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Pending home sales in the US fell by 0.8%, contrary to expectations of growth
US pending home sales for June decreased by 0.8%, while forecasts had predicted a 0.3% increase. Last month, sales rose by 1.8%, but the index has now dropped to 72.0 from 72.6.
Compared to last year, sales are down 2.8%, in contrast to a 1.1% rise a year earlier. In the Northeast, pending sales have shown slight growth, even though this region is experiencing the highest home price increases in the country.
Hassett discusses strong GDP growth, expected changes in trade deals, and the importance of Fed autonomy
The latest GDP data shows strong growth and falling prices for imported goods. The Federal Reserve is closely monitoring the data and maintaining its independence while evaluating monetary policy.
Tariff revenue plays a vital role in reducing the deficit. There is hope that India will open its markets, as a deal with India could greatly change the global economy. Agreements with the EU and Japan are expected to increase capital spending, supporting a 4% growth forecast for Q3.
Trade Matters with China
President Trump will receive an update on trade matters with China, with possible adjustments expected before any agreement is final. The situation looks promising for U.S.-China trade relations. Today’s GDP figures exceeded expectations, buoyed by strong employment data from ADP. This positive economic backdrop comes just before the Federal Open Market Committee’s decision, which is likely to keep interest rates steady. On this day, July 30, 2025, we look back to earlier predictions of 4% growth. Currently, the economy has expanded at a 2.1% annual rate in the second quarter, indicating that recent rate hikes have begun to cool things down. The previous belief that the Fed needed to catch up has materialized, with the target rate now at 4.75%. With inflation around 3% as of June, the market is split between anticipating one more rate hike or possible cuts later this year. This uncertainty may create opportunities in SOFR futures, where traders can speculate on the timing of the Fed’s next significant policy change.Deal with India
The “game-changing” deal with India we once expected hasn’t fully materialized. Instead, we’ve experienced steady, though not transformative, growth in bilateral trade, which has topped $190 billion annually in recent years. Traders should now focus on smaller, sector-specific trade news instead of waiting for one major event. Options on the Nifty 50 or the rupee can be utilized to trade the resulting volatility. The anticipated boom in capital spending from EU and Japan deals has been less than expected. Although new orders for nondefense capital goods rose by 0.3% last month, businesses are still cautious due to high borrowing costs. Therefore, trading strategies in the industrial or capital goods sectors may work better as range-bound plays, like iron condors, rather than outright bullish strategies. Concerns about falling import prices seem outdated, especially after the inflation surge of 2022-2023. Today, the stronger U.S. dollar is the main story, with the Dollar Index (DXY) steady around 105 due to higher interest rates. This currency strength is a challenge for S&P 500 companies with significant international sales, making bearish options strategies on those stocks potentially profitable. Create your live VT Markets account and start trading now.In July, private sector employment increased by 104,000, exceeding the expected rise of 78,000.
US private sector employment grew by 104,000 in July, according to Automatic Data Processing (ADP). This followed a revised decline of 23,000 in June and was higher than the expected increase of 78,000.
After this news, the US Dollar Index rose by 0.15% to reach 99.05. Employment levels are important indicators of an economy’s health, influencing currency values and consumer spending.
