France’s manufacturing PMI for July was revised down to 48.2 from an earlier estimate of 48.4. This suggests that the sector is still facing significant challenges. New factory orders dropped sharply, marking the biggest decline since January. Business confidence has also fallen to its lowest level since February.

Worsening Economic Outlook

The economic outlook for France’s manufacturing sector seems to have declined as the second half of the year begins. There were some signs of recovery in the first half, but recent data shows a slowdown. While the overall manufacturing index rose, it was overshadowed by fewer orders and poorer business expectations. While there is hope for economic improvement in 2025, the drop in orders and expectations is concerning. Recent easing of EU regulations and cuts in interest rates were anticipated to boost industry activity. However, political uncertainty and global trade tensions are hampering investments, leading to possible order cancellations. Delivery times are now much longer due to labor shortages, a lack of goods, and strikes. Supply chains may need to adjust due to new tariffs and changes within companies. Although the EU-US 15 percent tariff agreement could offer some stability, worries about its long-term viability persist due to the unpredictable nature of US trade policy. The finalized manufacturing numbers for July in France confirm a clear slowdown is occurring. Hopes for a recovery in the second half are now uncertain, especially as new orders are declining at the fastest rate since the year’s start. We should consider preparing for further weakness in French stocks by purchasing put options on the CAC 40 index.

Economic and Political Challenges

This decline in manufacturing is occurring alongside persistently high inflation, creating a tough environment. The latest inflation data for the Eurozone in July 2025 showed a rate of 2.8%, still well above the central bank’s target, limiting its ability to respond effectively. This mix of slowing growth and high inflation highlights the need for caution and makes defensive strategies more appealing. The political climate in France, driven by the government’s new austerity plan, is impacting business confidence. This situation mirrors what happened during the 2011-2012 sovereign debt crisis when fiscal tightening led to a prolonged economic downturn and market volatility. Given this historical context, we see the current political environment as a significant obstacle for domestic investment and growth. This negative outlook for Europe contrasts with the stronger US economy, putting downward pressure on the euro. The EUR/USD exchange rate has already dropped by over 2% in the last month, recently hovering around the 1.07 level. We believe there’s potential for the euro to weaken further, and traders should look to sell on any strength. Overall uncertainty is increasing due to poor economic data, supply chain issues, and an unpredictable global trade environment. The VSTOXX, which tracks Eurozone equity market volatility, has been rising and is now above the 18 level, a significant increase from earlier lows this year. We see value in buying call options on the VSTOXX to protect against and potentially profit from expected market volatility in the coming weeks. Create your live VT Markets account and start trading now.

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The latest data from HCOB shows Italy’s manufacturing PMI at 49.8 for July. This is slightly above the expected 49.0 and up from June’s 48.4. Even though the index is below 50.0, indicating ongoing contraction, the declines in output and new orders are less severe.

Italy’s Manufacturing Outlook

For the first time in nearly three years, Italy experienced a rise in input stocks while inflationary pressures returned. Italian manufacturers are boosting their inventories, likely due to supply chain issues, fewer orders, and increased business confidence. Optimism is growing above the long-term average, suggesting that some companies expect demand to increase. The EU–US trade agreement aids Italian exporters by replacing a potentially high 30% tariff with a 15% duty on certain goods. While this is an improvement, the 15% tariff still poses challenges for Italian competitiveness in the US. Uncertainty remains about how long this deal will last, as recent US trade policies could change the terms. We are starting to see signs of stability in Italy’s manufacturing sector, with the PMI nearing the critical 50.0 growth mark. This indication might lead to a decrease in negative views on Italian assets, such as covering shorts on FTSE MIB index futures. This improvement stands out compared to Germany’s PMI data from last week, which showed a deeper contraction at 47.5. It is important to monitor the increase in input stocks, a change not seen in nearly three years. Historically, such rebuilding of inventories often happens before broader economic recovery and a sustained stock market rally. This growing confidence may support cautious bullish strategies, such as selling out-of-the-money puts on the FTSE MIB to gain premiums.

