are not thought to affect expectations.

Federal Reserve Communications

The spotlight is on the Federal Reserve’s communications. Fed member Goolsbee will speak at 17:00 GMT. He tends to have a neutral to slightly dovish view. Fed members Barkin and Bostic will also be speaking, but their comments are unlikely to have an impact because they are not current voters and have spoken recently. Looking ahead, all eyes are on Fed Chair Powell’s speech at the Jackson Hole Symposium. A key event in September will be the NFP report, where a rate cut seems likely. Only an unexpectedly strong NFP report could lower the current 98% chance of a cut down to 50%. This situation could influence future policy decisions, but for now, the focus is on what the Federal Reserve will communicate next. With the market pricing in a 98% chance of a rate cut in September, the trend is clear. The weak July NFP report, which showed only 95,000 jobs added and an unemployment rate increasing to 4.2%, reinforces this dovish view. For now, this suggests keeping positions that benefit from lower interest rates and a potentially weaker dollar. Due to this high certainty, implied volatility on many assets has decreased, especially for short-term options. This creates a chance to sell weekly options that will expire before the next major market event, allowing you to collect premium while waiting. However, any surprising hawkish comments from Fed’s Goolsbee today could cause a temporary spike, making this a tactical, rather than a strategic, trade.

Jackson Hole Symposium

In the coming weeks, the main focus will be Fed Chair Powell’s speech at the Jackson Hole Symposium. We’ll be on the lookout for hints that might challenge the general consensus, which could give us a chance to adjust our positions. Until then, the market is likely to drift, mainly reacting to intraday comments from Fed officials without forming a new trend. The biggest risk to the current situation is an unexpectedly strong NFP report in early September. We recall late 2023 when the market aggressively anticipated rate cuts for 2024, only for strong data to necessitate a major reevaluation. To prepare for a similar situation, buying inexpensive, out-of-the-money call options on the dollar or put options on equity indices expiring after the NFP data could be a smart hedge. Thus, the strategy is to maintain a core dovish position while using low volatility to either sell short-term options or buy longer-term protection against risks. Volatility is almost guaranteed to rise as we approach the September data releases and the Fed meeting. These quiet days are the perfect time to set up for what’s ahead. Create your live VT Markets account and start trading now.

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Eurostoxx futures are up by 0.3% in early European trading, following a strong night on Wall Street. German DAX futures have risen by 0.4%, French CAC 40 futures by 0.3%, and UK FTSE futures by 0.2%. US indices closed at record highs, boosting European stocks. However, market sentiment is cautious; US futures are flat, with S&P 500 futures showing no change.

European Futures Show Limited Enthusiasm

A full risk-on wave has not yet taken over the broader markets today. We see a small rise in European futures this morning. However, this rally lacks strong support. The positive atmosphere mainly comes from Wall Street’s record highs, but flat S&P 500 futures indicate a pause in momentum. This suggests a more careful approach instead of a full risk-on sentiment. This caution is reasonable, especially with central bank discussions expected in the next two weeks. Recently, the US Core PCE Price Index for July came in at 2.9%, slightly above expectations. This persistent inflation could lead to further policy tightening by the Federal Reserve, which might disrupt the current calm in equity markets. From a derivatives perspective, the VIX index is low at around 14. This points to a level of market complacency, especially with major indices near all-time highs. Historically, such low volatility can be a good time to buy protection in case an unexpected event causes a market spike.

Strategic Insights for Traders

Given this situation, traders may want to consider strategies that could benefit from rising volatility or a market pullback. Buying put options on major indices for downside protection could be a smart move. We’ve observed that put-call skew is gradually increasing, indicating that some traders are already anticipating a higher chance of a decline. We should remember the sharp correction in the fourth quarter of 2024, which followed a similar phase of record highs and low volatility. That time serves as a reminder of how rapidly market sentiment can change, and the current environment shows some of those early warning signs. In the coming weeks, we’ll closely monitor trading volumes as we are in mid-August. The lower liquidity typical for this period can lead to larger price swings due to unexpected economic data or geopolitical news. In this environment, being agile and having hedges in place is essential. Create your live VT Markets account and start trading now.

