The UK construction PMI for August was 45.5, slightly higher than the expected 45.0, according to S&P Global data. This shows a small recovery from July’s low, the worst in over five years. However, the number is still below 50.0, indicating ongoing contraction in the sector. Residential and civil engineering activities saw significant declines, though a slower drop in commercial building helped balance these losses. Some improvements in supply conditions, like shorter delivery times and more subcontractor availability, were mainly due to weak demand and a shortage of new projects.

Business Confidence Declines

Business confidence in the construction sector fell further in August. Only 34% of panelists expect an increase in output over the next year, down from 37% in July. This is the lowest level since December 2022, due to high uncertainty and worries about the UK economy. The slight rise in the August construction PMI to 45.5 is misleading, as the sector remains in contraction for the eighth consecutive month of 2025. This decline is reflected in reports from major UK housebuilders like Taylor Wimpey, which have noted slowing sales reservations this year. As a result, buying put options on a UK housebuilder ETF might be a good way to protect against or capitalize on further drops in residential construction. This ongoing downturn in construction is the longest since the disruptions of early 2020 and suggests a broader economic slowdown. UK GDP growth was nearly flat in the second quarter of 2025, amplifying worries that weakness will continue into the third quarter. Thus, it might be wise to take a bearish stance on the British Pound, perhaps by shorting GBP/USD futures or purchasing options that yield profit if the exchange rate falls below specific levels.

Interest Rate Expectations

The ongoing weakness makes a Bank of England interest rate hike unlikely in the near future, supporting the idea that the bank will maintain its pause that began in early 2024. This report also increases the chances of a rate cut later this year, a sentiment reflected in falling government bond yields. Traders could consider going long on UK Gilt futures, which would gain value if interest rates are cut. It’s important to note the differences within the report, as commercial building showed more resilience compared to the sharp downturn in housing. This may create pair trading opportunities for those with specific sector knowledge. For example, a trader might take a long position in a commercial property-focused company while shorting a residential housebuilder. Create your live VT Markets account and start trading now.

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Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

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Oil prices slipped again in early Thursday trading, with concerns over potential extra supply weighing on sentiment. West Texas Intermediate fell 1.0% to $63.32 a barrel, while Brent crude shed 0.9% to $66.96, erasing the prior day’s advance.

The weakness followed a Reuters report hinting that OPEC+ may discuss loosening its production limits at the next policy meeting.

No firm decision has been taken, but the prospect of more barrels hitting the market was enough to unsettle bullish traders.

Oil prices extend losses as OPEC+ considers another output hike https://t.co/xWBDlcaowz https://t.co/xWBDlcaowz

— Reuters (@Reuters) September 4, 2025

Caution is high ahead of the US Energy Information Administration’s (EIA) inventory data later today. Investors are keen to see whether demand from the world’s largest consumer can offset last week’s unexpected stockpile increase.

Technical Analysis

Crude oil (CL-OIL) last traded at $63.26, down 0.75% on the session, with the market stuck in a consolidation phase after a volatile year. Prices tumbled to $55.11 in April before rebounding strongly to $77.90 in July.

Since then, the market has been moving sideways. The 30-day moving average has flattened, while shorter-term averages (5 and 10) are struggling to stay above it, a sign of hesitation.

The MACD indicator shows a modest bullish cross, but remains close to neutral, pointing to limited momentum. Immediate support is found at $60, with a firmer floor near $55. Resistance lies at $67, and higher up at $72.

A move above $67 could revive upward momentum, whereas a break below $60 would raise the risk of revisiting this year’s lows.

In the short run, oil is likely to continue swinging within its current band, with traders keeping a close eye on OPEC+ policy direction, US stock data, and wider demand cues.

Cautious Forecast

Unless OPEC+ walks back supply speculation, crude may remain under pressure into the weekend. A bearish EIA print could drive WTI toward the $60 handle, while any dovish surprise may offer brief reprieve. All eyes on Vienna and on barrels.

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Minimal Growth Expected

The Kiel Institute for the World Economy (IfW) predicts that the German economy will grow only 0.1% in 2025 after two years of decline. Better business expectations and increased government spending could help boost the economy, but US tariffs are a significant challenge in the short term. Looking ahead, IfW forecasts a slow recovery, estimating growth of 1.3% in 2026 and 1.2% in 2027. The budget deficit is also likely to widen, increasing from 2% of GDP in 2024 to about 3.5% by 2027. With growth projected at just 0.1% this year, we see limited potential for German stocks. This follows two consecutive years of economic decline, as shown by July 2025’s industrial production figures, which reported a 0.5% drop from the previous month. Therefore, we might consider shorting DAX index futures or buying put options on the index soon. US tariffs pose a direct threat to Germany’s export-driven industries, especially the automotive sector. We remember how trade disputes affected companies like Volkswagen and BMW from 2018 to 2020, and this new risk could similarly impact stock performance. It would be wise to hedge our investments or take bearish positions in these export-focused companies.

