Meetings held in Geneva, London, and Stockholm were successful. Talks included the possibility of a meeting with Trump, with plans for coordination among the leaders’ teams. Beijing has stressed its sovereignty and highlighted its security and energy needs, especially regarding oil imports from Iran. Currently, there is little leverage over China concerning Iranian oil, although outside forces could shift China’s economy towards consumer spending.

EU Trade Relationship Investment Monitoring

The EU’s trade relationship, which includes $600 billion in investments, will be closely watched. Despite potential changes in tariff rates, the EU is expected to keep its promises, with a significant portion of investments likely going towards defense and agriculture. Snap back tariffs are seen as manageable if negotiations continue among the countries involved. We are noticing a positive change in Europe, with rising diplomatic and economic sentiments. The Eurozone Sentix investor confidence index for July 2025 reached its highest point in a year. Additionally, volatility in the Euro Stoxx 50 (VSTOXX) has dropped below 15. This suggests that traders might cautiously sell out-of-the-money puts on European indices like the DAX, indicating reduced tail risks for now.

Transatlantic Investment Opportunities

The possibility of a $600 billion transatlantic investment and trade package is an important driving force. We expect a large share to focus on defense, particularly since over 20 NATO members are meeting their 2% of GDP spending targets, a significant increase from previous years. Derivative traders should consider call options on defense ETFs like ITA or PPA, as well as on agricultural commodities that will benefit too. The risk of “snap back” tariffs should be seen as a negotiation tactic rather than a looming disaster. This presents opportunities for volatility traders who remember the market swings in 2018-2019 during trade discussions. We think buying straddles or strangles on major indices during calm periods can be a smart way to prepare for upcoming headline risks. China’s shift to a consumer-focused economy continues to face challenges without external pressure. Recent data from late July 2025 shows China’s retail sales grew by just 2.9%, much lower than expected, while industrial production remains strong. This supports a strategy of buying puts on Chinese equity ETFs like FXI or MCHI, as the weak domestic demand is a major concern. In terms of energy, the US has little leverage on the China-Iran oil trade, which helps keep crude prices steady. Brent crude remains above $85 a barrel, and tanker tracking data confirms that Iranian oil exports to China have stayed consistently above 1.5 million barrels per day through mid-2025. Traders might consider options on oil ETFs like USO to prepare for price stability or possible gains due to geopolitical tensions, as this supply seems secure. Create your live VT Markets account and start trading now.

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Russia faces a tight deadline of 10 days before new sanctions on its oil exports begin, which adds to the already tense relationship with the US. The Trump administration has signaled that it plans to penalize countries buying Russian oil, raising geopolitical tensions further. President Trump has made it clear that he does not intend to engage in talks with Russian President Putin. He has also urged the UK to increase oil production from the North Sea, proposing alternative sources to reduce dependency on Russian oil.

Impact On Global Oil Prices

These developments have caused global oil prices to rise, with crude oil climbing from about $67.50 to $69.13 per barrel. This is an increase of roughly $2.20, or 3.24%, reflecting market reactions to the current situation and the risk of supply disruptions. With the impending sanctions on Russian oil, we see a significant shock to global supply. This pressure is already pushing crude prices closer to $70 per barrel. The immediate concern is that countries buying Russian crude may face penalties, which could remove barrels from the market. For traders in derivatives, we think oil prices will likely rise in the short term. This suggests that buying call options on crude oil futures or exchange-traded funds like the XLE might be a good strategy. Expect volatility to increase, which may make options pricier, but also presents opportunities.

