The GBP/USD has dropped to a daily low after falling below 1.3500. This decline is due to strong US economic data, which reinforces the Federal Reserve’s current monetary policy. Additionally, weak retail sales in the UK put further pressure on the pair, leading it to trade at 1.3434, a decrease of 0.52%. Pound Sterling is weak compared to major currencies as UK retail sales and PMI show only slight improvements. The Office for National Statistics has reported that retail sales growth for June was slower than expected.

Declining GBP/USD Pair

The GBP/USD pair is continuing to fall, reaching around 1.3490 during Asian trading hours. This drop is driven by rising demand for the US Dollar. Investors are taking a cautious stance as they await the tariff deadline from US President Donald Trump and an upcoming policy meeting from the Federal Reserve. It’s important to exercise caution when considering the mentioned assets. There are no guarantees of error-free information. Conduct thorough personal research, as trading forex carries high risk, which may lead to loss of all or part of your investment. Seeking advice from an independent financial advisor can help clarify the risks related to forex trading. We believe that derivative traders should prepare for ongoing weakness in the sterling-dollar exchange rate. Recent US inflation data moderated to 3.3% in May but remains well above the central bank’s target, supporting the Fed’s firm policy stance. This suggests that the dollar will continue to strengthen against other currencies.

UK Economic Concerns

Concerns about the British economy are valid, as retail sales figures have declined since initial reports. New data from the national statistics office shows a significant 2.3% drop in May sales volumes, far below expectations. This indicates that UK consumers are struggling, which could lead the Bank of England to consider lowering interest rates sooner than the US does. As a result, strategies that profit from declines, such as buying put options on the currency pair, may be beneficial. This approach allows traders to take advantage of the downtrend while limiting their maximum risk to the premium paid. Historical data from the 2022 UK “mini-budget” crisis, when the pair approached parity, illustrates how quickly sentiment can cause serious weakness. Traders should remain cautious, especially with potential political changes in the United States. The possibility of trade policy shifts during a second term for Mr. Trump introduces considerable uncertainty and could increase demand for safe-haven assets like the dollar. We advise traders to account for increased volatility around major political events and policy announcements. Create your live VT Markets account and start trading now.

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The Swiss Franc (CHF) has weakened against the US Dollar (USD) for three days in a row. This change is due to a rise in global risk sentiment and a stronger US Dollar. As optimism grows around international trade agreements, investors are shifting towards riskier assets, which makes safer currencies like the Swiss Franc less appealing. Right now, the USD/CHF pair is at approximately 0.7963, having recently hit a three-week low. It remains down 0.80% this week and is struggling to break the important barrier of 0.8000, well below its weekly high of 0.8226.

Global Trade Optimism Impact

Optimism in global trade has improved risk sentiment and helped the US Dollar gain strength. Recent trade agreements with Japan, Indonesia, and the Philippines suggest a move away from protectionism. Talks with the European Union and China may lead to new deals, although discussions with Canada are currently on hold. US economic data shows a mixed but stable picture that supports the US Dollar. Initial jobless claims came in lower than expected, indicating a tight job market. However, the Manufacturing PMI dropped, while the Services PMI stayed strong. Durable goods orders fell by 9.3% in June, but this was slightly better than predicted. With the positive shift in global risk sentiment, we think derivative traders should prepare for continued strength in this currency pair. The trend away from safe-haven assets is clear, and strategies should aim to capture more upside in the coming weeks.

Central Bank Policy Divergence

The difference in central bank policies supports this view. The Swiss National Bank recently lowered its key interest rate to 1.25% in June, which weakens its currency. In contrast, the US Federal Reserve is keeping rates steady between 5.25% and 5.50% to control inflation, which was at 3.3% annually in May. We consider the important psychological level of 0.8000 as a target, not just a barrier. A bull call spread could be a smart way to trade a potential breakthrough at this level while managing costs and risk. For example, one could buy a call option just below the current price and sell another call option above the barrier. Recent data on market positioning backs up our outlook for continued weakness in the franc. The Commodity Futures Trading Commission (CFTC) data from the week ending June 18th showed that large speculators increased their net short positions on the franc by over 6,000 contracts. This indicates that institutional investors are betting on further declines. Historically, when risk sentiment is strong, the franc tends to perform poorly. The pair’s rise from its multi-year low of about 0.8300 in late 2023 suggests that upward momentum is building. Moderate implied volatility means options-based strategies could be cost-effective for a potential breakout. Create your live VT Markets account and start trading now.

