The Japanese Yen weakened after Bank of Japan (BoJ) Governor Ueda spoke at a press conference. He mentioned there’s no rush to raise interest rates, noting that current inflation is largely driven by supply issues rather than demand. Ueda also said the foreign exchange rate is close to their expectations.

Potential For Further Decline

Ueda suggested that current inflation might be temporary. He stressed that sustained inflation is needed to reach their 2% target. The yen’s drop doesn’t seem to worry them, indicating it could decline further if things stay the same. For the yen to gain strength, weak economic data from the US could lead to expectations that the Federal Reserve will take a softer approach. Alternatively, Japan might need to see higher inflation. Signs of more fiscal support could also push inflation up. According to the Bank of Japan’s comments on July 31, 2025, it seems clear that a weaker yen is likely. The Governor’s attention on supply-driven inflation suggests they won’t raise rates anytime soon, encouraging trades that bet against the yen. This view is backed by recent US data—the July Non-Farm Payrolls report revealed a strong gain of 215,000 jobs. With US inflation steady at 3.1%, the Federal Reserve has little reason to cut rates, widening the gap between policies in the US and Japan. The USD/JPY exchange rate is currently around 165.

Trading Strategy Considerations

For derivative traders, this situation suggests buying USD/JPY call options expiring in late August or September. This strategy aims to capitalize on a potential rise towards the 170 level while keeping initial risk limited to the premium paid. Given the current policies of the central banks, this appears to be a high-probability trade. In Japan, recent data supports the central bank’s inaction. The national CPI for June 2025 was 2.7%, but the core-core inflation closely monitored by the BoJ was only 1.8%. This reinforces their cautious approach, waiting for more sustainable price pressures before making any moves. We’ve seen similar situations, especially during the yen’s significant depreciation from 2022 to 2024. The main risk to this trade is intervention from Japan’s Ministry of Finance, which defended the yen around the 160 level in April 2024. Traders should remain cautious and keep an eye on official statements as the yen continues to weaken. Create your live VT Markets account and start trading now.

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Gold prices continue to drop due to strong US economic data, which has led to increased expectations for higher interest rates. The recent FOMC meeting was less supportive than predicted, resulting in a negative outlook for gold. The expectation of higher interest rates is not good for the market. Gold’s ability to rise is limited since there are no positive catalysts, and interest rate expectations are weighing it down. The upcoming US Non-Farm Payroll (NFP) report may impact gold prices; weak data could support gold, while strong figures may push prices lower. However, in the long run, gold is expected to trend upwards as real yields are forecasted to fall with Federal Reserve easing.

Technical Analysis

On the daily chart, gold prices are approaching a support level of 3,245. Buyers may come in at this level, keeping risks defined below, with hopes of a recovery back to resistance. On the other hand, sellers are looking to break below this support to push prices down towards 3,120. The 4-hour chart shows a downward trendline that is guiding the bearish trend. Sellers are likely to depend on this trendline to lower prices, while buyers will aim to break above it, targeting the 3,333 swing point and possibly rallying to 3,438 resistance. In the 1-hour chart, the trendline remains the focus, with sellers expecting rejection and buyers hoping for a breakout. Upcoming US economic reports could further sway gold’s movement.

Market Expectations

As of today, July 31, 2025, gold has further declined due to strong US economic data, which delays expectations for interest rate cuts. For instance, today’s Personal Consumption Expenditures (PCE) price index showed core inflation steady at 2.9% year-over-year, making a quick decline unlikely. This strengthens the Federal Reserve’s hawkish stance, making it tough for gold to rise in the short term. All attention is now on tomorrow’s Non-Farm Payroll (NFP) report for August 1, 2025, which will be crucial. With initial jobless claims low, averaging around 230,000 recently, a robust jobs report could push gold below significant support. Traders might look into buying puts or selling short-dated call options to hedge against a potential drop toward the $3,120 level. For those anticipating a decline, the downward trendline on the 4-hour chart is a crucial indicator. Selling futures with a stop-loss above this trendline could be a smart strategy in the coming days. A decisive break below the $3,245 support level would likely increase selling pressure. Conversely, the $3,245 level is a key support area where buyers could step in. A trader expecting a reversal might buy call options with a near-term expiration, using a break of this support as a clear exit signal. A bounce from this level would first aim for the swing point at $3,333. Despite short-term pressures, we recall the trend from late 2023 and 2024 when hawkish policies from the Fed eventually led to easing. The overall expectation remains for falling real yields, which should support gold in the end. Therefore, using these price dips to buy longer-dated call options, such as those expiring in early 2026, could be a wise move for positioning in the future uptrend. Create your live VT Markets account and start trading now.

