France’s preliminary Consumer Price Index (CPI) for July rose by 1.0% compared to last year, which is in line with expectations. The previous month’s figure was also +1.0%. The Harmonised Index of Consumer Prices (HICP) increased by 0.9% year-on-year, which is higher than the anticipated 0.8%. The last HICP reading was also +0.9%.

Service Price Inflation

Service price inflation is still a major concern, but this data is not expected to change the European Central Bank’s current viewpoint. While this inflation number from France doesn’t alter the overall situation, it does confirm our observations. Prices for services are staying high, which is a critical issue for the European Central Bank. Since this figure was anticipated, there is no sudden shock to the market. Looking back, this aligns with the June 2025 Eurozone inflation that was reported at 2.3%, leading the ECB to pause its rate-cutting strategy. Germany’s preliminary July inflation also came in stubbornly at 2.5%, reinforcing the idea that the inflation battle is ongoing. The ECB, currently holding its deposit rate at 2.75%, is likely to stay this way for now as it watches if this trend continues into the August data release.

Implications For Interest Rate Markets

For interest rate markets, this suggests that the likelihood of an ECB rate cut in September is decreasing. We may see short-term rate futures, like the December 2025 €STR futures, dip slightly as traders adjust their expectations for further easing. This supports a view of “higher for longer” rates for the rest of the year. Ongoing inflation lends some support to the Euro against currencies like the US dollar, where the Federal Reserve indicates a more stable policy outlook. Traders might start buying short-term call options on the EUR/USD, anticipating a gradual increase. The market may have become too complacent in pricing in ECB cuts that may not happen as soon as expected. For stocks, this news isn’t positive since stubborn inflation and higher rates can squeeze corporate profits. It may be wise to consider buying protective puts on the Euro Stoxx 50 index as a safeguard against a market pullback. Memories of the high inflation seen in 2022 and 2023 mean that any sign of its return will make investors anxious. Create your live VT Markets account and start trading now.

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Japan’s economy is slowly improving but still faces challenges. Easy monetary policies should help, and while inflation may pause, it is expected to rise gradually. The impact of trade changes on prices and international economies is uncertain. We need to pay close attention to how trade policies influence financial markets and Japan’s economic future.

US-Japan Trade Deal Progress

The US-Japan trade deal represents progress and reduces uncertainty about the economic forecast. This suggests there may be future interest rate hikes, although the Bank of Japan is unlikely to commit to this immediately. Recent comments show a shift in the Bank of Japan’s thinking. Revised inflation forecasts indicate they may raise rates sooner than expected, signaling a move away from the very easy policies of the post-pandemic period. Data supports this shift. The national core-core CPI for June 2025 was 2.3%, staying above the 2% target for the fourth month in a row. This ongoing price pressure, along with average wage increases of 4.5% from spring Shunto negotiations, gives the Bank of Japan a solid reason to take action.

Implications for Currency and Bond Markets

For traders, this points to a stronger yen in the coming weeks. After the USD/JPY rate approached 170 earlier this year, these new comments could lead to a significant reversal. It’s wise to prepare for a move back toward the 160-162 range using options or futures. We must keep a close eye on the Japanese Government Bond market. Since the end of Yield Curve Control in early 2024, the 10-year JGB yield has risen to about 1.1%. Another rate hike could push this closer to 1.25%, opening up opportunities in interest rate swaps and bond futures. The new US-Japan trade agreement is a key factor in this situation. By lowering tariffs and reducing economic uncertainty, it removes a major reason the Bank of Japan has had for not acting over the past year. This makes a policy change more likely than at any time since the last small hike. Create your live VT Markets account and start trading now.

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Switzerland’s retail sales rose by 3.8% in June, surpassing the expected increase of just 0.2% year-on-year. This data comes from the Federal Statistics Office, which also updated the previous figure from 0.0% to 0.3%. The article touches on various issues beyond retail sales in Switzerland. These include geopolitical tensions, such as Iran’s missile strike on the Al Udeid Base and the U.S. hitting Iran’s nuclear facilities. Economic topics also highlight the U.S. economy’s growth of 3% in Q2 despite trade conflicts, while Chinese banks are launching significant funds in Southeast Asia.

