Inventory Levels and Supply Issues

The inventories-to-sales ratio dropped to 1.30 from 1.35 last year. This means there is less inventory compared to sales. It’s the lowest this ratio has been since 2022. If it keeps falling, we might face supply issues like we did after COVID when it hit 1.20, which led to higher prices. Tariffs could worsen supply problems and affect future prices. In June 2025, we saw that sales are increasing faster than inventory. This change caused the inventory-to-sales ratio to decline to 1.30, a level we haven’t seen since 2022’s recovery phase. This suggests businesses are running on thin supplies, making them vulnerable to supply disruptions. This tightening of inventory raises inflation concerns, supported by the July 2025 CPI report, which unexpectedly increased to 3.8%. We are closely monitoring whether the steady decrease in inflation we saw in early 2025 is starting to reverse. Upcoming inflation data will be crucial for market trends. The potential threat of tariffs is becoming a reality, adding to supply worries. Reports from late July confirmed that new tariffs on important imports, like auto parts, will start on October 1st. This could push the inventory-to-sales ratio down to around 1.20, a level that previously led to a sharp price rise after COVID.

Market Implications and Trade Strategies

As a result, the Federal Reserve is sounding more cautious and lowering expectations for interest rate cuts this year. The market’s anxiety is evident in the VIX, which has risen from its summer lows, indicating that traders are preparing for more volatility. We expect this uncertainty to increase as the market reassesses future Fed policies. For traders in derivatives, this is a good time to consider strategies that protect against rising inflation and interest rate risks. This might involve buying put options on major stock indices to guard against a possible economic slow down caused by higher rates. At the same time, call options on SOFR futures, which gain value when interest rates rise, are becoming a more sensible choice. We are also focusing on commodity derivatives, since supply-driven inflation usually raises raw material prices. The ‘prices paid’ index in the latest ISM manufacturing survey for July reached a one-year high, indicating that companies are already facing higher input costs. This suggests that call options on industrial metals or energy might perform well in the coming weeks. Create your live VT Markets account and start trading now.

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The Japanese Yen has fallen in value after the government updated its economic growth forecasts for 2025. The USD/JPY continues to fluctuate, mostly trading between 146.60 and 148.00. This volatility reflects the market’s reaction to the latest economic report and concerns about interest rates. The Japanese Cabinet Office has lowered its GDP growth expectation for 2025 to 0.7%. This change is linked to tariffs that could harm exports to the US. Additionally, there are warnings that the Bank of Japan may postpone necessary interest rate hikes, even though inflation is exceeding the 2% target.

Stabilizing Inflation

Recent comments from an economic council suggested a focus on stabilizing inflation at 2% instead of pushing for higher rates. This news had a limited positive effect on the Yen, while the US Dollar slightly rebounded, staying under 148.00. The Bank of Japan has a monetary policy targeting 2% inflation and started implementing very loose measures in 2013. They bought assets and set negative interest rates. However, in 2024, the BoJ began to shift its policies, which helped the Yen strengthen. Despite these changes, a weaker Yen has led to rising inflation in Japan, driven by higher global energy prices and increasing local wages. This inflation is above the BoJ’s target, creating challenges for its policy direction. The Japanese government’s downgrade in its growth forecast for 2025 indicates a challenging economic outlook. The Bank of Japan is likely to delay interest rate increases to avoid worsening the situation, even with ongoing inflation. This means the Yen may continue to face pressure in the coming weeks.

Market Outlook

Recent data shows Japan’s nationwide core inflation was at 2.8% in July 2025, significantly above the central bank’s target. In contrast, the US economy remains strong, with last week’s jobs report revealing that 250,000 jobs were added. The difference between the hesitant Japanese economy and the strong US economy supports a higher USD/JPY exchange rate. For derivative traders, this highlights an opportunity for the Yen to weaken further against the Dollar. We recommend buying call options on USD/JPY with strike prices above the 148.00 resistance level. This strategy allows for profits if the exchange rate breaks out of its current range while minimizing initial risk. This situation is reminiscent of late 2022, before major policy changes in 2024. At that time, the exchange rate exceeded 150 due to a significant interest rate gap between the US and Japan. If the Bank of Japan remains inactive, as expected, the market may test those historic highs again. We must stay alert, as volatility is high and market sentiment can change rapidly. Unexpected comments from Bank of Japan officials before their next policy meeting in September could lead to sharp movements. Thus, structuring trades with clear risk limits is crucial in this environment. Create your live VT Markets account and start trading now.