Impact On Inflation
A tight labor market, where employers struggle to find workers, can lead to inflation through rising wages. Wage growth is important for policymakers because higher salaries boost consumer spending, which impacts inflation. Central banks view employment differently based on their goals. The US Federal Reserve aims for maximum employment and stable prices, while the European Central Bank prioritizes controlling inflation. Regardless of their focus, labor market conditions are essential economic signals. This information is for informational purposes only and is not an investment recommendation. It’s crucial to conduct thorough research before making any investment decisions, as there are risks involved, including the potential total loss of your investment. The author has no personal investment positions in any mentioned companies. From our viewpoint on July 30, 2025, the unexpectedly strong private payrolls data introduces significant uncertainty. The addition of 104,000 jobs follows a revised loss in June, making it tough to gauge the labor market’s true direction. The quick rise in the US Dollar Index to 99.05 suggests the market may be expecting a slightly stronger economy.Federal Reserve Decision
This report complicates the Federal Reserve’s next steps as it tries to balance controlling inflation with ensuring employment. Before the data was released, futures markets were leaning toward a higher chance of a rate cut by year-end, but this report challenges that expectation. Currently, the implied probability of a September rate cut has dropped from over 60% to just below 50%. We now need to focus on the official Non-Farm Payrolls (NFP) report, set to be released on Friday, August 1st. Historically, there can be significant differences between ADP and NFP reports. For instance, in the summer of 2024, ADP often reported higher numbers than NFP, leading to sharp market reversals. We are also noticing a slight rise in implied volatility, with the VIX index increasing to 15.6, indicating that traders may be preparing for unexpected news. Given this uncertainty, options strategies that can benefit from large price changes, regardless of direction, are appealing. Buying a long straddle on an index ETF like SPY before the NFP release could be a smart way to handle the expected volatility. This strategy allows us to profit if the official numbers are much higher or lower than expected. In currency derivatives, the differing policies between the Federal Reserve and the European Central Bank continue to be a significant theme. This strong US jobs data, though preliminary, stands in contrast to the recent weaker economic figures from the Eurozone. We might consider call options on the USD/JPY pair, as a strong US economy could lead to the Fed maintaining rates longer than the Bank of Japan. Create your live VT Markets account and start trading now.In July, the ADP employment change in the United States exceeded expectations with 104,000 jobs added.
In July, the US ADP Employment Change report showed a surprising increase of 104,000 jobs, beating estimates of 78,000. This positive news bolstered the US Dollar and affected several currency pairs and commodities.
The EUR/USD dropped sharply below 1.1500 due to the strong US economic data, while GBP/USD fell to a two-month low, dipping below 1.3300. Gold prices also took a hit, trading close to $3,300 as US Treasury yields increased ahead of announcements from the Federal Reserve.
Federal Reserve Interest Rate Expectations
The Federal Reserve is likely to keep interest rates steady at its July meeting, marking the fifth consecutive hold following a previous reduction. There is ongoing speculation about whether the Fed is delaying necessary rate adjustments amid changes in the labor market. Several articles are available to help traders choose the best brokers for Forex, commodities, and CFDs. Options include brokers with competitive spreads, fast execution, and different trading platforms, enabling traders to make well-informed decisions for 2025. The stronger-than-expected ADP job numbers for July, which added 104,000 jobs, have strengthened the US dollar. This indicates a solid labor market, exerting pressure on other major currencies. All attention is now on the Federal Reserve’s interest rate decision later today. As a result, we see the EUR/USD struggling to maintain the 1.1500 level, a substantial drop driven by robust US data. Likewise, GBP/USD has fallen below 1.3300, reaching its lowest level since May 2025. The strength of the dollar is a key factor for traders in the upcoming weeks.Impact On Gold Prices
While the Federal Reserve is expected to keep rates steady today for the fifth consecutive meeting, views are shifting. The CME FedWatch tool now indicates a more than 50% likelihood of a rate hike in September, a noticeable increase from last week. This reflects a growing belief that the Fed may need to respond soon due to the high inflation seen in 2022-2023. We are also witnessing an impact on gold, which is currently trading near $3,300 per ounce. With the 10-year US Treasury yield nearing 4.75%, its highest point this year, gold—having no yield—becomes less appealing to investors. This downward pressure on gold is likely to continue if positive economic data persists. For traders, this situation suggests increased short-term volatility, especially around US data releases like the upcoming Non-Farm Payrolls report. It’s wise to consider strategies that take advantage of a stronger dollar, such as buying call options on the USD or put options on pairs like EUR/USD. Recent price movements confirm that betting against the dollar has not been favorable. Given these sharp market movements, it’s essential to ensure our trading infrastructure is robust. We need brokers with competitive spreads and reliable execution to navigate this increased volatility. Quick access to the markets is vital, especially as key levels like 1.1500 in the Euro are under pressure. Create your live VT Markets account and start trading now.The Bank of Canada keeps interest rate at 2.75% due to global economic uncertainties and trade issues
The Bank of Canada has decided to keep its overnight rate at 2.75% as global trade remains uncertain due to US tariffs. This decision surprised markets, which had expected a 56% chance of a rate cut.
Before the announcement, the exchange rate for the US dollar to the Canadian dollar was high at 1.3810, with the next targets being 1.3827 and 1.3833. It is expected that global growth will slow to about 2.5% by the end of 2025 and rebound to around 3% by 2027, assuming tariffs remain in place.