Potential Disruption Of Russian Oil Exports

The critical issue is the risk of disrupting over 10 million barrels per day of Russian oil production and exports. Recent data showed that China and India were taking over 60% of Russia’s seaborne crude. If these countries cut back on purchases to avoid US sanctions, the global supply balance will tighten significantly. Previously, after the 2022 invasion of Ukraine, Russia managed to redirect its oil to new buyers. However, these new sanctions are aimed at closing that loophole. We will monitor the Brent-WTI spread, which we expect to widen as Brent prices reflect greater geopolitical risks. If the spread exceeds the current $5, it would indicate serious market stress. While there are discussions about increasing North Sea production in the UK, any new supply will take years to be realized and won’t address the immediate shortfall. The market is more likely to look to OPEC+, as Saudi Arabia and the UAE hold the only significant spare capacity, just over 2 million barrels per day combined. Their willingness to use this spare capacity to stabilize prices remains uncertain. Given the current situation, we expect the CBOE Crude Oil Volatility Index (OVX) to increase significantly. In previous supply shocks, the OVX has risen well above 50, reflecting a high level of market uncertainty. This environment calls for strategies that can benefit from substantial price movements instead of just betting on one direction. Create your live VT Markets account and start trading now.

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Bandwidth reported quarterly earnings of $0.38 per share, beating the predicted $0.32. This is an increase from last year’s $0.29 per share after adjusting for one-time items. The earnings surprise was +18.75%. In the previous quarter, earnings were $0.36 per share against an anticipated $0.29, resulting in a surprise of +24.14%. Bandwidth has outperformed consensus EPS estimates in three of the last four quarters. The company earned $180.01 million in revenue, exceeding estimates by 0.75%, compared to $173.6 million last year. Bandwidth has consistently surpassed revenue expectations in the last four quarters. Management’s comments will likely affect the stock’s short-term price movements. Since the year began, Bandwidth shares have dropped 4.8%, while the S&P 500 gained 8.6%. The company holds a Zacks Rank #4 (Sell), indicating it may underperform in the near term. The current consensus EPS estimate for the next quarter is $0.38 on revenues of $190.5 million. The industry ranking could also influence Bandwidth’s performance. The Communication – Infrastructure industry is ranked in the top 21% of over 250 industries. Another company in this sector, Anterix, expects a loss of $0.54 per share while maintaining steady revenue projections. After reviewing the latest earnings report, we see that Bandwidth has once again exceeded expectations for both profits and revenue. The quarterly earnings per share were significantly higher, reflecting a strong trend of positive surprises, indicating solid operational strength that the market might be overlooking. However, we should consider the stock’s poor performance this year. It has fallen about 5% in 2025, compared to an over 8% increase in the S&P 500. This discrepancy shows that past earnings successes have not reassured investors about a turnaround. This situation creates high uncertainty, which is evident in the options market. Recently, implied volatility for upcoming options is high, suggesting traders expect bigger price swings than usual. With short interest around 12% of the float, many traders are betting against the stock, setting up the potential for a volatile reaction to new information. Given the current high cost of options, traders should think about managing costs. For those who lean bullish based on the positive sector and earnings history, a bull call spread could allow for potential gains while minimizing premium costs. On the other hand, those who believe in the bearish trend could consider a bear put spread to profit from a decline while defining their risk. The key factor will be management’s future guidance, which could either support the bearish views or lead to a short squeeze. For instance, following the earnings beat in the first quarter of 2024, the stock still fell over the next month, as the market focused on future prospects rather than past results. Thus, we should closely monitor any discussions about revenue growth and profit margins in upcoming quarters. In conclusion, the mixed signals suggest we avoid making simple, decisive bets. Elevated implied volatility indicates that selling premium could be a good strategy for those with the right risk tolerance, assuming the post-earnings movement won’t be as extreme as anticipated. Our immediate approach should be cautious, awaiting management’s comments to provide clearer direction.