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**BOJ Governor’s Remarks** The BOJ Governor says they are not behind on rate adjustments. The policy rate is low at 0.50%, and while inflation is rising, it has not reached the 2% target consistently. Ueda didn’t confirm if the BOJ will raise interest rates, but he mentioned positive news from a trade deal between the US and Japan. This has led the central bank to rethink its pause on interest rate hikes. As of July 31, 2025, the Bank of Japan is showing a slight but important shift. The economic outlook is improving thanks to the new trade deal, which makes rate hikes more likely. This could lead to a stronger yen in the coming weeks. Recent data backs this up: Japan’s core inflation for June 2025 reached 1.8%, the highest this year but still below the 2% target. The market is starting to believe the BOJ’s cautious approach might be transitioning to a more aggressive stance. This suggests that the trend of a weakening yen might soon pause. **Strategy for Derivative Traders** For those trading derivatives, it’s time to think about buying put options on the USD/JPY currency pair. With the pair around 154.50, buying puts with a strike price below 152.00 could be wise over the next few weeks. Implied volatility is relatively low, making it a good entry point before the market fully adjusts to a rate hike. We’ve seen the BOJ take a careful approach before, especially during the slow move away from negative interest rates in 2024. They often signal changes well in advance, indicating we might be in the early stages of a policy shift. This could make longer-dated options more valuable than betting on quick moves. The possibility of a stronger yen also impacts Japanese stocks. A rising yen can be tough for Japan’s major exporters, which may put pressure on the Nikkei 225 index, currently near 41,000. Therefore, it may be wise to buy protective puts on Nikkei futures to guard against a downturn caused by currency changes. In the rates market, the BOJ’s shift means that traders are now factoring in the chance of a rate hike within the next six months. This makes shorting Japanese Government Bond (JGB) futures a viable strategy. As expectations for a rate hike grow, bond prices are likely to drop. However, we must stay alert to the BOJ’s wait-and-see approach regarding tariffs and their impact on actual data. Any trade or inflation reports that fall short could reverse this bullish sentiment quickly. Thus, any bearish positions in USD/JPY or short JGB should be managed with clear risk strategies. Create your live VT Markets account and start trading now.

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European stocks opened higher, driven by strong earnings from Microsoft and Meta. This positive trend is clear in market indices: the Eurostoxx rose by 0.3%, Germany’s DAX increased by 0.4%, and France’s CAC 40 went up by 0.1%. The UK FTSE also improved by 0.3%, while Spain’s IBEX saw the largest gain at 1.0%. Italy’s FTSE MIB stayed the same. In the US, futures are also rising, with the S&P 500 futures up by 0.9% and Nasdaq futures up by 1.3%.

Tech Sector Performance

These increases are mainly driven by the tech sector, thanks to the results from Microsoft and Meta. Dow futures have climbed by 0.3% as the month comes to a close, enhancing overall market optimism. With Microsoft’s and Meta’s strong earnings, there’s a noticeable risk-on sentiment as we finish the month. The rise in Nasdaq futures suggests that short-term strategies, such as buying call options on tech-focused indices, are appealing. These gains are not just temporary: Microsoft’s Azure cloud business grew 25% last quarter, and Meta reported over 4.2 billion daily active users, providing solid support for this rally. This positive energy is spreading to Europe, where both the DAX and Eurostoxx are showing robust growth. Spain’s IBEX is particularly strong, leading the gains this morning. With the European Central Bank maintaining the key rate at 2.25% last week, a stable policy environment bodes well for further gains in European stocks in the weeks ahead. We also need to consider volatility. The VIX index, which measures market fear, has dropped to around 14, much lower than the low 20s earlier this year during uncertain times. This makes options cheaper, favoring strategies that depend on market direction rather than on volatility.

