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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In July, UK house prices rose by 0.6%, surpassing the expected 0.3% increase. The average home price reached £272,664, as activity stabilized after the end of the stamp duty holiday. Housing affordability in the UK is slowly improving. This is due to strong income growth, slower house price increases, and slightly lower mortgage rates. The average home price is now 5.75 times the average income, down from a record high of 6.9 in 2022. This is the lowest ratio in over ten years, making it easier for buyers to save for a deposit and benefiting from more available high loan-to-value mortgages.

Economic Resilience and Interest Rate Outlook

The unexpected rise in July’s house prices challenges the idea that the UK economy is cooling rapidly. The 0.6% increase, compared to the 0.3% forecast, indicates that consumers are more resilient than we thought. This may lead us to rethink predictions about a soon-to-come Bank of England rate cut. Markets are quickly adjusting their expectations, showing less likelihood of a rate cut this year. This is evident in the selling pressure on SONIA futures. Since June’s Consumer Price Index (CPI) remained high at 2.8%, this housing data gives the Bank of England more reasons to keep its cautious approach from the July meeting. Traders might want to prepare for UK interest rates to stay higher for longer than previously expected.

Implications for Currency and Equity Markets

This change in rate expectations is boosting the British pound. We should consider buying GBP, especially against currencies where central banks are following a more lenient approach. Call options on GBP/USD could be a smart way to capitalize on this potential upward trend in the coming weeks. For equities, we are looking at call options on UK housebuilders and major mortgage lenders. After their struggles during the 2023-2024 housing slump, better affordability and higher transaction volumes offer significant positive momentum. The data showing a low price-to-income ratio also supports a more solid recovery for these stocks. Create your live VT Markets account and start trading now.

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Recent trade news has significantly impacted the market as the US approaches an important deadline. Tariffs on Malaysia, Thailand, Indonesia, and Cambodia are set at 19%. Taiwan has secured temporary relief with a 20% tariff. Vietnam is also facing a 20% tariff due to the latest US trade measures. In Europe, Switzerland is dealing with 39% tariffs, affecting the Swiss franc, which rose 0.2% against the dollar to 0.8137 during the European session. Canada has seen its tariffs increase from 25% to 35%, while the US has given Mexico an extra 90 days before its trade deadline.

Ongoing China Negotiations

China is a key player in these negotiations, with discussions about a possible extension. Although Beijing has agreed to delay, the US administration indicates that uncertainty remains. President Trump has not yet confirmed an extension, and the current deadline is set for August 12. For an updated list of tariff changes before the August 1 deadline, check the White House announcement. These trade updates are causing significant uncertainty in the markets. We anticipate a notable rise in implied volatility across various asset classes, similar to the 2018-2019 trade disputes. Traders should think about buying protection or using strategies that benefit from sudden price movements, as the VIX could easily exceed 20 in the coming days.

Expected Market Volatility

The 39% tariff on Switzerland is a major setback, likely driving down the Swiss franc against the dollar. With the U.S. being Switzerland’s second-largest goods export market in 2023, totaling over $67 billion, we might see USD/CHF targeting the 0.8500 level. Options traders will focus on put options for the Swiss Market Index (SMI), as companies in the pharmaceutical and luxury watch sectors are likely to face serious challenges. For Canada, the 35% tariff increase is concerning for the Canadian dollar, especially since around 75% of its exports go to the U.S. We expect the loonie to weaken and will monitor bearish positions on the S&P/TSX Composite Index. Mexico’s 90-day extension offers temporary relief for the peso, but lingering uncertainty may prevent any significant rallies. Tariffs on Malaysia, Thailand, and other Southeast Asian nations will likely negatively impact their currencies and stock markets. Attention is now on the August 12 deadline for China, creating a significant risk event. This uncertainty should keep implied volatility high for options on the Chinese yuan and related market ETFs like FXI. Global trade tensions often lead to a flight to safety. We expect gold to gain momentum, possibly reaching highs not seen since the inflation concerns of 2022. Likewise, demand for U.S. Treasuries should rise, driving yields lower as investors seek shelter from volatility. Create your live VT Markets account and start trading now.