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Germany’s final Consumer Price Index (CPI) for July is 2.0% year-on-year, unchanged from initial reports. This is the same rate as the previous month. The Harmonized Index of Consumer Prices (HICP) also remains steady at 1.8% year-on-year, matching earlier measurements. Previously, it was noted at 2.0%.

Core Annual Inflation Influence

Core annual inflation sticks at 2.7%, which affects the European Central Bank’s (ECB) decisions. However, no rate cuts are expected in September. Germany’s final inflation data for July confirms our expectations. While the headline figure aligns with the ECB’s 2.0% target, the more critical core inflation remains high at 2.7%. This persistent rate is why the ECB will likely maintain its interest rates. This reinforces our belief that the ECB will not cut rates in September. Markets are quickly adjusting their expectations; swaps are now predicting less than a 15% chance of a rate cut before the end of 2025. This marks a significant change from a month ago when the odds were around 40%.

Derivative Traders Strategy

For derivative traders, this situation suggests focusing on range-bound markets and potential spikes in volatility. With the ECB standing by, the upside for indices like the DAX and Euro Stoxx 50 appears limited. Selling call options or setting up bearish call spreads might be attractive strategies. Since the VSTOXX volatility index is near a low of 14, it could be wise to buy cheap protection through long-term call options. This policy dilemma occurs in the context of weak economic growth, which registered only 0.2% for the Eurozone in the second quarter. The current situation resembles late 2023 when the ECB kept rates high to combat stubborn inflation, even with a stagnating economy. That period saw equity markets moving sideways for months. Eyes will now be on the flash Eurozone-wide inflation data for August, expected at the end of this month. A persistent core reading there would almost certainly eliminate any remaining hopes for a rate cut in 2025. We anticipate that options betting on interest rates staying at current levels will become increasingly popular. Create your live VT Markets account and start trading now.

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Today’s notable foreign exchange option expiry for EUR/USD occurs at the 1.1700 level. Offers positioned at this mark since last week have limited gains after the US CPI report. These expiries may restrict price movements until US trading starts. Although the dollar is weak this week, traders expect a rate cut from the Fed in September.

Significant Options Expiry

We have an important options expiry for EUR/USD today at the 1.1700 level. This number has acted as a ceiling for the pair, particularly capping gains after the US inflation report yesterday. These expiries are likely to keep the price stable, at least until the morning session ends. In a broader view, the US dollar is currently in a weak state. Yesterday’s Consumer Price Index report for July 2025 showed core inflation easing to 2.8% year-over-year, the lowest since early 2024. This decline in price pressures adds to the dollar’s soft position. As a result, derivative markets are almost fully pricing in a Federal Reserve rate cut for the upcoming September meeting. Data from the CME FedWatch Tool shows over a 90% chance of a 25-basis-point rate reduction. This expectation is a significant factor weighing on the dollar.

Potential Rate Cut Impact

This shift in policy marks a big change from the aggressive rate hikes throughout 2023 and the prolonged high plateau during much of 2024. The latest Non-Farm Payrolls data from early August, which showed an unexpected increase of only 155,000 jobs, has further solidified this cautious outlook. We are clearly in a different economic phase now. In the short term, traders could think about selling short-dated call options with a 1.1700 strike price to capitalize on this barrier. This strategy would profit if the price doesn’t rise above this point before the options expire. It’s a way to take advantage of the expected range-bound action. Looking ahead a few weeks, the weak dollar suggests preparing for a possible breakout higher in EUR/USD. Buying call options with September or October expiries at strike prices like 1.1750 or 1.1800 could capture any potential upside. This would be a bet that the pair will rally once the Fed officially indicates the start of its easing cycle. Create your live VT Markets account and start trading now.