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The GBP/USD pair fell to a day’s low of 1.3434, a drop of 0.52%. This decline followed US economic reports that support the Federal Reserve’s current monetary policy, while UK Retail Sales performed poorly. Initial US Jobless Claims surpassed expectations, showing economic strength despite a decline in manufacturing, according to S&P Global. US Durable Goods Orders dropped by 9.6% in June, shifting down from a 16.5% growth in May, although analysts had expected a decline of 10.8%. In contrast, Core Durable Goods Orders rose by 0.2%. President Trump announced that most US trade deals are close to completion, with possible tariffs of 10% to 15%. He mentioned a 50-50 chance for a deal with the EU.

UK Retail Sales And Its Implications

UK Retail Sales grew by 0.9% in June, but this was below the expected 1.2%. Compared to the previous year, sales increased by 1.7%, missing the 1.8% estimate following a 1.3% decline. This disappointing performance raises concerns about a potential rate cut by the Bank of England. GBP/USD technical analysis suggests potential for an upward trend, even after falling below the 50-day Simple Moving Average. If the pair continues to drop, it may test support levels at 1.3369 and 1.3320. Conversely, a rise past 1.3450 could lead to a test at the 1.3500 resistance level. This week, the British Pound showed mixed results against major currencies. The main factor affecting the pound’s value against the dollar is the growing difference in monetary policy outlooks. The weak British consumer spending raises expectations for a Bank of England rate cut, with money markets now pricing in a 60% chance of a cut by August. This stands in stark contrast to the American central bank’s more cautious approach.

American Data And Dollar Strength

American data also supports a stronger dollar, making bearish strategies on the GBP/USD pair more appealing. The addition of 272,000 jobs in the last reported month greatly exceeded expectations and overshadows the drop in durable goods orders. Comments from the administration regarding trade deals add some volatility, but the solid economic strength of the US supports the currency. Given this scenario, we may consider buying put options to benefit from potential declines toward the 1.3369 support level. Selling out-of-the-money call options or creating bear call spreads could also be wise strategies to gain premiums while betting against a significant rise past the 1.3500 mark. The break of the key moving average supports this bearish outlook in the near future. However, we should stay alert since UK inflation recently returned to the 2.0% target for the first time in nearly three years, which may make policymakers cautious about a rate cut. Any unexpectedly strong economic data from the UK or a shift towards dovishness from the US central bank may challenge this perspective. The sterling has historically shown sharp reversals following policy surprises, as evidenced during the 2022 budget crisis, so it’s crucial to manage risks carefully. Create your live VT Markets account and start trading now.

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European Union officials and diplomats suggest that a trade deal between the EU and the US may be coming soon. This deal could establish a 15% baseline tariff on all imports from Europe, along with a possible 50% tariff specifically on steel and aluminum. As a result of these updates, the EUR/USD exchange rate has slightly recovered and is now trading around 1.1730. However, it is still down about 0.15% for the day.

Understanding Tariffs

Tariffs are taxes on imported goods designed to protect local markets by making foreign products more expensive. Unlike regular taxes, which consumers or businesses pay at purchase, tariffs are paid by importers when goods enter the country. Former US President Donald Trump intends to use tariffs to strengthen the US economy. In 2024, the largest exporters to the US were Mexico, China, and Canada, with Mexico at the top with $466.6 billion. Trump plans to impose tariffs on these countries and hopes to use the revenue to lower personal income taxes. The proposed trade framework with the European Union introduces a lot of uncertainty, likely increasing market volatility, especially in currency and commodity markets. Therefore, traders should think about strategies to benefit from expected price fluctuations, such as buying options. With the chance of a 15% baseline tariff, we expect continued downward pressure on the EUR/USD pair. The Euro has already been weak, trading around 1.07 in June 2024, and new tariffs would likely worsen this situation. We recommend buying put options on the Euro to protect against or even profit from a decline toward important support levels seen in late 2022.

