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Switzerland’s Consumer Price Index (CPI) for July increased by 0.2% compared to last year, which is higher than the expected 0.1%. This information, released by the Federal Statistics Office on August 4, 2025, indicates changes in inflation trends in the country. The Core CPI, which excludes unstable items like food and energy, went up to 0.8% year-on-year from a previous 0.6%. This change indicates a shift in core inflation trends, showing adjustments in Switzerland’s economic situation as the year continues.

Inflation And The Swiss National Bank

This new inflation data from Switzerland suggests that deflationary pressures may not be as strong as previously thought. With core inflation now at 0.8% year-on-year, we need to reassess our expectations for the Swiss National Bank (SNB). This unexpected increase makes it more likely that the SNB will pause its rate cuts. Previously, the SNB was a leader in easing policy, having lowered rates in both March and June of 2024. However, this new data complicates matters ahead of their upcoming meeting on September 18, 2025. The market was leaning towards another rate cut, but now those chances are becoming less likely. For traders, this will have a direct impact on Swiss Average Rate Overnight (SARON) futures. We can expect a sell-off in contracts for the fourth quarter of 2025 as the odds of another rate cut this year decrease. This adjustment reflects the market’s shift towards a more cautious SNB.

Implications For The Swiss Franc

In the foreign exchange market, a less accommodating SNB is positive news for the Swiss franc (CHF). It’s wise to reconsider any significant short positions against the franc, especially against the euro and the dollar. Implied volatility on CHF options will likely rise as traders prepare for potential currency strength leading up to the September meeting. The EURCHF exchange rate, which reached a one-year high near 0.99 just last month, may now face significant resistance. The unexpected inflation figure gives the SNB the opportunity to back away from the currency weakening it previously supported. This makes purchasing call options on the CHF a more appealing hedge or speculative move. While 0.8% core inflation is still low compared to the 3.4% peak seen in 2022, the change’s direction is what influences markets in the short term. Over the coming weeks, it will be crucial to monitor how interest rate swaps price in the chance of a final rate cut in 2025. This new data suggests that betting on that outcome is becoming riskier. Create your live VT Markets account and start trading now.

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Today, we’re focusing on the Swiss Consumer Price Index (CPI) report, which is expected to show a 0.1% increase year-on-year. This result is not likely to change how the Swiss National Bank (SNB) operates, as they are not planning to adjust rates unless there are consistent changes in the data. The Swiss Manufacturing Purchasing Managers’ Index (PMI) reached its highest level in two years recently. However, we may see future figures affected by potential increases in US tariffs.

Key Market Developments

We don’t anticipate any major market news unless something unexpected happens. This week, all eyes will be on comments from the Federal Reserve, along with the US ISM Services PMI and US Jobless Claims data. This morning, the Swiss CPI for July was announced at 0.2% year-over-year, which aligns closely with expectations. This low inflation supports our view that the Swiss National Bank will maintain current rates, which were last cut in March and June of 2024. Therefore, we expect minimal fluctuations in the franc, making short-volatility strategies on USD/CHF options attractive in the short term. With Swiss data providing little guidance, we’ll shift our focus to the United States this week. We’re looking for hints from Fed officials about their future plans, especially since they decided to keep rates steady during the July 2025 meeting. The market anticipates continued high rates, so any signals suggesting a softer approach could lead to big movements in equity and bond markets.

Upcoming US Economic Indicators

The US ISM Services PMI, which will be released later this week, is an important event to monitor. Last month, in July 2025, it had a solid reading of 53.5. However, forecasts suggest a slight decrease to 53.0, indicating the service sector may be slowing down. If the number drops below 52, it could indicate a quicker slowdown, prompting traders to buy put options on the S&P 500 as protection against recession concerns. We will also keep a close eye on the weekly US Jobless Claims data. Claims have stabilized around 220,000 for the last few months, showing a tight labor market. However, if claims unexpectedly rise above 235,000, it could alarm the markets and increase demand for VIX futures as traders prepare for more volatility. Create your live VT Markets account and start trading now.

