Insights 
VT 
JPMorgan warns that ongoing inflation could reduce bond profits and weaken the dollar.
JPMorgan Asset Management warns that rising inflation could disrupt the usual bond market gains, even if the Federal Reserve cuts interest rates. This situation might also weaken the US dollar.
If inflation goes up, the Federal Reserve may not be able to cut rates significantly. This means that easing policies could be cautious and less effective in boosting growth-sensitive assets.
Goldman Sachs forecasts a 70% increase in consumer costs from tariffs affecting markets
Goldman Sachs predicts that consumer costs will rise by 70% this autumn. Their initial analysis shows that tariffs impact different economic players in various ways.
Data from June 2025 reveals that foreign exporters have absorbed 14% of US tariffs, American companies have taken on 64%, while consumers feel 22% of the costs.
Impact Of Tariffs
Protected domestic companies have increased their prices. JP Morgan indicates that we are starting to see the effects of tariffs on the economy. Prices for goods are rising, and consumption is declining, signaling economic changes. US companies are shouldering the most tariff costs, absorbing 64% of the burden as of June 2025. With consumer prices projected to surge by another 70% into the autumn, corporate profit margins face serious threats. This suggests a negative outlook for market indices like the S&P 500 in the upcoming weeks. The combination of rising prices and slowing consumption points to increased market volatility. The CBOE Volatility Index (VIX) rose to 21 this past week, a significant increase from the low teens seen in the spring. Consider buying VIX call options or VIX futures to hedge against, or profit from, a potential spike in market fear.Federal Reserve Position
The Federal Reserve finds itself in a tough spot, needing to combat inflation while trying to avoid a recession. July’s CPI data showed inflation stubbornly high at 4.9%, making a rate cut unlikely despite the slowdown in consumption. Traders might consider options on SOFR futures, betting on continued fluctuations in short-term rate expectations. Certain sectors, especially retail and consumer discretionary stocks, seem particularly at risk. Major retailers are vulnerable to both rising import costs and decreasing consumer demand. Buying put options on retail-focused ETFs, like the XRT, could be a wise move in this environment. Historically, economic uncertainty leads to a shift toward safe-haven assets. During the stagflation of the 1970s, gold benefited significantly from this shift. Gold futures surpassed the $2,600 per ounce mark in early August, and we anticipate this upward trend will continue. A slowing US economy may put pressure on the US Dollar, though high inflation could provide some support. The US Dollar Index (DXY) has been trading sideways in a tight range, reflecting market indecision. This situation suggests opportunities in currency options that could profit from a significant breakout in either direction for pairs like EUR/USD. Create your live VT Markets account and start trading now.Markets show slight shifts ahead of CPI data as the US dollar strengthens against major currencies
US stocks closed lower today, despite the Nasdaq hitting a new intraday high before falling back. Crude oil ended at $63.96, and tariff revenues from Trump reached $29.6 billion in July. Major European indices had mixed results, while Trump extended the deadlines for China tariffs by 90 days. He also announced that gold would not face tariffs and deployed the National Guard to Washington, D.C.
The US dollar gained strength against major currency pairs, rising 0.34% against NZD and 0.18% against AUD. The Reserve Bank of Australia may cut rates by 25 basis points due to inflation at 2.1% and weak employment data. The upcoming US CPI report is expected to show a 0.2% month-to-month increase and a 3.0% year-on-year rise in core inflation.
Goods Inflation and Services Inflation
Goods inflation saw moderate growth, with core goods prices up 0.2% month-on-month in June. Services inflation, driven by shelter costs, rose by 0.3% month-on-month. Shelter costs increased slightly by 0.2%, the smallest rise since August 2021, and they impact 34% of the CPI weight. Trump’s 90-day delay on increased China tariffs coincided with reports of progress in Ukraine-Russia peace talks. US stock indices closed slightly lower, with little change in bond yields. The Dow was down 0.45%, the S&P 0.25%, and the Nasdaq 0.50%. This week, all eyes are on the upcoming US CPI report. Anticipations for a slight rise in core inflation to 3.0% create tension. If the number is higher than expected, it may lead to increased market volatility and push bond yields up. The VIX volatility index closed at 17.5, reflecting this concern, with options indicating a larger-than-average movement for the S&P 500 after the data release. We are monitoring how this inflation data will influence the Federal Reserve’s decisions, especially after the disappointing jobs report earlier this month. A modest inflation reading, especially if core goods prices stay soft, could raise expectations for a rate cut later this year. Currently, Fed Fund futures suggest about a 40% chance of a rate cut by December, a number that could change significantly after tomorrow’s data.The US Dollar and Currency Pairs
The US dollar is strong ahead of the report, but this could change. The expected rate cut from the RBA creates a clear policy difference from the Fed, which could lift the AUD/USD pair if US inflation remains strong. We think positioning for higher volatility in major currency pairs like EUR/USD and USD/JPY using simple options strategies could be a smart approach for this event. Equity markets show some nervousness, especially with the Nasdaq pulling back from its earlier highs. A strong inflation report could put pressure on technology and growth stocks sensitive to interest rates. The 90-day tariff delay on Chinese goods alleviates concerns for industrial sectors, particularly as China’s recent manufacturing PMI of 49.8 suggests economic stress. Geopolitical risks seem to be easing, which might lower implied volatility in the coming weeks. The tariff extension and planned discussions with Russia help reduce immediate market uncertainties. However, the domestic deployment of the National Guard in Washington D.C. adds a background risk that is hard to evaluate. Create your live VT Markets account and start trading now.Bank of America warns the Fed against rate cuts due to ongoing inflation and economic issues
Bank of America is worried that inflation will stay above the target because of recent tariff increases. It recommends that the Federal Reserve not lower interest rates in September since the current economic data doesn’t justify such a move.