Targeted Response To Steel Tariffs

The proposed 50% tariff on steel and aluminum requires a focused response in the industrial sector. When significant steel tariffs were last imposed in 2018, US steel prices soared over 40%, while European producers like Thyssenkrupp and ArcelorMittal faced challenges. We suggest looking at call options on US steel companies and put options on European competitors to prepare for similar outcomes. Trump’s broader protectionist approach, targeting major exporters like Mexico and China, signals that this could be part of a global trend. This may lead to a general risk-off sentiment that impacts stock markets beyond the directly affected sectors. To hedge against this systemic risk, we are considering call options on volatility indexes like the VIX, which has been trading at relatively low levels below 15, offering a cost-effective shield for portfolios. Create your live VT Markets account and start trading now.

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EUR/USD dropped after hitting a two-week high on Thursday. This was due to the European Central Bank (ECB) deciding to keep interest rates unchanged. Meanwhile, the US Dollar gained strength from strong economic data and optimism around trade, as President Trump mentioned a “50-50 chance” of reaching a trade deal with the EU. On Friday, the Euro fell against the US Dollar, influenced by strong US economic reports and positive trade news. The EUR/USD pair traded lower during US hours, moving away from its prior two-week high but still up almost 0.80% for the week.

Trade Agreement Speculation

The US Dollar Index has seen a slight recovery, approaching 97.80 after being near a two-week low. There are reports of a possible trade agreement between the US and EU, similar to the US-Japan deal which includes a 15% tariff cap on important goods, though nothing is official yet. ECB policymaker François Villeroy de Galhau expressed concerns about trade tensions. He indicated that the ECB may consider adjusting interest rates in the future and supports a flexible monetary policy due to uncertain global conditions. Today, the Euro increased the most against the British Pound. The US Dollar rose 0.12% against the Euro, while the Euro dropped 0.55% against the British Pound. We view the Euro’s recent two-week peak as a chance to sell rather than a sign of lasting strength. The contrast between a strong US economy and a cautious ECB suggests downward pressure on the EUR/USD pair. This sets a clear strategy for traders in the weeks ahead.

Currency Strategy and Historical Context

The strength of the dollar is backed by solid data. Recent reports show US weekly jobless claims around 212,000, indicating a healthy labor market. This robustness makes it unlikely that the Federal Reserve will cut interest rates soon. We believe this difference in policy will continue to support the US currency. Conversely, comments from officials like Villeroy highlight significant risks for the Eurozone economy. April’s Eurozone inflation stood at 2.4%, close to the ECB’s target but showing easing underlying pressures. His caution about potential future rate changes suggests a weaker Euro ahead. Given this outlook, we are planning for a decline in the EUR/USD by buying put options. This method allows us to make a profit if the pair falls while limiting our maximum loss to the premium paid. With market volatility remaining relatively low, the cost of these options is appealing. Historical trends back this perspective. A similar divergence in central bank policies occurred from 2014 to 2015, causing the EUR/USD to drop from about 1.40 to nearly 1.05. The current situation—with a hawkish Fed and a dovish ECB—mirrors that period. Furthermore, President Trump’s optimism about a trade agreement clouds the Euro’s prospects, as any agreement could limit its potential for growth. Create your live VT Markets account and start trading now.

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The Japanese Yen is losing ground against the US Dollar because of improved risk appetite and growing interest rate differences. The USD/JPY is trading above 147.00, facing resistance at 148.03. The upcoming meetings of the Federal Reserve and the Bank of Japan will keep interest rate differences in focus. The Fed’s “higher-for-longer” approach contrasts with the BoJ’s cautious stance as inflation in Japan stabilizes. In July, Tokyo’s CPI showed inflation easing to 2.9%, supporting this cautious policy.