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Eurostoxx futures climbed 0.6% in early European trading. This slight increase follows the steep losses from last Friday. German DAX futures rose by 0.5%, while UK FTSE futures also increased by 0.5%. Investor sentiment has turned more positive, shifting away from worries about US labor market data to the possibility of Federal Reserve rate cuts.

Market Sentiment Shift

Even with the rise, today’s gains don’t fully recover last week’s big losses. It’s important to remember this may just be a short-term pause in the ongoing downward trend. European markets, like the Euro Stoxx 50, are seeing a small rebound this Monday, August 4th, after a rough end to last week. The market seems to view Friday’s poor US jobs report as a sign that the Federal Reserve might cut interest rates soon. The hope for cheaper money is giving stocks a boost this morning. The shift was sparked by the July Non-Farm Payrolls report from last Friday, which revealed that the US economy added only 50,000 jobs, far short of the expected 180,000. The unemployment rate also rose to 4.2%, its highest level this year. These figures show that the economic slowdown we’ve been worried about might be speeding up. As a result, futures markets now indicate a greater than 70% chance that the Fed will cut rates at its next meeting in September, a big leap from the 20% chance seen last week. This significant shift in expectations is the main reason for today’s bounce. Traders are betting that bad economic news could actually be good for the markets.

Investment Strategies Amid Volatility

However, we should be cautious not to get too excited about this small rally. Europe’s volatility index, the VSTOXX, remains high above 25, showing that there is still a lot of fear beneath the surface. This might turn into a “bull trap” before another drop. For traders who think this rally is temporary, buying put options on the Euro Stoxx 50 might be a good strategy. This approach can be profitable if the index reverses today’s gains and continues the downtrend from last week. It allows for a bet on further weakness while managing risk. Looking back, we noticed similar situations in 2022 when weak economic data led to brief rallies fueled by hopes of a central bank shift, only for markets to fall again. The current scenario feels precarious, and the sharp losses from Friday are still fresh in our minds. Considering the uncertainty, strategies that benefit from major price swings, like straddles, might also be worth looking into for protection against a sharp move in either direction. Create your live VT Markets account and start trading now.

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The US dollar’s strength weakened after a surprise drop in US jobs data last Friday. Previously strong, the dollar faced challenges. The EUR/USD pair increased from eight-week lows around 1.1400 to almost 1.1600, testing important technical levels. Both sellers and buyers hold a neutral short-term bias, with no major shift toward selling the dollar yet. The USD/JPY pair fell from above 150.00 to about 147.00, crossing critical moving averages, which indicates a bearish short-term outlook. This change is driven by fluctuating bond yields and uncertainties in US-Japan trade relations. The GBP/USD pair broke a six-day losing streak, but the recovery was limited, failing to surpass key technical levels. It maintains a bearish to neutral bias depending on price movement around these levels.

USD/CAD Patterns

The USD/CAD pair shows similar patterns, trading between key hourly moving averages without strong negative momentum. The AUD/USD pair rose above its 100-hour moving average after the weak jobs data impacted the dollar. However, it remains neutral and needs more upward movement to favor buyers decisively. Overall, the charts indicate weaker dollar momentum with a neutral bias, but not a clear downturn. Ongoing weak labor data might push the Fed toward rate cuts, capping the dollar’s potential upside. Inflation worries from tariffs and data politicization could lower confidence in US economic data, complicating the dollar’s outlook. The weak US jobs report from Friday, August 1st, has shifted the dollar’s situation. The economy added only 95,000 jobs instead of the expected 180,000, and the unemployment rate rose to 4.1%. This surprised many and capped the dollar’s strength. This sudden weakness has led markets to reconsider the Federal Reserve’s next steps. Futures for fed funds show rate cut expectations for September jumped from about 30% last week to over 70% this morning. This rapid change in interest rate expectations is the key reason for the dollar’s drop, especially against the yen.