European Economic Strategies

The return of price pressures coincided with the European Central Bank’s recent decision to keep interest rates unchanged, due to ongoing core inflation. This situation might limit growth for the broader market but could strengthen the Euro. As a result, traders may want to consider taking long positions in the Euro, such as via EUR/USD call options. Despite the clarity provided by the new EU-US trade agreement, the continuing 15% tariff presents ongoing challenges for Italian exporters. Given the sharp market fluctuations seen during the 2024 trade policy disputes, it’s prudent to maintain some downside protection. Keeping long-dated, affordable put options on key industrial stocks could help hedge against any renewed trade volatility. Create your live VT Markets account and start trading now.

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The USDJPY pair is close to a key level as we await the US Non-Farm Payroll (NFP) data. Recent strong US economic figures and Fed Chair Powell’s hawkish remarks have boosted the US dollar. The ADP employment report and second-quarter GDP growth were better than expected, and Powell did not mention any rate cuts in September, which signals a change in interest rate outlook. Market predictions for rate cuts have changed. Now, they expect a reduction of 35 basis points by the end of the year, down from 47 basis points. Investors are paying close attention to the NFP report, particularly the unemployment rate that Powell highlighted. Meanwhile, the Bank of Japan (BoJ) has kept interest rates steady but raised its inflation forecasts, leading to minimal changes in the yen’s value.

Technical Analysis of USDJPY

For the yen to strengthen, we may need weak US data or rising Japanese inflation. Technically, the USDJPY has broken past the 148.30 resistance level and is targeting 151.00. A pullback to 148.30 could happen, but there’s still room for upward movement towards 155.00. In shorter timeframes, the bullish trendline supports upward momentum, as buyers rely on it to push towards new highs. Sellers are looking to see if the price drops to 142.35. Important upcoming events include the US NFP report and ISM Manufacturing PMI. We’re noticing a reduction in the long-standing policy gap between the US and Japan. The Fed has enacted two rate cuts since late 2024 due to a softer labor market, with the unemployment rate now at 4.2% according to the June 2025 report. However, with core inflation stubbornly at 2.8%, questions arise about further easing from the Fed.

Shifts in US and Japan Monetary Policies

The situation in Japan has changed since 2024. The BoJ increased its policy rate to 0.25% to address ongoing inflation, which the latest Tokyo Consumer Price Index shows is at 2.6%. This is a sharp contrast to when Governor Ueda seemed untroubled by yen weaknesses. For derivative traders, the pair is critical, currently trading around 152.50. The 151.20 level, previously a strong resistance we observed through late 2023 and 2024, is now an important support level for the upcoming weeks. Options traders might explore buying puts below 151.00 to prepare for a potential dovish shift from the Fed. All attention is on the upcoming US Non-Farm Payrolls for July, releasing soon. A weak jobs report could trigger new bets for a Fed cut in September, putting pressure on the pair and testing the 151.20 support. Conversely, a strong report could strengthen the Fed’s cautious approach and push us back towards the 155.00 level. Create your live VT Markets account and start trading now.

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Spain’s manufacturing activity saw notable improvement in July, marking the best month of the year for new orders. Production increased, and job growth continued, highlighting a positive trend in manufacturing over recent months. The overall index climbed for the third month in a row. Although increases were moderate, both domestic and international orders grew, showing stable demand.

Industrial Production Prospects

For three months, industrial production has risen, with expectations for further growth thanks to better demand. The US-EU tariff agreement might provide short-term stability, but uncertainty in US policies remains a concern. Employment trends and capacity utilization support this growth. Over the past three months, backlogs of work have increased, while stocks of finished goods have decreased. Manufacturers are hesitant to increase purchases of intermediate goods and are relying on current inventories for production increases. In July, price trends shifted after two months of declines, with both input and output prices rising again, likely due to tariffs. Delivery times for inputs are getting longer, and some of the cost increases are being passed to consumers. This outlook points to increased production, workforce growth, and adjusted pricing strategies among manufacturers. Spain’s manufacturing sector shows strong growth, which helps explain why the IBEX 35 has outperformed the broader Euro Stoxx 50 by nearly 2% over the last month. The final Spanish manufacturing PMI was 52.5 for July, significantly higher than the Eurozone average of 50.8. This highlights a unique opportunity in Spanish assets.