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The USD seems to be in a consolidation phase, likely staying between 146.90 and 148.00. Analysts think that although the USD might drop sharply, it probably won’t go lower than 145.80. Recently, the USD traded in a tighter range than expected, moving between 146.95 and 147.88, and it closed slightly lower by 0.17% at 147.35. Unless it breaks above 148.60, any further decline is likely to stay above 145.80.

Market Risks and Uncertainties

It’s crucial to understand that there are risks and uncertainties in market movements and instruments. Doing thorough research is essential before making any financial decisions, as market risks can lead to significant losses and emotional stress. No personal recommendations are made here, and there are no guarantees regarding the accuracy or completeness of the information given. Neither the author nor the publication is responsible for any inaccuracies, mistakes, or financial losses resulting from the information provided. We expect the USD to stay within the 146.90 to 148.00 range. This sideways movement is backed by recent economic data, with July’s Non-Farm Payrolls showing only 195,000 jobs added, which is slightly below expectations. This indicates a cooling but not collapsing job market, leading to little chance of a price breakout. The Federal Reserve’s last statement in late July 2025 stressed that they are data-dependent, keeping the market uncertain. We think this uncertainty will keep volatility low in the short term, keeping the currency within its range. This situation reminds us of the tight trading we saw in late 2023 before the Fed indicated a change in policy.

Trading Strategies for a Range-Bound Market

For derivatives traders, this environment favors strategies that benefit from low volatility and time decay. Selling options, like using an iron condor strategy with strike prices outside 145.80 and 148.60, could be a good choice. This strategy aims to earn premiums while the USD remains range-bound over the next few weeks. However, we should be ready for a possible breakout, especially with the upcoming August inflation report. A move above 148.60 could lead to a sharp rise. Traders might think about buying inexpensive, out-of-the-money call options as a hedge or for speculative purposes on rising volatility. The support at 145.80 seems strong for now, especially since recent core CPI data for July showed inflation holding at 3.1%, which makes aggressive bets on rate cuts unlikely. A drop below this level would probably require a significant economic shock or a much clearer dovish signal from the Fed. Thus, selling put options with a strike price below 145.80 could also be an opportunity. Remember, risks are part of any market instrument. It’s essential to conduct thorough research before committing to any positions. Market movements can be unpredictable, and losses are always a possibility. Create your live VT Markets account and start trading now.

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Eli Lilly Share Performance

The NASDAQ is hitting record highs, leading to a sense of calm in the market. The CBOE Volatility Index (VIX) is around 13, a low number that history shows can signal sudden market drops. This might be a good time to buy protective puts on the QQQ or SPY as a cheap way to guard against unexpected tariff news in the upcoming weeks. Many believe that chipmakers like Nvidia and AMD will be safe from tariffs, which is boosting their recovery. We should recall the volatility spikes in 2018 and 2019, when sudden tariff announcements caused the S&P 500 to drop more than 5% in just one week. Recent data from the Semiconductor Industry Association reveals a 15% rise in capital spending for U.S. fabrication plants, further supporting the idea that companies are bringing operations back to the U.S.

Apple and Intel Market Dynamics

Apple is showing strong performance, particularly as its domestic smartphone market share recently reached 65%. This positions Apple well against foreign competitors. Meanwhile, Intel is facing political challenges, making it a candidate for bearish put strategies or bear call spreads. This highlights the importance of looking at specific company risks rather than only the overall market. Create your live VT Markets account and start trading now.

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The Swiss government is set to continue talks with the United States after a recent meeting did not go as planned. The focus will be on finding ways to help Swiss businesses suffering from US tariffs. Currently, 60% of Swiss exports to the US are facing extra tariffs, but Switzerland is not looking to impose retaliatory tariffs. Swiss President Keller-Suter pointed out that introducing tariffs is a tough challenge. The purpose of the visit to Washington was to present a new proposal, which was achieved even though the US will keep tariffs for now. The resilience of Swiss industry is highlighted, withstanding previous challenges such as the pandemic.