Derivative Traders and Volatility

For derivative traders, volatility is back. The VIX, a measure of expected market swings, rose to 18 following the jobs data, marking its highest level in three months. This suggests we should brace for larger price movements in the coming weeks, making options strategies more appealing but also pricier. The technical outlook is currently mostly neutral, meaning the dollar isn’t crashing, but its upward trajectory is blocked. A smart response would be to hedge long dollar positions with puts or consider selling call options on pairs like USD/CAD, which is still above key support. We aren’t yet in a strong downtrend, so aggressive bearish bets are premature. The most notable weakness is in USD/JPY, which dropped through key support levels to nearly 147.00 as US bond yields fell. The diminishing interest rate gap between the US and Japan makes holding dollars less attractive than yen. Buying puts on USD/JPY provides a direct way to capitalize on this weakness. Conversely, pairs like EUR/USD and AUD/USD have shifted to a neutral bias, stuck between technical levels. This price action could create an opportunity to sell options strangles, gathering premium while the market decides on its next move. However, a significant break in either direction could risk this strategy. Fundamentally, the situation is complicated by persistent inflation, influenced by tariffs. The last CPI reading in July 2025 showed 3.4%, putting the Fed in a tough position, similar to the policy challenges faced in 2022 and 2023. The conflict between slowing growth and ongoing inflation creates substantial uncertainty for the dollar’s future. Create your live VT Markets account and start trading now.

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Expiring foreign exchange options for August 4 are important for the EUR/USD pair, especially between 1.1550 and 1.1600. The US dollar weakened after last week’s job report revealed significant downward revisions to payroll figures. Additionally, the dismissal of the BLS chief and shifts in Fed funds futures toward a potential September rate cut further contributed to the dollar’s decline. Consequently, EUR/USD is currently trading between 1.1497 and 1.1610, its major hourly moving averages.

Euro Us Dollar Expiry Importance

The EUR/USD expiry near 1.1600 holds more significance and may limit volatility during European trading hours. These expiries could keep price movements steady until Wall Street opens. We observe substantial EUR/USD option expiries between 1.1550 and 1.1600, which might limit the pair’s upside in the short term. This comes after the dollar’s decline following a disappointing U.S. jobs report, which showed only 95,000 new jobs in July compared to an expected 180,000. These expiries are likely to keep price movements subdued, especially during the European session. The market is responding strongly to signs of slowing growth, with Fed funds futures indicating a 70% likelihood of a rate pause in September. This marks a significant shift from a month ago when a rate hike was still considered. With last month’s core CPI at a stubborn 3.8%, the Federal Reserve faces a tough situation.

Derivative Trading Strategies

This environment feels reminiscent of the sharp changes in sentiment we witnessed in 2023 when economic data prompted sudden shifts in central bank policies. Back then, dollar volatility surged following key jobs and inflation reports. We can anticipate similar fluctuations now as the market assesses whether this is a fleeting issue or the beginning of a new trend. For derivative traders, selling short-dated call options with strike prices above the 1.1610 resistance level could be a good strategy for collecting premium. Conversely, those who believe in the ongoing weakness of the dollar might see this as a chance to buy longer-dated call options, expecting a breakout later in the quarter. Monitoring the pair’s reaction around its key moving averages near 1.1497 will be essential for timing any trades. Create your live VT Markets account and start trading now.

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Gold prices are climbing, driven by speculation about rate cuts and demand for safe investments. Gold futures are currently at $3,411.8, up by 0.35% today. Over the last year, gold has surged by 36.98%, nearing the top of its long-term range. Several factors are behind this rise. A weaker U.S. jobs report has raised the chances of a Federal Reserve rate cut, now over 80%. Lower interest rates make gold more appealing since holding it costs less. Concerns about geopolitical tensions, trade policies, and inflation also make investors favor gold.

Trading Perspective on Gold

From a trading standpoint, the current trend supports buyers. Gold’s stability above $3,400 indicates strong support, particularly with prices hovering around $3,406-$3,409. Recent changes in market sentiment show increased buying activity, maintaining levels above key indicators like VWAP and POC. Order Flow Intel indicates a bullish trend, suggesting a potential move towards $3,440. However, traders may want to wait for a price pullback to enter, aiming for better risk-reward ratios. This analysis offers helpful insights for trading decisions but is not a direct trade recommendation. The outlook for gold remains positive, especially after the weaker U.S. jobs report heightened expectations for a Federal Reserve rate cut in September. After a long period of high rates, the market now sees an over 80% chance that the Fed will change its stance. This makes non-yielding assets like gold more attractive. This anticipation of lower rates comes as inflation remains a concern, a situation that has been difficult to manage since 2024. There has been a strong move toward safer investments amid ongoing geopolitical tensions and uncertainty in global trade policies. This persistent demand has pushed gold’s year-to-date performance above 29%.

