Insights 
VT 
Gold rebounds to around $3,300 after reaching a one-month low amid trade concerns and tariffs.
Gold prices have bounced back sharply after hitting a one-month low of $3,268. This rise is fueled by increased demand for safe-haven assets, as trade tensions rise and the US Dollar weakens slightly. Currently, gold is trading around $3,306, up 0.95% for the day, benefiting from uncertainty ahead of the August 1 tariff deadline.
The trade situation remains unpredictable. President Donald Trump plans to impose final tariffs on countries that haven’t reached agreements. Recently, a 25% tariff was placed on Indian imports, and tariffs on Brazilian goods were increased. In a somewhat positive move, a 15% tariff on South Korean goods is part of a new trade agreement, but the temporary ceasefire with China is nearing its end.
Key US economic reports, including the Core Personal Consumption Expenditures Price Index, are expected soon. The Federal Reserve is keeping interest rates steady at 4.25%-4.50%, which has lowered market expectations for a rate cut in September to 37.2%. Even as the Fed holds rates, Treasury yields have dropped, indicating a shift in market sentiments.
Gold demand has surged, with the World Gold Council reporting a 45% increase in value over the past year. Central banks added 166 tonnes of gold to their reserves in Q2, showing they view gold as a strategic asset. The XAU/USD is trading in a range between $3,250 and $3,450, with weak technical indicators suggesting a stable market unless there’s a significant breakout or breakdown.
With the tariff deadline approaching on August 1, gold is stabilizing around the $3,306 mark. This quiet period indicates that the market is waiting for clear signals from upcoming trade news. Traders should be careful of volatile moves driven by headlines.
Recent market data highlights this caution: the VIX volatility index rose to 22.5 this week, its highest level in three months. Additionally, the latest CFTC report shows a 12% increase in net-long positions in gold futures held by managed money, indicating that larger traders are optimistic about price increases.
Considering the $3,250 to $3,450 trading range, we recommend options strategies. A long strangle—buying both an out-of-the-money call and put—can help traders profit from significant price moves in either direction following announcements. This strategy allows traders to prepare for a breakout without committing to a specific outcome.
Looking back at past trade disputes from 2018-2019 gives us insight into the current circumstances. During that time, gold prices rose over 20% as tariff escalations created uncertainty and drove investors towards safe-haven assets. A similar scenario may occur if the trade truce with China fails.
Strong demand from central banks, which added 166 tonnes of gold last quarter, provides crucial support for gold prices. This institutional buying reinforces the $3,250 mark as a significant price floor, suggesting that dips toward this level may present buying opportunities.
While high Federal Reserve interest rates would typically pressure gold prices, falling Treasury yields tell a different story. The market appears to believe that aggressive trade policies could weaken the economy, leading the Fed to cut rates later this year. This expectation offers support for gold, even with the current hawkish outlook from the Fed.
Initial jobless claims were 218K, lower than expected, while continuing claims saw a slight decrease.
US initial jobless claims stand at 218,000, lower than the estimated 224,000. Last week’s figure was 217,000. The four-week moving average of initial claims is 221,000, down from 224,500 the previous week.
Continuing claims fell to 1.946 million, down from 1.955 million last week, which is below the estimate of 1.955 million. The four-week average for continuing claims is now 1.949 million, slightly down from 1.954 million.