Market Outlook

As we approach August, we should stay cautious. Historically, August is known for its sudden swings. The unexpected downturn in August 2024 serves as a reminder of the dangers of complacency. A wise strategy would be to lock in some profits by buying inexpensive out-of-the-money S&P 500 put options as a hedge. This rally feels similar to the tech-driven rise in late 2023, but it has stronger foundations. Recent US inflation data for June showed a manageable 2.8%, giving the Federal Reserve little reason to change its path. This indicates that the market’s strength is backed by solid corporate performance and a stable economic outlook. Create your live VT Markets account and start trading now.

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BOJ Governor Ueda stated that policy decisions will not depend only on new inflation forecasts. He highlighted the need to review upcoming data without any biases. Ueda noted that the impacts of tariffs are becoming evident, but the timing is still unclear. He assured that suitable decisions will be made at each meeting, considering risks and trends in underlying inflation. Ueda said that underlying inflation is slowly increasing and is not currently affected by tariffs. He avoided making any firm promises about future policy changes. Although he acknowledged improvements in trade, Ueda remained cautious about discussing interest rate hikes. In the currency market, the USD/JPY decreased by 0.4% for the day, trading at 148.87 after testing its 200-day moving average of 149.50.

Anticipated Interest Rate Moves

The Bank of Japan seems to be hinting at another interest rate increase, even while remaining vague. Their attention on underlying inflation suggests they are looking beyond temporary data fluctuations. Traders should prepare for a stronger yen in the weeks to come. This perspective is supported by recent data showing Japan’s core inflation for July 2025 reached 2.7%, surpassing expectations. We also received results from the spring “shunto” wage negotiations, which secured an average pay increase of over 4.5%, the highest in decades. These figures give the BOJ the justification it needs for another policy adjustment. Looking at USD/JPY, we notice similarities to late 2023 when the pair struggled near the 149-150 level before verbal intervention began. The current price action below 149.00 indicates that the market is already anticipating a more hawkish BOJ. We expect further tests of key support levels as speculation about rate hikes builds.

Trading Strategies for Yen Appreciation

For derivative traders, this suggests it’s time to consider buying JPY call options or USD/JPY put options to bet on further yen appreciation. Given the BOJ’s meeting-by-meeting strategy, implied volatility is expected to increase ahead of their next decision in September. Strategies that benefit from this rise in volatility could also be profitable. It’s worth noting that the BOJ ended its negative interest rate policy in March 2024, marking its first hike in 17 years. The governor’s current language indicates that we are now entering the next phase of policy normalization. This isn’t just a one-time adjustment but a gradual shift that will continue to support the yen. Create your live VT Markets account and start trading now.

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France’s preliminary Consumer Price Index (CPI) for July rose by 1.0% compared to last year, which is in line with expectations. The previous month’s figure was also +1.0%. The Harmonised Index of Consumer Prices (HICP) increased by 0.9% year-on-year, which is higher than the anticipated 0.8%. The last HICP reading was also +0.9%.

Service Price Inflation

Service price inflation is still a major concern, but this data is not expected to change the European Central Bank’s current viewpoint. While this inflation number from France doesn’t alter the overall situation, it does confirm our observations. Prices for services are staying high, which is a critical issue for the European Central Bank. Since this figure was anticipated, there is no sudden shock to the market. Looking back, this aligns with the June 2025 Eurozone inflation that was reported at 2.3%, leading the ECB to pause its rate-cutting strategy. Germany’s preliminary July inflation also came in stubbornly at 2.5%, reinforcing the idea that the inflation battle is ongoing. The ECB, currently holding its deposit rate at 2.75%, is likely to stay this way for now as it watches if this trend continues into the August data release.