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Following the recent US CPI report, the markets have entered a calm period. In the crypto world, Ethereum has surged above $4,600, reaching a four-year high. Meanwhile, other asset classes show only slight changes. In the Forex market, major currencies are stable after a recent dollar drop. Traders expect a 25 basis point rate cut by September and about 60 basis points by year-end. Dollar pairs are showing limited movement, sticking to narrow ranges.

Quiet Equities Market

The equities market is relatively still, with S&P 500 futures standing flat after reaching record highs on Wall Street. Tech stocks continue to perform well, boosted by the ongoing AI boom. The market’s reaction to the CPI data indicates a calm atmosphere. According to the CPI report, core monthly inflation is at 0.322%, which aligns with predictions but is the highest since January. Core annual inflation is slightly above expectations at 3.059%, nearly 3.1%. Core goods inflation increased modestly by 0.21% month-on-month, showing little change from June. The median core goods inflation across 56 items dropped to 0.28% m/m from June’s 0.44% m/m. Analysts expect stronger increases in autumn, but inflation concerns for the Federal Reserve are currently on hold. Fed reactions are mixed, with different views on future rate cuts and tariff impacts. After the US inflation report on August 12, 2025, markets are taking a pause. Initial excitement has faded, and volatility, as shown by the VIX, has settled in the low 13s. This indicates that traders have processed the news and are now waiting for the next big development.

Outlook for Interest Rates

For those trading interest rates, the path ahead looks clear, with a September rate cut nearly certain. The CME FedWatch Tool shows a greater than 90% chance of a 25 basis point cut next month. This certainty likely means lower implied volatility on rate options, making it a good time to hedge against surprises later in the year. In the stock market, the AI-driven rally continues to push the S&P 500 to new heights, clearing the 6,500 level. This creates a split market, where tech thrives while other sectors lag due to inflation and tariff concerns. This divide supports strategies like pair trades, buying strong tech stocks while selling weaker industrial ones. The worry regarding tariffs has been postponed for another month, as July’s inflation numbers showed minimal impact. We saw a similar pattern in summer 2023 when markets traded sideways in low volume before volatility increased in autumn. It makes sense to prepare for a few quiet weeks, but expect increased activity as we enter September and October. The US dollar fell after the inflation data but has since stabilized, keeping major currency pairs within tight ranges. This low-volatility environment makes it cheaper to buy long-term options like straddles or strangles on pairs such as EUR/USD or USD/JPY. These positions could profit if the current calm is disrupted by a significant move in either direction this fall. The main exception to this calm is in the crypto market, where Ethereum has surpassed $4,600, a level not seen since the bull run of 2021. This surge appears to be driven by factors unique to the crypto space, separate from the overall economic picture. It serves as a reminder to view digital assets as their own ecosystem, where volatility is influenced by its own stories. Create your live VT Markets account and start trading now.

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The US dollar saw small gains after selling off due to the CPI report, with USD/JPY rising above 148.10. This rise comes as Japan’s Producer Price Index continues to decline, marking the fourth month of year-on-year losses. The foreign exchange market was mostly quiet, lacking major news or data to drive movement. In the US, Treasury Secretary Bessent mentioned that efforts to curb China’s fentanyl exports might affect tariff choices and suggested the Federal Reserve consider a 50 basis point rate cut.

Australian Economic News

In Australia, wage growth for the second quarter rose 3.4% year-on-year, surpassing expectations of 3.3%, while holding steady at the first quarter’s growth rate. This might raise concerns about inflation and lessen expectations for major rate cuts, even as quarterly wage growth fell slightly from 0.9% to 0.8%. Stock markets generally mirrored Wall Street’s upward trend, although there were some regional differences. The Australian S&P/ASX 200 index dropped by 0.4%, while Hong Kong’s Hang Seng rose by 1.9%, Japan’s Nikkei 225 increased by 1.5%, and the Shanghai Composite gained 0.6%. With widespread agreement on a Federal Reserve rate cut in September, we expect increased volatility in interest rate futures. The key debate now is whether the cut will be 25 or 50 basis points, creating uncertainty that traders can capitalize on. We are looking at options on Treasury futures to take advantage of this anticipated volatility in the next few weeks. US stock indexes, like the S&P 500, are reaching record highs, largely due to expectations of cheaper money. However, with warnings of a potential slowdown, we believe it’s wise to protect these gains by buying put options. When looking back at the last Fed easing cycle that started in July 2019, the S&P 500 surged over 12% in the next six months, experiencing sharp pullbacks that benefited hedgers.