Stable Job Market
These numbers indicate a stable job market, with a small drop in continuing claims. Chair Powell noted that the supply and demand for workers remains balanced, which supports this stability. A US jobs report is due tomorrow. The recent jobless claims show a steady labor market, which is good for the economy. Initial claims are staying below 225,000, suggesting that employers are not aggressively laying off workers. This stability eases the pressure on the Federal Reserve to change interest rates drastically. This jobs data matches the recent Core CPI reading for June 2025, which was stuck at 3.1%. With the Fed funds rate steady at 4.75% since February 2025, the market sees a low chance of a rate cut before the fourth quarter. This makes tomorrow’s employment report crucial for changing those expectations.Volatility and Strategic Options
Given this mixed outlook, we should expect more volatility around tomorrow’s announcement. The VIX has stayed low at about 14.5 this past month, which may be too low given the uncertainty. This situation reminds us of the summer of 2023 when similar ‘good news is bad news’ reactions led to sharp market swings after jobs reports. Traders might look at options strategies that profit from significant price moves in either direction, like a long straddle on the SPY ETF. This strategy allows for gains from the expected volatility after the jobs numbers are released, whether the news is positive or negative. Alternatively, if you believe stability will continue, selling covered calls on current stock positions could earn income while we wait for clearer signals. We should carefully monitor the continuing claims numbers, as their higher level indicates some weakness despite the solid initial claims. If tomorrow’s report shows an increase in the unemployment rate or slow wage growth, it could confirm this weakness and quickly shift market sentiment. This could lead to a drop in bond yields and spark renewed anticipations for an earlier Fed rate cut. Create your live VT Markets account and start trading now.Canada’s GDP in May fell by 0.1%, meeting expectations, while June is projected to show growth.
Canada’s GDP dipped by 0.1% in May, which was as expected. The previous month also saw a 0.1% decline.
A preliminary estimate for June suggests a small GDP growth of 0.1%. The goods-producing industries faced challenges, mainly because of a slowdown in mining, quarrying, and oil and gas extraction, even though manufacturing showed some growth.
Services Producing Industries
The services-producing industries stayed mostly steady. Within this group, real estate, rental and leasing, and transportation and warehousing sectors grew. However, retail trade and public administration faced declines. Out of 20 sectors, 7 grew in May. The date today is 2025-07-31T14:55:44.645Z. These two months of slight economic drop and a weak June estimate suggest that the Canadian economy is stalling. This supports the idea that the Bank of Canada will keep cutting rates, as it began to do in June and July this year. Derivative traders should prepare for lower interest rates in the months ahead.Economic Outlook
This sluggish trend matches recent statistics. The June 2025 Consumer Price Index (CPI) showed inflation dropped to 2.8%, while the latest Labour Force Survey revealed the unemployment rate rose to 6.2%. These numbers give the central bank a strong reason to lower rates further to boost the economy. Given this situation, the Canadian dollar may come under more pressure. The USD/CAD exchange rate has risen from about 1.35 in spring to over 1.38 now. Traders might consider buying call options on USD/CAD to prepare for further weakness in the Canadian dollar. The bond market reflects this outlook. Canadian two-year bond yields, which fell below 3.5% after the last rate cut, will likely continue to decrease. Traders should think about buying bond futures or using interest rate swaps to bet on lower short-term yields. The report’s details suggest a pairs trading strategy in equity derivatives. The ongoing weakness in the oil and gas sector, indicated by Western Canadian Select crude prices nearing $70 a barrel, makes put options on energy sector ETFs appealing. In contrast, the surprising strength in manufacturing may make selling puts on select industrial stocks a good strategy. Create your live VT Markets account and start trading now.In July, Germany’s inflation rate held steady at 2%, exceeding the expected 1.9%
Germany’s annual CPI inflation held steady at 2% in July, which is higher than the expected 1.9%. The monthly CPI rose by 0.3% after staying unchanged in June. On the other hand, the Harmonized Index of Consumer Prices increased by 1.8% year-on-year, missing the forecast of 1.9%.
The euro remained stable against the dollar, trading around 1.1450 after the inflation report, showing a daily rise of 0.4%.