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The British pound has been falling against the US dollar for four straight days, dropping a total of 1.5%. Currently, GBP/USD is trading at 1.3338, down 0.10% today, and reached its lowest value since May 19 at 1.3315. UK inflation is rising, according to the British Retail Consortium Shop Price Index, which went up to 0.7% in July from 0.4% in June. This is higher than the expected 0.2%. After a small rebound, GBP/USD traded just above 1.3350 after dipping below 1.3320 earlier, indicating that it might be oversold and could correct soon. The US dollar has gained strength as worries about a US economic downturn have eased. This improvement comes after a trade agreement with the EU, which includes a 15% tariff on goods. On Monday, GBP/USD remained lower, trading just above 1.3400. Its technical outlook suggests a continued bearish trend. The dollar’s strength is supported by a $600 billion investment into the US from the EU and a strong US jobs report, which showed that non-farm payrolls added 250,000 jobs in July. These developments have reduced fears of a US economic slowdown, making the dollar more attractive. The pound’s prior losses against the dollar have not reversed, leading to a challenging short-term outlook for GBP. With the British pound now at 1.3338 against the dollar, we see this as a lasting trend rather than a temporary drop. The strong US economy, backed by the new trade agreement with the EU, supports the dollar’s strength. For traders in derivatives, this signals a clear bearish outlook for the GBP/USD pair in the coming weeks. Despite rising inflation, the UK’s situation looks less favorable. The British Retail Consortium’s report showing a 0.7% increase in prices may make the Bank of England cautious, especially since the UK’s latest Q2 GDP showed a slight contraction of 0.1%. This could cause the central bank to hesitate in raising rates aggressively, putting further pressure on the pound. As a result, we recommend buying put options on the GBP/USD pair that expire in late August or September. Strike prices below 1.3300, like 1.3250 or 1.3200, are appealing for capitalizing on further declines. This strategy limits risk to the premium paid for the options. For those worried about a possible short-term bounce from oversold conditions, a bear put spread is a sensible alternative. This strategy involves buying a put option with a higher strike price, such as 1.3300, and selling another at a lower strike, like 1.3150. This reduces the initial cost of the trade while still allowing for profit from a price drop, although with limited upside. Historically, different monetary policies between the US Federal Reserve and other central banks have led to long-lasting currency trends, like the pound’s decline following the 2016 Brexit referendum. In the current climate, where the US economy seems stronger, this scenario favors the dollar for a prolonged period. We will closely monitor future US and UK inflation and employment data to confirm this ongoing divergence.

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The AUD/USD shows a downward trend, with prices below the 100- and 200-bar moving averages, found between 0.6528 and 0.6539 on the 4-hour chart. This resistance zone allows sellers to stay in control as long as the price stays below it. The current channel structure is holding steady, and recent price movements fit this pattern. On the downside, buying interest exists in the 0.6484 to 0.6502 range, which has provided support for the pair several times recently, even after a brief drop below this level.

Potential Downside Movement

If the price breaks below 0.6484, it may weaken the technical outlook, potentially heading toward key support at the channel trendline of 0.6462, and then to 0.6407. For a more positive outlook, the price needs to get above the moving averages at 0.6528 and 0.6539. Until that occurs, sellers have the advantage in the larger trading range. We are closely monitoring the AUD/USD, as sellers are firmly in control below the 0.6539 mark. The price is struggling to climb back above the crucial moving averages, indicating a likely downward trend in the near term. This keeps our outlook cautious to bearish. This perspective aligns with recent data showing that the US jobs market is unexpectedly strong, with the latest Non-Farm Payroll figures exceeding expectations. Meanwhile, iron ore prices, a key Australian export, have decreased to about $105 per tonne, down from previous highs. This mix of a strong US dollar and weakening commodity fundamentals strengthens the bearish outlook.

Derivative Trading Strategies

For derivative traders, this suggests considering put options in the upcoming weeks, particularly during any minor rallies. A solid break below the support level at 0.6484 would be a significant signal for us. We would then focus on strike prices near the next support levels of 0.6462 and even 0.6407. Alternatively, there’s also an opportunity to sell call options with strike prices well above the 0.6540 resistance zone. This strategy earns profits from the price staying low and from time decay, as long as the pair doesn’t rise above those key moving averages. Historically, in times of differing central bank policies, the US dollar has shown consistent strength that limits AUD/USD rallies. The key is to be patient and wait for a clear break of the 0.6484 to 0.6502 support area. Until then, the pair may stay within a range, but our preference is to sell any strength toward the moving averages. We will keep an eye on inflation data from both countries to confirm our position. Create your live VT Markets account and start trading now.

