UK shop prices saw their biggest increase since April 2024, reports the British Retail Consortium. The Shop Price Index revealed a year-on-year rise of 0.7% in July, which is higher than the expected 0.2%. Food prices jumped by 4.0%, the highest since February. Essential items like meat and tea increased in price due to global supply issues, leading to higher grocery bills for six months in a row.

Impact On Bank Of England Strategy

This data points to ongoing inflation, making it harder for the Bank of England to adjust interest rates. Headline inflation rose to 3.6% in June, further complicating monetary policy. The Bank of England will meet next on August 7th. Given this report, we think the odds of an interest rate cut from the Bank of England have decreased significantly. The unexpected rise in shop prices, particularly food costs, indicates that inflation remains a key issue. This makes it less likely for the central bank to ease its policies on August 7th. Although the recent Consumer Price Index for June hit the central bank’s target of 2.0%, data from the British Retail Consortium shows that underlying price pressures are starting to rise again. Food inflation is a sensitive and highly noticeable part of the cost of living, and a sharp jump to 4.0% will make policymakers think twice. Typically, central banks are cautious about cutting rates when core inflation components are strengthening.

Market Opportunities And Strategies

In light of this, there are opportunities in interest rate derivatives that bet against a near-term cut. Traders should consider selling short-term interest rate futures, as their prices are likely to drop with a decrease in the likelihood of an August rate reduction. Before this data was released, the market estimated about a 40% chance of a cut, a figure we expect to decline sharply. This change in expectations should support the British pound. A more aggressive central bank stance makes a currency more appealing, so we expect the pound to strengthen against the dollar and euro. Buying call options on the pound is a smart way to prepare for this potential gain. The surprising numbers mentioned in Sheridan’s piece will likely heighten market uncertainty. As a result, implied volatility on sterling options is expected to rise ahead of the central bank meeting. For traders uncertain about direction, buying a volatility instrument like a straddle could be a useful strategy to profit from significant price changes. Create your live VT Markets account and start trading now.

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Trump has cut his original 50-day deadline for a Russia-Ukraine peace deal to just “10 or 12 days.” He showed his frustration during a press conference in Scotland with UK Prime Minister Keir Starmer. Trump warned that if Russia doesn’t comply, his administration will impose 100% secondary tariffs on countries still buying Russian exports. Right now, countries like India, China, and Turkey buy about 60% of Russia’s crude exports, helping Russia’s economy since its 2022 invasion of Ukraine. The EU plans to stop importing refined products made from Russian oil by 2026. Indian officials caution that U.S. secondary sanctions could cause major disruptions, forcing these countries to look for other suppliers.

Potential Market Volatility

We expect significant fluctuations in the market, especially in energy and currency, due to the new, tight deadline. The 10-to-12-day window set by Trump could lead to sharp, quick price changes depending on the outcome. Traders should be ready for increased risk, as large-scale diplomatic negotiations rarely conclude under such urgent timeframes. With the risk of sanctions threatening nearly 60% of Russia’s crude exports, oil prices may rise. Brent crude is already nearing $86 a barrel following this news, and we advise buying call options on WTI or Brent futures to capitalize on potential price increases from a supply shock. Watch the CBOE Crude Oil ETF Volatility Index (OVX) for signs of panic buying. On the stock market side, it could be smart to hedge against a possible downturn by purchasing put options on indices like the S&P 500 or emerging market ETFs. The CBOE Volatility Index (VIX) is currently around 14, which we believe doesn’t accurately reflect the geopolitical risks if these negotiations fail. A breakdown in talks might significantly impact global companies linked to supply chains in China and India.

Market Reactions and Currency Implications

In the past, during the U.S.-China trade war, markets reacted sharply to tariff announcements, often even before they took effect. We expect a similar reaction now, with algorithmic trading likely to aggressively sell assets at any hint of impending secondary sanctions. Therefore, it’s vital to have defensive positions ready before the deadline hits. If a deal doesn’t happen, we foresee a shift toward the U.S. dollar as a safe haven, putting pressure on the currencies of affected countries. This creates an opportunity to short the Russian ruble or Indian rupee against the dollar. The potential for 100% tariffs would be a significant economic shock that currency markets would adjust to quickly. Create your live VT Markets account and start trading now.

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Trade tensions are calming down as the US has reached two important trade deals with Japan and the EU. Currently, discussions are happening in Sweden to extend the trade pause between the US and China, which ends on August 12. Negotiations started on Monday and may go on, increasing the chances of an extension. However, there is a small chance that no agreement will be reached. People are also focused on the Federal Open Market Committee, as a tougher statement could surprise the markets.

