The Bank of England (BoE) is set to announce its policy decision, likely keeping the bank rate at 4.00%. The voting is expected to split 7-2, with a reduction in quantitative tightening from £100.0 billion to £67.5 billion. Markets predict a reduction of 10 basis points by the end of this year and 42 basis points by the end of 2026. The BoE is likely to stick with its previous guidance, focusing on inflation.

US Session Focus

In the US session, attention will be on the Jobless Claims report. Initial Claims are forecasted to drop to 240,000 from 263,000. Continuing Claims are expected to rise slightly to 1,950,000 from 1,939,000. Last week’s spike in Initial Claims was caused by fraud in Texas, which distorted the data. These figures are likely to be adjusted, staying within a four-year range, with 260,000 as the peak. This report comes after the recent Federal Reserve decision and could impact market trends, especially if the figures differ from expectations. The Fed has taken a more cautious approach, and economic data in the months to come may adjust their future predictions. With the Bank of England expected to hold the rate at 4.00% today, derivative markets are indicating a “higher for longer” perspective. Given that UK inflation is stubborn, recently at 3.1% in August 2025, market predictions of only a 10 basis point rate cut this year seem reasonable. Traders might want to consider strategies that benefit from minimal declines in UK rates, such as selling out-of-the-money call options on Gilt futures.

Market Implications

Attention shifts to US Jobless Claims, especially after last week’s fraudulent data boost. A number lower than the expected 240,000 would suggest a strong labor market, similar to the tight conditions seen in much of 2024 when claims often stayed below 220,000. A solid report would support the Fed’s hawkish tone from yesterday, likely increasing US dollar volatility and putting pressure on Treasury futures. This focus on data makes it likely that implied volatility on short-term options will stay high. Given the Fed’s approach, any changes in upcoming labor or inflation data could lead to significant market movements. We anticipate traders will use options straddles on major currency pairs like EUR/USD around important data releases to take advantage of expected price fluctuations, whatever the direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

European markets are trending positively in early trading. Eurostoxx futures are up 0.3%. German DAX futures have also increased by 0.3%, while French CAC 40 futures rose by 0.2%. UK FTSE futures are up by 0.1%. In the US, futures are also rising. S&P 500 futures increased by 0.4%, Nasdaq futures went up by 0.5%, and Dow futures climbed by 0.3%. Overall, the sentiment is optimistic, even as the dollar remains stable at the start of the European trading day.

Market Analysis

The markets are showing a slight risk-on mood, but the strong dollar suggests this rally may not be straightforward. The recent rise in futures follows the Federal Reserve’s decision to maintain steady rates. However, their comments hinted that rates might stay high longer than expected. Traders should approach this equity strength with caution, as the currency market indicates a flight to quality. The market is reacting to the Fed’s indication that rates will likely remain high until early 2026, influenced by the persistent August 2025 CPI data at 3.4%. This clarity from the Fed has reduced immediate uncertainty, leading to less volatility. The VIX index has fallen to around 18 from pre-meeting highs of 22, presenting potential opportunities to sell premium on short-term options outside the expected trading range. This situation suggests a covered call strategy on major indices like the S&P 500 could work well in the coming weeks. With implied volatility decreasing but still present, selling out-of-the-money call options can generate income and provide some protection if the market’s rally stalls. We observed a similar trend after the Fed’s hawkish pause in late 2023, where initial relief rallies were quickly limited.

Strategies and Considerations

The strong performance of tech futures compared to the overall market indicates a defensive growth trade. Traders might look into buying call option spreads on the Nasdaq 100 to gain exposure to this leadership while managing their risk. In Europe, modest gains reflect a more cautious view, particularly after the latest German IFO Business Climate index showed only a small rebound to 90.5. Given the strength of the US dollar, it would be wise to hedge long equity positions with currency derivatives. The dollar index (DXY) continues to test its summer highs, which generally poses challenges for the earnings of US multinational corporations. Buying puts on the EUR/USD or going long DXY futures could safeguard portfolios in case equities lose momentum while the dollar rises further. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Switzerland’s trade surplus fell to CHF 4.01 billion in August, down from a revised CHF 4.62 billion in July. This change indicates a smaller trade balance for the country. Exports and imports impacted this figure, as the trade surplus was adjusted from CHF 4.59 billion to CHF 4.62 billion before August. These adjustments highlight fluctuations in trade during this time.