Currency Markets Analysis

In the currency markets, the USD/CHF pair has risen above its 100-hour and 200-hour moving averages. This is a positive sign for short-term buyers, but as momentum wanes, the exchange rate is testing these averages again. If it stays above these moving averages, buyer control may continue; if not, selling pressure could increase. The pair’s support level is just above the 50% retracement from the July to August rally at 0.80405. If it falls below the moving averages, traders may aim for this support level. The unsuccessful trade meeting has created uncertainty for Swiss assets, but the Federal Council has confirmed that discussions with the US will carry on. The main point is that Switzerland is not planning retaliatory tariffs right now. This strategy avoids escalating tensions but still leaves Swiss exporters vulnerable to ongoing economic challenges. With nearly 60% of Swiss exports to the US now facing additional tariffs, there is growing downward pressure on the Swiss Franc. The government’s choice to discuss “relief measures” instead of counteractions shows an understanding of immediate economic difficulties. This supports a weaker outlook for the CHF against the dollar in the coming weeks. Recent data backs this view. The Swiss Economic Institute (KOF) survey from late July 2025 shows a sharp drop in business confidence. Additionally, early export data for July showed a 4.2% month-over-month decrease in shipments to the US, particularly affecting the machinery and watchmaking sectors. This evidence indicates a real economic impact is taking shape.

Swiss Industry Resilience

Swiss industry has faced challenges before, such as the COVID-19 pandemic and the 2015 removal of the minimum exchange rate against the Euro. That incident caused significant volatility and highlighted how sensitive the Franc can be to major policy changes. While today’s situation is different, that history suggests traders should prepare for potential sharp currency movements. In the upcoming weeks, traders dealing in derivatives should consider strategies that benefit from a falling Swiss Franc. Buying call options on USD/CHF can provide upside exposure with clearly defined risks. This approach seems favorable given the recent technical breakout above key moving averages, indicating potential for further gains. The ongoing diplomatic uncertainty means volatility is a factor to trade on. Implied volatility on USD/CHF options has risen by 7% since yesterday’s unsuccessful meeting. Traders who expect a significant price swing but aren’t sure which direction to take might consider buying straddles to profit from a large move either way. Technically, the market is in a critical position as USD/CHF tests the 100 and 200-hour moving averages again. Successfully holding above this range would support bullish positions and likely encourage additional buying. Conversely, failing to hold would shift attention to the next major support level near 0.80405. If the pair falls below these moving averages, it would signal a failed breakout and could lead to renewed selling. Traders with bullish derivatives should have risk management strategies, such as protective puts or stop-loss orders below this technical area. The market’s reaction at these moving averages in the next couple of days will be crucial. Create your live VT Markets account and start trading now.

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The USD/CNH remains steady below the important resistance level of 7.2000. In July, China’s exports grew by 7.2% compared to last year, surpassing expectations. Shipments to the ASEAN region increased by 13.5%, and exports to the European Union rose by 7%. However, exports to the US fell by 12.6% year-to-date compared to the previous year. Imports into China unexpectedly grew by 4.1%, suggesting a fragile recovery in local demand. China faces three main challenges that hinder consumption growth: low household income, high savings for emergencies, and significant household debt. As a result, the country is still relying on infrastructure spending to meet its growth goals. While this boosts commodity prices, it could harm long-term economic health. Today’s date is 2025-08-07. The stability of USD/CNH below the key level of 7.2000 provides a strategic opportunity for us. Recent statements from the US Federal Reserve suggest they will pause interest rate hikes, while the People’s Bank of China continues with supportive policies. This makes a sudden breakout seem unlikely. We see value in selling out-of-the-money call options with strike prices above 7.2000, believing that the yuan won’t weaken significantly in the near future. China’s focus on infrastructure spending indicates strong demand in commodity markets. This is already shown by Dalian iron ore futures, which rose above $120 per tonne in late July 2025. We think buying call options on copper and other base metal ETFs is a good way to profit from this government-driven demand. The difference in trade data—strong exports to ASEAN and the EU but declining shipments to the US—suggests we should target specific investments. We should look for opportunities in Chinese companies heavily involved with Southeast Asia while being cautious about the overall market. Ongoing weak domestic consumption and tensions with the US make buying put options on a major index like the Hang Seng a sensible hedge. Reflecting on the past, we see similarities with events following the 2008 and 2015 economic slowdowns. Those periods also saw large commodity rallies due to infrastructure spending, which later contributed to the debt issues China now faces. This historical perspective supports our positive short-term outlook on commodities, while reminding us that this growth strategy isn’t sustainable.