Indicators of Economic Health

No rate cuts are expected, but there is some worry about complacency. The US labor market shows little slack, and there are signs that core inflation is rising. The S&P 500 (SPX) looks strong, but it’s unclear if this strength is real or just a sign of complacency, as shown in daily candle patterns. With trade agreements in place with major partners like the European Union—which received over $336 billion in US goods last year—geopolitical concerns are decreasing. This situation could lead to lower implied volatility, making strategies that benefit from time decay, such as selling out-of-the-money options, appealing. We believe this calm environment provides opportunities to earn premiums. The market seems to be betting on a positive outcome for the extension talks with China. This sets up an uneven risk profile; if no agreement is reached, there could be a larger decline than the gains from a successful extension. Holding long positions without a hedge during this time carries significant risk.

The Need for Strategic Hedging

We are particularly worried about the complacency surrounding the Federal Open Market Committee. The latest Non-Farm Payrolls report showed a solid addition of 272,000 jobs in May, while core inflation remains high at 3.4%. This suggests the economy may be too strong for a gentle approach. There’s a risk that the chairman’s statement could be more aggressive in addressing inflation than the market expects. Given this potential for a hawkish surprise, we think buying protection is both smart and affordable. The CBOE Volatility Index, or VIX, has been hovering around a historically low level of 13, indicating that option premiums are cheap. Buying out-of-the-money puts on the S&P 500 or VIX call options offers a budget-friendly hedge against a market downturn. The strength seen in daily candles might hide underlying weakness. We’ve seen this before, such as during the market’s sharp decline in the fourth quarter of 2018 after a Fed meeting was viewed as too aggressive. A careful derivatives trader should be prepared for a potential pullback if the chairman’s press conference unnerves investors. Create your live VT Markets account and start trading now.

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Senior officials from the U.S. and China met in Stockholm for over five hours on Monday. They discussed extending the current tariff pause for an additional 90 days. Key figures in the talks included U.S. Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng. The focus was on resolving trade and technology disputes, with China looking for relief from tariffs and restrictions on technology exports. Analysts believe that a potential summit between Trump and Xi could help reduce tensions, with an August 12 deadline to finalize a long-term agreement. There were preliminary deals made in May and June, but after Monday’s discussions, no public statements were released.

Ninety Day Extension

A 90-day extension of the truce, first agreed upon in mid-May, is expected to stop any further increase in tariffs. This extension may also lead to a Trump-Xi summit in late October or early November, continuing the efforts to resolve ongoing disputes between the two countries. News over the weekend suggested that the U.S. and China would extend the tariff hold for another 90 days. Talks will continue on Tuesday, and the proposed extension aims to ease tensions ahead of the summit. The market has already factored in this extension, which likely means low implied volatility across major indices for now. The CBOE Volatility Index (VIX) is trading near 13.5, significantly below its historical average, indicating that traders are not expecting major disruptions from these talks. This situation makes buying call or put options relatively inexpensive while offering chances for those selling premium.

Trading Strategies and Risks

We see opportunities in strategies that benefit from this expected calm, such as selling short-dated iron condors or credit spreads on the S&P 500. The goal is to take advantage of the market’s calmness before the August 12 deadline. Historical data from the 2018-2019 trade war shows that times of negotiation after a truce usually lead to steady markets and a gradual decline in option premiums. The main risk here is a sudden breakdown in negotiations, which would cause volatility to spike sharply. For example, the VIX soared over 40% in early May 2019 when talks unexpectedly fell apart. To protect against this risk, we recommend holding a few long-shot, out-of-the-money puts on technology or semiconductor ETFs, as these areas are most affected by potential negative outcomes. A negative comment from either Bessent or Lifeng could trigger a quick market reaction. Recent economic reports, such as China’s lower-than-expected July exports, which fell 1.2% year-over-year, indicate that Beijing is under pressure to ensure market access and prevent further tariffs. This supports our belief that an extension of the truce is the most likely outcome. Therefore, the best strategy is to prepare for ongoing stability while keeping an affordable hedge against unlikely negative surprises. Create your live VT Markets account and start trading now.

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Ray Dalio, the founder of Bridgewater Associates, recommends putting 15% of a portfolio into long-term assets like gold and bitcoin. On CNBC’s Master Investor Podcast, he voiced a preference for gold but said it’s ultimately up to individual choice. Dalio highlighted the fragile economic situation in the U.S., mainly because of its rising national debt. He predicted that the U.S. government would need to issue nearly $12 trillion in Treasuries next year to manage this debt. He warned that not only the U.S. but also other Western countries are stuck in a “debt doom loop.”