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The meetings between US Treasury Secretary Bessent and Chinese officials were productive. They mainly talked about improving trade relations while ensuring national security. The discussions highlighted the need to address China’s global economic imbalances and the potential for other developed countries to impose tariffs. With the US economy on the rise, more topics became available for conversation. Bessent will meet with President Trump to go over the trade deal. Meanwhile, EU-US trade discussions are looking positive, as noted by Sweden’s Prime Minister. Bessent mentioned that China might face high tariffs on Russian oil due to US secondary tariffs. Recently, Xi invited Trump to China, signaling more engagement in their conversations.

Trade Deficit Reduction

Greer pointed out that the US trade deficit with China could be reduced by at least $50 billion this year. President Trump has the power to change tariffs on Chinese products. On his return from the UK, Trump confirmed that discussions about China trade were productive. The trade deal with India is still pending, with warnings of possible 20-25% tariffs. Trump also made remarks about the mayor of London during his visit. The positive tone of the recent US-China meetings suggests that implied volatility may drop in the weeks ahead. This means strategies like selling option premiums, such as short strangles on broad market indices, could be beneficial. The easing tensions reduce the risk of a significant market shock from new tariffs. We should remain cautiously optimistic about stocks, especially in the US, which are described as “firing on all cylinders.” This situation supports buying call options on the S&P 500. There is also potential in Chinese stocks; as fears of economic separation lessen, call spreads on China-focused ETFs like FXI look promising. The notion that the trade deficit with China is decreasing seems valid and lessens the urgency for sudden actions. Recent data from the U.S. Census Bureau through May 2025 shows that the goods deficit with China is about $23 billion lower than last year. This reinforces the idea of a more stable trade relationship in the near future.

New Global Risks

However, we are noticing new risks emerging beyond the US-China dynamic. A potential trade dispute with India, which could lead to tariffs of up to 25%, suggests we should consider purchasing protective puts on Indian market ETFs. This would help safeguard against negative global trade sentiment if this situation arises. We must also keep an eye on China’s purchases of sanctioned Russian oil. If US secondary tariffs are implemented, it would create a significant risk and could quickly dampen the current positive atmosphere. Historically, trade talks can backtrack unexpectedly. We remember the sharp market fluctuations during the 2018-2019 discussions that often followed a single comment or change in attitude. Thus, holding some inexpensive out-of-the-money puts on major indices is a wise way to protect against this uncertainty. The risk of other countries raising tariffs against China, particularly the European Union, is another concern. The EU is already investigating Chinese subsidies for electric vehicles, and any resulting tariffs could disrupt global supply chains. This would limit global growth potential, even if the US and China manage to establish a stable relationship. Create your live VT Markets account and start trading now.

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US Commerce Chief Howard Lutnick announced that President Trump will make decisions on trade deals this week, just ahead of the August 1 deadline. Negotiations with China and the European Union are still ongoing. Talks with the EU will focus on digital services, steel, and aluminum, while natural resources will remain exempt from tariffs. In two weeks, a new plan for pharmaceuticals is expected, indicating more changes in this area. Trump can set the terms for trade deals, stressing the importance of open markets, and he intends to wrap up decisions by Friday. For India, Trump needs to decide on pursuing a trade deal. This situation carries risks and uncertainties, and the discussions about financial markets are only for informational purposes.

