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The French finance minister thinks the trade agreement with the US is the best solution.
French finance minister Eric Lombard recently spoke about the trade deal with the US. He called it the best compromise we can get, but also stressed the need for tariff exemptions for wines and spirits.
Lombard’s remarks show a careful optimism, differing from the bleaker tone we’ve seen lately. He warned that the deal could have painful effects on the European economy if it goes through.
Nikkei Ends Steady As Markets Await BOJ Verdict
Japanese stocks closed on a mixed note on Wednesday, as investors took a cautious stance ahead of the Bank of Japan’s (BOJ) upcoming policy announcement. The Nikkei 225 edged marginally lower, slipping 0.05% to finish at 40,625.15. Meanwhile, the broader Topix Index climbed 0.4% to 2,920, buoyed by strength in the banking and energy sectors.
Investor hesitation was largely driven by uncertainty surrounding Thursday’s BOJ decision. While markets broadly anticipate no change to interest rates, attention has turned to potential upward revisions in the central bank’s inflation projections.
Persistent price increases in sectors such as food and services may bring the BOJ closer to tightening its policy later in the year. However, officials remain wary of potential risks tied to global trade tensions.
Adding to the cautious mood, US Commerce Secretary Howard Lutnick reaffirmed that the 1 August tariff deadline for countries lacking trade agreements is still set in stone.
Although an extension of the trade ceasefire between the U.S. and China seems probable, no formal deal has been struck. Japan, as a key global exporter, remains vulnerable to disruptions in international manufacturing supply chains.
Technical Analysis
The Nikkei 225 traded sideways after a sharp intraday spike toward 40,962.15 was swiftly retraced. Price action now hovers around the 5-, 10-, and 30-period moving averages, all of which have begun to flatten. This typically signals market indecision or the start of a consolidation phase.
The MACD histogram has remained subdued, alternating weakly between green and red bars, and the signal line has stayed close to the zero axis without a clear trend bias.
With Japan’s earnings season still in motion and the Bank of Japan maintaining its ultra-loose stance as expected, equity traders appear hesitant to commit to a direction.
The lack of a strong catalyst may keep the index pinned within the 40,550 to 40,950 band for now. A confirmed break above 41,000 could open the door for renewed bullish momentum, but a dip below 40,540 might shift sentiment to the downside.
Watchful But Guarded Outlook
Should the BOJ adopt a more hawkish tone or sharply upgrade its inflation outlook, Japanese equities could come under pressure, especially if the yen strengthens in response.
From a technical perspective, a move below the 40,560 support zone may open the door to a slide towards 40,400. On the other hand, sustained gains above 40,800 would likely require more robust support from broader macroeconomic developments.
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A few FX options are set to expire, affecting EUR/USD and USD/CAD prices ahead of US trading.
EUR/USD expiries are observed between 1.1525 and 1.1550. This may temporarily stabilize prices, particularly before U.S. trading, as the pair has dropped significantly this week and is now testing the 38.2 Fibonacci retracement level at 1.1537.
For USD/CAD, there’s an expiry at the 1.3775 level, which coincides with previous highs from June and mid-July. While this isn’t a critical level, it might act as a support before North American trading begins, where U.S. data and meetings from the BOC and Fed will be important.
Focus on EUR/USD
Today’s significant option expiries in EUR/USD, centered around the 1.1525 to 1.1550 range, are currently keeping the price stable. This comes after a sharp decline this week, leading the pair to test a crucial support level at 1.1537. The market is considering Eurozone inflation data from last week, which at 2.5% suggests that the European Central Bank might need to maintain higher rates longer than the U.S. Federal Reserve. For derivative traders, this creates a lot of pressure just hours before the Federal Reserve’s interest rate decision. We see the implied volatility for one-month EUR/USD options rising to 6.8%, up from 6.2% earlier in July, as traders expect a significant movement. A hawkish Fed today could break through the 1.1500 level, while any indication of a dovish shift could push the pair back toward recent highs. In USD/CAD, the significant option expiry at 1.3775 is keeping the price steady near the highs from June and early July. This level is essential as traders weigh different outlooks from central banks, especially since recent Canadian inflation data remains close to the Bank of Canada’s target of 2.7%. The upcoming BOC statement will be critical in determining if the pair can move higher.Upcoming Market Trends
Looking ahead, we see a scenario similar to late 2023, when markets misjudged the timing of Fed rate cuts, leading to a sudden dollar rally. Traders should be on the lookout for potential spikes in volatility around central bank announcements, which could make strategies benefiting from large price movements appealing. The market’s response today will likely set the trading direction for the upcoming weeks. Create your live VT Markets account and start trading now.France’s preliminary GDP increased by 0.3%, but domestic demand stayed flat due to a decline in trade.