Positioning for Hard Assets

With concerns about money losing value, we believe that derivative traders should prepare for rising prices of hard assets. This means looking into long-term call options on both gold and bitcoin to profit from potential gains while controlling risk. We see this as a bet on increased market volatility and a move toward scarce resources. Dalio’s preference for gold is timely, as the price has recently climbed to nearly $2,300 an ounce, close to its all-time highs. We can express this outlook by using options on the SPDR Gold Shares (GLD) exchange-traded fund. Historically, gold has been a solid hedge during times of significant government debt, which matches the current situation. For bitcoin, recent approvals of spot Bitcoin ETFs have changed the market landscape. For instance, BlackRock’s IBIT fund has attracted over $17 billion since its launch in January 2024, indicating high institutional interest. We can leverage this trend with CME Group’s bitcoin futures contracts.

Debt Doom Loop Strategy

The core issue is the “debt doom loop,” as the U.S. national debt has now surpassed $34.6 trillion. A straightforward way to trade this view is by expecting higher interest rates through short positions in Treasury futures. Another method to profit if bond prices drop from increased government debt is by purchasing put options on a long-duration Treasury bond ETF like the iShares 20+ Year Treasury Bond ETF (TLT). These alarming economic forecasts point to a period of substantial market upheaval ahead. Therefore, we should consider preparing for a surge in overall market volatility. Buying calls on the CBOE Volatility Index (VIX) could effectively hedge against the kinds of systemic risks we’ve discussed. Create your live VT Markets account and start trading now.

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The USD grew stronger against major currencies after the US and EU reached an agreement, easing worries about a trade war. This deal boosts confidence in the US economy, increasing global demand for the dollar. Economic data indicates a shift in trade benefits towards the US, raising hopes for better trade balances, which supports the dollar. The S&P 500 hit a new high, showing confidence in US growth and attracting more investment into US assets.

Currency And Gold Movements

The USD gained significantly against the EUR, rising by 1.31%. It also increased over 1% against the CHF and 0.75% against both the AUD and NZD. Gold prices fell for the fourth straight session due to the strong dollar, dropping to intraday lows of $3301. Gold fell below critical support at $3327, suggesting further declines may happen, with key support levels at $3286, $3255, and $3242.55. Crude oil prices went up because of geopolitical tensions and optimism about trade deals. President Trump called for a quicker resolution in Ukraine while the EU imposed new sanctions on Russian oil. News of trade agreements also improved global demand forecasts. In the stock market, the Dow dipped by 0.14%, while the S&P rose by 0.02%, and Nasdaq increased by 0.33%. In the US debt market, yields rose: 2-year to 3.929%, 5-year to 3.971%, 10-year to 4.413%, and 30-year to 4.959%. Given these developments, we believe the Euro is likely to weaken against the dollar. The Federal Reserve has more flexibility with interest rates compared to Europe, where the main rate is around 4.50%. It seems wise to bet on continued dollar strength through call options or futures. The trade deal presented by USTR Greer is a major boost for the US dollar. While the record highs for the S&P and Nasdaq are positive, we advocate for caution instead of aggressive buying. In the past, when equity indices hit new heights amidst widespread optimism, the VIX volatility index often dropped to low levels, making protective put options affordable. We suggest hedging long equity positions by buying puts on the SPX or QQQ indices, as seen during past euphoric periods like late 2021 before declines.

Market Opportunities And Strategies

The drop in gold below critical trend support creates a chance for bearish strategies. The strong dollar is a significant challenge, as market data shows a 1% rise in the DXY dollar index often results in a similar decline in gold prices. Therefore, we are considering buying puts on gold ETFs, aiming for the 100-day moving average mentioned by Michalowski as an essential level. We see considerable weakness in the US debt market and traders should adapt. The planned Treasury borrowing of over $1 trillion for the quarter is huge, far surpassing the $243 billion from the second quarter of 2024, which will push yields higher. In this environment, shorting long-duration bonds, possibly by buying puts on an ETF like TLT, is an appealing strategy. Crude oil prices are supported by supply risks and positive demand outlooks. Tensions with Russia, as noted by Medvedev’s comments, alongside US trade deals, create a favorable backdrop for energy prices. We believe buying call options on crude oil futures is a smart way to prepare for a potential rise toward the $70 per barrel mark in the coming weeks. Considering the mixed signals from a trade deal and ongoing geopolitical tensions mentioned by Carney and others, we should brace for increased price fluctuations across asset classes. The combination of record-high stocks, rising bond yields, and a cautious energy market suggests that implied volatility might be underestimated. This scenario calls for strategies that profit from significant price movements, no matter which direction. Create your live VT Markets account and start trading now.