Understanding Inflation
Inflation measures how prices for goods and services increase over time, expressed as a percentage. Core inflation excludes unpredictable items like food and fuel. Economists and central banks pay close attention to this figure because inflation above 2% can lead to higher interest rates and a stronger currency. High inflation generally supports a country’s currency, as central banks often raise interest rates to manage it, making the currency more appealing. In contrast, low inflation can weaken a currency due to reduced attractiveness. Gold is often seen as a safe investment during periods of high inflation, though rising interest rates can make interest-earning assets more attractive. Lower inflation can help support gold prices by allowing for lower interest rates. Germany’s stable inflation impacts the euro and financial markets, influencing decision-making on monetary policy. On July 31, 2025, these inflation figures are important for the coming weeks. Since headline inflation is steady at 2%, the European Central Bank (ECB) is likely to hold off on cutting interest rates. We expect the ECB to keep its cautious approach throughout the August holiday period. This situation contrasts with the United States, where core inflation has been steadily declining, reaching 2.5% as reported in June 2025. The Federal Reserve has paused its rate hikes, leading to a policy difference that favors the euro. This is a key reason for the euro’s recent strength against the dollar.Strategic Trading Decisions
Our trading strategies now lean bullish on the euro. We can consider buying near-term call options on EUR/USD futures, aiming for a rise towards the 1.1550 level. This strategy allows us to benefit from potential gains while limiting our risk, particularly if German economic weakness—like the recent drop in the July manufacturing PMI to 48.5—begins to impact the currency. The euro’s stability after the report indicates that implied volatility might be undervalued. There is a clear tension between Germany’s persistent inflation and its slowing industrial sector. This could lead to a sharp price movement, so buying straddles or strangles on the euro may be a smart way to profit from a big move in either direction. Looking at gold, the metal has been trading around $2,450 an ounce. With European inflation stable and not increasing, the pressure for aggressive ECB rate hikes has eased for now. This stable but high rate environment is generally favorable for non-yielding gold, making it a strong option for portfolio diversification. We remember how sharply the markets reacted to inflation reports in 2023 when central banks were rapidly increasing rates. Now, the market is more sophisticated and reacts less to small changes. This suggests we should concentrate on overall central bank policy trends instead of overreacting to a single data point. Create your live VT Markets account and start trading now.South Africa’s trade balance rose to 22.04 billion Rands in June, up from 21.67 billion Rands.
South Africa’s trade balance in rands rose from 21.67 billion to 22.04 billion in June. This change highlights the country’s trading activities over the month.
The overall numbers give us a glimpse into how imports and exports are performing. The increase shows a shift in the trade balance.
These figures are important for understanding the country’s economic situation. Keeping track of trade balances helps us see economic trends and trade relationships with other countries.
In June 2025, the trade surplus increased slightly to R22.04 billion, which is a small boost for the South African rand. This improvement indicates some strength in our export sector. However, it should be seen as a stabilizing factor, not a sign of a major currency rally.
This news is supported by recent data from the Minerals Council of South Africa, showing a 3.5% rise in coal exports for the second quarter of 2025. Yet, the SARB has reported a slowdown in foreign investments in July. These mixed signals suggest a tug-of-war for the currency’s direction.
Global factors are also affecting the rand. The U.S. Federal Reserve has pointed out ongoing inflation, which keeps the dollar strong against emerging market currencies. This external pressure may limit any significant gains for the ZAR in the coming weeks.
We also need to consider local factors, especially reports of increased load-shedding from Eskom that could reduce industrial output and future exports. This brings to mind a similar situation in early 2024 when a decent trade surplus was overshadowed by domestic power issues, resulting in ZAR weakening. This pattern suggests we should be cautious.
Given these conditions, we think making clear bets on the USD/ZAR is too risky. The mixed signals indicate that the market may trade within a range rather than follow a clear trend. Thus, we recommend using strategies that benefit from low volatility, like selling strangles or iron condors on the USD/ZAR pair.
This strategy allows us to earn premiums while the market absorbs the positive trade news against a strong dollar and local energy risks. We will focus on options expiring in late August and September to take advantage of this expected period of consolidation. We see more opportunities in managing volatility than in guessing the market direction.