Canada’s Economic Outlook
Canada’s economy shrank by 1.5% in GDP during the second quarter of 2025, mostly due to reduced exports and trade issues. There is excess supply, unemployment has risen to 6.9%, and wage growth is slowing. If tariffs stay the same, GDP growth might bounce back to 1% later this year. Inflation was recorded at 1.9% in June, with various pressures balancing each other out. Future policies will be shaped by ongoing economic and inflation challenges. The Bank of Canada is focused on maintaining price stability while fostering economic growth in these uncertain times. While the Bank has kept its interest rate at 2.75%, their statement suggests a strong chance of a future cut. This shift towards a more dovish stance, despite holding rates steady, indicates a weaker Canadian dollar ahead. This situation presents an opportunity for us to prepare for a fall in currency value.Implications for Usd/Cad Strategy
The USDCAD pair is testing crucial resistance around the 1.3830 mark, also near its 100-day moving average. Given the rising likelihood of a rate cut, it might be wise to buy USDCAD call options with expiration dates in the coming months. This would allow us to benefit from a possible price increase while limiting our risks. Recent data supports this cautious approach and indicates a need for easing. The July employment report showed the unemployment rate rising to 7.1%, following June’s rate of 6.9%. Additionally, the latest Consumer Price Index (CPI) data for July was 1.7%, falling short of the Bank’s 2% target. The market is already responding to forward guidance, moving beyond the 56% chance of a rate cut by the year’s end that was expected before the meeting. Overnight Index Swaps now show odds of over 75% for a 25-basis-point cut at the next meeting in September, indicating a strong belief that easing is on the way. We have observed a similar trend before, like with the US Federal Reserve in late 2018 and early 2019. When the Fed paused rate hikes and hinted at a shift, actual rate cuts followed months later. This historical pattern suggests that the Bank of Canada’s current messaging is a reliable indicator of its next steps. The primary influence on the outlook remains US trade policy, which is introducing substantial uncertainty for Canadian exports and business investments. Any negative developments regarding tariffs or trade talks in the coming weeks could hasten the decline of the Canadian dollar. We need to keep a close watch on this situation, as it is the main risk highlighted by the central bank. Create your live VT Markets account and start trading now.Dollar strengthens ahead of Bank of Canada’s decision following strong US economic data
The U.S. dollar has strengthened thanks to better-than-expected ADP employment numbers and a 3.0% annual growth in Q2 GDP. This growth is attributed to favorable changes in trade and inventories, although final sales to private domestic buyers only increased by 1.2%. ADP reported 104,000 private payrolls, exceeding the predicted 75,000. However, differences from the BLS nonfarm payrolls affect predictability.
In currency news, EURUSD has dipped below several swing points, aiming next for the 50% midpoint of the move from May to July’s high. USDJPY has hit new highs, with the next target at the 50% midpoint of recent high-low movements. The Bank of Canada (BoC) is likely to maintain its interest rate at 2.75% amid uncertainties about U.S. tariffs and potential trade agreements.
BoC Interest Rate Movements
The BoC rate is in the neutral range of 2.25-3.25%, with the market estimating a 56% chance of a rate cut by the end of the year. Despite solid labor market data, risks lean toward the downside due to trade uncertainties. The USDCAD has been rising, surpassing the 50% midpoint and other important technical levels, with future targets near higher retracement levels and moving averages. Given the strong U.S. data released, the dollar is likely to continue rising against major currencies. Although the Q2 GDP figure of 3.0% appears strong, the underlying weakness in consumer demand—private sales only up by 1.2%—suggests that this growth may not be sustainable. The ADP payroll number may have exceeded expectations, but it often diverges from the official BLS jobs report, which will be released later this week. Currently, the technical breakdown in EURUSD below the 1.1500 level is significant. With the price now targeting the 1.1447 midpoint, traders should consider strategies that could profit from further declines or potential caps on any rebounds. Selling at rallies near the 1.1500 resistance or purchasing short-dated put options could be strategies to test the 100-day moving average. Similarly, USDJPY has moved above the 148.72 resistance area, aiming for the pivotal 149.036 level. This level has halted price increases twice this month, so a sustained move above it is necessary to confirm bullish momentum. Buying call options may provide a leveraged opportunity for a breakout toward the 200-day moving average at 149.53.Trade Talks and Market Volatility