Trade Surplus Decline

The August trade surplus of CHF 4.01 billion is significantly lower than the revised CHF 4.62 billion from July. This reduction may signal challenges for the Swiss franc, leading to a need to reconsider bullish positions on it. This data also provides the Swiss National Bank (SNB) more room to adopt a cautious approach in its upcoming policy meeting. A decline in export trends eases the pressure on the SNB to keep interest rates high in order to curb a strong currency. The market is now anticipating a greater chance of a rate cut before the end of the year, a shift from the sentiment just a quarter ago. In the coming weeks, there may be opportunities to position for a rising EUR/CHF exchange rate. Buying call options on EUR/CHF with a strike price around 0.9900 could effectively leverage potential weakness in the franc, allowing for gains while clearly defining the maximum risk.

Global Manufacturing Data Impact

This trade strategy is backed by recent global manufacturing data. The PMIs for August 2025 show ongoing slowdowns in key Swiss export markets, especially in the Eurozone, which is having trouble bouncing back. Demand for Swiss goods is weakening internationally, reflecting the lower trade balance. Historically, a similar pattern occurred in 2023-2024 when weak trade figures preceded a more lenient approach from the SNB. This history indicates that the central bank pays close attention to the health of its export sector. Consequently, the latest data will likely significantly influence their policy discussions. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Federal Reserve has cut interest rates by 25 basis points after its recent meeting. One member, Miran, disagreed and wanted a larger cut of 50 basis points. Fed Chair Powell noted that there wasn’t a strong push for a bigger reduction. The latest projections show that ten members expect at least two more 25 basis point cuts this year, while nine believe there will only be one more. Miran prefers a 50 basis point cut at every meeting. He predicts rates will be at 2.875% by 2025. The median projections for 2026 and 2027 are 3.4% and 3.1%, respectively. Powell described the rate cut as a “risk management” step, as concerns about the labor market increase while inflation worries ease. He emphasized the Fed’s focus on data for future decisions.

Potential Rate Reductions

The Fed might lower rates again in October and December. Powell mentioned that current market expectations may not be fully realized, but they are still being considered. Markets are paying close attention to improvements in the labor market, especially with the upcoming non-farm payrolls report. If labor data remains weak, it could lead to more cuts, but improvements might change the outlook. Markets expect an additional cut of 44 basis points by the end of the year, leaning towards two cuts of 25 basis points each. The current dot plots do not show strong support for a more aggressive reduction plan. The next Federal Reserve meeting is on October 29, which will allow them to review new U.S. economic data. Market conditions appear stable, with no significant change in sentiment. With yesterday’s rate cut, it seems the Federal Reserve is starting a cautious easing cycle. While the 25 basis point cut was expected, the divided opinions in the dot plot indicate uncertainty about the pace of future cuts. This division suggests that upcoming economic data will heavily influence decisions. Attention is now primarily focused on the labor market, which Powell identified as a major risk. Concerns grew after the August 2025 Non-Farm Payrolls report showed a disappointing 155,000 new jobs, and recent JOLTS data revealed job openings dropped below 8.4 million for the first time since early 2021. The upcoming jobs report on October 3 will be crucial for setting expectations for the October meeting.

Market Reactions and Strategies

The shift towards labor risks is possible because inflation has remained stable, with the latest Core PCE inflation for July 2025 at 2.7%. This stability gives the Fed room to respond to a slowing economy without reigniting inflation. We believe this situation supports the proactive “risk management” strategy for rate cuts. For derivative traders, this data-driven environment is likely to increase volatility around important economic releases. Options strategies like straddles or strangles on short-term interest rate futures (SOFR) may work well for capitalizing on potential price movements after the October 3 payroll report. Implied volatility is expected to rise as the report date approaches. Currently, the market is pricing in about 44 basis points of further cuts by the end of the year, which aligns with the expectation of two additional 25 basis point reductions. Traders can express this view using December SOFR futures contracts. A weak jobs report would confirm this pricing, while a surprisingly strong report over 200,000 jobs could lead to quick adjustments and a shift in these dovish expectations. We have seen similar situations in the past, such as during the “mid-cycle adjustment” of 2019 when the Fed implemented a series of careful rate cuts. In that time, the market reacted to every economic data point, creating short-term trading opportunities. This historical pattern suggests that we shouldn’t expect a steady decrease in rates but rather a fluctuating, data-driven approach. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

On September 18, a significant forex option expiry at the 1.1800 level for EUR/USD could affect market movements by drawing prices toward it. As traders react to recent actions from the Federal Reserve, the dollar has gained strength while stock markets are recovering. The Fed’s decision presents a mix of optimism and caution, making it hard to predict market direction. Analysts struggle to find a clear trend, whether leaning towards a stronger or weaker dollar.