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Canada’s Prime Minister, Mark Carney, is unhappy with the U.S. decision to raise tariffs on Canadian exports to 35%. This increase affects key sectors like lumber, steel, aluminum, and autos, which are not included in the USMCA agreement. The U.S. has hinted at possible negotiations, but tariffs are set to rise for various countries, including Canada, after the August 1 deadline. Previously, tariffs were at 25%, but President Trump has signed an order raising them by an additional 10%.

Market Volatility Predictions

Today’s announcement of the 35% tariff will likely cause a significant spike in market volatility. The Chicago Board Options Exchange’s Volatility Index (VIX) experienced similar spikes during trade disputes in the late 2010s, so traders should brace for a similar situation. One strategy could be to buy call options on volatility ETFs to prepare for the upcoming uncertainty. The Canadian dollar is likely to drop in value against the U.S. dollar. Since about 75% of Canadian exports go to the U.S., the tariff profoundly impacts Canada’s economy. Consider buying put options on the loonie or going long on USD/CAD futures, predicting a decline in the coming weeks. The S&P/TSX Composite Index is expected to face significant pressure, particularly in the materials and industrial sectors. Companies in steel, aluminum, and auto parts are now at risk of losing their main market. Traders should think about purchasing put options on Canadian index ETFs like XIU to protect their portfolios or speculate on a possible downturn.

Interest Rate Outlook

This trade dispute raises the likelihood that the Bank of Canada might reduce interest rates to support the economy. In mid-2024, the Bank acted before the U.S. Federal Reserve to manage domestic issues, setting an important precedent. Traders might consider futures contracts on Canadian government bonds, as prices are expected to rise while yields fall. Create your live VT Markets account and start trading now.

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Taiwan has announced a 20% “temporary” tariff as it nears the final stage of trade talks with the US. Once a formal agreement is in place, this tariff rate is likely to decrease. This new interim tariff is lower than the previous one and is significantly less than tariffs imposed on other major trading partners currently negotiating. Taiwan’s progress indicates that a deal with the US may be reached soon.

Significance Of Market Developments

The news that US-Taiwan trade talks are nearing completion is important for the market. It lowers the risk of a full-blown trade war, which has created a lot of uncertainty. We see this as a sign to prepare for a possible rally in assets linked to Taiwan’s economy. The Taiwan Stock Exchange Weighted Index (TAIEX), which has been nervously trading below its June 2025 high of 24,150, now has a reason to break out. With two-way trade between the US and Taiwan nearing $200 billion annually, and semiconductors being the main export, we expect bullish strategies. Call options on major tech exporters like TSMC should do well as tariff risks fade. We expect the New Taiwan Dollar (TWD) to strengthen against the US dollar. After the currency fell to 32.5 per dollar last month due to negotiation tensions, a return to earlier stronger levels near 31.0 is now likely. Traders should explore strategies that benefit from a weakening USD/TWD exchange rate. Implied volatility for Taiwanese stocks is likely to drop significantly in the coming weeks. The removal of tariff concerns makes sharp downturns less likely, which reduces volatility pricing. This environment is ideal for selling put options or creating bullish call spreads on ETFs that track the Taiwanese market.

Impact On US Technology Firms

This situation is similar to the USMCA trade agreement finalized in 2019, which cleared a major uncertainty from the North American market. After that deal, the Mexican Peso and related stocks rallied as uncertainty faded. We expect a comparable positive reaction for Taiwanese assets once this agreement is officially signed. This is also good news for major US tech firms that heavily rely on the Taiwanese supply chain. Companies like Apple and NVIDIA can expect more stable costs for components, which should positively impact their stock prices. A lower need for currency and supply chain hedging will benefit their profits. Create your live VT Markets account and start trading now. Create your live VT Markets account and start trading now.