In the coming weeks, the focus will be on the Bank of Canada and the ongoing U.S. trade discussions. The BoC is expected to keep its rate steady at 2.75%, balancing strong domestic data against the risk of U.S. tariffs. Recent data, including June’s core inflation at 2.8% and a resilient labor market, supports this decision. However, the August 1st deadline for a new trade agreement is the most significant catalyst ahead. Prime Minister Carney has indicated that a deal is unlikely by then, and the market is already pricing in a 56% chance of a BoC rate cut by year-end, highlighting traders’ anxieties. We recall the market volatility during the 2018-2019 trade disputes over steel and aluminum, and we expect similar conditions now. This uncertainty makes USDCAD the most intriguing currency pair for derivatives trading. The pair has surpassed the 1.3800 level and is now targeting key resistance around the 100-day moving average at 1.38277. The risk of trade talks failing and tariffs rising supports a bullish outlook for the pair. As the deadline approaches, implied volatility in USDCAD options is likely to rise sharply. Buying call options now, while they may be more affordable, could effectively prepare you for a significant upward movement if the trade situation worsens. This strategy limits your risk while giving you exposure to a potentially explosive price change. Create your live VT Markets account and start trading now.The dollar’s rebound causes EUR/USD to lose daily gains and face a monthly decline
The Euro is now trading close to a one-month low because of worries over the EU-US trade deal. Surprisingly, the Eurozone’s GDP grew in the second quarter. The EUR/USD exchange rate is falling and is set for its first monthly drop since December.
Before the US Federal Reserve makes its decision, the Euro is trying to bounce back but is struggling below 1.1575. It has dropped more than 2% since Monday. In the meantime, the US GDP is expected to show a 2.4% annual growth for the second quarter, bouncing back from a previous drop.
On Wednesday, the main event will be the US Federal Reserve’s decision on interest rates, which will be closely watched, especially statements from Chairman Jerome Powell. Just days ago, the US experienced a drop in job openings and a rise in consumer confidence, although there are concerns about tariffs.
The Euro is under pressure from a stronger US Dollar as US-China trade talks drag on. In Europe, GDP data showed slight growth, with better-than-expected results for German retail sales and France’s GDP. The EUR/USD remains weak, with technical indicators showing oversold conditions, and it may test the 1.1450 support level.
Looking back to mid-2018 offers valuable insights. At that time, the EUR/USD struggled near 1.1500 due to trade deal worries. Today, the pair is much lower, around 1.0750, showing the long-lasting effects of changing monetary policies.
Back then, the strong US dollar and tightening policies from the US Federal Reserve were in focus. Now, the scenario is more complicated, with the European Central Bank hinting at tougher measures to combat inflation, which remains steady at 2.8% in the Eurozone. In contrast, the US economy’s latest jobs report from July 2025 showed an unexpected slowdown in hiring.
Concerns about trade have shifted from tariffs to issues like digital services taxes and regulatory differences, which continue to impact the Euro. However, the situation is no longer as one-sided. We should be cautious about expecting the dollar to rise on trade news alone, as it did before.
Given the recent weak US data, the overly negative sentiment from 2018 may not be appropriate today. The market seems to expect the Fed to hold off on tightening before the ECB does. We are considering options strategies that benefit from volatility instead of simply betting against the Euro.
Current technical indicators are not as oversold as they were back then. The EUR/USD has been trading in a narrow range ahead of next month’s central bank meetings. We see a chance to buy straddles on the EUR/USD, positioning ourselves for a significant price movement in either direction once central bankers clarify their plans.
Mexico’s GDP in the second quarter surpassed forecasts, growing by 0.7% instead of the anticipated -0.1%
Mexico’s Gross Domestic Product (GDP) grew by 0.7% year-on-year in the second quarter, beating expectations that predicted a 0.1% decline. This growth shows that Mexico’s economy was stronger than many had thought during this time.
GDP measures the total value of goods and services produced in a specific period and is essential for understanding economic health. Positive GDP growth often means an expanding economy, while negative growth could indicate a downturn.
This unexpected growth of 0.7% in the second quarter challenges our recently cautious view on Mexico. Since the market anticipated a small contraction, this positive news will likely lead to a quick reassessment of Mexican assets. We need to adjust our strategies to account for this newfound economic strength.
We expect the Mexican Peso to rally. It had weakened to around 18.50 per dollar earlier this month due to recession worries. This strong GDP figure could push it back toward the 17.80 level we saw earlier this year. Traders might consider taking long positions on MXN futures or buying call options on peso-tracking ETFs.