Implications For Interest Rate Markets

For interest rate markets, this suggests that the likelihood of an ECB rate cut in September is decreasing. We may see short-term rate futures, like the December 2025 €STR futures, dip slightly as traders adjust their expectations for further easing. This supports a view of “higher for longer” rates for the rest of the year. Ongoing inflation lends some support to the Euro against currencies like the US dollar, where the Federal Reserve indicates a more stable policy outlook. Traders might start buying short-term call options on the EUR/USD, anticipating a gradual increase. The market may have become too complacent in pricing in ECB cuts that may not happen as soon as expected. For stocks, this news isn’t positive since stubborn inflation and higher rates can squeeze corporate profits. It may be wise to consider buying protective puts on the Euro Stoxx 50 index as a safeguard against a market pullback. Memories of the high inflation seen in 2022 and 2023 mean that any sign of its return will make investors anxious. Create your live VT Markets account and start trading now.

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Japan’s economy is slowly improving but still faces challenges. Easy monetary policies should help, and while inflation may pause, it is expected to rise gradually. The impact of trade changes on prices and international economies is uncertain. We need to pay close attention to how trade policies influence financial markets and Japan’s economic future.

US-Japan Trade Deal Progress

The US-Japan trade deal represents progress and reduces uncertainty about the economic forecast. This suggests there may be future interest rate hikes, although the Bank of Japan is unlikely to commit to this immediately. Recent comments show a shift in the Bank of Japan’s thinking. Revised inflation forecasts indicate they may raise rates sooner than expected, signaling a move away from the very easy policies of the post-pandemic period. Data supports this shift. The national core-core CPI for June 2025 was 2.3%, staying above the 2% target for the fourth month in a row. This ongoing price pressure, along with average wage increases of 4.5% from spring Shunto negotiations, gives the Bank of Japan a solid reason to take action.

Implications for Currency and Bond Markets

For traders, this points to a stronger yen in the coming weeks. After the USD/JPY rate approached 170 earlier this year, these new comments could lead to a significant reversal. It’s wise to prepare for a move back toward the 160-162 range using options or futures. We must keep a close eye on the Japanese Government Bond market. Since the end of Yield Curve Control in early 2024, the 10-year JGB yield has risen to about 1.1%. Another rate hike could push this closer to 1.25%, opening up opportunities in interest rate swaps and bond futures. The new US-Japan trade agreement is a key factor in this situation. By lowering tariffs and reducing economic uncertainty, it removes a major reason the Bank of Japan has had for not acting over the past year. This makes a policy change more likely than at any time since the last small hike. Create your live VT Markets account and start trading now.

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Switzerland’s retail sales rose by 3.8% in June, surpassing the expected increase of just 0.2% year-on-year. This data comes from the Federal Statistics Office, which also updated the previous figure from 0.0% to 0.3%. The article touches on various issues beyond retail sales in Switzerland. These include geopolitical tensions, such as Iran’s missile strike on the Al Udeid Base and the U.S. hitting Iran’s nuclear facilities. Economic topics also highlight the U.S. economy’s growth of 3% in Q2 despite trade conflicts, while Chinese banks are launching significant funds in Southeast Asia.

Global Economic Effects

US tariffs on goods like copper are affecting prices worldwide, and India is facing a 25% tariff. Changes in UK tax laws are impacting wealthy individuals, leading to a 14% drop in butler jobs. Due to US tariffs, India’s rupee has hit a five-month low, which is impacting market expectations. In technology news, OpenAI’s revenues have skyrocketed thanks to an influx of ChatGPT users. Microsoft and Meta have also reported strong earnings, with Meta planning major investments in superintelligence technologies. Additionally, there’s a warning about the risks of foreign exchange trading. The ongoing US-Iran conflict signals high geopolitical risk, indicating a need for long volatility strategies. Buying VIX call options or options on major indices might be a wise hedge. Historical data shows that spikes in Middle Eastern tensions, like in early 2020, caused the VIX to jump over 30% in a week; we might see this pattern again.