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Apple and Amazon both reported strong earnings, beating expectations on both revenue and profit. Apple saw double-digit growth across various products, with its services sector generating a record $27.4 billion. Amazon’s revenue reached $167.7 billion, surpassing forecasts of $162.1 billion, while AWS revenue increased more than 17% compared to last year. However, both companies face challenges due to tariff concerns. Apple expects its costs to rise by $1.1 billion this quarter due to tariffs, following $800 million in tariff costs in Q2 2025. This will continue to put pressure on the company’s stock performance this year.

Amazon’s Operating Income Guidance

Amazon provided a wide operating income estimate for Q3 2025, projecting between $15.5 billion and $20.5 billion. This broad range indicates potential impacts from tariffs, as the previous expectation was around $19.4 billion. CEO Andy Jassy expressed concerns about how tariffs might affect costs and demand. Both Apple and Amazon do not have much protection from AI advancements compared to some competitors. This could make them more vulnerable to tariff effects in the long run. On August 1, 2025, the market reaction suggests that worries over tariffs overshadow the positive earnings reports from both companies. Their forecasts indicate significant challenges ahead, creating uncertainty for these major players.

Market Uncertainty and Recommendations

For Apple, the projected $1.1 billion cost from tariffs this quarter is a significant negative factor, up from $800 million in Q2 2025. Given the stock’s poor performance this year, buying put options for September or October might be a smart strategy to protect against additional decline. Amazon’s income guidance for Q3 raises flags. A range that exceeds 25% of the midpoint shows major uncertainty, likely related to tariffs. This could lead to increased implied volatility, making long straddles an appealing option for traders anticipating a large price movement once the tariff situation clarifies. This isn’t happening in isolation; just last week, the U.S. Trade Representative announced a review of tariffs on over $300 billion of Chinese goods, which has kept the market on edge. The CBOE Volatility Index (VIX) has recently risen to nearly 18, a level not seen in months, reflecting growing anxiety. This situation is reminiscent of the trade tensions in 2019, which caused a spike in market volatility. Create your live VT Markets account and start trading now.

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Amazon and Apple reported strong earnings for Q3, exceeding analysts’ expectations and showcasing the resilience of Big Tech. In response, President Trump announced a 35% tariff on Canadian goods starting August 1. However, goods covered by the USMCA agreement and energy products like oil will not be affected. This controversial decision raises questions since the U.S. has a manufacturing trade surplus with Canada. Additionally, a broader range of tariffs has been announced, including a 39% tariff on Swiss goods, which has impacted the Swiss franc. A complete list of affected countries and products will be released in a week. Japan’s Finance Minister Shunichi Kato criticized the yen’s value, suggesting it is being influenced by speculators, and hinted at possible intervention. Despite these warnings, USD/JPY remained steady above 150.70.

Chinese Economic Performance

In China, the S&P Global Manufacturing PMI fell to 49.5 in July, below the expected 50.3 and June’s 50.4, indicating that factory activity is contracting. This result is slightly better than the official NBS figure of 49.3, showing ongoing weakness in China’s industrial sector. Meanwhile, major currencies remained stable as markets awaited the U.S. nonfarm payrolls report. The new tariffs add uncertainty to the markets, likely leading to increased volatility. We have seen similar situations during the 2018-2019 trade wars when the VIX index spiked after unexpected announcements. Option premiums are expected to rise, offering chances to buy protection or sell overpriced volatility based on your risk appetite. The 39% tariff on Switzerland targets high-value exports like watches and pharmaceuticals, which make up over 45% of Swiss goods sent to the U.S. annually. This makes bearish trades on the franc appealing. It may be wise to buy USD/CHF call options, as the Swiss National Bank may hesitate to intervene aggressively after recent rate cuts. For Canada, the situation is more complex due to the USMCA and energy exemptions reducing the impact. Still, the headline tariff might create negative sentiment, pushing USD/CAD higher, possibly nearing the 1.3800 level seen in early 2024. We should consider long positions in USD/CAD, while keeping in mind that the actual economic damage could be limited.

