The recent ECB survey of professional forecasters for the third quarter of 2025 shows a drop in expected inflation rates. Inflation for 2025 is estimated at 2.0%, down from 2.2%. For 2026, inflation is expected to fall to 1.8%, a decrease from the previous 2.0% forecast. The survey also touches on economic growth, with a positive update for GDP growth in 2025. It is now projected to be 1.1%, up from an earlier estimate of 0.9%. However, the GDP growth forecast for 2026 has been revised down to 1.1% from 1.2%.

Long Term Inflation Forecast

The long-term inflation forecast remains steady at 2%, which aligns with the European Central Bank’s target for medium-term inflation. These updated projections give insight into expected future economic conditions, focusing on inflation and growth. With the new survey data, it seems the European Central Bank can start lowering interest rates. The expected decrease in inflation to the 2.0% target for 2025 provides enough reason for policymakers to ease monetary policy. This view is supported by recent statistics showing Euro area inflation cooled to 2.4% in April 2024. In the coming weeks, we will focus on interest rate derivatives that benefit from falling rates. We plan to enter into receive-fixed interest rate swaps and buy futures contracts based on Euribor. This strategy prepares our portfolio for the anticipated rate cut in June and possible further cuts later this year.

Opportunities and Market Strategies

Comments from key officials suggest a cautious approach to easing. President Lagarde has hinted strongly at a move next month but is non-committal about future actions. This opens up an opportunity, as the market may be underestimating the number of cuts needed to address the disinflation trend highlighted in the new survey. The 2026 inflation outlook, now at 1.8%, is crucial for our strategy. This figure, falling below the target, indicates the ECB might need to be more aggressive in easing than previously thought. We see potential in options strategies that bet on quicker rate reductions through late 2024 and into 2025. Slow economic growth also supports the central bank’s need for action. The modest 1.1% GDP growth forecast aligns with recent data, such as the HCOB Eurozone Manufacturing PMI, which remained below growth territory at 47.3 in May. A weak economy cannot sustain high interest rates, reinforcing our negative view on rates. Historically, when the ECB has started an easing cycle amid weak growth, it usually doesn’t stop at just one or two cuts. The central bank tends to continue easing until there is significant economic improvement. We expect this trend to continue, making long-term positions for lower rates appealing. This interest rate gap could negatively impact the Euro’s value. Therefore, we will also consider strategies to short the Euro against the US Dollar. Buying put options on the EUR/USD offers a cost-effective way to speculate on a weaker Euro due to a more dovish central bank. Create your live VT Markets account and start trading now.

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Light Crude Oil Futures for July 25, 2025, are priced at $66.28. A key bearish level is $66.38, while bullish opportunities appear above $66.62, depending on sustained movement. Bearish targets include $66.23, near today’s Value Area Low, and $65.31, above the Point of Control from July 23. Bullish targets could reach $67.47 if prices stay above $66.62 for two 30-minute periods or continuously for 15 minutes.

Key Levels in Volume Profile Analysis

Important levels such as Value Area High, Low, VWAP, and Point of Control come from volume profile analysis. These areas often influence price direction and reversal points. Knowing these helps traders enter and exit trades intentionally. The tradeCompass system recommends making no more than one trade in each direction daily. It encourages taking partial profits and adjusting stop-loss orders as trades evolve. Following these guidelines can help reduce risk. Volume profile tools like POC, VAH/VAL, and VWAP highlight where market interest lies. They assist traders in identifying possible reversals or accelerations.

