New Zealand’s business confidence rose to 47.8% in July, up from 46.3% previously. However, business activity slipped slightly to 40.6%, down from 40.9%. Sector performance varied significantly. While agriculture grew, both construction and retail saw declines.

Increase in Business Confidence

July showed a slight rise in business confidence. Yet, the decrease in actual business activity and mixed results across sectors indicate a fragile economic situation. This means opportunities may arise in specific areas rather than a general market increase. Traders should note the clear differences between sectors. Agriculture is performing well, especially after Fonterra raised its milk payout forecast to NZ$8.50. In contrast, retail and construction are struggling. This situation encourages long positions in agribusiness derivatives and bearish bets on domestic retail companies, particularly following last quarter’s 0.7% drop in retail sales volumes. Given the sluggish domestic activity, it’s unlikely the Reserve Bank of New Zealand will raise interest rates soon. The RBNZ maintained the Official Cash Rate at 5.50% last week, and with Q2 inflation easing to 3.8%, the New Zealand dollar (NZD) is expected to move sideways or decline. We advise caution when buying the Kiwi dollar, which has had difficulty staying above the 0.6150 level against the US dollar this year.

Market Movement Outlook

Looking ahead, indicators suggest minimal overall market movement in the coming weeks. Implied volatility on the NZX 50 index is at one-year lows. This environment may make strategies such as selling covered calls or cash-secured puts on stable blue-chip stocks appealing. However, be cautious; certain sectors could see sharp movements, making broad market shorts on volatility risky. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The People’s Bank of China (PBOC) determines the daily midpoint for the yuan using a managed floating exchange rate system. This system allows the currency to fluctuate within a +/- 2% range around the central reference rate. Each morning, the midpoint is set based on factors like market supply and demand and international currency trends. **Managing The Yuan’s Fluctuations** Throughout the trading day, the yuan can move within this established range around the midpoint. If the yuan approaches the limits of this band or shows excessive volatility, the PBOC may step in and trade currency to stabilize its value. This intervention helps ensure a controlled adjustment. The PBOC may also change the size of the trading band depending on economic conditions and policy objectives. Today, we expect the USD/CNY reference rate to be 7.1742. This reflects the central bank’s ongoing efforts to manage the yuan’s depreciation against a strong dollar. This reference rate is likely stronger than what market forces would suggest, continuing a trend we’ve observed for several months. Recent data indicates that China’s manufacturing PMI for July fell to 49.5, showing a slight contraction and ongoing economic weakness. This situation, along with a struggling property sector, puts pressure on the central bank to maintain a loose monetary policy. This policy contrasts with a US dollar that remains high, even as the Federal Reserve pauses its rate hikes. **Volatility And Trading Strategy** Given this managed environment, we expect low volatility in the coming weeks. Selling options on the offshore yuan (USD/CNH) to collect premiums could be a smart strategy, as the PBOC’s actions help limit sharp, unexpected market moves. The +/- 2% trading band serves as both a ceiling and floor for daily price action. A similar trend was seen throughout much of 2024, when the central bank regularly set strong fixes to counteract fundamental economic weakness. During that time, implied volatility on USD/CNH options stayed relatively low, despite a generally bearish sentiment towards the yuan. This past behavior supports the belief that authorities will act to prevent a chaotic decline in the currency. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Monetary Authority of Singapore (MAS) has decided to keep its monetary policy the same after its meeting on July 30, 2025. They will maintain the current appreciation rate of the S$NEER policy band, without changing its width or central level. Inflation rates for 2025 are expected to average between 0.5% and 1.5% for both MAS core and CPI-All Items inflation. While underlying inflation pressures are manageable, there are still risks. GDP growth in Singapore is expected to slow down in the second half of 2025 after a strong first half. Overall, GDP growth for 2025 is predicted to be around zero percent.