Potential Market Strategies

The report’s focus on rising input and output prices is an important indicator. This aligns with July’s Spanish CPI data, which rose to 2.8%, reversing the cooling trend from the previous quarter. This new price pressure may lead the European Central Bank to adopt a more aggressive stance in upcoming meetings. With ongoing uncertainty surrounding US trade policy and its impact on supply chains, we expect increased market volatility. For options traders, this suggests looking at strategies that profit from price fluctuations in key industrial or shipping stocks. The report’s mention of longer delivery times is a classic sign of potential market instability. One strategic approach could be to focus on relative value trades, preferring Spanish equities over weaker German or French counterparts. This can be expressed by going long on IBEX 35 futures while shorting DAX futures, taking advantage of Spain’s resilient performance. For those dealing with interest rate derivatives, the shift in price dynamics is important. We should consider positioning for a steeper yield curve, as short-term inflation concerns might exceed long-term growth expectations. Historical patterns, like the inflationary trend from 2021-2022 that followed similar supply chain issues, support this view. Create your live VT Markets account and start trading now.

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European stocks started the month with a decline. Key indices showed the following drops: Eurostoxx down 1.2%, Germany’s DAX down 1.3%, France’s CAC 40 down 1.2%, the UK’s FTSE down 0.6%, Spain’s IBEX down 0.8%, and Italy’s FTSE MIB down 1.3%. Market sentiment is cautious as the US prepares to finalize a list of reciprocal tariffs. While Apple and Amazon recently reported positive earnings, worries about the tariffs are affecting risk appetite. US futures also fell, down about 0.4%. Attention is now on the upcoming US labor market report, which could influence the market before the week ends.

US Tariffs Impact

European markets are sharply dropping this morning due to concerns about new US tariffs. This uncertainty is weighing on US futures, even with strong earnings from major tech firms. The US labor market report coming out later today is crucial. Consumer spending data has weakened in the second quarter of 2025, and economists expect Non-Farm Payrolls around 185,000, indicating a cooling job market. If the number is unexpectedly strong, it could be seen negatively, suggesting the Federal Reserve may need to keep its current policies in place. Market fear is rising, with the VIX index, which measures market volatility, increasing over 15% this week and trading above 23. Concerns about tariffs from companies like Apple and Amazon are driving this fear, indicating that no one is exempt from the impact. In this environment, a defensive strategy is advisable for the weeks ahead.

Strategies For Uncertainty

To protect your investments, consider buying put options on major indices like the Eurostoxx 50 or the S&P 500. This will help hedge against further declines if trade tensions worsen or economic data disappoints. These options should be held for 30 to 45 days to cover this uncertain period. Another strategy is to trade volatility itself. With the VIX elevated, purchasing VIX call options or futures could yield profit in case of further spikes in fear. History shows that during the US-China trade war in 2018-2019, high volatility periods rewarded those prepared for it. It’s also important to recall how markets reacted to initial tariffs in 2018, which resulted in sudden drops followed by unpredictable, news-driven trading for months. The current situation between the US and Europe feels similar, suggesting that this is not just a temporary issue but the beginning of a more volatile phase. This pattern favors strategies that capitalize on price fluctuations rather than a clear market direction. Given the rise in implied volatility, selling out-of-the-money call option spreads in certain overbought sectors can be a good way to generate income. This strategy benefits from sideways or downward price movements and a eventual decline in volatility, allowing us to take advantage of the market’s current fears. Create your live VT Markets account and start trading now.

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Gold futures are currently at $3,343.8, and tradeCompass shows a bullish area for potential long trades. The upward trend will continue unless prices drop below the bearish threshold of $3,335.5. Bullish targets are set between $3,349.6 and $3,407, while bearish targets range from $3,329.1 to $3,326.4. Today’s market remains bullish as long as prices stay above $3,342, with buyers in control. Over the past year, gold has increased by 34.29%, though it dipped by 0.70% in the past week. The overall long-term trend is positive, driven by a rise in gold demand, which grew by 3% in Q2 2025 to 1,249 tonnes, largely due to a 78% increase in investment demand.