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Oppenheimer has raised its year-end prediction for the S&P 500 to 7,100, up from the earlier target of 5,950 set in April. The firm keeps its 2025 earnings forecast at $275 per share, leading to a forward price-to-earnings ratio of 25.8.

Reduced Market Uncertainty

The updated forecast comes from less market uncertainty due to new trade agreements with Japan and the European Union. A strong earnings season also plays a role, with 84% of companies beating expectations this quarter. Other positive influences include the ongoing strength of the U.S. economy and the Federal Reserve’s success in lowering inflation from 9% to 2.7% without triggering a recession. Oppenheimer is a U.S.-based independent investment bank and financial services firm. With such an optimistic forecast, we think traders should prepare for continued growth in the S&P 500. This means focusing on bullish strategies in the upcoming weeks to take advantage of the expected rally. One suggested strategy is to buy call options on the SPX or its related ETFs. These options provide leveraged exposure to the anticipated rise towards the new 7,100 target while managing risk.

Current Market Climate

The CBOE Volatility Index (VIX) is trading around 13, significantly lower than its historical average of about 20. This low option cost makes it easier to enter new long positions since premiums aren’t inflated by market fear. Bullish sentiment is backed by recent economic data, which shows a strong labor market and steady unemployment at 3.8%. These figures support the notion of economic strength without an immediate recession. However, that implied forward price-to-earnings ratio of 25.8 is higher than usual, similar to levels seen during the dot-com boom in the late 1990s. Therefore, traders might also consider selling out-of-the-money put options. This strategy generates income while showing confidence that a major decline isn’t likely. Historically, markets perform well when the Federal Reserve effectively manages a soft landing, as seems to be the case now. After the rate-hike cycle of 1994-1995, the index saw significant gains, which may serve as a model for our current situation. Create your live VT Markets account and start trading now.

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Donald Trump has criticized the Federal Reserve ahead of a key meeting where many expect interest rates to remain unchanged. He believes that cutting rates would help the economy, even though he thinks it is already doing well. Interest rates are set by central banks and impact the cost of borrowing and saving. They are usually adjusted to control inflation, which is typically aimed at around 2%. Higher interest rates can strengthen a currency by attracting foreign investment, but they can also affect gold prices by making other investments more appealing since gold does not earn interest.

Fed Funds Rate And Market Expectations

The Fed funds rate is an important part of US monetary policy, established during Federal Reserve meetings. This rate influences market expectations and is tracked by the CME FedWatch tool. It plays a significant role in shaping market movements leading to Fed policy decisions. We see Trump’s criticism of the central bank as political noise that may increase market volatility. Traders using derivatives should get ready for bigger price fluctuations around Federal Reserve announcements. One way to prepare is to use strategies like options straddles on major indices, which can profit from large price changes in either direction. Currently, the market largely expects interest rates to remain steady for the near future. The CME FedWatch tool indicates a more than 99% likelihood that the rates will not change at the next meeting, making any surprise decision very impactful. A small investment in inexpensive, out-of-the-money options could serve as a cost-effective way to hedge against unexpected changes in policy.

U.S. Dollar And Market Opportunities

As long as U.S. monetary policy is tighter than that of other major economies, we expect the U.S. dollar to remain strong. The U.S. Dollar Index (DXY) has been robust throughout 2024, reflecting this trend. This creates opportunities to use futures or forex options to bet on ongoing dollar strength against currencies like the euro or yen. Gold prices have recently surpassed $2,300 an ounce, despite the usual pattern of falling when interest rates are high. This rise seems to be linked to strong central bank purchases and geopolitical uncertainties. If the Fed signals a future rate cut, it could remove a significant obstacle for gold, making call options on gold futures a tempting way to speculate on further increases. Ultimately, policy decisions will hinge on inflation data, which is still above the 2% target. The latest annual Consumer Price Index (CPI) stands at 3.4%, indicating that the battle against inflation is ongoing. We will be closely monitoring the next inflation report, as a lower-than-expected figure could significantly boost rate-cut expectations and impact the market. Create your live VT Markets account and start trading now.