Economic Indicators

Market watchers are also looking at US Durable Goods Orders for June, which dropped by 9.3%. This decline was expected after a sharp increase in May, so the market’s reaction was muted. The USD/JPY has bounced back from the 38.2% Fibonacci retracement level at 147.14, targeting the resistance at 148.03. The pair is currently above the 50-day SMA at 145.23, indicating bullish momentum. If it breaks above 148.00, the next target is around 149.38. The US Dollar is the official currency of the United States and is widely traded around the world. Its value is affected by the Federal Reserve’s monetary policy. Quantitative easing can weaken the Dollar, while quantitative tightening tends to strengthen it. We recommend that derivative traders prepare for further gains in this currency pair, as the key factors remain in place. The interest rate difference is crucial; the yield on the US 10-year Treasury note is recently above 4.2%, while Japan’s yield remains below 1.0%. This significant gap makes holding US Dollars more appealing than Yen.

Central Bank Policies

The different approaches of the central banks are likely to reinforce this trend in the upcoming weeks. We expect Chairman Powell to continue the “higher-for-longer” message to tackle persistent US inflation, which was at 3.7% in the latest annual reading from August. In contrast, Governor Ueda is likely to be cautious, waiting for stable wage growth from the spring “Shunto” negotiations before changing negative rates. Given the current technical indicators, buying call options with strike prices above the 148.03 resistance appears to be a sensible strategy. This would allow traders to capitalize on potential gains toward the next major target near 149.38 while also defining their maximum risk. The pair’s consistent performance above its 50-day Simple Moving Average supports this bullish outlook. However, we need to stay alert for the risk of government intervention as the pair approaches the 150.00 level. Historically, Japanese authorities have acted to support their currency near this level, as seen several times in late 2022. The likelihood of direct market action from the Ministry of Finance increases as this significant level approaches. Market positioning data is also important for traders to consider. Recent reports from the Commodity Futures Trading Commission reveal that speculative traders hold a large net-short position on the Yen. While this confirms the current bearish sentiment, a crowded trade can lead to a quick reversal if there’s a sudden shift in policy or market mood. Create your live VT Markets account and start trading now.

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US President Donald Trump recently had a productive meeting with Federal Reserve Chairman Jerome Powell. He felt that Powell might be open to lowering interest rates. Trump also shared his doubts about reaching a trade deal with Canada and suggested he might impose tariffs unilaterally. The market reacted moderately to these comments, with the US Dollar Index climbing 0.3% to 97.80. Tariffs are duties on imports that help local producers compete better. Unlike taxes, tariffs are paid in advance by importers rather than individuals or businesses.

Opinions On Tariffs

Views on tariffs are mixed. Some believe they protect domestic industries, while others think they could hurt the economy and spark trade wars. Trump plans to use tariffs to strengthen the US economy, especially concerning trade with Mexico, China, and Canada, which made up 42% of US imports in 2024. These tariffs aim to lower personal income taxes with the revenue raised. However, there are risks and uncertainties involved, so it’s important to do thorough research before making investment choices. Given the possibility of a rate cut mentioned by Powell, caution is essential. Recent data shows US inflation remains high, with the Consumer Price Index rising 3.4% year-over-year as of April 2024. This complicates decision-making for Mr. Powell. Therefore, we are exploring options that bet on lower rates while also hedging against the risk of rates staying high for a longer period. The uncertainty expressed by Trump about Canada is noteworthy. The auto industry is especially at risk because parts often cross the US-Canada border multiple times before cars are completed, highlighting the highly integrated supply chain. We believe that buying put options on automotive ETFs could be a smart way to protect against sudden tariff announcements that affect this industry.