In a note to clients, the bank emphasizes that some policymakers might be underestimating how a labor supply shock can affect inflation. Ongoing inflation and the effects of recent tariffs could remain a threat, with inflation still above the Fed’s 2% target.
Bank Warns Against Rate Cuts
Bank of America warns that cutting rates in September could start a trend of easing without solid proof that inflation is stabilizing. It believes there will be no rate cuts this year. The bank also notes that U.S. nonfarm payroll figures have been revised downward. This raises fears of “bad cuts,” which could happen if the labor market worsens instead of helping to control inflation. We believe that inflation is sticking around longer than many expect. The July 2025 Consumer Price Index was at 3.1%, still above the 2% goal. The new tariffs on imported electronics and industrial components create a fresh inflation shock. These developments challenge the idea that the Federal Reserve can afford to ease its policies. The Fed should refrain from lowering interest rates in September. The revision of June’s nonfarm payroll data—from 190,000 to only 150,000—raises the chances of making “bad cuts” based on labor market fears rather than having confidence in controlling inflation. We think those calling for rate cuts are underestimating how persistent inflation will be.Market Implications and Strategies
For derivatives traders, this suggests that the market might incorrectly price how monetary policy will unfold. The CME FedWatch tool shows a 60% chance of a rate cut in September, which we believe is too optimistic. Traders should consider strategies that benefit from rates remaining high, such as selling September SOFR futures or buying payer swaptions. This uncertainty could lead to more market volatility. We observed similar spikes in the VIX in 2022 when the Fed needed to take more drastic actions than the market expected. Buying VIX call options or futures for September and October could be a smart hedge against a hawkish surprise from the Fed. If the Fed keeps rates steady in September, it may disappoint equity markets that are anticipating a shift to easing. A cautious approach is advisable, and traders should think about buying protective put options on the S&P 500 to safeguard portfolios against a possible market downturn from a revaluation of interest rates. Moreover, a hawkish Federal Reserve, especially while the European Central Bank is adopting a softer approach, suggests a stronger U.S. dollar. This makes long positions on the dollar appealing. Derivative opportunities related to a rising USD/EUR exchange rate could be attractive in the coming weeks. Create your live VT Markets account and start trading now.Anticipation of a 25 basis point rate cut from the Reserve Bank of Australia today
The Reserve Bank of Australia is likely to cut its cash rate by 25 basis points this week after pausing in July. The announcement is expected tomorrow.
On Tuesday, August 12, 2025, several economic data releases are scheduled for Asia. All times are in GMT, along with prior and consensus figures for various economic indicators.
Hawkish Rate Cut
Tomorrow, August 12th, the Reserve Bank of Australia is expected to lower its cash rate by 25 basis points. This is described as a ‘hawkish cut,’ meaning the bank is hesitant and this isn’t the start of a major easing trend. This situation is creating a challenging trading environment. The mixed signals come from recent economic data. GDP growth has slowed to just 0.2% last quarter, indicating a need for a rate cut to help the economy. However, with the last quarterly CPI inflation rate still high at 3.8% and unemployment low at 3.9%, the RBA cannot signal that it’s finished fighting inflation. For traders dealing with derivatives, this scenario suggests increased volatility for the Australian dollar. A prudent strategy for the upcoming event is to use options to buy volatility, such as a straddle on the AUD/USD pair. This strategy will profit from significant price moves in either direction, which are likely as the market processes the conflicting messages of a rate cut paired with cautious language. In the coming weeks, we believe this policy will stabilize short-term bond yields, as markets adjust their expectations for further immediate cuts. Traders should keep an eye on interest rate futures to see how the predictions for the year-end cash rate change. The RBA’s statement will be crucial in shaping the market outlook for the rest of the quarter.Policy Fine-Tuning
Looking back, the current situation is much more complex than the clear hiking cycles we saw globally in 2023 and 2024. During that time, the direction of policy was straightforward, leading to simpler trades. Now, we are in a phase of policy fine-tuning, which requires more advanced strategies that consider risks in both directions. Create your live VT Markets account and start trading now.The NASDAQ index fell after an early gain, and the S&P and Dow also experienced losses.