Core PCE year-on-year climbed to 2.8%, surpassing expectations, while all stock indices posted gains
In June 2025, the core Personal Consumption Expenditures (PCE) in the U.S. rose to 2.8% year-over-year, slightly above the expected 2.7%. Month-over-month, the PCE increased by 0.3%, which matched forecasts. PCE prices, excluding food, energy, and housing, also rose by 0.3%, and services without energy and shelter saw a 0.2% increase compared to the previous month.
The overall PCE figures showed a year-over-year increase of 2.6%, slightly ahead of the anticipated 2.5%. The month-over-month rise was in line with predictions at 0.3%, based on an unrounded PCE figure of 0.2805%, which rounded to 0.3%.
Personal Income And Expenditures
Personal income grew by 0.3%, or $71.4 billion, rebounding from a decline of 0.4% the month before. Personal consumption expenditures rose by $69.9 billion (0.3%), although actual consumption only increased by 0.1%, following a revised figure of -0.2% from last month. Total personal outlays surged by $69.5 billion, keeping the personal saving rate steady at 4.5%, which amounts to $1.01 trillion in total savings. Meanwhile, major stock indices have made gains, with the Dow Industrial average rising by 118 points, the S&P index up by 62 points, and the NASDAQ increasing by 120 points. The latest Personal Consumption Expenditures (PCE) data presents a mixed picture. Inflation remains stubborn, with the core year-over-year figure at 2.8%, slightly higher than the 2.7% that was anticipated. Consumer spending appears weak, up only 0.1% for the month. These mixed signals put the Federal Reserve in a tough situation, and traders should expect more uncertainty. The market has been hoping for the Fed to indicate a start to rate cuts after keeping rates steady at 5.25% for over a year. However, ongoing inflation makes immediate cuts less likely. After the report, the CME FedWatch tool shows the probability of a rate cut at the September meeting has dropped below 40%.Market Volatility And Trading Strategies
For traders in derivatives, this suggests increased volatility over the coming weeks. The VIX, which measures expected stock market volatility, has been hovering just above 18, and it’s expected to stay high or even rise around future data releases. In this environment, buying options like straddles or strangles on major indices such as the S&P 500 could be a smart strategy to prepare for significant market moves in either direction. We’re also noticing personal income rising faster than spending, leading to a personal savings rate of 4.5%. This indicates that consumers are cautious despite having the capacity to spend, a trend also shown in the recent Q2 GDP estimate, which indicated growth slowing to 1.8%. This underlying weakness suggests that buying put options on indices or specific consumer-discretionary stocks may be a wise hedge. Looking back, this situation resembles the volatile markets from 2023 and 2024. During that time, each inflation report caused big intraday swings as traders adjusted based on changing Fed expectations. We should be ready for a similar pattern through August 2025, with sharp reactions to employment and manufacturing data. As a result, traders should pay attention to interest rate derivatives, as the direction of Treasury yields has become less clear. Options on Treasury futures are likely to see increased activity as the market weighs whether persistent inflation or slowing growth will catch the Fed’s attention. Employing defined-risk strategies like iron condors could be effective in a range-bound Treasury market until a clearer trend emerges. Create your live VT Markets account and start trading now.US employment cost index for Q2 rises by 0.9%, slightly exceeding expectations
The US Employment Cost Index for the second quarter of 2025 rose by 0.9%, exceeding the expected growth of 0.8%. During the same period, wages increased by 1.0% quarterly, up from 0.8% before.
Benefits saw a quarterly rise of 0.7%, down from the previous growth of 1.2%. This report is the best source for tracking wage growth, but it is released quarterly, unlike the more frequent Average Hourly Earnings data.