USD/JPY Currency Pair Dynamics

The USD/JPY currency pair is in a tricky spot, impacted by a weakening US dollar and a Japanese economy with slowing inflation. This situation can lead to significant price fluctuations without a clear direction. Historical data indicates that in similar scenarios, 3-month implied volatility on this pair can exceed 12%, making strategies like straddles potentially lucrative. We are also paying attention to the Australian dollar, with wage growth at 3.4%, slightly above forecasts from the Reserve Bank of Australia. This difference in monetary policy—where the Fed is expected to cut rates while the RBA may need to hold steady—could support the AUD/USD pair. We see potential in buying call options to capture possible gains. Ethereum has surged to over $4,600, accompanied by growing institutional interest, indicating continued upward momentum. We believe the easiest path is higher for this cryptocurrency. We are considering long positions in ETH futures or call options to join this trend. Lastly, we must consider external risks that could disturb the current market stability. Tensions over Iran’s nuclear program and ongoing US-China trade issues represent low-probability, high-impact scenarios. Buying inexpensive, out-of-the-money put options on equity indexes or call options on oil can effectively hedge our portfolios against sudden disruptions. Create your live VT Markets account and start trading now.

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Opportunity For Australia

Australia, the second-largest canola exporter, has a chance to benefit as it regains market access after a long ban. However, it probably won’t fully compensate for the loss unless China’s demand for imports drops significantly. Canadian officials were disappointed by Beijing’s decision and expressed their willingness to talk and reduce trade tensions. Canola is Canada’s biggest cash crop and is used for cooking oil and animal feed in China. We expect immediate and ongoing downward pressure on ICE Canada Canola futures contracts. The loss of China, the top buyer, creates a significant surplus in Canada that can’t be quickly absorbed. Statistics Canada already predicted a healthy 2025 harvest of over 20 million tonnes in their July report, so this oversupply will likely lower prices in the coming weeks.

Market Dynamics And Strategy

This situation presents a clear opportunity for substitute oilseeds, mainly soybeans. China needs to replace millions of tonnes of canola for its cooking oil and animal feed industries, making soybeans a natural alternative. Last week, we saw a 4% increase in CBOT Soybean futures, and we expect this trend to continue as China’s buyers establish new supply sources. The currency market will reflect these changes in agricultural fortunes. We recommend taking a long position in the Australian dollar against the Canadian dollar (AUD/CAD). As the second-largest canola exporter, Australia is well-positioned to capture some of the lost demand, which should support its currency. Historically, Australia’s export capacity has faced challenges, such as during trade disruptions in the early 2020s, indicating they can’t fully replace Canada’s volume. However, the immediate sentiment favors Australian exporters. Data from the Australian Bureau of Statistics for the second quarter of 2025 shows a tightening in grain inventories, suggesting that any new large-scale demand will boost prices. Additionally, we expect the Canadian dollar to weaken against the US dollar. The loss of a C$5 billion export market, which canola represented in 2024, significantly impacts Canada’s trade balance. This situation could complicate the Bank of Canada’s policy, as a major hit to an export sector may require a more cautious economic approach. Traders should consider buying put options on canola futures to hedge against or speculate on further price drops. At the same time, call options on soybean futures look appealing to capture the expected demand increase. This strategy allows for managing risk while taking advantage of the trade disruption. Create your live VT Markets account and start trading now.

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