The NASDAQ index saw a rise of nearly 100 points earlier in the session, but it has now fallen. Currently, the NASDAQ is down by 21 points, or 0.10%, at 21,429.93. At the same time, the S&P index is down by 0.12%, losing 4-7.73 points after a previous gain of 17.80 points.
The Dow industrial average, which had increased by 97.42 points, is now down 200.62 points, or 0.45%. Major tech stocks are also struggling, with Apple down 0.78%, Amazon down 0.80%, and Meta down 0.21%.
Nvidia And AMD Tariffs
Nvidia started the day down $2.45 but has now climbed to a gain of $0.21. Both Nvidia and AMD have announced a 15% tariff on chips exported to China. Even with this news, AMD’s stock has risen slightly by 0.28%. The NASDAQ’s inability to maintain its earlier gains may indicate market fatigue. Sellers are reappearing after a strong rally, which might mean the easy profits have been made for now. This type of intraday reversal, especially after good performance in July 2025, often leads to a period of increased volatility. The CBOE Volatility Index (VIX) has shown this unease, climbing from summer lows around 15 to just over 19. This increase suggests traders are starting to buy protection against a possible downturn. In this environment, long volatility plays like VIX calls or straddles on major stocks become more appealing.Market Volume And Volatility
It’s concerning to see market leaders like Apple, which fueled much of last week’s gains, trading lower. The new 15% tariffs on certain chip exports to China are a specific challenge for Nvidia and AMD. We should keep an eye on continued weakness in these key stocks as an indicator for the broader market’s direction. Remember, August has historically been a month with lower trading volumes and unexpected volatility. With the key Consumer Price Index (CPI) report coming in two weeks and the Federal Reserve meeting scheduled for September, many investors are cautious about making large new investments before getting more clarity on inflation. This uncertainty is something we can navigate. Recent data shows that the equity put/call ratio has risen to 1.15, indicating that more bearish put options are being traded than bullish calls. This suggests we should think about buying protective puts for our long positions in indexes like the QQQ. Speculative traders might even want to consider puts on tech giants that are starting to show signs of weakness. Create your live VT Markets account and start trading now.The precious metal faced challenges as risk appetite grew, resulting in lower demand for safe havens.
**Gold Market Dynamics**
Gold prices are falling as the week starts, driven by lower demand for safe-haven investments and a growing risk appetite. The metal is currently trading at approximately $3,345, down nearly 1.50%, after struggling to break past the $3,400 mark last week.
Market feelings are cautiously positive due to recent diplomatic efforts regarding tensions between Russia and Ukraine. President Trump has scheduled a meeting with Russian President Putin for mid-August, aiming to find a resolution to the conflict.
Anticipation of an interest rate cut by the Federal Reserve in September is helping to reduce Gold’s potential for further declines. Additionally, the US Dollar remains weak, trading close to a two-week low, while yields on 10-year Treasury bonds stand at around 4.262%.
Global stock markets are rising, buoyed by hope surrounding US-Russia peace talks and strong corporate earnings. However, trade tensions continue, with US tariffs driving rates to their highest since 1934.
Gold traders are watching closely, especially with the uncertainty around Swiss Gold bars possibly facing US tariffs. Future diplomatic meetings and upcoming US economic data releases are expected to influence market trends.
On a technical level, Gold is experiencing selling pressure after failing to break above the $3,400 level. Key support is at the 50-day simple moving average (SMA) around $3,350, with more significant support at the 100-day SMA near $3,292.
**Gold Market Volatility**
Gold is now testing the vital 50-day moving average support at approximately $3,350, leading to a cautious outlook. The upcoming mid-August meeting between President Trump and President Putin is making investors more willing to take risks, diverting funds from safe havens. We saw a similar trend during the early US-North Korea meetings in 2018, where optimism in diplomacy temporarily lowered Gold prices.
Nonetheless, the possibility of a Federal Reserve interest rate cut in September provides solid support for the market. The CME FedWatch tool shows a 78% chance of a 25-basis-point cut, which should keep the US Dollar low and help Gold prices. Given the short-term pressures, we see potential in buying near-term put options to protect against favorable peace talk outcomes, aiming for a move towards the $3,292 level.