Global Economic Effects

US tariffs on goods like copper are affecting prices worldwide, and India is facing a 25% tariff. Changes in UK tax laws are impacting wealthy individuals, leading to a 14% drop in butler jobs. Due to US tariffs, India’s rupee has hit a five-month low, which is impacting market expectations. In technology news, OpenAI’s revenues have skyrocketed thanks to an influx of ChatGPT users. Microsoft and Meta have also reported strong earnings, with Meta planning major investments in superintelligence technologies. Additionally, there’s a warning about the risks of foreign exchange trading. The ongoing US-Iran conflict signals high geopolitical risk, indicating a need for long volatility strategies. Buying VIX call options or options on major indices might be a wise hedge. Historical data shows that spikes in Middle Eastern tensions, like in early 2020, caused the VIX to jump over 30% in a week; we might see this pattern again.

Federal Reserve Stance

The Federal Reserve is keeping its rates at 4.3%, which clashes with political calls for deeper cuts. This situation suggests opportunities for trading interest rate volatility through options on Fed Funds futures or SOFR futures. After the Fed’s latest statement, the chances of a rate cut in September have likely dropped below 20%. However, if Powell shows any uncertainty, it could lead to sudden market shifts. Switzerland’s retail sales have exceeded expectations with an impressive 3.8% annual growth instead of the anticipated 0.2%. This robust economic performance strengthens the case for the Swiss franc, particularly against weaker currencies. We might consider call options on CHF or short EUR/CHF futures, anticipating more strength ahead. High tariffs have significantly impacted copper prices, which have fallen by 50%, affecting industrial and emerging markets. Continued pressure makes put options on copper miners or shorting copper futures attractive. The new 25% tariff on India will likely further weaken its industrial demand, adding to the bearish outlook. We’re seeing a clear divide in the market: Big Tech is thriving, while the broader economy is under stress. Strong earnings from Microsoft and Meta and hefty revenue growth for OpenAI indicate that technology could be a safe haven amid uncertainty. This separation opens up a pair trade opportunity: going long on the Nasdaq 100 via futures while buying puts on more industrial-focused indices like the Russell 2000. India is certainly feeling the impact of US tariffs, with the rupee at a five-month low and a decline in the Nifty index. The grim growth outlook and a recent Reserve Bank of India report showing a 1.2% drop in manufacturing PMI might lead traders to consider buying USD/INR call options, betting on further rupee weakness toward the 88.00 level. Create your live VT Markets account and start trading now.

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Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

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French and German inflation rates, Canadian GDP, US PCE, US ECI, and US Jobless Claims are important economic indicators. In the European session, we will see Swiss Retail Sales, French CPI, and German inflation, with no changes expected from the SNB or ECB. Market expectations for a rate cut before the end of the year are decreasing. In the American session, Canadian GDP is not expected to have an impact since the Bank of Canada is holding rates steady. The chance of a rate cut by the end of the year is around 50%. The US PCE price index is expected to be 2.5% year-over-year, with Core PCE at 2.7% year-over-year. Both figures are seen as predictable based on earlier CPI and PPI data.

US Employment Cost Index and Jobless Claims

The US Employment Cost Index for Q2 is forecasted at 0.8%. The Fed tracks this for signs of wage growth, but it often lags behind the economy. US Jobless Claims indicate a “low firing, low hiring” trend due to tariff uncertainties. Initial Claims are expected to be 224K, up from 217K, while Continuing Claims remain steady at 1,955K. These indicators will shape market sentiment and future monetary policy. As the Federal Reserve holds back on signaling a rate cut in September, the next few weeks will hinge on US data. The market is adjusting expectations with each new release, rather than waiting for the complete data set the Fed is looking for. Attention is focused on the next two Non-Farm Payroll and CPI reports ahead of the Fed’s meeting. The upcoming US PCE data, projected with a core reading of 2.7%, is not anticipated to be shocking since it is mainly based on previous inflation reports. However, Core PCE has been stubbornly above 2.8% for the first half of 2025, so any deviation from this prediction will be monitored closely. This is exactly why the Fed is hesitant to act without strong evidence of a slowdown.