Financial Market Opportunities

The approaching August 1 deadline for trade deals brings a lot of uncertainty to the market, creating chances with volatility instruments. The CBOE Volatility Index, or VIX, has already risen over 8% in the last five trading sessions, reaching 19.5, as traders feel more anxious before the decision. We expect this trend to continue, making long positions in VIX futures or buying call options on volatility ETFs appealing in the short term. The ongoing negotiations with the European Union put the steel and aluminum industries in the spotlight. The XME metals and mining ETF has underperformed compared to the S&P 500 by about 4% this quarter. This sets up a potential sharp move based on the outcomes of the talks. Traders might consider straddles on major steel producers to profit from significant price swings. The situation with China remains critical, as the latest data shows the U.S. trade deficit with the country grew to $28.4 billion last month. This pressure could result in a tougher stance, making put options on China-focused ETFs like FXI more attractive. On the other hand, a surprisingly positive resolution could trigger a significant rally, potentially benefiting U.S. companies with substantial revenue from mainland China.

Anticipated Pharmaceutical Plan

A decision on an Indian trade deal presents a clear opportunity. Implied volatility on front-month options for the INDA India ETF has surged to a 90-day high as traders make their bets. We believe a simple call or put spread is a defined-risk way to speculate on whether the administration will decide to pursue a deal. The upcoming plan on pharmaceuticals in two weeks is likely to create more volatility in that sector. We remember how the suggestion of drug pricing reforms in the early 2020s caused the XLV healthcare ETF to drop nearly 5% in just one week. Buying longer-dated options on major pharmaceutical companies could help capture the price movements after this announcement. Overall, Trump’s ability to set terms brings central risks, making it wise to hedge the broader market. With potential market-moving announcements expected by Friday, buying out-of-the-money put options on SPY or QQQ ETFs could act as affordable portfolio insurance, protecting against problems arising from negotiations. Create your live VT Markets account and start trading now.

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The Euro is losing value against the British Pound, marking a decline that has lasted two days. This drop is largely due to criticism of the recent US-EU trade agreement, which many consider to favor the US. As of Tuesday, the EUR/GBP exchange rate is about 0.8656, down nearly 0.20%, following a significant drop on Monday. Before this decline, the rate peaked at 0.8753, its highest since November 2023.

Criticism of the US-EU Trade Agreement

The trade agreement, signed by US President Trump and European Commission President von der Leyen, has faced backlash for being unbalanced. The US gained major concessions, while the EU now faces a flat 15% tariff on many exports, up from an average of only 1.2%. Only a few EU exports are exempt from tariffs through a “zero-for-zero” clause, while US goods enter Europe tariff-free. Additionally, tariffs on EU steel and aluminum exports to the US remain at 50%. Recently, President Trump and UK Prime Minister Starmer discussed trade relations, particularly about tariff reforms. Trump expressed a willingness to reduce tariffs on UK pharmaceuticals, though talks on industrial goods are ongoing.

Eurozone Economic Outlook

The Eurozone’s economic agenda will soon feature a preliminary GDP estimate and several sentiment indicators. These figures could influence the Euro’s short-term movements, especially amid the trade agreement issues. Given the current situation, we expect the Euro to keep falling against the British Pound. The new trade agreement has significantly hurt the Eurozone’s export prospects, creating a strong headwind. This suggests the recent drop in the EUR/GBP pair is not just a temporary setback but may lead to a new lower trend. We anticipate a break below the important 0.8600 support level in the coming weeks. The latest German ZEW Economic Sentiment for July has already shown this negativity, dropping to -5.2 when a positive figure was expected, clearly reacting to the trade news. Historical data from late 2023 indicates that as momentum builds, a decline toward the 0.8500 mark is very likely. Given this outlook, buying put options on EUR/GBP is a low-risk way to profit from further declines. Over the past week, three-month implied volatility for the pair has risen from around 5% to over 8%, showing that the market is preparing for notable price changes. This situation makes options an appealing choice for traders expecting a continued downturn. The United Kingdom is in a relatively strong negotiating position, highlighted by the recent talks between Starmer and his US counterparty. With UK inflation steady at 2.9% and the Bank of England’s key rate at 4.75%, monetary policy is tighter than in the Eurozone. This difference in interest rates favors the Pound. This week’s preliminary Q2 GDP estimate for the Eurozone will be a crucial test for the market’s bearish sentiment. After von der Leyen’s deal, a growth figure below the 0.2% consensus forecast would confirm economic challenges. A significant shortfall here would likely speed up the pair’s decline. Create your live VT Markets account and start trading now.

