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Expectations indicate that the Bank of England will keep interest rates steady and slow down gilt sales.
The Bank of England is set to slow down its bond sales while keeping interest rates steady at 4%. This decision is anticipated during Thursday’s meeting, where policymakers are likely to vote 7–2 to maintain the current rate after a recent close 5–4 vote to lower rates.
Markets predict that the annual rate of gilt sales will decrease from £100 billion to about £67.5 billion. Some forecasts even hint at a further drop to £60 billion or a shift to shorter-term bonds. While the Bank of England downplays the effect of quantitative tightening on borrowing costs, others believe it has increased market volatility and raised long-term gilt yields.
China’s auto industry faces excess supply, resulting in discounts and survival worries for manufacturers
China’s auto industry is in trouble. Years of overproduction, supported by government policies, have created an oversupply of vehicles. This has forced dealers to offer heavy discounts and rely on grey-market sales, hurting their profits.
Destructive Competition
To meet factory rebate requirements, dealers are slashing prices. Unsold cars are often manipulated: they might be registered as “sold” or exported as “used” vehicles. Some vehicles are abandoned or sold at auctions for only a small fraction of their original price. This situation has led to fierce competition and a cycle of oversupply. Local governments have made the problem worse by offering cheap land to attract factories, which has resulted in overcapacity across the country. While big companies like BYD and Geely may survive, many of China’s 129 electric vehicle (EV) and hybrid brands may not. Only about 15 are expected to remain by 2030. Beijing is hesitant to let automakers fail because of potential economic and political fallout. The crisis is not just hurting the auto sector; it impacts around 10% of China’s GDP. There are worries that cheap Chinese cars could flood European and North American markets. Although reforms are necessary, political and economic obstacles might delay these changes. Investors should brace for continued pressure on most Chinese automakers’ stocks due to this persistent oversupply. Recently, the China Automobile Dealers Association reported that dealer inventory has reached a 36-month high, with average vehicles unsold for over 75 days. This indicates that the oversupply issue is worsening, suggesting even tighter profit margins ahead.Market Dynamics and Investment Opportunities
The market is clearly distinguishing between successful and struggling companies. This creates opportunities for pair trades. For example, consider buying put options on smaller EV companies that are losing money and are unlikely to survive. At the same time, look at call options on established players like BYD, which can withstand this price war. The Q2 2025 earnings reports showed that nearly a dozen smaller brands are running with negative gross margins. The threat of tariffs is increasing, which might trap even more inventory in China’s domestic market. The European Commission’s announcement on September 10, 2025, to speed up its anti-dumping investigation is a big warning for automakers targeting European exports. This situation is reminiscent of the solar panel oversupply crisis in the late 2010s, which led to significant industry consolidation and many bankruptcies. This turmoil is spreading throughout the entire supply chain, affecting everything from battery manufacturers to steel producers. We are already seeing weak demand for lithium carbonate, with futures down over 12% since August 2025 due to concerns about slowing orders. This presents an opportunity to short raw material suppliers heavily tied to the Chinese auto sector. While the overall outlook is negative, we must be cautious about sudden government interventions. Beijing’s hesitation to allow major failures could lead to unexpected bailouts or forced mergers, resulting in extreme volatility and potential short squeezes on heavily shorted stocks. Therefore, bearish positions should be managed with tight stop-loss orders to safeguard against sudden price changes driven by policy decisions. Create your live VT Markets account and start trading now.New Zealand’s economy shrinks by 0.9% in Q2, disappointing expectations and negatively impacting NZD/USD
**New Zealand Industry Impact**
After the latest report, the NZD/USD currency pair saw a small drop. The Reserve Bank of New Zealand had predicted a smaller decline of 0.3% for the quarter.
This GDP data shows that the New Zealand economy is doing worse than expected. Growth has fallen three times more than the Reserve Bank predicted, indicating that the central bank is falling behind. This raises the chances of an interest rate cut at their next meeting.
The overall weakness isn’t surprising, especially since the U.S. government increased agricultural tariffs in August 2025. This has directly affected our dairy and meat exports. Additionally, recent data from the Real Estate Institute of New Zealand showed that Auckland house prices dropped another 1.2% in August, marking the sixth month in a row of price declines. This mix of outside and inside pressures is creating a tough situation for the economy.