France’s GDP for the second quarter of 2025 saw a 0.3% increase, surpassing the expected 0.1% growth. INSEE’s latest data highlights what drove this GDP change.
Domestic demand stayed the same during this quarter, while foreign trade dipped by 0.2%. However, a 0.5% rise in inventory changes balanced this out. Domestic demand has struggled in the first half of 2025, dropping by 0.1% in the first quarter.
Underlying Weakness in the French Economy
The positive GDP figure for the second quarter disguises some serious issues. The growth was mainly due to businesses increasing unsold inventory, not from real consumer spending or trade. This suggests weaknesses that could indicate a slowdown in the future. This weak domestic demand reflects other recent data from summer 2025. The latest S&P Global Flash PMI for July revealed a contraction in France’s private sector, with the index dropping to 48.5. Meanwhile, inflation in France remains stubborn at 2.8%, significantly above the ECB’s target, making households cautious about spending. For traders, this underlying weakness paints a bearish outlook for French stocks. It’s worth considering buying put options on the CAC 40 index, as a market correction may follow once investors look beyond the headlines. The initial positive reaction could create a better opportunity to buy these positions in the weeks ahead.Impact on the Euro
This situation also negatively affects the euro. As the Eurozone’s second-largest economy struggles, it puts pressure on the currency. A similar scenario occurred during the 2011-2012 sovereign debt crisis when weaknesses in major member states heavily impacted the EUR/USD exchange rate. The conflicting data—a positive headline paired with concerning details—creates market uncertainty. This could lead to increased volatility in European markets. We might want to consider buying call options on the VSTOXX index, which tracks Euro Stoxx 50 volatility, to take advantage of expected market fluctuations. Create your live VT Markets account and start trading now.The extension of the trade truce with China depends on Trump’s decision amid ongoing tensions and misunderstandings.
The recent meetings in Stockholm aimed to extend the US-China trade truce. Both countries want to prevent a trade war and have agreed to keep things the same while they rethink their strategies.
China announced the extension, but US officials said President Trump will make the final call. This shows the ongoing frustrations and different interpretations of the agreements made during talks between the US and China.
Possible Outcomes
For now, both countries are working together, but the outcome of their next steps is still unclear. An extension seems likely, which may lead to a meeting between Trump and Xi Jinping either in October or before Thanksgiving. This potential summit could set the stage for future trade talks. However, recalling events like the 2019 Phase One trade deal, it could end up being just a show without any real concessions from either side. As time passes, both nations’ strong positions might result in more deadlock. With the final decision on the trade truce extension still undecided, market nervousness is increasing. The CBOE Volatility Index (VIX) climbed to just over 18 this past week, indicating uncertainty among traders. This situation reminds us of 2019 when each news update about negotiations caused sharp, short-term market movements.Market Implications
The most likely outcome is that Trump will approve the 90-day extension, merely postponing any serious confrontation. If this happens, traders can expect a brief rally in equity indices like the S&P 500 and a drop in the VIX. This creates a short window for profit through selling expensive options, as implied volatility is likely to decrease dramatically with the news. However, it’s important to remember that this is just delaying the issue. The underlying tensions remain, as shown by the latest Commerce Department data from June 2025, which indicated that the U.S. trade deficit with China grew slightly. Past experience with the Phase One deal teaches us that these agreements can be fragile and often focus more on political appearances than on real solutions. Thus, any market strength in August should be seen as a chance to prepare for future volatility. Looking ahead to the possible Trump-Xi meeting in October, it would be wise to start building protective positions. Buying put options on key indices or exchange-traded funds that expire later in the fourth quarter could be a smart way to guard against potential setbacks. Create your live VT Markets account and start trading now.The upcoming economic calendar includes major data releases and central bank decisions that will influence market sentiment.
Today features several important financial events to watch. Australia’s quarterly CPI report for Q2 met expectations, showing a trimmed mean of 2.7%. This has increased the chances of a 25 basis points rate cut next month from 84% to 92%.
In Europe, we will see preliminary Q2 GDP data for France, Italy, Germany, and the Eurozone, along with inflation figures from Spain for July. These reports will shed light on the region’s economic performance during the quarter.