US Labor Market Data

The US labor market data is where the real concerns are. After a weaker NFP figure for June 2025 of about 175K, all eyes are on tomorrow’s report and another in September. Weekly jobless claims have remained within a tight range of 215K to 230K for months, indicating a market that is neither aggressively hiring nor firing. With the Fed’s next steps uncertain, traders in derivatives should brace for increased volatility. Strategies such as buying straddles or strangles on major indices like the S&P 500 or rate-sensitive ETFs could be effective. These positions can profit from significant market movements in either direction following the crucial US jobs and inflation data. Meanwhile, European and Canadian markets present fewer immediate opportunities, as their central banks appear to be on a steadier path. The European Central Bank has indicated a strong pause after its one rate cut in March 2025. This makes currency pairs like EUR/USD more reliant on how the US dollar reacts to its own domestic information. Create your live VT Markets account and start trading now.

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Eurostoxx futures rose by 0.4% during early European trading, fueled by strong earnings reports from Microsoft and Meta. Other European indices are seeing similar gains: German DAX futures are up 0.3%, French CAC 40 futures have increased by 0.6%, and UK FTSE futures have risen by 0.1%. In the U.S., futures are climbing as well. S&P 500 futures increased by 0.9%, and Nasdaq futures are up 1.3%. The market is anticipating more earnings reports, as Apple and Amazon will share their Q2 results later today.

Optimism Driven by Big Tech

The current optimism from big tech suggests a short-term market upswing. Traders may consider buying near-term call options on the Nasdaq 100 to take advantage of the momentum from companies like Microsoft and Meta. The upcoming earnings from Apple and Amazon will be crucial in determining if this trend continues. However, we should be careful since market volatility is low, with the VIX index around 13. While this makes options cheaper, it could also indicate complacency and a risk of sudden market shifts. It might be wise to use protective strategies, like buying put spreads on the S&P 500, to guard against any negative surprises or changes in sentiment. In Europe, the gains in the Eurostoxx 50 seem less stable, especially as the ECB remains cautious about inflation. We recall how the rally in early 2025 stalled when economic data fell short of expectations. A potential strategy could be selling covered calls on broad European ETFs, allowing for premium earnings while the market processes conflicting signals.

Focus on Central Bank Policy

In the weeks ahead, attention will likely return to central bank policy rather than earnings. The US Core PCE inflation for June 2025 was reported at 2.8%, still above the Federal Reserve’s target. This means interest rate decisions continue to pose a risk. Unexpected strength in the upcoming jobs report could dampen current market enthusiasm. This situation reminds us of the narrow, tech-led rally throughout much of 2023. To navigate this, we could consider a pairs trade, going long on technology sector futures while buying puts on a more cyclical index like the Russell 2000. This strategy focuses on the belief that tech will outperform the broader, more economically sensitive market. Create your live VT Markets account and start trading now.

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Germany’s import price index for June stayed the same at 0.0%, missing the expected drop of 0.2% for the month. This comes after a decline of 0.7% in the previous month. Year over year, import prices fell by 1.4%. This decrease is mainly due to a 13.6% drop in energy prices over the same period. However, energy prices rose by 3.4% in June compared to the previous month, which affected the overall import price. Excluding energy, import prices actually fell by 0.4% for the month.

Underlying Weakness And Energy Costs

The latest import price data for June 2025 may look flat, but it’s misleading. The 3.4% monthly rise in energy costs masks broader weakness in the economy. When we remove energy from the equation, import prices decreased by 0.4%, signaling weak demand. This detail matters for those monitoring the European Central Bank, suggesting they may be less aggressive with interest rates. Therefore, it’s wise to consider strategies that benefit from a cautious central bank. For instance, buying German Bund futures could be a smart move, as bond prices typically rise when rate hike expectations drop. For currency traders, this points to potential weakness in the Euro. Although the headline number might cause a brief rally, the trend of weak import demand suggests a downward move for the currency. We believe that buying EUR/USD put options is a sensible strategy for the next few weeks, particularly if the pair gains on the headline news.

