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Chinese institutions work to boost the renminbi’s global presence with an offshore RMB stablecoin initiative.
China’s financial institutions are working hard to elevate the renminbi (RMB) on the global stage, especially as the U.S. dollar weakened in early 2025. The People’s Bank of China (PBOC) is considering introducing an offshore RMB-based stablecoin. This would provide a reliable option for international trade and finance.
This move is part of China’s broader plan to lessen dependence on the U.S. dollar and enhance its presence in global capital markets. A report from Chinese media indicated a growing positive sentiment for the RMB, which may also affect regional currencies like the Australian dollar (AUD) and South Korean won (KRW).
Saudi Arabia’s pursuit of market share will lead to increased oil output, negatively impacting prices and profits.
**OPEC+ Increases Oil Production**
OPEC+ plans to raise oil production in October, but at a slower rate. The group will increase output by 137,000 barrels per day, which is less than the larger boosts seen in recent months. This change marks the start of unwinding a previous cut of 1.65 million barrels per day after reversing an earlier cut of 2.5 million barrels per day this year. The main goal appears to be regaining market share rather than keeping prices stable. Only Saudi Arabia and the UAE can significantly increase their supply.
This announcement comes as we expect a drop in seasonal demand. Crude oil prices have fallen about 15% this year to around $65 a barrel. This decline is impacting oil company profits and jobs, despite some support from Western sanctions on Russia and Iran.
In the short term, this decision could lower oil prices. This may benefit importing countries like EUR, JPY, and INR. However, it could create challenges for petrocurrencies like CAD, NOK, and RUB if crude prices remain low. The market did not find this development surprising.
As OPEC+ adds supply during a seasonal slowdown, oil prices are likely to drop. Traders are starting to buy put options on November Brent crude futures, aiming for a price drop to $60 a barrel. This strategy allows them to profit from potential price declines while managing risk.
**OPEC+ Market Dynamics**
This bearish outlook is supported by recent data from the Energy Information Administration. Their early September 2025 report confirmed a global supply surplus for the fourth quarter, highlighting weak demand. We’ve seen this market-share strategy before during the oil glut from 2014 to 2016, suggesting this pressure on prices may continue. The current crude price of about $65 a barrel is down nearly 15% since the start of 2025, indicating ongoing weakness.
In currency markets, this means a negative outlook for petrocurrencies. We expect further weakness in the Canadian dollar, which has declined 3% against the U.S. dollar in the last quarter, trading near 1.39. On the flip side, lower energy import costs are a boost for the Japanese yen and the euro, making call options on these currencies a smart hedge.
Beyond oil, there are opportunities in equity derivatives reflecting these changing cost structures. Put options on energy sector ETFs seem wise as oil company profit margins are likely to shrink. Conversely, call options on airline and transportation indexes are gaining interest, as lower fuel prices directly enhance their earnings.
However, since the OPEC+ decision was anticipated, much of this news may already be reflected in the market. This suggests that implied volatility in oil options could drop if prices stabilize without sharp declines. Thus, we are also considering selling out-of-the-money call spreads to earn premiums, betting that any price spikes in the upcoming weeks will be limited.
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The People’s Bank of China has increased its gold reserves as bullion prices surpass $3,500.
The People’s Bank of China has added to its gold reserves for the tenth month in a row in August. It increased its holdings by 0.06 million troy ounces, totaling 74.02 million ounces since it began buying again last November.
Gold prices have soared over 30% this year, now exceeding $3,500 per ounce. Key reasons for this rise include expectations of US interest rate cuts and concerns about political influences on the Federal Reserve.