Framework Context and Market Dynamics

This analysis is part of the tradeCompass framework and serves as a guideline, not financial advice. Trading futures and leveraged instruments carries risk—only use money you can afford to lose. Currently, the market is confirming a bearish trend, as prices struggle below the $66.38 threshold. This technical weakness aligns with a recent Energy Information Administration (EIA) report showing an unexpected increase in U.S. crude inventories of 3.6 million barrels. This rise in supply adds downward pressure on prices, making short targets more appealing. Concerns also arise from recent comments by OPEC+ delegates suggesting they may reverse production cuts sooner if demand drops. On the demand side, China’s latest manufacturing PMI is at 49.5, indicating a contraction and a decrease in fuel appetite from the world’s largest oil importer. These fundamental issues strengthen the bearish price targets highlighted in the analysis. For derivative traders, considering short futures positions or buying put options seems wise in the upcoming weeks. It’s vital to watch for a potential reversal if prices rise above $66.62, as ongoing geopolitical tensions can lead to sudden price spikes. This highlights the importance of following profit-taking and stop-loss management strategies from the tradeCompass system. Historically, the mid-$60s range has been critical for oil prices, often serving as a support level before further declines. The last significant drop below this area happened in early 2023 and led to a decline toward the low $60s due to recession fears. With the Federal Reserve indicating a “higher for longer” interest rate approach, similar economic challenges could push prices to the final target of $65.31. Create your live VT Markets account and start trading now.

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The Ifo business climate index for Germany in July was 88.6, which is slightly below the expected 89.0. The previous month’s index was 88.4. Current conditions have improved to 87.8, beating the forecast of 86.7. Last month’s number was 86.2. Meanwhile, expectations stayed the same at 90.7 but were revised down from 90.7 to 90.6.

German Business Climate

The German business climate has seen a slight improvement this month, showing a small positive outlook. However, uncertainties like Trump’s tariffs could create challenges, much like those reflected in Volkswagen’s Q2 earnings. The current business climate index suggests a delicate balance in the German economy. While the small rise in current conditions is a hopeful sign, it is balanced by stagnant future expectations. This mixed picture indicates that the market lacks a clear direction in the short term. Recent data reveals that German factory orders dropped by 0.8% last month, emphasizing how global uncertainties affect the industrial sector. Still, with Eurozone core inflation steady at 1.9%, the European Central Bank does not face immediate pressure to tighten policies. This helps maintain support for the markets, even if there’s a limit to growth.

Impact of Tariff Threats

The potential threat of tariffs from the former U.S. president is a major concern, especially after Volkswagen’s warning. Recent statements from Washington have revived threats of a 25% tariff on European auto imports, which would significantly affect major DAX companies. We think that derivatives in the auto sector are accounting for a higher chance of this happening. Considering this environment, we should prepare for increased market volatility rather than a clear trend. We have observed VSTOXX, Europe’s main volatility index, rise from 14 to 17.5 in just two weeks, and we expect this trend to continue. Strategies like long straddles on the Euro Stoxx 50 index might work well for gaining from price movements in either direction. Looking back, the trade disputes of 2018-2019 created a similarly volatile atmosphere for European equities. During that time, markets experienced sharp but short-lived sell-offs due to negative news, followed by rapid recoveries fueled by hopes of resolution. This pattern suggests that selling out-of-the-money puts and calls could be a good strategy for markets that are in a range-bound state. Create your live VT Markets account and start trading now.

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Eurozone’s M3 money supply rose by 3.3% in June compared to a year ago, which is slightly less than the expected 3.7%. This marks a decline from the previous rate of 3.9%. Loans to households increased by 2.2%, up from 2.0% in the earlier period. Loans to companies grew by 2.7%, an increase from 2.5%.

Data Released by the ECB

The European Central Bank released this data on July 25, 2025. It meets expectations in light of the ECB’s easing measures. We see this data as a sign of a continued slowdown in the Eurozone economy, even with a small rise in private loans. The lower money supply growth is a crucial indicator that earlier monetary tightening is still influencing the economy. This situation puts more pressure on the European Central Bank to adopt a more accommodating stance going forward. The recent HCOB Flash Eurozone PMI Composite Output Index has dropped to 49.5, making us cautious about equities. We suggest traders think about buying protective put options on the Euro Stoxx 50 index. This can help shield against a potential economic slowdown in the coming weeks.