Market Insights And Trends

The VWAP and Point of Control provide important insights into market consensus and possible trend changes. TradeCompass advises disciplined trade management, including adjusting stop-losses and entering single trades per direction. Recent market shifts, such as increased demand in Asia and changes in central bank policies, impact gold’s long-term outlook, indicating a complex demand situation. Currently, there’s a clear bullish bias as long as gold futures remain above $3,342. Traders should look for long entries, aiming for a profit target at $3,349.6. If the upward momentum continues, a move towards the key psychological level of $3,400 seems likely in the next few weeks. We must stay disciplined, though, as a break below $3,335.5 would change the bullish outlook. If that occurs, focusing on a short trade targeting $3,329.1 becomes essential. This quick shift in strategy is vital for managing risk in a market that has recently cooled down slightly. The broader trend strongly supports a rise, with gold up over 26% since early 2025. This powerful bull run is driven by major changes in monetary policy. The Federal Reserve has initiated two rate cuts this year, which typically weakens the dollar and boosts gold prices.

Inflation And Monetary Policy

The latest inflation data for July 2025 shows that the Consumer Price Index (CPI) remains steady at 3.1%, keeping real yields low. This scenario makes non-yielding gold more appealing for investors looking to preserve wealth. Ongoing inflation suggests ongoing demand for gold as a hedge. Additionally, the World Gold Council’s Q2 2025 demand report revealed a 78% rise in investment buying. Although central bank purchases have slowed from 2024’s record levels, they still added 166 tonnes, solidifying market support. This indicates that while one major driver has eased, another has accelerated. For derivative traders, this environment is ideal for buying call options with strike prices at or above the $3,400 target. Selling out-of-the-money put options below the bearish threshold of $3,335.5 can also be a good strategy for collecting premiums, allowing us to take advantage of the bullish trend while managing risk. Looking ahead, we should view any dips toward the $3,342 support level as opportunities to increase long positions. The main risks to this outlook include an unexpected hawkish shift from the Federal Reserve or a sudden resolution of global geopolitical tensions. Therefore, we’ll keep a close watch on Fed communications and economic data. Create your live VT Markets account and start trading now.

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During the European session, all eyes are on the Eurozone flash CPI report. The expected year-on-year CPI is 1.9%, which is down from the previous 2.0%. The Core CPI is projected to drop to 2.2% from 2.3%. Market sentiment shows a lower chance of a rate cut, now at about 38%. Better economic data and inflation risks suggest that policymakers will tread carefully. In the American session, the focus shifts to the US NFP report. Payroll figures are expected to be 110,000, a decrease from 147,000 previously. The unemployment rate is predicted to rise to 4.2% from 4.1%. Average hourly earnings may see a slight increase to 3.8% from 3.7%. Month-on-month growth is projected to be 0.3%, up from 0.2%.

Fed Chair Powell’s Focus

Federal Reserve Chair Powell emphasized the need to balance labor demand and supply, linking this to unemployment statistics. The unemployment rate remains a key focus. After the NFP release, the US ISM Manufacturing PMI report will follow, expected to be at 49.5, up from 49.0. However, the primary focus is on the NFP and CPI reports unless PMI data shows significant changes. Given the emphasis on today’s US NFP report, we should anticipate more market volatility. The expected slowdown in job growth to 110K, combined with rising annual wage growth of 3.8%, sends mixed signals to the Federal Reserve. This balancing act between a cooling labor market and ongoing inflation creates trading opportunities. We are closely monitoring the unemployment rate, as Powell has spotlighted it as a crucial measure of labor market balance. The latest US CPI data for June 2025 shows core inflation stubbornly at 3.5%, making today’s labor data even more vital for the Fed’s upcoming decisions. Remember the market fluctuations in late 2023 when similar mixed signals caused notable changes in Treasury yields. If the unemployment rate exceeds the 4.2% forecast, market expectations for a Fed rate cut later this year would likely increase. This could weaken the dollar and lift equities. On the other hand, a rate at or below 4.1% would bolster the “higher for longer” stance, particularly given wage growth concerns.

Options And Strategic Positioning

To prepare for this situation, we see value in options that can profit from significant price movements, regardless of their direction. The VIX index, which indicates market volatility, has risen, currently around 18, up from approximately 14 earlier this summer. Buying straddles or strangles on major indices before the report could be a smart move to capture the expected volatility. In the Eurozone, the CPI data will also impact currency markets. Recently, German industrial production showed an unexpected increase, so today’s slight cooling in CPI is unlikely to lead the ECB to cut rates. This could strengthen the Euro, especially if the US NFP data turns out weak. While the ISM Manufacturing PMI is a secondary concern, we won’t ignore it altogether. Job growth has been trending down, averaging around 150K in the second quarter of 2025 compared to over 200K in late 2024. A significant miss in the ISM figure, falling below the expected 49.5, could worsen any negative reaction from the jobs report. Create your live VT Markets account and start trading now.