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Liberty Energy Inc. reported an adjusted net income of 12 cents per share for the second quarter of 2025, which was below expectations. This was a significant drop from last year’s 61 cents, largely due to ongoing economic challenges and decreased customer activity. The company’s revenues reached $1 billion, beating forecasts by $37 million. However, this represented a 10% decline from $1.2 billion in the previous year, reflecting a drop in completion activities.

Ebitda and Nuclear Collaboration

Adjusted EBITDA was $180.8 million, down from $273.3 million last year and below the expected $194.1 million. Liberty Energy has teamed up with Oklo to explore the use of distributed natural gas power and small modular nuclear reactors. As of June 30, the company had $19.6 million in cash and cash equivalents and a long-term debt of $160 million. Overall, Liberty Energy’s liquidity was $276 million, and it cut capital spending to $134 million from an earlier estimate of $165.7 million. Despite some market ups and downs, North America’s oil production remains steady. However, activity is predicted to slow down in the second half of the year. Liberty Energy plans to focus on its growing simul frac business, leveraging its advanced technology and strong financial position. Given the recent earnings report, we foresee a bearish outlook for the company in the short term. The missed adjusted net income and the sharp decline from last year indicate downward pressure on the stock price. Therefore, we recommend considering put options to benefit from a potential decrease in value in the next few weeks.

Industry Data and Strategy Outlook

The drop in completion activities is supported by broader industry trends. For example, the Baker Hughes U.S. rig count decreased to 488 in late May 2024, down from 570 the previous year. This supports our view that a quick recovery is unlikely. While revenues exceeded projections, this positive news is overshadowed by a significant decline in profitability and lower adjusted EBITDA. This suggests serious margin pressure, which investors might penalize more than reward for a minor revenue increase. This could create opportunities to sell call options at prices we see as a ceiling for the stock. Energy service stocks usually show high volatility following mixed earnings reports. We expect implied volatility to stay high as the market processes the disappointing earnings alongside future technology initiatives. In this context, strategies like a straddle, which benefits from significant price shifts in either direction, could be appealing if one is uncertain about the immediate market trend. The collaboration for small modular nuclear reactors is a long-term initiative and won’t affect cash flow in the near term. We will set aside this news in our strategies for the coming weeks and focus on the current weakness in customer activity. The cuts in capital spending, aimed at conserving cash, also indicate a lack of immediate investment opportunities, further reinforcing a cautious or bearish stance. Create your live VT Markets account and start trading now.

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The US Treasury has raised its borrowing estimate for the July–September period to $1.01 trillion, almost double the earlier forecast of $554 billion. This increase follows the recent suspension of the debt ceiling, which allows for a $5 trillion uptick. To manage this, the Treasury is speeding up the issuance of bonds to rebuild its cash reserves, aiming for an $850 billion balance by the end of September. In the fourth quarter, borrowing is expected to drop to $590 billion.

Treasury Bond Issuance Strategy

Revenue from higher tariffs is adding extra funds, even though corporate tax receipts are expected to decline. The Treasury will provide details about its upcoming bond sales on Wednesday. We believe this significant rise in government borrowing will flood the market with new bonds, lowering their prices and raising yields. Derivative traders should get ready for a higher interest rate environment in the short term. This situation favors trades that benefit from rising yields, such as shorting Treasury futures. The 10-year Treasury yield has already risen above 4.2%, a level not seen in over 15 years, as markets start to account for this influx of supply. Historically, rapid increases in debt issuance have led to higher borrowing costs across the economy. We expect this trend to grow as new bonds are auctioned.

Impact on Financial Markets

This level of market absorption brings uncertainty, which we expect will increase volatility. The MOVE Index, a key measure of bond market volatility, has remained high throughout most of 2023, and we anticipate that this large issuance will lead to even more price fluctuations. It may be wise to buy options that benefit from this expected volatility. Higher returns on government debt can draw money out of the stock market, putting pressure on equity prices. We’ve already seen major indices like the S&P 500 pull back from their yearly highs as yields have risen in recent weeks. As a result, we are considering adding protective put options on equity indexes. A rise in U.S. yields can also attract foreign capital, which strengthens the dollar. The U.S. Dollar Index (DXY) has already gained over 2.5% since mid-July, and we see more upside as this borrowing plan moves forward. This makes long positions on the dollar against other major currencies look more appealing. With lower borrowing needs expected towards the end of the year, this intense pressure may be focused in the current quarter. Thus, while we should prepare for higher rates now, we need to be ready to reassess as we approach the fourth quarter. Market dynamics may change once this supply shock is absorbed. Create your live VT Markets account and start trading now.

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