Market Dynamics and Trader Strategy

Currently priced near $3,411, gold is building on a significant rally that began with the all-time highs in 2024. We are also witnessing record purchases from global central banks, which added over 1,037 tonnes in 2023 alone and continues to rise. These substantial buyers provide solid support for gold prices. Recent order flow shifts show a transition from sellers to buyers, indicating that upward momentum is likely to persist. It’s not advisable to chase the market at the current price. A more strategic approach is to wait for a price pullback for a better entry point. A support zone is forming between $3,406 and $3,409, which aligns with key indicators such as the Volume Weighted Average Price (VWAP). Placing entry orders for long positions within this range can offer a good risk-to-reward opportunity. This strategy allows traders to join the bullish trend without buying at the highest point of the current move. If this support level holds and the trend continues upwards, the next target could be around $3,440. Traders should use stop-loss orders to manage risk in case the market suddenly changes direction. Patience is key; wait for the market to reach your desired price. Create your live VT Markets account and start trading now.

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Citi has raised its gold price forecast to $3,500 for the next three months. This is an increase from the previous estimate of $3,300, with a new trading range set between $3,300 and $3,600, up from $3,100 to $3,500. Citi’s adjustment comes as they see a weaker US economy and growing inflation concerns in the second half of 2025. Coupled with a declining dollar, these factors could drive gold prices to new record highs.

Concerns Over US Economic Data

There are concerns about US labor market data from the second quarter as well as doubts about institutions like the Federal Reserve and the Bureau of Labor Statistics. Despite these issues, investment demand for gold remains strong, and moderate buying from central banks is expected to keep gold in a good position in the market. We maintain a bullish outlook on gold for the next three months, aiming for a price target of $3,500 and a possible trading range up to $3,600. Traders in derivatives might consider strategies that benefit from rising gold prices, such as buying call options or creating bull call spreads that expire in October or November 2025. This outlook is encouraged by the worsening US economic conditions. The recent Q2 GDP report revealed a growth rate of just 0.8%, which fell short of expectations. Additionally, the June Non-Farm Payrolls report showed much lower job creation compared to what we saw in 2024. This slowdown highlights the challenges facing the US economy.

Impact of Economic Pressures and Trade Tariffs

At the same time, new trade tariffs are raising inflation concerns, with the July Consumer Price Index climbing to 3.9%. These pressures are contributing to a weaker dollar, as shown by the Dollar Index (DXY) dropping from around 105 in May to its current level of 101.5. A weaker dollar typically makes gold more appealing to foreign buyers. Strong demand for gold acts as a solid foundation for any bullish strategy. Q2 2025 reports indicate that central banks, especially in Asia, continued to increase their gold reserves, adding over 200 tonnes. This ongoing buying helps cushion any price drops. Lastly, there are worries about the Federal Reserve’s credibility after its dovish stance in July. Some traders believe this shift was due to political influence rather than just economic conditions. This kind of uncertainty usually boosts demand for gold as a safe-haven asset. Create your live VT Markets account and start trading now.

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The recent jobs data has shaken up the markets, raising hopes for a Federal Reserve rate cut in September from about 39% to 81%. The main concern wasn’t the headline number but the significant downward revisions to previous reports. President Trump criticized Fed Chair Powell, calling for immediate rate cuts. He also blamed BLS Chief Erika McEntarfer for what he viewed as inaccurate job numbers, which led to her dismissal. Trump insisted that the US economy is doing well and demanded better data.

Impact On The Trump Economy

The flawed job numbers complicate the perception of the “Trump economy.” Strong numbers would support the Fed’s decision to hold off on cuts, which would upset Trump. In contrast, weak figures could lead the Fed to act, disrupting his economic story. This situation also risks both the independence of the central bank and the credibility of the statistics in the US. Accurate data is crucial for sound policymaking. If the data gets politicized, it undermines the trustworthiness of US financial information. The integrity of Treasury Inflation-Protected Securities (TIPS), which depend on accurate BLS inflation data, might be at risk. This could harm the credibility of the dollar and US financial assets. After a disappointing jobs report on August 1st, the market quickly shifted to price in a September rate cut. The non-farm payrolls report showed a gain of only 50,000 jobs, far less than the expected 150,000, with major downward revisions for prior months. Data from the CME FedWatch Tool indicated that the chance of a cut surged from around 39% to over 80% within hours.