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Eurostoxx futures have fallen by 0.7% in early trading in Europe. The German DAX futures dropped by 0.9%, the French CAC 40 futures decreased by 0.6%, and the UK FTSE futures dipped by 0.2%.

US Markets Outlook

US futures are also down at the start of the session. Trade tensions, especially after recent tariff announcements, are raising market worries. Major companies like Apple and Amazon have reported earnings that reveal possible tariff effects. Currently, S&P 500, Nasdaq, and Dow futures are all down by 0.3%. As we begin August 2025, the risk-off sentiment is clear, driven by renewed trade war fears. The CBOE Volatility Index (VIX), known as the market’s fear gauge, has surged over 15% this week, now trading near 21.5—its highest level in three months. This indicates that traders are buying protection against potential losses. With pressure on European markets, especially German industries, traders may want to consider buying put options on the Eurostoxx 50. This week’s German IFO Business Climate index dropped to 88.1, its lowest this year, showing that manufacturing sentiment is weak. These put options can serve as a hedge against declines caused by tariff threats to European automotive and industrial goods.

Opportunities Amid Volatility

This situation resembles the market volatility seen during the 2018-2019 trade disputes. Back then, uncertainty lingered for months, creating trading opportunities. Taking long positions in VIX futures or VIX call options might be a smart way to profit from the expected market swings in the coming weeks. Traders should also focus on specific companies that rely heavily on international supply chains, like Apple. The company’s recent earnings call indicated that new tariffs could squeeze margins, a concern now reflected in the stock prices. Buying puts on vulnerable tech and retail stocks may be a more focused strategy than shorting a broad index like the Nasdaq 100. Additionally, tariff discussions are boosting the US dollar as a safe-haven asset, putting pressure on the Euro. The EUR/USD exchange rate has already dipped to a five-week low of 1.0750. Derivative traders might consider EUR/USD put options to bet on a continued drop towards the 1.06 level seen earlier this year. Create your live VT Markets account and start trading now.

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On August 1, there is one important FX option expiry to watch: the EUR/USD at the 1.1460 level. This option expiry does not match up with significant technical indicators, indicating it might have a limited impact on the market. However, it could help keep prices stable as the current trend favors sellers.

Key Focus: Moving Averages

We are closely watching the 100-day moving average, which is at 1.1361. The upcoming US jobs report is also drawing attention. With the EUR/USD option expiry at 1.1460 potentially capping today’s movements, it reinforces the downward pressure on the pair. This level is not a major technical obstacle, so we are focusing on the US jobs report expected later. The market seems set for sellers to maintain control, especially if the report shows a strong US economy. The bearish sentiment stems from differing central bank policies. Recently, US Core PCE data has remained steady around 2.7%, keeping the Federal Reserve cautious. Meanwhile, Eurozone HICP inflation has dropped to 2.1%. This difference supports a stronger dollar, making it harder for the euro to make gains. We are particularly attentive to the 100-day moving average at 1.1361, which is our key support level. A significant drop below this level, especially after a strong US jobs report, could indicate further declines. Therefore, we are considering buying put options with strikes around 1.1300 or 1.1250, set to expire in late August, in anticipation of a potential drop.

Market Impact of Policy Divergence

Reflecting on the sharp fluctuations during the Fed’s interest rate hikes in 2022 and 2023 reminds us of how quickly currency markets react to policy differences. While the current environment is less aggressive, we are again seeing that theme. One-month implied volatility for EUR/USD has increased from 6.5% to 7.2% in recent weeks, indicating that the market expects larger movements. Looking beyond today’s events, we should consider strategies that can benefit from ongoing downward pressure. Selling out-of-the-money call spreads with strikes above the 1.1500 psychological level could be a wise choice to earn premium. This strategy would profit from both a decline in the pair and time decay, aligning well with the current market sentiment. Create your live VT Markets account and start trading now.

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