**Option Strategy Analysis**
In the weeks ahead, we recommend buying NZD/USD put options that expire after the RBNZ’s October policy meeting. This strategy allows for downside protection with controlled risk, preparing for a significant drop if the RBNZ issues a dovish statement or cuts rates. Implied volatility remains relatively low, making option prices attractive before the market fully adjusts to this new economic situation.
We’ve seen this scenario before. During the post-pandemic slowdown in 2022, weak economic data led to a quick decline in the currency’s value. GDP has now dropped in three of the last five quarters, indicating this isn’t just a temporary downturn but rather a deeper recession. This suggests that interest rate futures markets are not fully accounting for the possibility of multiple cuts before the end of the year.
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US SEC approves new crypto ETF listing standards, boosting momentum for cryptocurrency
The US SEC has approved new standards for listing crypto ETFs, which is a positive step for the cryptocurrency market.
In other news, a golden statue of Trump holding Bitcoin was seen outside the Capitol before the Federal Reserve’s rate decision. Additionally, Trump’s proposed tariff on EU goods has caused the EURUSD to drop.
Bank Of England Expectations
The Bank of England is likely to slow down bond sales and keep interest rates at 4%. Meanwhile, China’s excess of vehicles has led to discounts and grey markets, raising concerns for manufacturers. In New Zealand, the GDP fell by 0.9% in the second quarter, worse than the expected decline of 0.3%. The FOMC shows a neutral stance, but ongoing inflation may delay any rate cuts. In a tragic event, three police officers were fatally shot in Pennsylvania, USA. A general risk warning highlights that foreign exchange trading is risky, and people should only invest money they can afford to lose.InvestingLive Information
InvestingLive offers market information for educational purposes only and does not provide investment advice. They may also receive compensation from advertisers through user interaction. The SEC’s approval of listing standards for crypto ETFs is a big win for the industry. This move could speed up the launch of new products, increase market access, and attract new investments in digital assets. Derivative traders might consider buying longer-term call options on Bitcoin and Ethereum, expecting increased volatility and price rises, similar to what we saw after the initial spot ETF approvals in 2024. Trump’s proposed 15-20% tariff on EU goods brings significant geopolitical risk, putting pressure on the EURUSD exchange rate. This situation may create an opportunity to short the Euro through futures or put options, as trade-war talk usually weakens that currency. This uncertainty could also increase market volatility, making call options on the VIX a potentially useful hedge against a broader market decline. The Federal Reserve is remaining cautious, indicating that stubborn inflation is delaying any rate cuts. Core inflation rose above 3% according to the latest August 2025 Consumer Price Index data, leading the market to possibly give up on hopes for rate easing this year. This “higher for longer” scenario supports a strong US dollar and suggests caution with rate-sensitive growth stocks, such as using put spreads on the Nasdaq 100. Economic troubles outside the US are becoming more evident, illustrated by New Zealand’s GDP drop and the troubling oversupply of cars in China. These issues reinforce a narrative of global slowdown, which should strengthen the US dollar against commodity currencies like the NZD and AUD. We advise caution with long positions in industrial commodities, as China’s slowing manufacturing has often predicted declines in copper and oil prices. Create your live VT Markets account and start trading now.Westpac suggests that the Fed’s neutral stance may delay easing because of ongoing inflation concerns and uncertainty.
The Federal Reserve is shifting towards a neutral position as inflation and job market risks balance out, although uncertainty is still present.
In its September meeting, the Fed lowered rates by 25 basis points to a midpoint of 4.125%, focusing on managing risks. Updated forecasts indicate stronger growth and a smaller rise in unemployment, with GDP expected to stay close to trend through 2028. Unemployment may peak at 4.5% in late 2025, while inflation is projected to gradually approach the 2% target by 2027.