Market Volatility And Tariff Impact

These conflicting factors—a potential rate cut and a possible trade slowdown—create chances for market volatility. Historically, during the 2018 tariff disputes with China, the CBOE Volatility Index (VIX) spiked by over 40% after major announcements. We see an opportunity to buy call options on the VIX to profit from anticipated market fluctuations in the coming weeks. Using tariff revenue to lower other taxes will impact importers financially. Mexico became the US’s largest trading partner in 2023, with over $475 billion in goods traded, putting companies that rely heavily on these imports at risk. We are identifying publicly traded companies with significant exposure to Mexican supply chains to consider purchasing put options against them. Create your live VT Markets account and start trading now.

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The S&P 500 recently hit an all-time high, closing at 6,381.31. It made a small gain before finishing the session nearly unchanged. The market rose about 1% since last Friday, with S&P 500 futures trading above 6,400. Currently, there are no clear negative signs, but there is still a chance of a topping pattern. The Nasdaq 100 also reached a record at 23,268.49, fueled by expectations for quarterly earnings. Although there are no strong signs of decline, a topping pattern could develop. The VIX, which measures market volatility, dropped to 14.95, its lowest level since late February. A lower VIX usually means less market fear but also hints at a possible market reversal.

Crude Oil Market

In the crude oil market, prices increased by 1.20% and are staying above $65. This rise is driven by positive outlooks on trade agreements and falling inventory levels. Significant developments from major producers like the U.S., Russia, and Venezuela may affect global fuel markets. Overall, concerns about earnings, interest rates, and trade are making the market cautious, even as stocks near record highs. With the broader market reaching these heights, we recommend derivative traders consider protective strategies. Buying put options on major indices can help shield against possible topping patterns. This strategy allows traders to benefit from further gains while limiting risks in the coming weeks. The low volatility index makes options cheaper to buy. Recent data shows the VIX around 12.5, indicating a level of calm that often comes before market pullbacks, like those seen in late 2019 and mid-2021. We see this as a good chance to invest in protection before volatility may increase.

Tech Sector Insights

As quarterly results from tech giants approach, we expect increased price movements in this sector. For a stock like NVIDIA, which saw post-earnings shifts over 8% recently, using straddles or strangles could be smart. This method allows traders to profit from large movements, regardless of direction, after the earnings reports. In the energy sector, the rise in crude prices opens doors for bullish opportunities. The latest Energy Information Administration report shows a draw of 2.5 million barrels in U.S. crude inventories, supporting optimism. We suggest considering call options on oil futures or energy-focused ETFs to take advantage of the hopeful outlook from producers. Lastly, we should keep an eye on upcoming interest rate decisions and comments from Federal Reserve officials. Current market pricing, per the CME FedWatch Tool, indicates a strong chance of steady rates, but any unexpected hawkish surprises could lead to a sell-off. Holding protective positions through the next FOMC meeting would be a wise move. Create your live VT Markets account and start trading now.

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The U.S. dollar has gained strength against major currencies, nearing a two-week high due to improved trade sentiment and stable Treasury yields. President Trump addressed currency policies and trade issues, criticized China and Japan for devaluing their currencies, discussed potential trade agreements with the EU, and reiterated his tariff plans. EUR/USD traded below 1.1750 because of option expirations and expected discussions between Trump and the EU’s Ursula von der Leyen. GBP/USD faced downward pressure from disappointing UK retail sales data, closing below its 100-hour moving average, which suggests limited corrections.

US Advanced Durable Goods Report

The U.S. Advanced Durable Goods Report for June 2025 showed a 9.3% decline in total orders, which was better than expected after a 16.5% increase in May. This drop was largely due to transportation equipment, impacting $32.6 billion. Excluding transportation, orders increased by 0.2%, while core capital goods decreased by 0.7%. Despite a steady 2.4% growth estimate for Q2 2025 from the Atlanta Fed’s GDPNow model, traders will keep an eye on the upcoming factory orders report. U.S. stock indices finished higher, reaching record highs thanks to tech earnings and anticipation of the Fed’s decision and GDP release, indicating a positive market outlook amid significant upcoming economic events. Given the wave of upcoming events, we see the current market calm as a major risk. The CBOE Volatility Index, or VIX, is at around 13, a historically low level that suggests traders might not be ready for potential market fluctuations from next week’s data and earnings. We are preparing for an increase in volatility by considering options strategies to take advantage of larger price movements.