The mixed signals from diplomacy and monetary policy create a volatile environment. The CBOE Gold Volatility Index (GVZ) is currently around 18.5. Although this is lower than recent peaks, it indicates that traders anticipate significant price fluctuations. A long straddle strategy, using options that expire after the September Fed meeting, could effectively capitalize on large price changes in either direction.
Ongoing trade tensions also play a crucial role. Commerce Department data shows that the average US tariff rate has now reached 4.5%, a level not seen since the 1930s. This uncertainty, combined with possible tariffs on Swiss Gold, supports a longer-term bullish outlook for the precious metal. For those preferring a less aggressive approach, a bull call spread could be a cost-effective way to prepare for a future move back toward the $3,400 resistance.
Create your live VT Markets account and start trading now.
In June, Mexico’s industrial output improved from -0.8% to -0.4% compared to the previous year.
Mexico’s industrial output improved slightly in June, changing from -0.8% to -0.4% compared to the same month last year.
This shift shows a small recovery in the industrial sector. The contraction is narrowing compared to previous months, indicating a gradual positive change in Mexico’s industrial performance.
In June, industrial output data indicated a slight recovery, signaling that the worst part of the slowdown may be over. This information is crucial as we prepare for the upcoming weeks.
Recent data adds to this cautious optimism. The inflation rate for July 2025 is at 4.1%, continuing a slow downward trend. This development has likely helped stabilize the Mexican Peso against the dollar, which is around the 17.30 level. These trends suggest that economic resilience is slowly building.
For derivative traders, it may be a good strategy to sell out-of-the-money puts on the iShares MSCI Mexico ETF (EWW). This approach benefits from the stable and improving outlook while allowing traders to earn premiums despite lingering market uncertainties. We don’t expect a huge rally, but we do see support forming under key Mexican assets.
Looking back at the aggressive rate hikes in 2023 and 2024, the central bank’s choice to keep rates steady in early August 2025 indicates a major policy shift. We think Banxico is now ready to pause and evaluate the effects of its past decisions on the economy. This change lowers the risk of further economic shocks from monetary policy.
A key consideration is the health of the U.S. economy, Mexico’s largest trading partner. The latest U.S. jobs report for July 2025 shows modest but steady growth, which is a positive sign for demand for Mexican exports. We will be closely monitoring U.S. consumer spending for insights into Mexico’s manufacturing sector.
Crude oil futures close at $63.96, fluctuating between $64.44 and $63.02
Crude oil futures have risen by eight cents, reaching $63.96. The highest price today was $64.44, while the lowest was $63.02.
Recently, prices have stabilized, bringing the 100-hour moving average closer to the current price. This average is now at $64.49 and is trending downwards. If prices rise above this average, it could signal a positive short-term change, marking the first break above it since August 1.
Crude Oil Price Consolidation
Crude oil prices are currently stabilizing, sitting just below $64 a barrel. A key focus is the 100-hour moving average at $64.49. If prices move above this, it would mark the first break since early August and could indicate a short-term price increase. This price movement coincides with new data from the Energy Information Administration, which showed another increase in U.S. crude inventories. With domestic production remaining close to record levels set in late 2024, supply pressure is high. This means prices may only rise if demand improves. On the demand side, we see signs of slowdown in important markets. Manufacturing data from China has been weak for two months, and Europe’s economic growth is sluggish. Low demand during this summer driving season has also kept prices in check. For traders, this creates an interesting situation for the coming weeks. While the fundamentals look weak, rumors about possible OPEC+ production cuts in September could spark a rally if prices break the $64.49 level. Buying call options with short expirations might be a way to manage risk while betting on a potential price rise.Trading Strategies in Current Market
On the other hand, if prices do not break above the moving average, it could confirm a downward trend. Given the high inventories and weak demand outlook, failing this level might be a signal to buy put options. This could safeguard against a drop back to lower summer prices from 2025. We should consider the price volatility seen in past years, like the spikes after geopolitical events in 2022. Today’s market is different, driven more by economic trends than by supply shocks. This stable environment may favor strategies that benefit from price consolidation if this behavior continues. Create your live VT Markets account and start trading now.Trump postpones China’s tariff deadlines by 90 days, sidestepping immediate expiration and controversy
Trump has signed an executive order that extends the deadline for China tariffs by 90 days, now set to expire on November 9. The original deadline was due tomorrow, but this extension changes the timeline.
This 90-day extension lowers an important market risk. Investors’ immediate fears are easing, which should lead to a significant decrease in implied volatility.