Uncertainties in the Singapore Economy

The Singapore economy faces uncertainties like potential trade conflicts, financial instability, and geopolitical tensions, which could lead to a global economic slowdown. The MAS mainly uses its exchange rate policy, managing the Singapore dollar (SGD) against major trading partners’ currencies, rather than adjusting domestic interest rates. The S$NEER is a trade-weighted index that influences the SGD relative to its main trading partners. The MAS allows the S$NEER to fluctuate within a set band and only intervenes when it breaches this band to ensure stability. This policy band has adjustable parameters: slope, level, and width. By keeping the policy steady, the MAS has set a temporary floor for the Singapore dollar. This decision might have disappointed traders expecting further easing, likely leading to a stronger SGD. In the upcoming weeks, we expect the currency to stay well-supported within its policy band. This stability from the central bank points to limited currency volatility. The MAS has indicated that it will defend the S$NEER policy band, preventing both extreme gains and losses. Therefore, strategies that benefit from low volatility—such as selling straddles on the USD/SGD pair—could be advantageous.

Global Trade’s Impact on Singapore

Singapore relies heavily on global trade, especially with China, which has recently shown improvement. For example, China’s official manufacturing PMI was 50.8 in March 2024, suggesting growth and a potential boost for regional trade. This resilience likely gave the MAS the confidence to pause its easing. However, domestically, growth is expected to moderate for the rest of 2025, which could pressure local stocks. We recommend considering hedging strategies, such as buying put options on the Straits Times Index (STI) or related ETFs. Historically, Singapore’s interest rates, like SORA, tend to follow global trends but with some delay due to the focus on foreign exchange. With the MAS holding steady, we expect local rates may not drop as quickly as in other major economies that are still easing. This could create trading opportunities in the interest rate swap market for those expecting a stable SORA. A key risk comes from any surprises in upcoming economic data, as the market was split on expectations. Singapore’s Q1 2024 GDP grew by 2.7% year-on-year, providing a strong foundation, but any sign of a sharper-than-expected slowdown in the second half could change market sentiment quickly. We will keep a close eye on leading indicators for any shifts in the economic outlook. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Fiscal Measures To Boost Consumption

China will implement new fiscal measures to encourage domestic consumption, according to Finance Minister Lan Fo’an. He mentioned that the uncertainty in China’s economic environment is growing. Beijing plans to strengthen growth by using more proactive fiscal policies. Key focus areas include creating a balanced property market and addressing local government debt. These issues have recently affected investor confidence and the finances of regions. Lan highlighted the importance of internal demand and fiscal flexibility as China navigates its structural and global economic challenges. These remarks may impact short-term perceptions of Chinese stocks and risk assets linked to domestic consumption and property. Active fiscal policies could help ease concerns about growth; however, the ongoing uncertainty regarding local government debt and the property sector might limit potential benefits. The yuan may receive slight support if stimulus expectations rise, but any significant appreciation would likely require tangible policy actions. With signs of increased fiscal support, we believe derivative traders should prepare for a possible near-term rally in Chinese assets. The second quarter of 2025 saw GDP growth at 4.6%, slightly below targets, while retail sales in June grew only 2.9%, highlighting the need for this stimulus. These data points set the stage for potential market shifts in the coming weeks.

Opportunities And Strategies

For equity derivatives, we see a chance to buy call options on indices like the FTSE China A50 for August and September. This strategy allows traders to take advantage of positive sentiment without investing large amounts of money. We recommend focusing on sectors mentioned directly, such as consumer discretionary and specific state-backed property developers who are likely to benefit. In commodities, we should consider long positions in industrial metals futures, especially copper and iron ore. Historically, announcements of Chinese infrastructure and property stimulus have led to short-term spikes in demand for these materials. However, we advise using tight stop-losses, as follow-through on policy promises can be uneven. Regarding the currency, the yuan has been stable around 7.33 to the dollar, and these announcements might help prevent further declines. We suggest selling near-term call options on the USD/CNH pair, as this strategy bets that the yuan will maintain its value or strengthen slightly. The yuan’s upside may be limited until clear spending plans are made public. We also expect an increase in implied volatility among Chinese equity options as the market processes this news. This creates an opportunity to sell volatility through strategies like short straddles or strangles after the initial excitement fades. This approach bets that the actual market movement will be less dramatic than what the options market predicts. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Recent cuts to tariffs on U.S. exports have global effects, according to economists at JPMorgan. While the impact on U.S. growth may be small, changes in global trade rules could benefit many countries. The World Trade Organization’s Most Favoured Nation principle states that if one country lowers tariffs on U.S. goods, it must also lower them for all other MFN partners. This means that countries cutting tariffs on U.S. products also lower them for other nations, including emerging markets.