Feds Dot Plot Analysis
The Fed’s “dot plot” reveals differing views among policymakers. Some support more rate cuts this year, while others see little reason for further easing. By 2027, however, predictions start to align with the trend. Westpac is more cautious than the Fed’s average outlook. It expects weaker growth and employment, along with more persistent inflation. This outlook could lead the Fed to maintain a slightly restrictive policy for a longer period instead of quickly shifting to a supportive approach. With the Fed’s recent rate cut to 4.125%, we are entering a time of significant uncertainty. The Fed is divided about the future path, as shown in the dot plot, which reveals varied expectations among its members. This internal disagreement means making strong financial moves based on a clear Fed direction will be challenging in the near future. We believe the Fed’s official forecasts for steady growth and smooth inflation decline are overly optimistic. The August jobs report showed job growth slowing to 110,000. Additionally, core CPI remains high at 3.8% year-over-year, indicating that the last part of the battle against inflation will be tough. This information supports our view that the economy is weaker and inflation is more persistent than the Fed’s average projection suggests.Economic Divergence And Market Opportunities
The gap between market expectations and a potentially tougher reality presents opportunities in options trading. With high uncertainty, the VIX remains around 19, a significant increase from the calmer periods seen in 2023. This environment is suitable for strategies that profit from market volatility or stability, like selling iron condors on equity indices. The interest rate market seems to be expecting a more gradual approach than we foresee. For instance, the CME FedWatch tool currently indicates a 60% chance of another rate cut by December, which we believe is premature. This suggests traders might consider positions that benefit from rates staying high for a longer time, like selling near-term SOFR futures contracts. If the Fed has to keep rates restrictive longer than anticipated, this would create challenges for equities and support the US dollar. After the strong rate hikes of 2023 and 2024, the market is eager for a clear shift towards easing, which may not fully happen this year. Traders should be careful with sustained market rallies and consider strategies to shield against downturns, such as buying puts on the SPY or QQQ ETFs. Create your live VT Markets account and start trading now.Deutsche Bank raises its 2026 gold forecast to $4,000 and silver to $45 an ounce
Deutsche Bank has raised its gold forecast for 2026 to an average of $4,000 per ounce. This change is mainly due to ongoing purchases by central banks, especially China, and anticipated cuts in U.S. Federal Reserve interest rates.
The earlier forecast was $3,700. The new prediction indicates that gold prices might stay above what fair-value models suggest. Analyst Michael Hsueh expects further increases, estimating central bank purchases could hit 900 tons next year.
Gold Market Dynamics
The forecast does not consider potential challenges to the Federal Reserve’s independence, which could lead to even higher gold prices. While the Fed is likely to keep interest rates steady in 2026 after three planned cuts, tighter immigration policies might influence labor supply and result in more easing. Deutsche Bank has also updated its 2026 silver forecast to $45 per ounce, up from $40. The silver market is facing its fifth year of physical deficits, impacting supply and demand. With the gold price forecast nearing $4,000, we see the main strategy in the coming weeks as building long-term bullish positions. The driving factors are the Fed’s easing policies and ongoing central bank demand. This isn’t just a short-term move; it’s a structural change that traders should prep for now. Looking back, the two Fed rate cuts in 2025 have given gold prices a solid base. With expectations for a third cut before the year ends, we believe the gold price will likely rise. Recent data from the World Gold Council reveals that central banks, particularly the People’s Bank of China, added 215 tons to their reserves in the second quarter of 2025.Trading Strategies Overview
In the derivatives market, buying long-term call options seems like the best approach. We’re eyeing options that expire in mid-to-late 2026, with target strike prices around $3,500 to $4,000. Current low implied volatility in the gold options market presents a good chance to purchase these calls before larger price moves occur. For those who prefer a more conservative strategy, bull call spreads can be a cost-effective choice. A trader may purchase a June 2026 $3,200 call while selling a June 2026 $4,000 call. Although this caps potential gains, it greatly lowers the initial investment needed to start the position. Political pressure on the Fed’s independence is a key unpriced risk that could push gold prices beyond current models. Holding a small number of out-of-the-money calls could serve as a low-cost hedge against this scenario. We also see a bullish outlook for silver, which has a new average forecast of $45 per ounce. This projection is supported by a weaker dollar due to the Fed’s cuts and a severe ongoing supply shortage. The market faces its fifth consecutive year of physical deficits, a strong trend that shows no signs of ending. Recent data from The Silver Institute confirms that industrial demand, especially from the solar and electric vehicle industries, is exceeding mine production and recycling supply. The 2025 deficit is expected to be even larger than the 215.3 million ounce shortfall recorded in 2024. This tight supply situation offers a solid foundation against significant price drops. Traders should consider investing in silver futures contracts for direct exposure to the spot price. Alternatively, call options on silver ETFs offer a lower-cost opportunity to aim for the $45 target. We favor strike prices in the $40 to $42 range with expirations in the second half of 2026. Create your live VT Markets account and start trading now.A golden Trump statue holding Bitcoin appears outside the Capitol to spark discussion on cryptocurrency
A 12-foot golden statue of Donald Trump, holding a Bitcoin, has been placed outside the U.S. Capitol. This temporary display was funded by a group of cryptocurrency supporters and can be seen from 9 a.m. to 4 p.m.