Impact of Federal Reserve Independence
Goldman Sachs warns that threats to the Federal Reserve’s independence could drive gold prices up to $5,000. Although global central banks are buying less gold due to rising prices, the World Gold Council believes that geopolitical risks will keep demand strong. With gold stable above $3,500 an ounce, the ongoing purchases by the People’s Bank of China signal strong and consistent demand. The trend of de-dollarization has been important since the dollar was used as a weapon in 2022, providing support for gold prices. Central banks bought a net total of 800 tonnes in 2024, continuing a multi-year trend that supports a bullish outlook. The main reason for gold’s 30% price increase this year is the market’s expectation of US interest rate cuts. Historically, gold has performed well when the Federal Reserve lowers rates, as seen in 2019. Any hints of political interference with the Fed will likely boost this positive sentiment. Traders may want to consider positioning themselves for further gains, but they should be cautious given the current high prices. Buying long-dated call options on gold futures or exchange-traded funds can be a good way to benefit from a potential rise to $5,000 while limiting risk to the premium paid. Given the increased volatility, using call spreads can help lower the entry cost.Global Central Bank Buying Trends
It is important to note that while global central bank buying remains steady, it has slowed at these higher prices. The upcoming US inflation data and Federal Reserve meeting later this month are critical turning points. A surprising inflation report or a cautious statement from the Fed could lead to a sharp, temporary decline in prices. This environment may be suitable for “buy the dip” strategies, as geopolitical risks remain high, keeping safe-haven demand strong. We can look at the derivatives market for guidance, observing that open interest in call options with strike prices above $3,800 has increased by over 15% in the past month. Traders should pay attention to any unwinding of these positions, which could indicate a loss of confidence. Create your live VT Markets account and start trading now.The Czech central bank aims to keep a restrictive monetary policy to control long-term inflationary pressures.
Czech National Bank Deputy Governor Eva Zamrazilova stated that the monetary policy must stay restrictive for a longer time to control inflation risks.
Right now, the policy is set at a somewhat restrictive rate of 3.5%. This benchmark rate has remained at 3.5% for the last two meetings, after starting to ease in late 2023.
Key Indicators
Policymakers are keeping an eye on several key indicators. These include rising housing prices, ongoing inflation in the service sector, and increased wage growth, which could lead to higher consumer demand. Zamrazilova emphasized the importance of maintaining the current policy to achieve inflation targets. Even though a stronger koruna is lowering import costs and reducing energy prices is helping, these factors might not last. Plans are in place for the Czechs to switch to the euro. This information comes from a Bloomberg report. The Czech central bank’s decision to keep the policy restrictive should help stabilize the koruna. This makes strategies like buying call options on the CZK or put options on the EUR/CZK pair appealing in the coming weeks. With the European Central Bank’s policy rate staying at 2.5%, the interest rate difference continues to favor the koruna.Market Implications
This strong stance suggests that the market might be too hopeful about when rates will be cut. Traders should consider positions that benefit from sustained higher rates, like paying the fixed rate on short-term Czech interest rate swaps. This strategy takes advantage of the central bank maintaining its 3.5% benchmark rate until the end of 2025. It’s important to recall the aggressive rate hikes in 2021 and 2022, when rates peaked at 7.00%. This context makes today’s 3.5% rate seem only moderately restrictive. The latest data from August 2025 shows consumer prices at 2.8%, still above the central bank’s 2% target. This indicates the bank has little reason to cut rates anytime soon. For equity derivative traders, this outlook poses challenges for the local stock market. Extended tight credit conditions may hurt corporate earnings and economic growth, suggesting caution regarding the Prague Stock Exchange (PX) Index. We see value in buying protective put options on the PX index as a safeguard against potential downturns. Create your live VT Markets account and start trading now.Ishiba’s resignation weakens the yen as FX trading starts, revealing various exchange rates
Market liquidity on Monday mornings is usually low, but it improves as more Asian markets open. This early thin trading can lead to price volatility.
The Japanese yen started weak after Prime Minister Ishiba resigned. Current exchange rates are EUR/USD at 1.1710, USD/JPY at 148.13, and GBP/USD at 1.3502.