Federal Reserve Monitoring
The Federal Reserve pays close attention to this data to evaluate economic conditions in the labor market. Recent figures indicate some acceleration in wage growth, but benefits are not keeping up. Today’s Q2 Employment Cost Index data was stronger than expected, showing a 0.9% increase. Although benefits costs slowed, wages rose to 1.0% for the quarter. This suggests that wage pressures in the economy are not easing as quickly as desired. The Federal Reserve now faces a tougher challenge, as this data indicates inflation may remain high. This report follows the June 2025 CPI data, which showed core inflation stubbornly around 3.2%, well above the Fed’s target. With the Fed funds rate at 5.25%, this wage data dims the chances of a rate cut later this year. For derivative traders, this changes the outlook on future Fed policy in the coming weeks. It might be wise to position for interest rates to stay high longer, which could involve selling September or December SOFR futures contracts. Following this release, the market reacted, pushing the 2-year Treasury yield up 10 basis points.Impact on Equity and Currency Markets
In equity markets, continued wage pressure could hinder corporate profits and stock valuations. We can expect more volatility, so buying VIX call options for August or September could be a smart hedge. Protective put options on interest-rate-sensitive indices like the Nasdaq 100 are now more appealing than they were yesterday. This scenario is also positive for the US dollar, as a more hawkish Fed increases the interest rate gap with other central banks. We can expect the dollar to strengthen against currencies like the Euro and the Yen. This reflects the trend we saw in 2023 when strong economic data consistently boosted the dollar. Looking ahead, all eyes will be on next week’s August jobs report. The market will closely examine the Average Hourly Earnings figure for signs that this ECI strength is continuing. A strong AHE figure would support this hawkish outlook and likely enhance these trading trends. Create your live VT Markets account and start trading now.Barclays rules out the chance of an ECB rate cut in September based on Lagarde’s statements
Barclays has updated its forecast for the European Central Bank (ECB) rate cuts. Initially, they expected two cuts this year, one in September and another in December. Now, they foresee just one rate cut, which will happen in December. This change comes after considering US tariffs on EU imports and worries about inflation in the medium term.
Terminal Rate Forecast Update
The earlier forecast for the terminal rate was 1.50%, based on expectations about tariffs and inflation risks. While US tariffs matched this expectation, Barclays has decided to remove the September rate cut prediction. This decision was influenced by ECB President Christine Lagarde’s recent press conference and insights from ECB sources, which suggest that policy rates will likely stay the same in September. We are revising our outlook for the ECB’s next steps. A September rate cut now seems unlikely, and a pause in rate changes is more probable. This adjustment follows the latest communications from the central bank, which indicated a cautious approach to easing.Implications for Trading Strategies
This new outlook should support the euro in the upcoming weeks. Since the EUR/USD exchange rate has already strengthened above 1.09, strategies that bet on the euro maintaining its value or increasing further appear wise. The market is adjusting to the idea that the gap between European and US interest rates may not decrease as quickly as we previously thought this year. For those trading interest rates, it’s essential to raise short-term rate expectations for September. The most recent estimate for Eurozone inflation in June was a stubborn 2.5%, giving the ECB good reason to wait before a rate cut. This suggests that positions aimed at a September cut, as seen in Euribor futures, are at odds with the central bank’s clear message. European equities now face challenges from both higher interest rates lasting longer and a slowdown in global trade. The recent 15% US tariffs on major EU exports, which were highlighted earlier this month, will soon begin to affect corporate earnings. Traders may want to consider protective put options on major indices like the DAX or Euro Stoxx 50 to guard against potential declines in August and September. The tension between slowing growth and a cautious central bank could lead to increased market volatility. This situation echoes past cycles, like in 2022, when markets had to adjust their expectations following the ECB’s cues. Positioning for an increase in the VSTOXX index, Europe’s primary gauge of volatility, could be a smart strategy during the quieter month of August. Create your live VT Markets account and start trading now.Recent economic events lead to varied USD performance with mixed stock and yield movements.
Following the Federal Reserve’s choice to keep interest rates the same, the US dollar is performing in mixed ways. Fed Chair Powell highlighted the importance of managing inflation and employment but refrained from making specific commitments about rates, pointing to upcoming jobs and inflation reports. Two members of the Fed disagreed with this approach and may share their views soon.