Impact on Market Volatility and Strategy

This slow growth environment suggests that overall market volatility may remain low. Therefore, we see a chance to profit from strategies that benefit from stable or gradually declining markets, like selling out-of-the-money call spreads on broad indices. This is different from the high volatility seen during the 2022 energy crisis, indicating a new market situation is underway. The current figures support the need for monetary easing, which may lead to future rate cuts from the central bank. We are preparing for lower yields by using derivatives linked to German Bund futures. This strategy is reminiscent of actions taken from 2014 to 2016, when slow growth and disinflation prompted significant policy changes. If Frankfurt follows a more aggressive easing path while the US Federal Reserve keeps rates steady, this could lead to a policy divergence that weighs on the Euro. Additionally, the latest Eurostat data shows core inflation falling to 1.8%, further backing this currency strategy. Therefore, we find it wise to consider short positions on the Euro against the US dollar using futures or options. While Mr. Dellamotta points out that this single release is not immediately impactful on the market, we believe it serves as an important indicator of a wider trend. It strengthens the case for adopting a defensive stance on equities and suggests a weaker Euro. Create your live VT Markets account and start trading now.

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Inflation is expected to stay at 2% in the near term, according to a recent comment from an ECB policymaker. After the ECB makes decisions, its members often share insights, but these remarks usually don’t add new details.

Current Economic Stance

Simkus affirmed that the central bank is happy with its economic strategy. To lower rates in the future, strong reasons will be needed. Currently, the market sees a 50/50 chance of a rate cut. From the policymaker’s statements, it looks like the European Central Bank plans to keep rates steady after its recent cut. This indicates that interest rates are likely to remain unchanged unless a significant economic event occurs. Therefore, derivative traders should focus on strategies that benefit from stability rather than speculating on rate changes. However, recent data complicates this view. Eurozone inflation actually rose to 2.6% in May, up from 2.4% in April. High services inflation, now at 4.1%, is a major factor keeping the central bank cautious. This stubbornness makes the future uncertain, supporting a “wait-and-see” strategy from Frankfurt. The market has already adjusted to this information. Money markets have significantly lowered their bets on further rate cuts, now only expecting one more cut for the remainder of 2024. For traders, this means short-term interest rate futures are likely to stay within a range, making strategies that sell volatility, like short strangles on EURIBOR options, more appealing.

Historical Context and Current Opportunities

Looking back to 2011, we can see the risks in the ECB’s position. Back then, the bank raised rates twice but quickly reversed as the sovereign debt crisis grew. We face a similar risk today, where a long pause could hurt a weakening economy or fail to control persistent inflation. This uncertainty can be managed with calendar spreads, which profit from sideways price movement now while remaining open to potential large moves later. In this context, we believe implied volatility on European assets should be sold during spikes caused by political events or minor data misses. The VSTOXX index, which tracks Euro Stoxx 50 volatility, recently spiked due to political issues in France, but the core monetary policy remains stable. We see chances to profit by selling options when fear temporarily overshadows the central bank’s steady stance. Create your live VT Markets account and start trading now.

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The USDJPY pair is currently near an important resistance level, as focus shifts to Japanese politics and upcoming US economic data. The US dollar is one of the weakest major currencies, helped by positive news on tariffs and lower-than-expected inflation data from last week. Markets predict two rate cuts from the Fed by the end of the year, with conditions remaining stable. In Japan, the Tokyo CPI figures also came in lower than expected, and for the JPY to appreciate further, we might need weak US data or higher inflation in Japan. On the daily chart, the USDJPY dropped below the 148.30 resistance level, falling to 146.00 before recovering. Sellers are likely to continue targeting the 148.28 resistance, hoping for a decline to the 142.35 support level. Buyers are looking for a breakout to turn bullish towards the 151.20 resistance. In the 4-hour chart, a small resistance at 147.00 has become support, with buyers expected to accumulate here, aiming to break above 148.28. Sellers might watch for a price drop to take advantage of bearish opportunities leading to the 142.35 support. In the 1-hour chart, buyers are looking for chances to buy dips at support, while sellers are aiming for a downward breakout to hit new lows.

Critical Technical Point

The currency pair is at a key technical point, indicating that volatility may increase in the weeks ahead. Conflicting economic signals from the US and Japan create uncertainty, making it crucial to assess risk for new positions. This tension provides an opportunity for strategies that can benefit from significant price movements, no matter the direction. Recent data shows persistent core inflation in the US, with the latest CPI figures at 3.8% year-over-year. This raises doubts about the expected two rate cuts, making a sharp drop in the dollar less likely. We believe this strength suggests traders should be careful about betting aggressively against the US dollar based solely on monetary policy. In Japan, national inflation recently stood at 2.2%, falling short of expectations. This supports a cautious approach from the Bank of Japan, as the recent rate hike did not come with strong commitments for further tightening. This indicates weak fundamental support for the yen to gain sustained strength.