Additional Currency Pairs Update
Other currency pairs include USD/CHF at 0.7978 and USD/CAD at 1.3833. The AUD/USD and NZD/USD are at 0.6553 and 0.5892, respectively. These values show the changing trends in global currency markets. Traders should proceed with caution during this early trading period. Given the low liquidity, we should be careful of initial price swings. The immediate focus is on the yen’s weakness after the resignation of Prime Minister Ishiba, pushing USD/JPY toward the 148 level. This political uncertainty is causing increased volatility, with traders positioning themselves for further declines in the yen. The sudden leadership change in Japan is noteworthy. We might consider buying USD/JPY call options to take advantage of potential price increases with defined risk. One-month implied volatility for the pair has jumped from around 8.5% to over 12% overnight, indicating expectations of bigger price moves. This situation reminds us of previous market turbulence during leadership changes in Japan in the late 2000s.Global Currency Market Trends
In addition to Japan, the US dollar is strong against commodity currencies. This follows a strong US jobs report from last Friday, September 5th, which added 250,000 new jobs, surprising forecasts of 180,000. This data has strengthened expectations that the Federal Reserve will keep its aggressive stance for the rest of the year. In contrast, the euro remains stable, with EUR/USD trading above 1.1700. Last week’s Eurozone flash CPI data came in higher than expected at 3.1%, increasing expectations that the European Central Bank may need to raise rates again this year. We should closely monitor the growing policy differences between the ECB and other central banks, like the Bank of Canada. The pound is also holding steady near 1.3500, as the Bank of England continues to show its commitment to controlling inflation. However, commodity-linked currencies like the Australian and Canadian dollars are feeling the pressure from a strong US dollar and recent weak trade data from China. We are considering options strategies that would benefit from a stronger US dollar against the Aussie, especially with AUD/USD now below 0.6600. Create your live VT Markets account and start trading now.After Ishiba’s resignation, the Yen weakens as USD/JPY approaches 148.22 and rises in value.
The Japanese yen has weakened as the new week starts, following Prime Minister Shigeru Ishiba’s resignation. The USD/JPY exchange rate is now about 148.22, up from around 147.35 on Friday.
Other yen pairs have also risen, with EUR/JPY hitting about 173.45. Ishiba resigned after facing increasing pressure in his party due to a major electoral loss.
Political Unrest and Economic Impact
Ishiba took office in October 2024, but his coalition has lost majorities in both the lower and upper houses of parliament. Since Ishiba’s resignation has created significant political uncertainty, the yen is likely to weaken further. The immediate rise in USD/JPY to 148.25 appears to be just the start of a trend caused by unclear leadership. For traders, this suggests strategies that take advantage of a falling yen, like buying USD/JPY call options or selling yen futures. This political chaos complicates the Bank of Japan’s response to recent economic data, which shows core inflation for August 2025 still at a stubborn 2.8%. With the U.S. Federal Reserve’s funds rate steady at 4.75%, the big interest rate gap that supports the yen carry trade is now reinforced by indecision in Tokyo. We expect the BoJ to stay inactive during this leadership change, putting more downward pressure on the yen. The uncertainty around who will succeed Ishiba is likely to increase market volatility in the coming weeks. We are already seeing one-month implied volatility for USD/JPY options rise from below 9% last week to over 11%, as traders anticipate bigger price swings. This situation could make strategies like long straddles appealing, allowing for profit from significant moves in either direction once a new policy direction becomes clearer.Historical Context and Future Outlook
Looking back, from 2022 to 2024, we saw the yen decline sharply due to a widening policy gap. The current political instability removes a crucial factor that had been supporting the currency. This suggests that the yen is more likely to weaken further, potentially approaching the multi-decade highs in USD/JPY seen in late 2024. Create your live VT Markets account and start trading now.Upcoming events include US CPI, ECB decisions, OPEC discussions, Japanese GDP, and Chinese trade updates.
The week ahead is packed with important economic events, including the US CPI report, the ECB’s rate decision, and Japan’s GDP figures. Japan’s GDP for Q2 is forecasted to remain at 0.3%, thanks to boosts from business investment and exports. We can also look forward to Germany’s industrial output for July and China’s trade balance for August.