US Economic Focus
US trading kicks off with ADP employment data and Q2 GDP figures. Next, attention will turn to central banks, particularly the Bank of Canada and the US Federal Reserve, both likely to keep rates unchanged. The focus will be on the Fed, especially on Jerome Powell’s press conference for any signs of division or future guidance. The day wraps up with significant tech earnings, as Microsoft and Meta share their results after the market closes. Their performance will impact tech stocks and could influence market sentiment for the week ahead. The likelihood of a Reserve Bank of Australia rate cut in August is now at 92%. The latest trimmed CPI reading of 2.7% for Q2 places inflation within the RBA’s target range for the first time since early 2022. Derivative traders might consider buying put options on the AUD/USD to hedge against a weaker Australian dollar. Today’s preliminary GDP figures for Europe’s second quarter are crucial, especially after Q1 showed just 0.1% growth. If Germany and the Eurozone report flat or negative growth, it will put more pressure on the European Central Bank. This scenario could prompt traders to buy put options on the EUR/USD or get ready for increased volatility in European indices.Anticipated Federal Reserve Moves
All attention is now on the Federal Reserve as US Q2 GDP data will shape discussions on a potential rate cut in September. After growth slowed to 1.8% in Q1, another weak reading today would strengthen the case for doves on the committee, especially with ongoing political pressure. Traders are heavily invested in options related to the September Fed meeting, expecting Powell may indicate readiness to act if data continues to decline. Tonight’s earnings from Microsoft and Meta will test the tech sector’s high valuations, which have driven the Nasdaq 100 up over 15% this year. Key points of interest will include their guidance on cloud and AI spending. Traders are using options on the QQQ exchange-traded fund to hedge or speculate on the market’s reaction, as a disappointing report from either tech giant could quickly dampen market sentiment. Create your live VT Markets account and start trading now.Tesla signs $4.3 billion battery supply deal with LG Energy for U.S. storage systems
Tesla has signed a $4.3 billion deal with LG Energy Solution for lithium iron phosphate (LFP) batteries. These batteries will be used in Tesla’s energy storage systems in the U.S., but not in vehicles. Production will begin in August 2027 at LG’s U.S. facilities.
This is the second major partnership Tesla has formed with a South Korean company this month. Earlier, Tesla made a $16.5 billion semiconductor deal with Samsung Electronics. While LG didn’t mention Tesla by name, the company announced a 5.9 trillion won overseas contract for LFP batteries. This contract can be extended for up to seven years and could increase supply.
The agreement will help LG Energy grow its presence in the U.S. energy storage market, especially as competition with Chinese battery makers intensifies. LG has also started producing LFP batteries at its plant in Michigan and plans to expand through a joint venture with General Motors in Tennessee.
This news is important for Tesla’s energy division, as it secures a key part of its supply chain. However, since production won’t start until 2027, the immediate financial impact is far off. Tesla’s energy storage reached a record 5.4 GWh in the second quarter of 2025, so securing this future supply is a major risk-reduction move. Traders might see any initial rise in Tesla’s stock as a chance to sell short-dated call options, as implied volatility could drop once the long-term nature of the deal becomes clear.
For LG Energy Solution, this agreement supports its plan to expand in the U.S. and compete with Chinese rivals. The deal enables LG to challenge CATL, which had over 35% of the global EV and energy storage battery market at the end of 2024. Since the deal benefits from tax credits in the Inflation Reduction Act, investors might consider bullish options for LG, expecting strong confidence in its North American growth.
This partnership, along with the recent Samsung semiconductor deal, highlights a trend of securing supply chains with U.S. allies. We see this as a long-term shift, especially considering the price volatility in lithium in 2023 and 2024 that showed supply chain weaknesses. A potential strategy could be to invest in U.S. and South Korean suppliers benefitting from these partnerships while taking short positions on competitors missing out on these crucial deals.
Powerful earthquake triggers tsunami alerts as Australia and China report economic updates affecting markets
A magnitude 8.8 earthquake hit off the east coast of Russia, triggering tsunami warnings across the Pacific. Waves reaching up to four meters have affected Russia, with smaller waves expected in Japan, China, the U.S. West Coast, and other areas. This earthquake is among the largest ever recorded.
In Singapore, the Monetary Authority decided to keep policies unchanged due to stronger-than-expected GDP growth in Q2. The settings for the Singapore Dollar’s Nominal Effective Exchange Rate remain the same.