Possibility of a Short Squeeze

Given the current standoff, buying options to capitalize on potential volatility seems wise. A long straddle, which involves purchasing both a call and a put option at the same price, allows a trader to benefit from movements in either direction. This strategy fits well with the present uncertainty since it doesn’t require choosing a side. For traders with a specific direction in mind, using options at key technical levels helps manage risk. Bearish traders might consider buying put options to prepare for a drop below the 146.00 support level. On the flip side, bullish traders could buy call options to take advantage of a potential rise above the 148.30 resistance. It’s also important to consider historical context, especially the direct intervention by authorities in late 2022 when the pair went above 150. This creates a psychological barrier, and as we near this level again, the chance of official action to strengthen the yen significantly increases. This is a major risk factor for any long derivative positions. Recent Commitment of Traders data shows that speculative net-short positions against the yen are at historic highs. Such extreme positioning often leads to quick reversals; any positive news for the yen could result in a substantial short-squeeze. This signal warns that simply following the trend of yen weakness may carry significant risk. Create your live VT Markets account and start trading now.

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European indices opened lower and showed some mixed results. The Eurostoxx decreased by 0.7%, Germany’s DAX fell by 0.9%, France’s CAC 40 dropped by 0.6%, the UK’s FTSE declined by 0.2%, Spain’s IBEX went down by 0.4%, and Italy’s FTSE MIB decreased by 0.4%. Volkswagen reported a significant drop in profits for Q2 and lowered its full-year forecasts due to tariff impacts. LVMH also had weaker quarterly sales, negatively affecting French stocks. These shifts follow a decline in the Dow as Wall Street turns its attention to tech shares.

Stability In US Futures

US futures, in contrast, remained steadier, rising by about 0.1%. European stocks are especially influenced by the pending US-EU trade deal, which is not yet finalized as the weekend approaches. The overall drop in European indices signals increasing investor anxiety. This fear is reflected in volatility measures like Germany’s VDAX-NEW index, which has risen over 15% in the last month to above 17. Thus, we believe it is wise to prepare for more market fluctuations. Low’s comments about the German automaker’s issues highlight a broader weakness in the sector, which is highly sensitive to trade policies. Recent data from the European Automobile Manufacturers’ Association shows a 2.6% drop in EU car registrations over the last month, reinforcing this concern. We are considering buying put options on auto-focused ETFs to profit from potential further declines due to the mentioned tariff situation.

Weakness In French Luxury Sector

The reported weakness in the French luxury giant is another important signal, as this sector often reflects global consumer confidence. Recent analyst reports raise concerns about declining demand from Chinese consumers, who represent about 20% of the European luxury market, leading us to be cautious. This scenario makes protective puts on major consumer discretionary stocks an appealing hedging strategy. Given the uncertainty about the US-EU trade deal, we expect continued market volatility. Past trade disputes, like those in 2018 with the former US president, caused the Euro Stoxx 50 Volatility Index (VSTOXX) to rise above 20. We are considering long positions in VSTOXX futures or call options as a hedge against potential breakdowns in negotiations. Create your live VT Markets account and start trading now.

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In July 2025, French consumer confidence rose to 89, slightly above the expected 88, according to INSEE data. However, this figure is still below the long-term average of 100. Households are showing increased intentions to save, reaching a historic high first seen in February 2025. Additionally, worries about unemployment have eased somewhat.

Analysis Of Consumer Confidence

The small increase in consumer confidence is less significant than it seems. The main concern is that French household confidence remains low, which can hinder economic growth. We should remain cautious in the upcoming weeks. The high savings intentions are the most important takeaway. This suggests people are postponing spending, which is supported by recent Eurostat data showing that the French household savings rate is around 17%. We recommend considering put options on consumer discretionary stocks, particularly in the luxury sector. The decrease in unemployment worries adds some complexity to the situation, so we can’t be entirely negative. The mix of low consumer confidence and a slightly improved job outlook creates uncertainty, often leading to higher option premiums. We can take advantage of this by exploring strategies that sell volatility, especially since the CAC 40 index might face challenges in finding clear direction after its recent performance.