Effects on Emerging Markets

Economists point out that these trade deals may unintentionally benefit third countries. For example, when tariffs on U.S. agricultural imports are reduced, it could boost exports from other MFN countries more than those from the U.S., affecting markets and economic models. It seems that recent tariff cuts on U.S. exports are not the main interest for traders. The real opportunity lies in the broader effects of global trade rules. Because of the Most Favored Nation principle, these tariff cuts influence many other countries, creating a wider impact than expected. This isn’t just a theory; the data shows early signs of this trend. After recent trade talks that resulted in lower tariffs on U.S. goods, export volumes from emerging markets rose by 1.5% in the last quarter. Additionally, net inflows into emerging market ETFs reached a six-month high in early July, indicating some capital is already shifting.

Opportunities in Derivatives and Currency Markets

In the coming weeks, we see a strong opportunity in the derivatives market. We are considering call options on emerging market indices, like the MSCI Emerging Markets Index, which appear undervalued. The market may not yet reflect the potential gains for export-oriented economies outside the U.S. Historically, trade liberalizations, like those after 2001, have led to long-term gains for assets in developing nations. We expect that currencies of emerging markets focused on exports could strengthen against the dollar. Thus, using currency options or forwards could be another way to benefit from this trend. We’re focusing on sectors in third-party countries that compete directly with U.S. exports, such as agriculture and manufactured goods. For instance, if a country reduces tariffs on U.S. soybeans, it also makes Brazilian or Argentine soybeans cheaper for itself. This distribution effect may be overlooked in current market pricing. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

A Republican senator, Josh Hawley, is proposing a new law to stop lawmakers from trading stocks. The White House is against adding the president and vice president to the bill. This proposed law, called the Preventing Elected Leaders from Owning Securities and Investments (PELOSI) Act, would prevent lawmakers from buying or holding individual stocks. Hawley’s plan to include the executive branch has faced pushback from the White House’s Office of Legislative Affairs.

Impact On Market Volatility

The White House’s opposition could add political uncertainty to the market. Conflicts like this, especially with the executive branch involved, often lead to instability in major market indices. Derivative traders should brace for increased market volatility in the coming weeks. We are monitoring the CBOE Volatility Index (VIX), which is currently at a low level of about 14. Any signs of movement on this bill could cause a spike in the VIX, similar to the significant surge we observed during the legislative stalemate in early 2024. So, investing in VIX call options or VIX-related ETFs could be a smart way to protect against or profit from potential market swings.