Mixed Reactions Following The Fed

The market is reacting in varied ways as it processes the Fed’s decision to keep interest rates steady. The dollar is slightly up, but the Fed’s unclear stance on future policy has left both hawks and doves debating. This uncertainty makes sense since core CPI remains stubborn at 2.8%, even as the labor market shows signs of cooling. Amid this unpredictability, a large options expiry for EUR/USD is set for today at 10 AM New York time. The significant interest at the 1.0800 strike price could act like a magnet, potentially limiting big price changes in the short term. Traders often hedge their positions around these key levels, which keeps movements contained. For derivative traders, this situation might suggest that selling short-term volatility could be a good strategy, especially with the 1.0800 level holding the market steady. Looking back at the sharp price moves of 2023 and 2024, the current market is more focused on range trading. We should remain cautious, as lower volatility might lead to complacency before a breakout happens.

Impact Of Transatlantic Policy Divergence

This situation isn’t only about the Fed; the European Central Bank’s dovish stance is preventing any real gains for the euro. Recent Eurozone PMI figures have stayed just below the 50-point mark, indicating ongoing economic weakness. This difference in policies suggests that any drop in the dollar may be temporary, favoring strategies that do not expect a strong recovery for the euro. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

US futures are showing signs of recovery as traders assess the recent decisions made by the Federal Reserve. S&P 500 futures are up 0.5%, and Nasdaq futures have increased by 0.7%. Yesterday, Wall Street had mixed results; tech stocks fell, while the Dow climbed by 0.6%. Despite a wave of selling after Fed Chair Powell’s less reassuring comments, buyers remained hopeful for rate cuts in October and December.

Fed’s Internal Disagreement

The Fed’s dot plot reveals differing opinions: 10 policymakers expect two or more rate cuts, while 9 anticipate just one. This division makes it tough to predict the Fed’s next steps. Powell has pointed to a focus on risk management and data-driven decisions. Traders seem to have adopted a “buy first, worry later” mindset. They expect upcoming US economic data to challenge market assumptions, rather than responding to rising inflation and a strong job market. Stocks are skillfully interpreting narratives to fit their outlook. Market reactions suggest that traders are eager to overlook cautious comments from the Federal Reserve. The strong buying during yesterday’s dip signals confidence that rate cuts in October and December remain plausible, making it risky to short the market since the overall sentiment is still bullish. Given the Fed’s clear divisions on its future direction, we can expect sharp movements around upcoming economic data releases. Reflecting on August’s jobs report, which showed 175,000 new jobs, any signs of renewed strength in September could trigger market panic. On the other hand, a disappointing report would support the call for more rate cuts.

Opportunities Amid Volatility

This market is favorable for traders using options to bet on volatility. The Volatility Index, or VIX, is currently around 14. This level suggests market calmness, leading to lower option prices. We plan to buy straddles before the next inflation report to take advantage of the price swings expected after its release. The strong performance of technology stocks, with Nasdaq futures leading the S&P 500, aligns with the market’s strategy. This pattern recalls the rallies in 2023, where expectations of lower interest rates particularly favored growth-oriented tech firms. For now, buying call options on tech-heavy indexes during market dips is the preferred move. However, we should also consider the risk that the “buy first, worry later” approach may be misguided, especially since last week’s August CPI data indicated inflation at 3.1%, well above the Fed’s target. Thus, buying low-cost, out-of-the-money put options may be a wise hedge, protecting against a situation where strong economic data forces the market to rethink its optimistic views. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Nomura has changed its forecast for US Federal Reserve interest rate cuts, now expecting reductions in both October and December this year. Originally, they only expected one cut in December. This change matches what many in the market believe. For next year, Nomura also predicts further cuts of 25 basis points in March, June, and September.

Risk Management and Labor Market Impact

Federal Reserve Chair Powell explained that a recent rate decision was made to manage risks. He said this choice was mainly due to concerns in the labor market. While inflation risks have lessened, they haven’t been completely resolved. Currently, the market anticipates about 44 basis points in rate cuts by the year’s end. With the Federal Reserve likely to cut rates in both October and December, we can see a clearer direction for monetary policy for the rest of the year. This shift follows yesterday’s “risk management” decision and matches market expectations, which point to a strong chance of another cut next month. The CME FedWatch Tool now shows over an 85% likelihood of a 25-basis-point cut during the October meeting. This cautious approach is a direct result of rising concerns in the labor market. The latest jobs report for August 2025 showed only 110,000 new jobs and an unemployment rate that rose to 4.2%. These figures support the Fed’s worries and indicate that planning for lower rates is the primary focus.