Chaos In The Markets

The weekend firing of the Bureau of Labor Statistics chief has added more chaos. This attack on the independence of government data is generating enormous uncertainty in the markets. We can see this in the market’s fear gauge, with the VIX index, which measures expected volatility, rising from a calm 16 to over 24, warning traders to prepare for larger price fluctuations and to think about purchasing protection. This political upheaval puts pressure on the US dollar, which has weakened significantly against other major currencies. The Dollar Index (DXY) dropped sharply from over 105 to around 103.5 as global confidence in US institutions faces scrutiny. This scenario suggests that traders may consider buying put options on the dollar, possibly against traditionally safe currencies like the Swiss franc or Japanese yen. A similar pattern of political pressure on economic institutions occurred in 2018 and 2019. During that time, constant criticism of the Federal Reserve led to unpredictable market movements and sustained higher volatility. History indicates that this environment favors strategies that profit from instability, such as straddles or strangles, rather than taking a strong position on economic direction. The most pressing concern is the integrity of inflation data, which poses a serious issue for certain financial products. Instruments like Treasury Inflation-Protected Securities (TIPS) and the inflation swaps market are now facing a major credibility crisis. Traders should be extremely cautious with these instruments, as their pricing models heavily rely on government data that is now being openly challenged. Create your live VT Markets account and start trading now.

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China plans to tax interest income from government and financial institution bonds, ending a long-standing tax exemption in its bond market. This new tax will start on 8 August and will affect nearly 70% of China’s bond market by total amount. This change has caused a quick reevaluation of fixed income investments, mainly due to worries about lower after-tax returns. Demand for Chinese government and policy bank bonds may drop, especially among institutions that previously enjoyed tax-free benefits.

Implementation Details

Details about how this will be implemented are still unclear, but it shows China’s goal to expand its tax base. Analysts predict that the new 6% value-added tax on bonds will raise investment costs and create a yield gap of about 5-10 basis points between old and new bonds. Since this policy starts in just four days, we can expect increased volatility in China’s fixed-income markets. Traders might consider buying options on Chinese government bond (CGB) futures or related ETFs. This approach could help us profit from the large price movements expected as the market adjusts to this unexpected tax. We should anticipate bond prices to drop and yields to rise. Establishing short positions in 10-year CGB futures contracts on the China Financial Futures Exchange is advisable. This bets that the new tax will lower demand and, thus, the value of future government debt.

Impact on Global Markets

This tax change affects a huge amount of capital since China’s bond market is the second largest in the world, valued at over $21 trillion. By the second quarter of 2025, foreign institutions held around ¥3.2 trillion in Chinese bonds. A significant sell-off from these investors could weaken the yuan. Traders can also look for opportunities in the 5-10 basis point yield gap between old and new bonds. A basis trade that goes long on existing tax-exempt bonds while shorting futures contracts related to the new taxed bonds could capture this difference. This strategy takes advantage of the new tax inefficiency. This situation recalls the “Taper Tantrum” of 2013 when an unexpected announcement from the US Federal Reserve led to a sell-off in emerging market bonds. Although this tax is a domestic policy, it could shock investors who relied on tax-free bonds for years, creating a similar risk-off mood. This past incident serves as a helpful reminder of potential outcomes now. With the chance of capital outflows, we should also monitor currency markets. Hedging or betting on a weaker offshore yuan (CNH) in the coming weeks seems wise. Using options or forward contracts on USD/CNH would be an effective strategy. Finally, for those with bond portfolios, interest rate swaps (IRS) are a crucial defensive measure. By entering a swap to pay a fixed rate and receive a floating rate, we can guard against the risk of rising bond yields that are likely to affect all holdings. Create your live VT Markets account and start trading now.

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