Sector Specific Implications

This issue could also affect specific sectors, which options traders should keep a close eye on. Data from the first half of 2025 reveals that lawmakers have most of their investments in technology, defense, and healthcare. We’ll be on the lookout for unusual trading volumes in options for ETFs like XLK and IHF, as these could indicate insider activity before the committee vote. The result of the vote on Wednesday will be crucial for our short-term strategy. If the bill fails, it may bring a brief relief for the current situation, reducing regulatory worries. However, if the bill moves forward despite opposition, we expect a negative impact on the sectors favored by politicians. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Bank of America is predicting a weaker U.S. jobs report for July, estimating a 60,000 increase in nonfarm payrolls. This is lower than the 100,000 forecast by Dow Jones. Economist Aditya Bhave mentioned that while markets might initially react negatively to a lower headline number, it’s more important to focus on private payroll growth and the unemployment rate. For July, a drop of 25,000 in public-sector jobs is expected, influenced by seasonal factors. ### Private Sector Hiring Insights On the other hand, private-sector hiring is expected to rise slightly to 85,000 from June’s 74,000. The unemployment rate is predicted to stay at 4.2%, in line with expectations, but small changes could impact market attitudes. If the rate were 4.1% or lower, it could be seen as a positive sign, while a rate of 4.3% or higher might suggest weakness in the labor market. Bhave highlighted that even minor shifts, especially in the second decimal place, can influence market sentiment. We are gearing up for the U.S. jobs report this Friday, August 1, 2025. The forecast shows a possible gain of only 60,000 jobs, far below the expected 100,000. This underperformance could create significant trading chances in the upcoming weeks. ### Market Strategy and Sentiment The initial market reaction to a low jobs figure will probably be cautious, leading traders to speculate that the Federal Reserve will delay tightening measures. This could result in a brief rise in stocks and bonds, alongside a decline in the US dollar. Derivative traders may act quickly on this immediate response. However, we urge everyone to focus on the details beyond the initial headline. Government job numbers may be distorted by seasonal trends, and we anticipate a drop of 25,000. The actual strength of the labor market will be revealed through private-sector hiring. We predict private payrolls will increase slightly to 85,000 from last month’s 74,000, a view supported by recent data showing a slowing trend. For example, the latest JOLTS report indicated that job openings fell to 8.2 million, and weekly jobless claims have averaged around 245,000 in the last month. The unemployment rate is the most critical figure to watch. We expect it to be 4.2%, but even small differences will significantly affect market sentiment. A rate of 4.1% or lower would likely be perceived positively, while a 4.3% or higher rate could suggest a weakening labor market. In past situations, such as late 2023, initial market reactions to jobs data were often reversed once investors grasped the full context. This indicates that making quick bets based solely on the report might be risky. A more thoughtful approach that waits for a complete understanding of the situation is wiser. Given this complex outlook, traders should think about strategies that take advantage of increased volatility. Using options to trade indices like the S&P 500 or currency pairs like EUR/USD can be effective. This strategy allows for profit from significant market moves, regardless of the direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Central Bank of Chile has lowered the interest rate by 25 basis points, bringing it down to 4.75% from 5%. This decision was unanimous among the bank’s board members. The bank is keeping an eye on global trade tensions and their effects on the international economy. They expect the interest rate to move towards a neutral level in the future.

Evaluating the Macroeconomic Environment

The board intends to closely assess the macroeconomic environment. This evaluation will help guide future decisions on the Monetary Policy Rate (MPR) to keep inflation in check with their target. We view the 25 basis point cut by the Central Bank of Chile as a strong indication for further easing. The drop to 4.75% was expected, so we are now focused on how quickly more cuts may occur. The bank’s statement about rates moving toward neutral values suggests that this easing cycle is ongoing. For currency traders, we believe the Chilean Peso will likely weaken against the dollar. Chile’s annual inflation recently dropped to 3.1% in June 2025, which gives the bank more room to focus on growth rather than inflation. With the US Federal Reserve maintaining rates around 5.25%, the increasing interest rate gap makes the USD/CLP pair appealing for upward moves.

Interest Rate Derivatives and Currency Volatility

The bank’s forward guidance encourages us to explore interest rate derivatives. We plan to benefit from upcoming lower rates, likely through interest rate swaps. Historically, easing cycles in Chile, like the one in 2019, have led to a steady drop in short-term government bond yields, a trend we expect will happen again. This easing should ideally boost Chilean equities, especially the S&P IPSA index. However, we are cautious due to the external risks highlighted by the bank. The recent 4% drop in copper prices, linked to weak manufacturing data from China, poses a significant challenge for Chile’s export-driven economy. With the conflicting forces of domestic policies and global uncertainties, we predict an increase in currency volatility. We are using options to express our viewpoint, as they allow for defined risk. Buying call options on the USD/CLP lets us gain from a weaker peso while limiting our potential loss to the premium paid. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The U.S. Securities and Exchange Commission (SEC) has approved a new way for cryptocurrency exchange-traded products (ETPs) to create and redeem shares. This change lets authorized participants swap ETP shares directly for the actual crypto assets, instead of doing it with cash. The SEC believes this update will lower costs and increase efficiency for crypto ETPs. It should also provide more flexibility and save money for issuers and intermediaries.