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The New Zealand Dollar (NZD) is expected to rise, but it probably won’t reach 0.5960. In the next few weeks, it should trade between 0.5860 and 0.5960. Recently, the NZD rose unexpectedly, breaking through 0.5930 and peaking at 0.5942. While it might gain further, hitting 0.5960 today is unlikely. The downward trend for the NZD seems to be slowing down. Thus, it’s predicted to stay between 0.5860 and 0.5960 over the next one to three weeks. Trading in open markets involves risks, including the possibility of losing your entire investment. It is wise to do thorough research before making investment choices. Trading foreign exchange is particularly challenging, so investors should understand the risks and consider consulting a financial advisor. As of August 7, 2025, the New Zealand Dollar appears to be in a consolidation phase. It is expected to remain in the range of 0.5860 to 0.5960. The recent rise above 0.5930 has lost momentum, indicating that the resistance at 0.5960 is likely to hold. This expectation is backed by a slowdown in New Zealand’s inflation. Recent statistics from Stats NZ showed that inflation dropped to 3.2% for the year ending July 2025. With this drop, the Reserve Bank of New Zealand kept its cash rate at 5.5% last month, making a surprise rate increase less likely. This suggests we may experience stability rather than a major surge. For those trading derivatives, this situation favors strategies that benefit from low volatility and a fixed range. Consider selling call options with a strike price at or above the 0.5960 resistance, and selling put options at or below the 0.5860 support. This approach allows for collecting premiums as long as the NZD/USD stays within this channel over the next few weeks. The market is also supported by steady employment figures from Q2 2025, which stood at 4.1%. This solid background reinforces our belief that a significant move outside the current range is unlikely. Looking back at the 2023-2024 period, we note that when central banks paused their interest rate hikes, the Kiwi frequently entered sideways trading phases for weeks. This history suggests that the current environment is better suited for range-trading strategies rather than directional moves. Consequently, implied volatility for NZD options has been decreasing, making the premiums from selling them more appealing. The main risk comes from unexpected economic data or shifts in global sentiment that could push the currency out of its established range. We’ll need to watch for new data from both New Zealand and the United States closely.

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The GBP/USD exchange rate went up after the Bank of England cut rates by 25 basis points. This decision revealed a split committee, with a close vote of 5-4, instead of the expected 7-2. The committee had to vote twice because opinions were very different in the beginning. Governor Andrew Bailey mentioned that there are still risks related to inflation and growth, but he is unsure about the future of interest rates.

Economic Factors Influencing The Market

Bailey highlighted slow wage growth and postponed business investments. Deputy Governor Ramsden pointed out unexpected UK inflation, which he linked to supply issues. Fears of a recession were minimized, with Bailey saying that updated GDP forecasts were based on new data rather than a change in how the economy is viewed. In trading terms, GBP/USD moved above the 38.2% retracement level from July to August and crossed its 100-day moving average. The previous resistance levels between 1.33607 and 1.3378 became support, showing a bullish trend. With this positive momentum, the target is now set at the July-August 50% midpoint of 1.3463. Even though there were declines below June’s 100-day average, the overall trend has been upward since January. Recent price movements have strengthened the buyers’ position in the market. The unexpected 5-4 vote on the rate cut indicates the Bank of England may not want to ease policies further. This change in perspective makes bullish strategies on GBP/USD more appealing. The prior resistance around 1.3378 has now formed a solid support base for any pullbacks.

Trading Strategies And Market Outlook

This outlook is supported by the latest UK inflation data from July 2025, which showed a stubborn 3.1%, backing the MPC’s cautious approach. Additionally, last week’s US jobs report revealed only 160,000 new jobs, which pressured the dollar side of the currency pair. This mix of a cautious BoE and a weaker US economy sets a positive backdrop for the pound. In the upcoming weeks, we plan to buy call options to take advantage of this upward momentum. September 2025 call options with a strike price near 1.3500 provide a favorable risk/reward balance, aiming for the next resistance near 1.3463. This tactic allows us to benefit from an increase in GBP/USD while keeping potential losses limited to the premium paid. Due to rising uncertainty, implied volatility has increased, leading to slightly higher options prices. To manage this expense, traders might consider utilizing a bull call spread, such as buying the September 1.3450 call and selling the 1.3550 call. This approach reduces the initial investment but limits potential profits. We’ve seen similar trends in the past, like during the 2022-2023 period, when divided central bank decisions often resulted in short-term currency strength. The recent trading patterns also confirm the long-term uptrend that began in January 2025. The inability to fall lower last month showed that interest from buyers remains strong. Create your live VT Markets account and start trading now.