Currency Policy and Market Outlook

The President’s remarks on currency policy support a strong dollar, matching the current trend. The U.S. Dollar Index (DXY) remains above the 106 level, and we will be closely monitoring the upcoming GDP and Core PCE inflation data to see if the dollar continues to strengthen. If the dollar experiences temporary dips due to weaker data, this could be a buying opportunity for us in the uptrend. For EUR/USD, 1.1700 is a vital support level, as shown by last week’s rebound from that area. We will exercise caution in holding large positions over the weekend, as upcoming trade discussions with von der Leyen may create a significant price gap at the market open. The 100-hour moving average will remain our key pivot for short-term trades. The pound is under pressure, and we believe the 200-hour moving average is crucial to maintain stability and avoid a steeper decline. Given the weak UK economic data, any positive news from the meeting with Starmer could present selling opportunities. We plan to sell into rallies that approach the 1.3500 mark. With stock indices reaching all-time highs, we are reducing our long exposure ahead of major tech earnings. The combined risk of reports from Microsoft and Apple, along with the Fed’s interest rate decision, is too significant to overlook. Historically, a hawkish stance from Powell has outweighed even strong corporate profits, so we are actively protecting our remaining equity positions. The Federal Reserve’s decision is the main focus. While a rate hold is expected, Fed funds futures indicate nearly a 60% chance of a rate cut by September. We will be attentive to any changes in language from the Fed Chair that could alter those odds, as this will influence market direction. The employment report on Friday will be the final confirmation of the Fed’s position, with economists predicting around 180,000 new jobs. Create your live VT Markets account and start trading now.

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The US stock indices finished strong, with the S&P and NASDAQ hitting new record highs. The Dow industrial average came close to its own record earlier in the week but dipped slightly. All three major indices showed growth over the week. Here’s a quick overview: – **Dow:** Up by 208.01 points (0.47%) to close at 44,901.92 – **S&P:** Up by 25.29 points (0.40%) to close at 6,388.64 – **NASDAQ:** Up by 50.36 points (0.24%) to close at 21,108.32 – **Russell 2000:** Up by 8.93 points (0.40%) to close at 2,261.06

Weekly Growth Analysis

During the week, all indices grew, with the S&P leading the way. Here are the overall increases: – **Dow:** +1.26% – **S&P:** +1.46% – **NASDAQ:** +1.02% – **Russell 2000:** +0.94% According to Michalowski, with recent records being set, the market’s trend appears to be upward for now. Derivative traders should think about strategies that benefit from a continued, though possibly slower, upward trend. This means looking for options that profit from rising prices or stable market conditions. Supporting this outlook, the latest Consumer Price Index (CPI) for May was lower than expected at a 3.3% annual rate, calming inflation worries. The CME FedWatch Tool indicates over a 60% chance of a Federal Reserve rate cut by September, which benefits stock prices and supports a positive market outlook. For this reason, selling out-of-the-money put credit spreads on the S&P index might be a solid strategy to earn premium income. The CBOE Volatility Index (VIX) is low at around 12, making options relatively inexpensive. This strategy takes advantage of time decay in an upward-moving market. We recommend targeting strikes significantly below the current market level for added safety.

Market Breadth Concerns

Despite the positive trends, there are signs of weakness underneath. Market breadth is an issue, as less than 50% of S&P 500 stocks are trading above their 50-day moving average, even though the index is reaching new heights. This suggests that the gains are mainly driven by a small group of large-cap stocks. This narrow support makes the market vulnerable to quick pullbacks if any major stock stumbles. Because of this, we recommend buying protective puts on the Russell 2000, which consists of smaller companies that have underperformed the broader market and may react more sharply to economic downturns. Historically, August and September often see more volatility and market struggles. With the S&P 500’s forward price-to-earnings ratio over 21, traders should brace for a possible seasonal pullback. Holding some bearish positions can provide a low-cost hedge against this risk. Create your live VT Markets account and start trading now.

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