Institutional Adoption of Crypto Investment Vehicles

This reform is seen as a step toward greater acceptance of crypto investments by institutions. It could boost market liquidity and tighten trading spreads, which makes crypto investments more efficient. With the SEC’s approval of in-kind creations for crypto ETPs, we expect to see less price volatility in the coming months. While the announcement may cause a temporary increase in trading activity, the overall efficiency will decrease market friction and price fluctuations. Traders might want to consider strategies that benefit from lower volatility. This could include selling covered calls or cash-secured puts on the underlying assets. The new system greatly reduces the difference between the market price of an ETP and its net asset value (NAV). This happens because exchanging crypto for ETP shares directly makes arbitrage faster and cheaper for authorized participants. For those trading derivatives, this means the profitable arbitrage opportunities between ETPs and the spot or futures markets will mostly vanish.

Impact on Market Liquidity and Trading Volumes

We view this as a significant trigger for more institutional adoption, much like how gold ETFs launched in 2004 led to a prolonged bull market for gold. The initial cash-create spot bitcoin ETPs approved in early 2024 have already attracted over $60 billion in assets, showing strong demand. This new in-kind model will likely speed up inflows from large institutions that have been waiting to invest. This structural improvement should boost market liquidity for the underlying crypto assets. We expect trading volumes for Bitcoin, which have averaged around $50 billion daily in 2025, to rise as ETPs become more popular. This increased liquidity will lead to tighter bid-ask spreads on derivative contracts, lowering transaction costs for everyone involved. Given these factors, we are positioning ourselves for a steady, positive trend in the prices of underlying crypto assets. The combination of reduced volatility, growing institutional interest, and improved liquidity creates a favorable setting for long-term bullish strategies. We are considering longer-dated call options to leverage this anticipated growth while managing risk. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

UBS has issued a warning that tariffs could impact global growth, even with new trade agreements between the U.S., EU, and Japan. These agreements provide more clarity, but the ongoing 15% tariff on many goods from the EU and Japan might still slow economic progress. Ulrike Hoffmann-Burchardi from UBS Global Wealth Management highlights that these tariffs could affect global economic momentum. Higher inflation or reduced corporate profits might dampen market confidence and change economic forecasts.

The Role Of The US Consumer

UBS believes that the strength of the U.S. consumer could help prevent a recession. However, there is a need to be aware of the risks posed by tariffs. If trade tensions or inflation pressures rise, they could lead to new market volatility. Although recent trade deals offer a clearer picture, the remaining tariffs may continue to slow global economic growth. The latest World Trade Organization data shows that global goods trade for the second quarter of 2025 is still below its expected level, indicating ongoing weakness. This suggests that the market may be too hopeful about a quick recovery. A significant concern is that inflation could remain higher for longer than expected, which might lead central banks to keep a strict approach. The latest Consumer Price Index for June 2025 shows an inflation rate of 3.8%, driven by stubborn costs in services. This challenges the expectation of lower interest rates and could impact asset prices. Corporate profit margins are also under pressure this earnings season. With over two-thirds of S&P 500 companies reporting, profit margins have decreased by 50 basis points compared to last year, with many companies citing increased import costs. This profit squeeze poses a major challenge for stock valuations moving forward.

Strategies For Market Downturns

Considering these challenges, we recommend looking into hedging strategies. Buying protective puts on major indices like the S&P 500 or on sectors sensitive to tariffs, such as industrials and consumer discretionary, can provide important downside protection. This strategy allows for potential gains while limiting losses in case of a sudden market drop. Currently, the CBOE Volatility Index (VIX) is trading near historical lows around 14, making options relatively cheap. We see an opportunity to buy VIX call options or use VIX futures to guard against a potential rise in market volatility. History shows that times of trade tensions or unexpected inflation can lead to sharp increases in volatility, which can be profitable. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now