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US Commerce Secretary Lutnick announced a 90-day extension for the China deadline, shifting it from the original date of August 12. President Trump will not impose tariffs on semiconductors made in the US. The US government expects to collect $50 billion in monthly tariff revenue, lowering previous projections from $700 billion to $600 billion. Lutnick is pushing for the return of manufacturing to the US.

China Deadline Extension

He emphasized the leverage gained through tariffs, which led to commitments like Apple’s additional $100 billion investment in US manufacturing. Lutnick acknowledged that negotiations with China are complicated and take time. With the China deadline likely being extended by 90 days, we expect less market volatility. This mirrors what occurred during the trade disputes of 2018 and 2019 when extensions eased investor worries. Strategies such as selling VIX call options or buying puts may become popular as “fear” levels decrease. This reduced near-term risk should help boost the broader market. We may want to cut back on hedges by selling some S&P 500 and Nasdaq 100 put options. The market now has a clearer path until the new mid-November deadline.

Impact on US Semiconductors and Market Strategy

Protecting US-made semiconductors is a big win for that sector. It lifts a heavy burden that has kept valuations low, making call options on key companies in the PHLX Semiconductor Index (SOX) appealing. These firms will now have more certainty regarding their domestic operations. This strategy seems well-timed, considering the fragile economic data we’ve seen. The manufacturing PMI from July showed a reading of 49.1, indicating the administration likely wants to prevent another supply chain shock. This backdrop supports a more optimistic sentiment in the short term. The downgrade of annual tariff revenue expectations to $600 billion indicates careful economic management. This suggests a shift from direct confrontation to securing long-term investment commitments from companies like Apple, focusing more on re-shoring jobs rather than just tariff income. However, we must keep in mind that core issues with China remain unresolved and complicated. While short-term options strategies may benefit, traders should be cautious with longer-term derivatives. The new November deadline is likely to bring back volatility as it approaches. Create your live VT Markets account and start trading now.

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The British pound is currently stronger against the US dollar but weaker compared to the euro. Stagflation challenges in the UK may cause the GBP to drop further against the euro. The Bank of England (BoE) is expected to lower its policy rate by 25 basis points to 4.00%. This move shows a cautious approach to future rate changes. Even though the UK’s real GDP shrank in April and May, high inflation may keep the BoE from making big policy shifts.

Monetary Policy Committee Dynamics

In a recent meeting, the Monetary Policy Committee voted 6-3 to keep interest rates steady, with some members suggesting a 25 basis point cut. Predictions indicate possible disagreement among members about rate cuts, maintaining rates, or even a 50 basis point cut, influencing the BoE’s easing plans. The upcoming Monetary Policy Report will provide updated economic forecasts and examine the previous year’s quantitative tightening. The BoE plans to reduce its gilt holdings by £100 billion between October 2024 and September 2025. Maintaining this pace of gilt sales could push long-term yields higher, as it would mean selling a large £51 billion in gilts. The stagflation risk in the UK poses challenges for the pound against the euro. The European Central Bank is keeping rates steady due to its own inflation issues, which may lead to a further decline in the GBP/EUR pair. This situation is noteworthy, as the BoE is likely easing policies while the European bank is more cautious. We expect the Bank of England to implement a 25 basis point rate cut, but there’s uncertainty about their future guidance. The anticipated disagreements within the Monetary Policy Committee may lead to greater volatility in the pound. Strategies that profit from significant price movements may be beneficial around the next policy announcement.

UK Economic Data and Gilt Market

Recent economic data reveals a contraction in April and May, affecting the outlook. Although June showed a slight improvement, July’s inflation rate was still high at 3.1%, well above the 2% target. This data highlights the BoE’s tough choice between supporting weak growth and combating persistent inflation. We are closely monitoring the UK gilt market as the Bank of England continues its £100 billion quantitative tightening program through September 2025. Selling gilts may lead to higher long-term borrowing costs, and we have already noticed a rise in 10-year gilt yields in anticipation. This mirrors market reactions from the 2022-2023 tightening cycle, creating chances for higher yields. While the pound has been strong against the dollar, this could be temporary. The US Federal Reserve appears stable, supported by a resilient economy and strong labor market data from July. If the BoE cuts rates while the Fed maintains its stance, the GBP/USD exchange rate may face downward pressure. Create your live VT Markets account and start trading now.

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