President Trump criticized Powell’s leadership, blaming him for economic errors, and reinforced his support for tariffs, arguing they help the US. Treasury Secretary Bessent spoke about tough trade negotiations with China, expressing hope for a deal while criticizing India’s role in global trade. He is optimistic about the US economy, citing positive trends in capital expenditures and upcoming negotiations with Canada on aluminum tariffs.
Central Bank Updates
In central bank news, the Bank of Japan kept interest rates unchanged. Governor Ueda mentioned cautious steps towards meeting inflation goals. While noting improvements in wages, he emphasized the need for continuous increases, pointing out weak consumer spending. Ueda suggested gradual policy adjustments tied to inflation confidence and is watching currency movements but has no immediate plans. US stock markets gained significantly, propelled by strong earnings from Microsoft and Meta. The NASDAQ performed particularly well: – Dow: up 110 points – S&P: up 59.10 points – NASDAQ: up 311 points (1.5%) Notable stock movements: – Meta: up 11.62% – Microsoft: up 8.68% – Nvidia: up 2.25% – AMD: up 2.36% – Amazon: up ahead of its earnings report – SMCI: up 2.64% Yields in the US debt market have fallen: – 2-year note: 3.932% – 5-year yield: 3.939% – 10-year yield: 4.342% – 30-year yield: 4.869%Market Trends and Predictions
The Federal Reserve is staying steady for now, but we will likely remain in a holding pattern until the next two inflation and jobs reports arrive before the September meeting. The Consumer Price Index (CPI) report from June 2025 was slightly cooler at 3.1%, though core inflation remains stubbornly above 3.5%, which explains the Fed’s caution. This situation makes options that wager on price swings, like straddles on major currency pairs, appealing around these key data release dates. The ongoing tension between the President and the Fed brings political risk, leading to unpredictable market moves. The August 12th China trade deadline is a significant upcoming event that could cause volatility. With US exports to China only recently recovering to pre-2022 levels, any new tariffs could disrupt supply chains and markets. As the Bank of Japan shows no urgency to raise interest rates, the yen is likely to remain weak against the dollar. We are closely monitoring the USD/JPY pair, which recently approached the 150 level—a psychological barrier not reached since late 2024. This clear difference in policy suggests that buying any major dips in this pair could be a smart strategy in the coming weeks. The stock market rally is notable but seems focused on a few large tech companies, which can signal instability. The CBOE Volatility Index (VIX), reflecting expected market volatility, dropped to 14 this week—too low considering upcoming risks. This environment may be ideal for buying protective puts on indices like the Nasdaq 100 or using call spreads to capture further tech gains while managing risk. Despite the Fed’s tough talk on inflation, US Treasury yields are slightly lower, signaling something important. Bond traders might be betting that future economic data will be weak enough to compel the Fed to change its stance, or they are buying bonds as a safe haven amid trade war concerns. This conflict between Fed guidance and bond market actions suggests we can expect choppy, uncertain trading. Create your live VT Markets account and start trading now.European markets experienced a yen decline while US futures remained stable amid optimism in the tech sector.
European markets saw various changes on July 31, 2025, driven by US tech earnings and comments from the Bank of Japan (BOJ). Big US firms like Microsoft and Meta had strong earnings, boosting tech stocks. However, European equities couldn’t hold onto their gains. S&P 500 futures rose by 0.9%, and Nasdaq futures climbed by 1.2%, as excitement grew for Apple and Amazon’s upcoming earnings.
In the foreign exchange market, the Japanese yen weakened after BOJ governor Ueda downplayed inflation risks, although inflation forecasts were raised. The USD/JPY pair initially increased from 148.90 toward 150.00 but settled around the 200-day moving average of 149.51. The US dollar was weaker in other pairs as well, with EUR/USD rising 0.4% to 1.1448 and USD/CHF dipping 0.4% to 0.8115. Meanwhile, AUD/USD increased by 0.2% to 0.6445, and USD/CAD held steady around 1.3835.