Federal Reserve Stance

The Federal Reserve is keeping its rates at 4.3%, which clashes with political calls for deeper cuts. This situation suggests opportunities for trading interest rate volatility through options on Fed Funds futures or SOFR futures. After the Fed’s latest statement, the chances of a rate cut in September have likely dropped below 20%. However, if Powell shows any uncertainty, it could lead to sudden market shifts. Switzerland’s retail sales have exceeded expectations with an impressive 3.8% annual growth instead of the anticipated 0.2%. This robust economic performance strengthens the case for the Swiss franc, particularly against weaker currencies. We might consider call options on CHF or short EUR/CHF futures, anticipating more strength ahead. High tariffs have significantly impacted copper prices, which have fallen by 50%, affecting industrial and emerging markets. Continued pressure makes put options on copper miners or shorting copper futures attractive. The new 25% tariff on India will likely further weaken its industrial demand, adding to the bearish outlook. We’re seeing a clear divide in the market: Big Tech is thriving, while the broader economy is under stress. Strong earnings from Microsoft and Meta and hefty revenue growth for OpenAI indicate that technology could be a safe haven amid uncertainty. This separation opens up a pair trade opportunity: going long on the Nasdaq 100 via futures while buying puts on more industrial-focused indices like the Russell 2000. India is certainly feeling the impact of US tariffs, with the rupee at a five-month low and a decline in the Nifty index. The grim growth outlook and a recent Reserve Bank of India report showing a 1.2% drop in manufacturing PMI might lead traders to consider buying USD/INR call options, betting on further rupee weakness toward the 88.00 level. Create your live VT Markets account and start trading now.

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French and German inflation rates, Canadian GDP, US PCE, US ECI, and US Jobless Claims are important economic indicators. In the European session, we will see Swiss Retail Sales, French CPI, and German inflation, with no changes expected from the SNB or ECB. Market expectations for a rate cut before the end of the year are decreasing. In the American session, Canadian GDP is not expected to have an impact since the Bank of Canada is holding rates steady. The chance of a rate cut by the end of the year is around 50%. The US PCE price index is expected to be 2.5% year-over-year, with Core PCE at 2.7% year-over-year. Both figures are seen as predictable based on earlier CPI and PPI data.

US Employment Cost Index and Jobless Claims

The US Employment Cost Index for Q2 is forecasted at 0.8%. The Fed tracks this for signs of wage growth, but it often lags behind the economy. US Jobless Claims indicate a “low firing, low hiring” trend due to tariff uncertainties. Initial Claims are expected to be 224K, up from 217K, while Continuing Claims remain steady at 1,955K. These indicators will shape market sentiment and future monetary policy. As the Federal Reserve holds back on signaling a rate cut in September, the next few weeks will hinge on US data. The market is adjusting expectations with each new release, rather than waiting for the complete data set the Fed is looking for. Attention is focused on the next two Non-Farm Payroll and CPI reports ahead of the Fed’s meeting. The upcoming US PCE data, projected with a core reading of 2.7%, is not anticipated to be shocking since it is mainly based on previous inflation reports. However, Core PCE has been stubbornly above 2.8% for the first half of 2025, so any deviation from this prediction will be monitored closely. This is exactly why the Fed is hesitant to act without strong evidence of a slowdown.

US Labor Market Data

The US labor market data is where the real concerns are. After a weaker NFP figure for June 2025 of about 175K, all eyes are on tomorrow’s report and another in September. Weekly jobless claims have remained within a tight range of 215K to 230K for months, indicating a market that is neither aggressively hiring nor firing. With the Fed’s next steps uncertain, traders in derivatives should brace for increased volatility. Strategies such as buying straddles or strangles on major indices like the S&P 500 or rate-sensitive ETFs could be effective. These positions can profit from significant market movements in either direction following the crucial US jobs and inflation data. Meanwhile, European and Canadian markets present fewer immediate opportunities, as their central banks appear to be on a steadier path. The European Central Bank has indicated a strong pause after its one rate cut in March 2025. This makes currency pairs like EUR/USD more reliant on how the US dollar reacts to its own domestic information. Create your live VT Markets account and start trading now.

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