Warning For German Stocks

This sign of weak demand is a warning for German stocks. Recent data, such as the flash manufacturing PMI for July 2025, which came in at a contractionary 47.9, indicates that the industrial sector is struggling. This reinforces the argument for buying put options on the DAX index to protect against potential downturns from poor corporate earnings. We’ve seen similar patterns before, especially during the economic slowdown of 2023. At that time, markets learned to overlook volatile energy prices and focus on core inflation trends. Those who acted early in anticipation of a more dovish central bank were rewarded. Create your live VT Markets account and start trading now.

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German states will release their Consumer Price Index (CPI) figures for July today. Current inflation in Germany is just above 2%, which worries the European Central Bank (ECB). The overall annual inflation is at 2%, while core inflation is at 2.7%, showing a slight decrease. For July, the overall annual inflation is expected to drop to 1.9%. Analysts are particularly interested in the core inflation figure since it influences the ECB’s decisions ahead of the September meeting. Currently, there is a roughly 93% chance the ECB will not change interest rates.

Influence of Economic Spending

Looking forward, Germany’s inflation is being evaluated alongside the government’s €500 billion spending plan. This spending is not likely to cause an immediate rise in inflation but may improve productivity and other economic factors. Today’s data will probably not change the ECB’s outlook during the summer. Today’s schedule includes releases from several regions: North Rhine Westphalia, Hesse, Bavaria, Baden-Württemberg, and Saxony at 08:00 GMT, followed by Germany’s national preliminary figures at 12:00 GMT. These releases might come out a bit earlier or later than expected. We’re closely watching the German state inflation numbers today since they will set the tone for the national data later. German headline inflation recently rose to 2.3% in June 2025, so the market hopes for a decrease to the expected 1.9% for July. However, the main concern remains the core inflation, which has been stubbornly high at 2.8%, worrying the ECB.

Impact on Derivative Traders

This situation presents an opportunity for derivative traders to look for volatility. If the market is too relaxed about the ECB’s likely decision, options related to the euro might be undervalued. A surprise, especially if core inflation is higher than expected, could lead to a rapid shift in interest rate expectations and increased volatility. Currently, the market prices a 93% chance the ECB will keep its deposit rate at 3.25% during the September meeting. This reflects the central bank’s tough position, trying to balance persistent inflation against slow economic growth in the region. A strong inflation number today could easily change those odds and affect short-term interest rate futures. From our perspective in 2025, the severe inflation spike from 2022 to 2023 left a significant impact on ECB policymakers. This recent history makes them highly sensitive to core inflation pressures, demonstrating their willingness to risk slower economic growth to maintain inflation control. Any hint that core prices aren’t declining will strengthen their cautious approach. Long-term government spending plans, like Germany’s €500 billion fund, add another factor for longer-dated contracts. While this spending is not expected to drive inflation up soon, its aim is to increase productivity. Successful rollout could alter Germany’s long-term growth and inflation patterns over the next few years. Ultimately, the key focus today is the core inflation data rather than the headline figure. Any significant deviation from expectations in the core reading will be a major driver for market movements in the coming weeks. Create your live VT Markets account and start trading now.

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Today, there are a few FX option expiries worth noting. For EUR/USD, the main levels to watch are 1.1400 and 1.1475-90. The pair is under pressure from developments in the US-EU trade deal and a strengthening dollar. The expiry at 1.1400 might help stabilize price movements as traders react to recent trends. This is happening amidst month-end flows and significant US data, with tomorrow’s focus on non-farm payrolls.

AUD/USD Expiry

There is also an expiry for AUD/USD at 0.6465. This level isn’t linked to any technical support, but the pair is finding backing from its 100-day moving average at 0.6426. For more insights and details on these figures, additional information is available online. Looking back to 2018, EUR/USD faced levels around 1.1400, largely affected by US-EU trade disputes. Today, the scenario is different, with the pair trading near 1.0950 as the market reacts to different central bank policies. This shift shows how key themes can change over time. The European Central Bank is taking a cautious approach on rates, especially after Eurozone inflation hit 1.8%, which is just below the target. Meanwhile, the US Federal Reserve is being careful, with Core PCE data remaining stubbornly at 2.7%, above their target. This gap in policies supports the dollar, keeping the euro below the crucial 1.1000 level. For derivative traders, large option expiries around the 1.0900 strike are likely to act as a short-term price floor. Today is also the end of the month, so portfolio rebalancing could lead to some fluctuations in price. These shifts, alongside the upcoming US PCE data, are the main focus before tomorrow’s non-farm payroll report.