Inflation Worries and Derivatives Strategy

However, the Fed remains careful because inflation is still an issue. The most recent Consumer Price Index for August 2025 was at 2.8%, which is an improvement but still above the 2% target. This suggests that while we can expect rate cuts, any unexpected inflation data might shift the Fed’s strategy and cause market fluctuations. For derivatives traders, this situation is favorable for positioning around falling short-term interest rates. We should look at purchasing December 2025 and March 2026 SOFR futures contracts to benefit from anticipated policy easing. Options strategies, like buying call spreads on these futures, could also be a low-risk way to profit from the expected cuts. This policy outlook also benefits the stock market, which often performs well when borrowing costs drop. Increased interest in call options on major indices like the S&P 500 is expected as traders anticipate a continued rally through the year-end. This situation recalls the “mid-cycle adjustment” seen in 2019, which extended the bull market. A weaker dollar is another likely result of ongoing Fed rate cuts. Derivative traders may build positions betting against the US dollar, especially compared to currencies where central banks are more hawkish. We might see this reflected in the options markets with a rise in demand for euro and yen calls against the dollar. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

**New Zealand Economic Challenges** New Zealand’s economy shrank by 0.9% in the second quarter, which the Reserve Bank of New Zealand considers weak. Governor Hawkesby mentioned that rate cuts could happen sooner if needed, with recent GDP data suggesting a possible 50 basis point reduction in August. Markets expect a rate decrease to 2.5% in October and another to 2.25% in November. As a result, the NZD/USD fell. Meanwhile, Hong Kong’s Monetary Authority lowered its base rate by 25 basis points, following the US Federal Reserve’s lead. In contrast, the People’s Bank of China kept its seven-day reverse repo rate at 1.4%, showing no immediate need for further easing. In Australia, August’s job data revealed a net loss in jobs, particularly full-time positions. The unemployment rate remained unchanged at 4.2%, with a lower participation rate. While this weak data could lead to an earlier RBA rate cut, it isn’t expected to prompt action at the upcoming September meeting. The AUD/USD dropped but later regained most of its losses. In other news, the US SEC approved new listing standards for spot crypto ETFs, which could cut approval time to about 75 days. This change might allow for launches in October, including tokens like Solana, XRP, and Dogecoin. In the Asia-Pacific region, stock performances varied: Japan’s Nikkei 225 rose by 1.27%, Hong Kong’s Hang Seng dropped by 0.1%, the Shanghai Composite gained 0.45%, and Australia’s S&P/ASX 200 fell by 0.5%. **Opportunities in Currency and Crypto Markets** Given New Zealand’s significant 0.9% economic contraction, we see a clear chance to short the Kiwi dollar. We are considering buying NZD/USD put options to take advantage of the Reserve Bank of New Zealand’s expected rate cuts in October and November. In the past, the RBNZ quickly implemented significant cuts when facing similar GDP weakness after 2020. Although Australia’s job market is also weak, it’s not as bad as New Zealand’s situation. This reinforces our strategy to trade the long AUD/NZD pair. We’re examining AUD/NZD futures as the cross rate tests support levels we haven’t seen since the first quarter of 2025. This trade is based on the idea that the Reserve Bank of Australia will be slower to cut rates than New Zealand’s bank. The People’s Bank of China’s decision to maintain its rate at 1.4% stands out. This decision contrasts with easing trends elsewhere and is backed by recent industrial output figures, which remain above 5% year-over-year, indicating some resilience. This stability may support long positions on Chinese equity index futures, like the FTSE A50, compared to other regional indices. The SEC’s quick approval of new spot crypto ETFs sends a positive signal for tokens like Solana and XRP. We are purchasing November call options on these assets in anticipation of a price increase ahead of the first fund launches in October. This strategy reflects successful trades we experienced in late 2023 when the excitement around spot Bitcoin ETFs drove the market up by over 50% in the following quarter. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The People’s Bank of China (PBOC) kept its main policy rate steady at 1.40%, even as the Federal Reserve lowered its rates. Strong exports and a stock market that is close to a ten-year high allowed Beijing to avoid changing rates, despite signs of a slowing economy. August’s data showed the economic downturn isn’t as bad as predicted, which may give officials room to delay some stimulus until next year. They might consider a small rate cut of 10 basis points if the markets drop, but there are worries that larger cuts could create a stock bubble.