UN General Assembly and Apple
The UN General Assembly will likely discuss Iran’s nuclear program and may address Palestinian issues. An Apple event is set to introduce new products and could lead to higher iPhone prices. Additionally, the US Bureau of Labor Statistics (BLS) might release revised employment data. Chinese inflation data is expected on Wednesday, with July’s figures showing no growth. Norway’s CPI is predicted to hold steady at 3.1%. On Thursday, the ECB is anticipated to keep interest rates unchanged, focusing on broader economic projections. The Central Bank of the Republic of Turkey (CBRT) is expecting a 200 basis points rate cut after recent inflation data. The US CPI is predicted to increase by 0.3% for both headline and core figures in August. On Friday, UK GDP growth for July is forecasted at 0.1%. OPEC’s meeting on Sunday may discuss increasing oil production, shifting from previous plans to maintain cuts. This week will be heavily influenced by inflation data and central bank decisions, which could create volatility in interest rates and stock markets. The upcoming OPEC-8 meeting on Sunday is an important factor for energy prices. If they indicate a production increase, we might see crude oil prices drop, a shift from their earlier commitment to extend production cuts.Focus on Inflation and Jobs
In the US, attention will be on inflation and job market data. Thursday’s CPI is expected to show an increase of 0.3%, a rate that has kept the Federal Reserve cautious for over a year. Importantly, Tuesday’s preliminary employment data revisions could reveal that fewer jobs were created than initially reported, complicating the Fed’s policy decisions and adding volatility to the S&P 500 options market. In Europe, the ECB is likely to maintain its deposit rate at 2.0% on Thursday. The press conference following the decision will be crucial, especially with rising political uncertainty in France. The widening spread between French and German bonds during election turmoil in June 2024 raises concerns; any instability from Monday’s no-confidence vote could lead to heightened activity in the CAC 40 index options. Tuesday’s Apple event is another key point of interest, with the stock experiencing high implied volatility. Given the expected price hikes and limited surprises, a “sell the news” reaction could happen, as seen in previous iPhone launches. We should look for opportunities to trade short-dated put options in case of a dip after the announcement. Data from China on Monday and Wednesday is expected to confirm ongoing economic weakness. Continued sluggish export growth and low inflation resemble the deflationary trends we saw throughout 2024. This may put pressure on commodity-linked currencies, like the Australian dollar, and affect industrial metals. Create your live VT Markets account and start trading now.Reports suggest that OPEC+ may increase production, which could lead to further declines in oil prices and US drilling.
Oil prices ended Friday at $61.87, and there may be more declines ahead. There are reports that Saudi Arabia is pushing for increased oil production, which could lower crude oil prices. OPEC+ might also ramp up output, but probably not as much as in October as summer comes to a close.
In 2023, OPEC+ has increased production by 2.5 million barrels per day, apparently due to pressure from the US. Prices below $60 threaten the US shale industry, as seen by a drop in the number of drilling rigs. This decline raises concerns about future US oil production and could impact previous policies.
OPEC Production Decisions
OPEC is still holding back 1.65 million barrels per day while it works to restore full production. They are considering gradually adding between 135,000 and 350,000 barrels per day. This situation could have short-term benefits for inflation, but prices under $60 could cause problems, similar to trying to keep a balloon underwater. With crude oil prices around $85 per barrel, the upcoming OPEC+ meeting is crucial. There are rumors about keeping production steady to help prices, but worries about declining global demand create a lot of uncertainty. We can look back at past situations to understand what might happen next. In the late 2010s, OPEC+ production increases brought WTI crude prices down to nearly $60. This price drop threatened US shale producers’ profits, causing a sharp reduction in drilling. The market discovered that US shale production is very sensitive to these supply changes. This lesson matters today as the US rig count has recently shown some recovery, up 5% year-over-year according to EIA data from August 2025. However, this fragile recovery relies on prices staying above the $75 break-even point for many producers. Any unexpected production increase from OPEC+ could quickly disrupt this progress.Oil Market Volatility and Strategies
Due to the uncertainty, implied volatility on oil options is rising. A potential strategy is to use options to profit from a significant price movement in either direction, specifically with November contracts. A long straddle, for example, would benefit from a big price change after the meeting’s announcement. In the long run, any price drop from a production increase would probably be temporary. A decline in prices now could reduce US investment, tightening supply for 2026. This could lead to a stronger price rebound once demand stabilizes. Create your live VT Markets account and start trading now.Disappointing employment figures from the US and Canada support the case for upcoming rate cuts
US non-farm payrolls rose by only 22,000 in August, falling short of the expected increase of 75,000. In Canada, employment dropped by 65,500 instead of the anticipated 10,000 rise.