For the IPC index, which has been around 54,000 points, we may see it rise. The unexpected nature of this data will likely increase implied volatility, making options strategies more appealing. We are considering buying call options on the index to seize potential short-term gains.
This stronger-than-expected economy complicates the outlook for Banxico’s upcoming policy meeting in August. Although inflation remained high at 5.5% in June, this growth data gives the central bank less reason to lower its 11.75% policy rate soon. This uncertainty presents opportunities for trading through straddles or strangles on rate-sensitive stocks.
Remember that the peso strengthened notably throughout 2023 due to high interest rates and nearshoring, creating the “super peso” narrative. This GDP reading may reignite that sentiment, but we must stay cautious. Upcoming US manufacturing data will be crucial; any slowdown there could dampen this positive domestic news.
Recent US economic data shows moderate growth fueled mainly by trade and consumer spending patterns.
US GDP for Q2 grew by 3.0%, exceeding the 2.4% estimate. However, this growth is not as strong as it seems, largely due to a significant drop in imports. Real final sales were only up 1.2%, the lowest since Q4 2022.
Consumer spending increased modestly by 1.4%, a rise from last quarter’s 0.5%. Core PCE (Personal Consumption Expenditures) edged up to 2.5% from 2.3%. The overall PCE price level was 2.1%, below the expected 2.9%. Excluding food, energy, and housing, the PCE rate dropped to 2.2% from 3.5% last quarter. PCE services, without energy and housing, stood at 2.3%, down from 4.3% last quarter.
GDP Growth Estimate And Trade Impact
The Atlanta Fed’s GDP growth estimate rose to 2.9% from 2.4%. Trade contributed 0.5% to GDP, but inventory reductions pulled growth down. Private domestic demand slowed to an annualized 1.2%, down from 1.9% in Q1. Residential investment fell about 10%, partially balanced by gains in technology and intellectual property investments. Overall, the economic growth seems to stem from temporary trade improvements rather than ongoing domestic strength. The initial 3.0% GDP growth figure for Q2 may be misleading for our strategy. Real final sales to private domestic buyers, a crucial indicator of actual strength, decelerated to just 1.2%. This is the weakest since Q4 2022, indicating that domestic demand is weakening significantly. The report’s inflation data calls for a more cautious perspective. Although Core PCE was a bit hot at 2.5%, other critical areas, like PCE services excluding energy and housing, dropped sharply to 2.3% from 4.3% last quarter. This decline in inflation gives the Federal Reserve reason to adopt a more cautious stance in the coming months.Economic Indicators And Strategies
The weak domestic outlook matches other recent data we’ve observed. The June 2025 jobs report showed non-farm payrolls adding just 150,000 jobs, while the unemployment rate rose to 4.1%. Consumer confidence has also decreased over the last three months, indicating a loss of consumer enthusiasm. In the upcoming weeks, we expect market volatility to rise as investors look beyond the headline figures. The CBOE Volatility Index (VIX) has been stable around multi-year lows of about 13, but the weaknesses in this report may drive it up. We should consider strategies that can benefit from a potential downturn or limit market gains. Reflecting on late 2023, we faced a similar scenario where slowing growth expectations led to a bond market rally, even as the Fed maintained rates. Now, we should think about purchasing puts or put spreads on broad market indices like the SPY to protect against a potential decline. Additionally, call options on Treasury bond ETFs like TLT could do well if the market anticipates earlier-than-expected rate cuts. In summary, the growth was heavily influenced by a temporary decrease in imports, which is not a sustainable driver. As we approach August 2025, we must pay attention to the weakening core of the economy. We expect upcoming employment and inflation data to confirm this slowing trend. Create your live VT Markets account and start trading now.The USD performs differently as central banks get ready to announce interest rate decisions.
The USD is experiencing mixed movements as the Federal Reserve and Bank of Canada prepare to announce their interest rate decisions today. Market attention is mainly on the Federal Reserve, as signs of a possible future rate cut may emerge.
In Europe, currency pairs like EURUSD and GBPUSD are fluctuating. EURUSD recently fell due to a trade agreement but has shown some recovery. Conversely, GBPUSD is moving slightly up after an initial drop. USDJPY has bounced back into positive territory after earlier declines.