The artwork aims to spark conversations about digital currency, monetary policy, and the government’s role in financial markets. Set against the backdrop of the Federal Reserve’s upcoming policy decision, it highlights the connection between politics and financial innovation.
Encouraging Reflection on Cryptocurrencies
The organizers want this statue to inspire thoughts on the growing influence of cryptocurrencies. It raises questions about the future of government-issued currency as the financial landscape changes. The golden statue linking a political figure to Bitcoin just before a Fed decision signals rising market tension. The Federal Reserve is expected to keep interest rates steady on September 18, 2025, making this display a move that adds political uncertainty to an already anxious market. It appears to be a deliberate effort to politicize cryptocurrency ahead of key policy updates. As a result, we should prepare for greater market volatility in the coming weeks, no matter how the Fed communicates its decisions. Bitcoin’s 30-day implied volatility has already jumped to 78% this week, indicating that sharp price changes are expected. For traders, this suggests that long volatility strategies, like buying straddles or strangles, might be more effective than simply betting on price direction.Digital Asset Prices and Regulatory Headlines
The statue highlights how digital asset prices are now closely linked to regulatory news, alongside macroeconomic data. We observe a significant increase in open interest for Bitcoin options that will expire in late October 2025, especially for strikes that are 20% above and below the current price. This suggests that traders are preparing for a breakout rather than just steady prices. This situation is reminiscent of 2023 and 2024 when rumors from Washington led to larger price swings than inflation data did. The market’s memory of these events means that stunts like this can greatly influence sentiment, more so than in the past. Therefore, we should expect similar overreactions to political news in the upcoming weeks. Create your live VT Markets account and start trading now.Brazil’s central bank keeps Selic rate at 15% amid inflation concerns
The Central Bank of Brazil has kept the Selic rate steady at 15%, which matches expectations. This unanimous decision reflects the bank’s cautious approach toward inflation, aligning with a recent Reuters poll.
The bank has removed language about “continuing the interruption” of rate hikes. They emphasized the need to stay vigilant in assessing whether the current rate effectively controls inflation. Future policies may change, with possible rate increases if necessary.