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The US Treasury held an auction for $44 billion in seven-year notes, resulting in a high yield of 4.092%. This yield was lower than the when-issued (WI) level of 4.118%, showing a tail of -2.6 basis points, compared to an average of -0.6 basis points over the last six months. The bid-to-cover ratio was 2.79, which is higher than the six-month average of 2.6. Direct bidders made up 33.68% of the auction, above their average of 22.5%. However, indirect bidders, usually foreign buyers, accounted for 62.26%, which is lower than their average of 67.0%.

Reduced Dealer Participation

Dealers ended up with just 4.06% of the auction, a drop from the typical 10.5%. Even though the auction received an ‘A’ rating, international participation was below what was expected. Domestic buyers helped balance this shortfall and contributed positively to the auction’s success. The demand for government debt is very strong. The seven-year auction’s high bid-to-cover ratio of 2.79 and a noticeable negative tail indicate that buyers were willing to pay more than anticipated. This suggests a strong interest in bonds at these yield levels. This demand matches recent data showing inflation cooled to 2.8% in June and a softening labor market. This supports the idea that the Federal Reserve will likely keep interest rates steady, with possible cuts expected in early 2026. It appears the market is gearing up for a less aggressive central bank.

Investment Strategies for Stable Yields

In the upcoming weeks, we should explore trades that benefit from stable or declining yields. One option is to buy Treasury futures since strong auctions often lead to rising bond prices. The heightened demand could also reduce bond market volatility, making strategies that sell volatility appealing. A key indicator was the low amount of bonds left with dealers, at just 4.06%. This is a historically low figure and mirrors the moves for safety during economic uncertainty. Such a limited presence of dealers indicates strong private demand for government bonds. We should consider buying call options on Treasury futures or selling put options to express a bullish outlook on bond prices. These strategies allow us to benefit from potential gains while managing risk. Given the auction results, the chances of significant declines in bond prices, resulting in higher yields, seem limited in the short term. Create your live VT Markets account and start trading now.

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The S&P/Case-Shiller Home Price Indices in the United States increased by 2.8% year-on-year in May. This rise was below the expected 3% growth. These numbers show the state of home prices in May and illustrate ongoing trends in the housing market. While this data is useful, it is for informational purposes only. People should do their own research before making investment decisions related to these indices. The May home price data confirms a cooling trend. The 2.8% increase was less than expected, hinting that high borrowing costs are starting to impact home values. This doesn’t indicate a market crash but rather a steady return to normal growth rates. This housing data comes amid mixed economic signals, making it hard to plan ahead. For example, the June Consumer Price Index was released recently and showed a higher-than-expected inflation rate of 3.5%. This reinforces the cautious approach of the Federal Reserve. With the 30-year fixed mortgage rate around 7.1% last week, we don’t expect any changes in policy that could boost housing demand soon. Given this situation, we are focusing on derivatives linked to homebuilder ETFs like ITB and XHB. A weaker housing market and persistent costs could pressure these companies. This makes bearish strategies, such as buying put options, appealing for protecting our investments or betting on a further slowdown. We are also looking at put debit spreads to manage our risk with these trades. The struggle between slowing growth in key areas like housing and stubborn inflation creates uncertainty in the market. This could lead to increased volatility in the coming weeks, moving away from the calm seen in the second quarter. Therefore, we are carefully adding VIX call options to protect our overall portfolio from unexpected market changes. We’ve seen similar patterns before, especially during the 2022-2023 period of tightening when aggressive rate hikes quickly cooled the previously hot housing market. Historical data indicates that rate-sensitive sectors tend to struggle until there is a clear change in central bank policy. We are using this past experience to guide our current risk assessments.

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