Economic Sentiment And Market Implications

This situation resembles the aftermath of the 2011 sovereign debt crisis, when confidence remained low for a long time despite policy efforts. During that period, markets experienced extended periods of stagnation before a clear trend developed. History tells us that any recovery in spending is likely to be gradual rather than sudden. Create your live VT Markets account and start trading now.

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Yesterday was the busiest day of the week for economic data. Today, the focus shifts to the German IFO index and US Durable Goods Orders data. These reports are not expected to significantly affect central banks or market trends. We’ve also got lower-profile releases, such as the ECB’s money supply data and Italy’s Business Confidence.

Upcoming Economic Events

Next week looks busy with key releases, including the Non-Farm Payrolls (NFP) report and a tariffs deadline on Friday. There’s growing excitement about potential trade deals throughout the week. We view this calm period as a chance to prepare for upcoming market changes. The CBOE Volatility Index, or VIX, is currently below 15, which is historically low and suggests that the market is feeling secure. This may be a good time to buy options contracts for protection or speculation before the big events hit. The upcoming employment data is a key focus. Economists predict around 185,000 new jobs will be created. A significant difference from this number could shake up the markets and change expectations for what the central bank will do next. We’ve seen in the past that a surprise of 75,000 jobs or more can lead to a 1-2% move in index futures within the first hour after the release.

Trade Policy Considerations

We should also prepare for possible outcomes related to trade policy. Any news, whether good or bad, about tariffs can lead to sharp price changes, especially during weekends. A neutral options strategy like a straddle might be a good way to benefit from a big price swing without needing to guess the outcome of the negotiations. Given the quiet before these events, it’s smart to take time to assess risk. Reducing exposure or buying protective put options on broader market ETFs can help shield a portfolio from negative surprises. This is like buying cheap insurance before a week filled with uncertainty. Create your live VT Markets account and start trading now.

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The Bank of Japan (BoJ) expects to have enough data by the end of the year to think about raising interest rates. However, they don’t see any urgent need to change the overall economic outlook. The recent trade deal between the US and Japan has helped to lower economic uncertainty.

Market Reactions to Rate Hike Speculation

Market reactions indicate that expectations for tightening have increased to 22 basis points by the end of the year, up from 14 basis points before the trade deal. The Japanese yen (JPY) could strengthen further if the US data weakens, suggesting more rate cuts by the Federal Reserve. Conversely, strong data from Japan could hint at more rate hikes by the BoJ. Political changes and more fiscal support may lead the market to expect even more rate hikes. It’s crucial to monitor both local and international data to understand these economic shifts. According to Dellamotta’s report, the market already reflects a possible rate change by the central bank. Traders should focus on the specific data that could trigger this change rather than if it will happen. The current pricing for 22 basis points of tightening shows that traders have positioned themselves for this adjustment. We believe that the next big opportunity will come from unexpected economic news rather than the anticipated announcement itself. Japan’s core inflation reached 2.5% in April, exceeding the BoJ’s 2% target. Any further gains in wages or prices could lead the market to expect even more. This makes buying call options on the yen an appealing strategy to protect against a quicker policy change.

US Federal Reserve and Implications for Traders

On the US side, recent data such as the April Consumer Price Index (CPI), which dropped to 3.4%, has been mixed. This uncertainty prevents the Federal Reserve from making aggressive rate cuts, creating a holding pattern that tends to reduce volatility and lower options prices. We think this is a great time to consider strategies that could benefit from a sudden, large move, like long straddles on the USD/JPY pair. Historically, the Federal Reserve hasn’t raised rates since 2007, meaning most active traders lack experience in this kind of environment. This inexperience could lead to an overreaction when changes finally do happen. Thus, owning volatility could be smarter than betting on a specific direction. The political side is also something we’re closely watching. Any announcement about a significant fiscal stimulus package would likely encourage policymakers to make more decisive moves on rates. This would almost definitely result in a sharp increase in the currency’s value. Create your live VT Markets account and start trading now.

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