Inflation Challenges
The bank acknowledged that U.S. tariffs and local fiscal policies might impact monetary conditions. Inflation expectations are still unstable, which may require a strict stance on rates for an extended time. Projections show high inflation pressures due to strong economic activity and a vibrant labor market. An uncertain global climate, affected by U.S. policies, makes the outlook more complicated. Despite slower growth, the job market remains robust. Both headline and core inflation are above targets, with significant risks impacting inflation from multiple directions. With the central bank deciding to maintain the Selic rate at 15% and adopting a firmer stance, any hopes for immediate rate cuts have likely faded. By removing language about pausing rate hikes, the central bank indicates that further tightening is possible if inflation data does not improve. This suggests that investors should prepare for higher short-term rates, especially on DI futures contracts for the first half of 2026. The central bank’s worry about unstable inflation expectations is well-founded. The recent August 2025 IPCA-15 inflation data showed an annual rate of 6.1%, considerably above the 3.5% target. Persistent inflation, alongside a surprisingly strong job market where unemployment fell to a multi-year low of 7.8% in July 2025, supports the bank’s decision to keep a restrictive policy. Consequently, the market will be highly sensitive to the next inflation report expected in early October.Market Implications
This policy approach is likely to support the Brazilian Real, as the 15% Selic rate is one of the most attractive carry trades available globally, particularly when the U.S. Federal Reserve rate remains at 5.25%. This situation signals a good opportunity to buy BRL call options against the U.S. dollar, as the significant interest rate gap offers a buffer against potential currency drops. On the flip side, a prolonged period of high interest rates may hinder the domestic stock market. The Ibovespa index has already hit a plateau in recent months, and this confirmation of a hawkish central bank will likely pressure corporate earnings and values. We consider purchasing put options on the Ibovespa index a wise strategy to protect against a potential market decline. Looking back, we recall the aggressive rate hikes that began in early 2021, which raised the Selic from a record low of 2% to its current level. This history indicates that the central bank is credible when it says it “will not hesitate to resume rate hikes” if necessary. This is a serious warning, and the market should now account for a higher chance of another rate hike than it did previously. Lastly, the bank pointed out uncertainty stemming from possible U.S. tariffs on Brazilian steel, with a decision expected in the coming month. This external risk, combined with uncertainties in domestic policies, suggests that market volatility could rise. Buying volatility through options strategies like straddles on the BRL/USD pair or on the Ibovespa might be an effective way to navigate the upcoming period of uncertainty. Create your live VT Markets account and start trading now.Bessent’s threat to Pulte sparks speculation about a possible revenge leak related to mortgages.
US Treasury Secretary Bessent reportedly marked two homes as his “principal residence” when getting mortgages in 2007. These homes were in New York and Massachusetts. This information, disclosed to Bank of America, drew parallels to President Donald Trump’s claims of “mortgage fraud.”
Mortgage experts found no signs of wrongdoing in Bessent’s documents. They noted that issues like this are quite common. Bank of America did not take Bessent’s claims at face value and did not expect him to live in both houses at the same time. Bessent’s lawyer, Alex Spiro, stated that the paperwork was filled out correctly nearly twenty years ago.
The Bloomberg Report
Bloomberg reported on this issue, leading to speculation about why the information was leaked. Some wondered if Bill Pulte, who works with Trump at the Federal Housing Finance Agency, might have shared the details, based on his past dealings with Bessent. However, this is just a theory. The news regarding Treasury Secretary Bessent isn’t just about an old mortgage; it signals growing political tensions. This tension may lead to increased market unpredictability, which we’ve seen with the VIX rising from 16 to 21 in the last two weeks. It would be wise to consider buying near-term VIX call options or options on the SPY to protect against a quick drop caused by news. The hinted conflict between the Treasury, the Federal Housing Finance Agency, and the Federal Reserve puts interest rate policy under scrutiny. The 10-year Treasury yield has been fluctuating between 4.3% and 4.6% this quarter, and this volatility could lead to sudden shifts. It would be more effective to use options on Treasury futures to prepare for a sharp change in yields rather than trying to guess which way they will go.US Dollar Concerns
Unrest at the Treasury often raises questions about the US dollar, especially with public disputes over fiscal and monetary power. We saw how political disagreements affected the dollar during the debt ceiling debates in 2011 and 2023. With the dollar index (DXY) approaching the 107 mark, we should look into currency derivatives to safeguard against a sudden loss of trust. The mention of the chairman of Fannie Mae and Freddie Mac indicates possible issues in the housing finance market. Any perceived weakness or conflict at the top could widen the spreads on mortgage-backed securities (MBS), which have been sensitive to policy chatter this year. We should keep an eye on credit default swaps related to agency debt and consider reducing MBS exposure until this political noise quiets down. Create your live VT Markets account and start trading now.Australia’s labour market remains resilient despite rising unemployment, with banks forecasting modest job growth and stability
Australia’s August jobs report will be released at 11:30 AM Sydney time. Experts predict the job market will remain strong, despite a slight rise in unemployment.
The Commonwealth Bank expects an increase of 20,000 jobs in August, keeping the unemployment rate steady at 4.2%. However, it might rise to 4.3% due to last month’s rate. This report will also include the first-quarter 2025 population update.