Opportunities in Currency Markets

In Japan, the market is challenging the Ministry of Finance more openly, compared to the fear that followed the interventions of late 2022. With verbal warnings proving ineffective, USD/JPY is likely to trend upward, making call options attractive on any dips. Traders may continue to push the pair higher to test the Ministry’s limit. The gap between a strong U.S. tech sector and a weakening Chinese economy creates a unique trading opportunity. Following remarkable earnings from Apple and Amazon, we can adopt a bullish stance on U.S. markets with call options on the Nasdaq 100. Meanwhile, China’s contracting manufacturing PMI at 49.5 supports buying put options on China-focused ETFs like FXI. All these positions will be tested by the U.S. nonfarm payrolls report released today. A strong jobs number, surpassing the expected 190,000, would boost the dollar’s strength and support these trends. However, a significant miss could lead to a sharp market reversal as investors reassess the U.S. economy’s health. Create your live VT Markets account and start trading now.

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Goldman Sachs has developed a strategy for how the equity markets might react to the upcoming U.S. nonfarm payrolls report. Their analysis shows that if job growth matches their prediction of +100,000 jobs, the S&P 500 could rise by +0.40%. Here’s how different job figures may affect the S&P 500: – **Less than 50,000 jobs:** Down by -0.75% – **50,000 to 74,000 jobs:** Down by -0.50% – **75,000 to 99,000 jobs:** Up by +0.25% – **100,000 to 124,000 jobs:** Up by +0.40% – **125,000 to 150,000 jobs:** Up by +0.25% – **More than 150,000 jobs:** Uncertain impact, ±0.25%

Implied Movements and Global Implications

The options market predicts an approximate movement of ~0.79% in the S&P 500 by the end of Friday. Goldman Sachs believes the best job figure would ease recession fears without sparking inflation concerns. However, they warn that job numbers above 150,000 could alter the equity outlook, possibly prompting changes in Federal Reserve policies. They’ve also noted that global corporate credit spreads are at their lowest since 2007, indicating that hedging strategies may be a good idea. As the jobs report is set to be released today, August 1st, 2025, we can understand how the S&P 500 might react. A jobs number around +100,000 is considered ideal, likely leading to a modest rise of +0.40%. Conversely, a weaker figure below 50,000 could result in a -0.75% drop, driven by recession fears. Traders in derivatives should keep in mind that the options market is only anticipating about a 0.79% move for the S&P 500 by the close today. This implies that if you expect a larger surprise, strategies that could benefit from a significant move in either direction might be undervalued. A number above 150,000 jobs carries uncertain impacts, reflecting mixed sentiments regarding inflation. In June 2025, job growth slowed to +140,000, following downward revisions from the previous month. This slowdown makes today’s report crucial. A figure below 100,000 could confirm worrying trends for the economy.

Federal Reserve and Market Risks

Market concerns arise from the Federal Reserve currently pausing interest rate changes, with inflation steady at around 3.1%. A surprisingly strong jobs report may challenge the perception that the Fed has finished raising rates. Therefore, a number exceeding 150,000 might not be a positive sign for stocks immediately. Looking ahead, there’s a notable warning sign for the upcoming weeks. Global corporate credit spreads are at their narrowest since 2007, with the BofA US High Yield Index spread hovering around just 320 basis points. This suggests a high level of complacency in the market, with little risk of default factored in. This low-risk pricing in the credit markets leads to the recommendation for traders to hedge their stock portfolios in the next few weeks. With the VIX currently around a calm level of 17, buying protective put options on the S&P 500 is a wise choice for insurance. These conditions indicate that while the market appears stable, underlying risks are increasing. Create your live VT Markets account and start trading now.

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