Echoes of the Past in AUD/USD

We can also see memories of the past in AUD/USD, which was once around the mid-0.6400s. Now, as the pair approaches 0.6800, the discussion has moved from simple technical levels to the health of the Chinese economy. The Australian dollar’s value is closely linked to demand for industrial commodities. Recent industrial production data from China showed a slight rebound, providing some support for the Aussie. However, this is countered by declining iron ore prices, which have fallen from over $110 to approximately $102 per tonne in July. This makes the currency sensitive to changes in global risk sentiment, making the upcoming global manufacturing PMI data crucial for future direction. Create your live VT Markets account and start trading now.

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A recent trade idea suggested taking a short position on crude oil futures based on several technical indicators. Light Crude Oil Futures were priced around $69.84 and displayed a bear flag pattern after touching a previously broken upward channel, indicating potential resistance. Volume Profile analysis indicated that the price was testing the Value Area Low, which added to the resistance. The significant psychological level of $70 often serves as a partial profit-taking point, further establishing resistance. Historical patterns also hint at price pullbacks following recent surges of nearly 9%, suggesting a likely downturn ahead.

Sentiment Influences

The sentiment from NASDAQ and S&P futures, driven by earnings from Meta and Microsoft, had an impact on crude prices. However, such sentiment increases are usually short-lived. The trading strategy recommended a stop-loss and take-profit set at 1.5%, which was later adjusted to 1%. Half of the position was closed at $69.64 to secure a risk-free trade. China’s slowing economy, highlighted by a PMI drop to 49.3, suggests reduced oil demand since China is the largest oil consumer. Even though GDP grew in Q2, weaknesses are becoming clearer, especially with the shift towards electric vehicles. Additionally, increased oil output from non-OPEC+ countries may lead to oversupply. Geopolitical factors can also unexpectedly affect oil prices. The current sentiment appears bearish due to higher oil production than demand; however, this situation can change quickly. Traders should keep an eye on China’s economic data, OPEC+’s strategies, and geopolitical developments for better-informed decisions. As of July 31, 2025, crude oil is struggling around the crucial $70 per barrel mark. The recent rally seems to be losing strength, creating a potential opportunity for bearish positions in the weeks ahead. Traders should be cautious not to get swayed by lingering bullish sentiment from the broader stock market.

Market Analysis

From a technical viewpoint, the oil price is hitting a resistance level that was previously a support level. This retest of a broken upward channel on the 4-hour chart indicates that sellers are entering at this resistance spot. Additionally, we are monitoring trading activity around the $70 mark, which adds to this resistance. The most significant challenge for oil prices is the economic slowdown in China. The official manufacturing PMI for July came in at 49.3, indicating contraction in factory activity. This is further supported by recent import data that showed a decrease to 10.8 million barrels per day, which is significantly lower than last year’s peaks, raising concerns about future demand. On the supply side, there is an ample amount of oil available in the market. The latest EIA report shows U.S. production reaching a record 13.5 million barrels per day, and OPEC+ has been steadily increasing output. The upcoming OPEC+ meeting in early August will be crucial to see if they adjust their production plans in response to China’s economic weakness. Reviewing the price action over the past year, we have frequently seen sharp rallies of 5% or more quickly fade away. The recent 9% rise seems excessive, especially since it was fueled by excitement from tech earnings rather than solid oil fundamentals. A pullback appears likely based on these historical trends. For traders in derivatives, this environment may favor strategies that profit from price drops or sideways movement. This could involve buying put options for a possible move down to the mid-$60s with defined risk. More cautious traders might consider selling out-of-the-money call credit spreads above the current resistance levels near $71-$72. Nonetheless, it is crucial to remain alert for sudden market changes. Geopolitical tensions in the Middle East or surprises from the upcoming OPEC+ meeting could easily send prices upward against the current trend. Managing risk with tight stop-losses on any short positions is essential. Create your live VT Markets account and start trading now.

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