Possible RBA Rate Cut
Australia’s latest CPI data met expectations or was lower, indicating that the Reserve Bank of Australia might cut rates by 25 basis points. Overall CPI growth has slowed, and core inflation has dropped to a three-year low, leading markets to predict a rate cut. China’s Finance Minister announced plans to boost fiscal support for domestic consumption. The government will work more closely with national and local investment funds to align with development goals. In foreign exchange markets, the U.S. dollar has weakened against key currencies, with the Japanese yen performing well. The Australian dollar briefly dipped after the CPI report but then recovered. Asia-Pacific stocks showed mixed results: – Australia’s S&P/ASX 200 rose by 0.6% – Hong Kong’s Hang Seng fell by 0.3% – Japan’s Nikkei 225 stayed flat – Shanghai Composite increased by 0.45%Market Volatility and Opportunities
The earthquake off Russia’s coast has created significant uncertainty in the markets, resulting in a risk-off atmosphere. Traders should expect increased volatility in Pacific-region assets in the coming weeks. We suggest buying protection, like put options on broad Asian stock indices, to respond wisely to the tsunami risk and potential economic disruptions. The Japanese yen is acting as a safe-haven asset, similar to the situation after the major 2011 Tōhoku earthquake, when repatriation led to a surge in value. With USD/JPY dropping below 148.00 from over 150 last week, we anticipate this trend to persist as Japanese firms secure domestic cash. Traders might consider buying JPY call options against the dollar to take advantage of this shift to safety. In Australia, softer inflation numbers have solidified expectations of a rate cut by the Reserve Bank on August 12. Since a 25 basis point cut is now fully priced in, the immediate trade opportunity has passed. However, traders can use options to speculate on the RBA’s future guidance, as any hint of a prolonged easing cycle could lower the Australian dollar considerably. Beijing’s commitment to increased fiscal support offers a positive outlook for certain assets. Recent data revealed that China’s industrial production growth slowed to 3.5% year-over-year in the second quarter, making this stimulus timely. This could benefit Chinese equities and industrial commodities, making call options on the Hang Seng China Enterprises Index or copper futures appealing. Besides financial implications, the earthquake directly threatens physical supply chains. We are keeping an eye on key ports like Vladivostok in Russia and Yokohama in Japan for any disruptions that might affect global shipping and energy flow. If liquefied natural gas (LNG) shipments to Japan are halted, prices could surge like they did after the 2011 disaster, opening up significant trading opportunities in energy derivatives. Create your live VT Markets account and start trading now.BofA raises year-end forecasts for Japan’s Topix and Nikkei due to positive market factors
BofA Global Research has updated its predictions for Japan’s Topix and Nikkei Stock Average for the end of the year. This update is influenced by factors such as the U.S.-Japan trade agreement, expected fiscal measures in Japan, and favorable market conditions.
BofA’s strategists recognize that cyclical stocks might face some challenges, but they also see opportunities for growth. They now expect Topix to reach 3,050 by the end of 2025, up from an earlier estimate of 2,850.
The Nikkei is forecasted to rise to 43,000, an increase from the previous prediction of 40,000. Right now, Topix is about 2,917, while the Nikkei is valued at 40,680.
Strategy Overview
With the new year-end targets of 43,000 for the Nikkei and 3,050 for the Topix, we see a clear, modest upside ahead. From the current Nikkei level of about 40,680, this suggests steady growth as we approach the end of 2025. Traders should interpret this as a sign to take bullish positions in the upcoming months. To make the most of this positive outlook, one effective strategy is to buy call options on Nikkei 225 futures. We think that contracts expiring in December 2025 with strike prices near 41,500 provide a great risk-reward balance. This way, traders can join in on the expected rise while keeping potential losses limited. This optimistic outlook is backed by real economic factors, including the finalized U.S.-Japan trade deal in early 2025. We also anticipate a new fiscal stimulus package from the Japanese government to be announced in September. These elements foster a supportive environment for stocks until the year’s end. Recent data supports this view, as the Japanese yen remains weak against the dollar, staying around the 158 level through July. This weakness benefits Japan’s large exporters, increasing their overseas profits when converted back to yen. Additionally, June 2025’s core inflation was reported at a manageable 2.2%, indicating that the Bank of Japan likely won’t need to tighten policy aggressively.Trading Strategies
Given that some cyclical stocks may encounter difficulties, a more targeted approach might be wise. Traders could focus on export-oriented sectors like automotive and technology, rather than domestic-focused industries. This could mean buying calls on individual strong stocks instead of the entire index. As the outlook suggests steady growth instead of sharp spikes, implied volatility may decrease. Consequently, selling out-of-the-money put spreads could be a good way to generate income. For instance, selling a 39,000 / 38,500 put spread for October would allow traders to benefit from both the upward trend and time decay. We experienced a similar market situation in late 2023 when a weak yen and expectations for supportive policies led to a strong rally at year-end. Now, in mid-2025, we observe conditions that closely mirror that period. This historical context gives us added confidence that the market can achieve these new higher year-end targets. Create your live VT Markets account and start trading now.Gold futures show bullish trends above $3,383 and bearish trends below $3,380, with corresponding targets set.
Gold futures are currently priced at $3,384.6, reflecting a 1.89% increase. This rise is primarily due to the rollover from August contracts to December ones. The outlook is bullish unless the price drops below $3,380, which would indicate a bearish trend. Important trading levels include a bullish zone above $3,383 and various profit-taking targets for both bullish and bearish strategies.
For bullish partial profits, if the price remains above $3,383, targets are set at $3,391.8, near a liquidity zone, $3,397.6—which is below the July 25 point of control—and $3,406.6, under July 25’s value area high. If the market turns bearish, targets drop to $3,378.4, just above today’s 3rd lower VWAP deviation, with a further target of $3,351 near the July 9 value area low.