Predictions for Policy Support

Analysts believe that policy support could arrive later this year to help China reach its growth goal of about 5%. More actions are expected in the fourth quarter, but discussions on structural reforms will take place during the October plenum. With the PBOC keeping its rate at 1.40% while the US Federal Reserve has made cuts, a clear gap in policy has formed. This situation is keeping the offshore yuan (CNH) strong, with the USD/CNH exchange rate recently near a yearly low of 7.15. For now, we see this stability as a chance to sell short-dated call options on USD/CNH, allowing us to earn premiums while the interest rate difference favors the yuan. The current calm in Chinese stocks, with the CSI 300 index slightly down from its recent ten-year high of 5,900, seems temporary. Implied volatility on A-share index options has dropped to low levels, making protective puts more affordable. We believe buying out-of-the-money puts on major indices is a smart way to guard against a potential market dip, especially if any weakness appears before reaching the growth target.

Upcoming October Plenum

The October plenum is a significant market event that the market may not be fully accounting for. Although officials are hesitant to introduce stimulus now due to a better-than-expected industrial production rate of 4.1% in August, the low retail sales growth of only 2.8% is concerning. To prepare for increased volatility, we are buying straddles on the Hang Seng Tech Index because announcements from the plenum could lead to significant market moves. Looking back, we remember a similar scenario in late 2021 when uncertainty about policy caused sharp market shifts before the year ended. Given that Beijing still needs to achieve a GDP growth target of “around 5%” by 2025, some form of stimulus in the fourth quarter seems likely. This calm period is therefore a key time to build positions that will benefit from the necessary policy actions to come. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Australian dollar slipped on Thursday, trading just under 0.665 after a softer-than-expected employment report raised doubts about the labour market’s durability.

Australian unemployment held steady last month even as the economy shed jobs with fewer people looking for work, signaling the labor market remains tight and reinforcing the Reserve Bank’s cautious approach to policy easing https://t.co/loOarA9LvY

— Bloomberg (@business) September 18, 2025

Total employment contracted by 5,400 in August, a stark miss compared with forecasts for a 21,500 increase. The decline came almost entirely from full-time jobs, which dropped by 40,900, a troubling sign that underlying momentum may be fading.

Although the jobless rate held steady at 4.2%, the participation rate edged down to 66.8%, hinting at a small retreat in the number of people actively seeking work.

Taken together, the figures suggest the labour market is gradually losing momentum.

Despite the weaker print, markets still expect the Reserve Bank of Australia (RBA) to hold steady in September, with only a 20% probability of a rate cut factored in. That likelihood, however, jumps to 70% for November, as inflation remains above target and policymakers continue to strike a guardedly hawkish tone.

Fed’s Measured Approach Adds To Global Pressures

Across the Pacific, the Federal Reserve delivered the widely anticipated 25-basis-point cut but flagged only two further reductions this year and a single move in 2026.

Chair Jerome Powell underscored a ‘risk management’ stance, choosing not to rush into deeper easing.

For the Australian dollar, the Fed’s cautious approach implies global yield spreads may narrow more slowly than markets had projected. That diminishes one potential source of support for the Aussie, particularly if the RBA cuts rates before the Fed acts again.

Technical Overview

The Australian dollar (AUD/USD) is trading at 0.66498, showing a minor dip of 0.03%, but overall momentum remains bullish. Since rebounding from the April low of 0.59214, the pair has been in a steady uptrend, supported by higher lows and consistent buying pressure.

The recent breakout above the 0.6600 handle has pushed the currency towards its next resistance near 0.6650–0.6700.

From a technical standpoint, price action is well-supported by the moving averages, which continue to slope upward. The MACD remains in bullish territory, with the histogram showing rising momentum, suggesting buyers are still in control despite today’s slight pullback.

Looking ahead, immediate resistance is seen at 0.6700, and a decisive break above this level could extend gains towards 0.6800.

On the downside, initial support lies at 0.6500, with stronger protection around 0.6400. Unless the pair falls back below these zones, the broader outlook remains constructive for further upside.

Outlook: Cautious But Constructive

In the near term, AUD/USD is likely to consolidate between 0.6600 and 0.6660 while traders weigh the policy outlook for both the RBA and the Fed.

A sustained push through 0.6655 could pave the way towards 0.6700, though this may require either softer US economic data or a more dovish tilt from Australian policymakers.

Looking further out, prospects lean towards modest upside, particularly if the RBA delays easing and global risk sentiment remains steady.

However, any renewed weakness in labour market data or a slump in commodity prices could quickly change the picture, dragging the Aussie back below 0.6550.

Create your live VT Markets account and start trading now.