As a result, the Federal Reserve is considering cutting rates by 25 basis points. There’s a 90% likelihood of a rate cut at each remaining meeting this year. Meanwhile, Saudi Arabia suggests that OPEC+ should quicken the next oil production increase.
Market Movements
Market reactions were significant; gold surged by $41, reaching a new high of $3,586. WTI crude oil dropped by $1.49 to $61.99, and US 10-year yields fell by 10.2 basis points to 4.07%. The S&P 500 lost 20 points, ending at 6,481, with the Swiss franc leading the way while the Canadian dollar lagged. Both US and Canadian currencies weakened slightly, with the Canadian dollar performing the worst. The market predicts 47 basis points of easing in Canada and 131 basis points in the US over the next year. Gold gained from expectations of rate cuts, but the stock market had mixed reactions. Initial excitement about rate cuts shifted to concerns about a potential recession. Still, some late bids pushed US indexes higher by the end of the week. With the disappointing job reports from both nations, there’s a clear sign for central banks to act. The market now sees a 90% chance of a Federal Reserve rate cut at the September meeting, making lower interest rates very likely. Traders should consider derivatives that profit from falling yields, like buying call options on Treasury bond ETFs such as TLT or purchasing SOFR futures.Rising Volatility
The uncertainty in the stock market, which rallied on hopes of rate cuts but then fell due to recession fears, indicates rising volatility. The CBOE Volatility Index (VIX) has climbed from its summer low of around 13 to just over 19, reflecting increasing market anxiety. This environment is suitable for long volatility strategies, like buying VIX call options or using straddles on the S&P 500 to benefit from significant market moves. The Canadian dollar is under pressure due to weak domestic job data and plummeting crude oil prices. We see the loonie as the most at-risk currency among the G10 and anticipate further declines. Traders should think about purchasing put options on the Canadian dollar or taking short positions against safer currencies like the Swiss franc. Gold’s rise to over $3,500 is driven by falling real yields and a move toward safer assets. This strong momentum is fueled by upcoming rate cuts and economic concerns, presenting a great opportunity for profit. We believe that buying call options on gold futures (GC) or related ETFs is the easiest way to benefit from this trend. Crude oil is sending warning signs, as worries about a recession causing reduced demand are now more prominent than supply issues. This negative sentiment is heightened by reports suggesting that OPEC+ may increase production, leading to a bearish outlook for coming weeks. We recommend considering put options on WTI futures to hedge against or profit from further declines in energy prices. This economic slowdown isn’t surprising. Key indicators, like the ISM Manufacturing PMI, have been below the contraction level of 50 for several months in 2025. With the latest Core PCE inflation rate from July 2025 at a manageable 2.7%, the Fed has a clear reason to cut rates. However, it’s important to remember that early rate cuts in past cycles, like in 2007, didn’t prevent economic downturns— a crucial lesson for today. Create your live VT Markets account and start trading now.US stocks ended lower overall but recovered slightly later, showing mixed performances across indices.
US stocks finished the day lower after a disappointing jobs report that was initially viewed positively because it suggested possible rate cuts. However, concerns about a recession took over, leading to a downward trend. Late-day buying helped reduce losses for the S&P 500.
The Russell 2000, which is sensitive to rate changes, rose due to strong financial stocks. In contrast, the Nasdaq closed flat. Here’s how the major indexes ended: the S&P 500 dropped by 0.36%, the DJIA fell by 0.5%, and the Toronto TSX Composite gained 0.45%.