Economic Pressure and Strategies

The expected rise in the budget deficit, potentially hitting 3.5% of GDP by 2027, puts pressure on the Euro. Combined with the European Central Bank maintaining interest rates at its August 2025 meeting amidst weak growth, there is a bearish outlook for the currency. We recommend shorting the EUR/USD pair as a suitable strategy for the near term. While there are some signs of improved business expectations, these positives seem fragile. If the market rallies due to this sentiment, it may provide better chances to enter our bearish positions. We anticipate continued volatility, as indicated by the elevated VDAX-NEW index, as the market processes this mixed information. With only a slight recovery expected for 2026, our focus should be on short-term derivative contracts. We should target options expiring in the fourth quarter of 2025 to make the most of the current stagnation. Longer-term bearish positions appear riskier given the possibility of a slow, eventual recovery. Create your live VT Markets account and start trading now.

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Future Outlook

Many are feeling uncertain about the future as the outlook index drops. This is mainly due to high long-term interest rates and challenges for the new government. While input price inflation has lessened, it still poses issues for construction. There are some signs of improvement, such as faster supplier delivery times—the best they’ve been since February. Subcontractor availability has increased, although the pace is slow, and their prices are rising more than before. The construction environment remains tough, and any recovery is expected to be gradual. The German construction PMI is at 46.0, clearly indicating weakness in this key area of Europe’s largest economy. This trend isn’t new; it mirrors what we saw during the economic downturn in 2023 when rising interest rates first impacted growth. The data strengthens concerns about German domestic demand in the coming weeks. With a significant fall in new orders for residential and commercial buildings, it may be wise to consider buying put options on major German construction and real estate firms. Companies like Vonovia and Heidelberg Materials, which are sensitive to the housing market, are good candidates for bearish bets. Recently, Heidelberg Materials lowered its Q3 revenue forecast due to a decline in residential project orders, aligning with the PMI data. A simple strategy would be to buy out-of-the-money puts on the DAX index, expiring in October or November 2025, to capitalize on a wider market decline. Weakness in construction often signals broader economic issues, and we expect German GDP for Q3 2025 to reflect this slowdown. With current market volatility low, options are an affordable way to prepare for a potential downturn.

Interest Rates and Economic Impact

High interest rates are contributing to the situation, with the European Central Bank keeping its main rate at 3.5% in its most recent meeting. This indicates that tackling inflation is still a top priority. The latest German inflation data for August 2025 is 3.1%, which is above the 2% target, meaning borrowing costs for construction projects are unlikely to decrease soon. This ongoing strain makes recovery in the sector seem remote for this year. On the plus side, civil engineering is benefiting from government spending on infrastructure. This creates an opportunity for experienced traders to engage in a pair trade. They can go long on firms heavily involved in public works projects while shorting a residential homebuilder, aiming to profit from the differing performances of these sectors. The ongoing economic weakness in Germany is also putting pressure on the euro. This could be a good time to short the EUR/USD currency pair using futures contracts or to buy put options on Euro-focused ETFs. With the US economy showing more strength, we expect the dollar to continue gaining against the euro through the fourth quarter. Create your live VT Markets account and start trading now.

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Dear Client,

As part of our commitment to provide the most reliable service to our clients, there will be maintenance this weekend.

Maintenance Details:

Please note that the following aspects might be affected during the maintenance:
1. The price quote and trading management will be temporarily disabled during the maintenance. You will not be able to open new positions, close open positions, or make any adjustments to the trades.
2. There might be a gap between the original price and the price after maintenance. The gaps between Pending Orders, Stop Loss, and Take Profit will be filled at the market price once the maintenance is completed. It is suggested that you manage the account properly.
3. During the maintenance period, VT Markets APP will not be available. It is recommended that you avoid using it during the maintenance.
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The above data is for reference only. Please refer to the MT4/MT5 software for the specific maintenance completion and marketing opening time.

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European indices showed mixed results at the start of the session. Eurostoxx remained steady, Germany’s DAX rose by 0.2%, while France’s CAC 40 and Spain’s IBEX both declined by 0.2%. The UK FTSE dropped by 0.1%, and Italy’s FTSE MIB increased by 0.1%. US futures also had little movement at the beginning. S&P 500 and Nasdaq futures gained 0.1%, while Dow futures fell by 0.1%. The bond market has caused some earlier fluctuations, but things are stabilizing now. Focus is shifting to upcoming US labor market data, which could affect market trends for the week. The market shows clear indecision ahead of important US labor data. With European and US indices mostly stable, volatility tends to decrease. For traders in derivatives, this calm before the storm presents an opportunity. As markets remain steady, implied volatility on major indices like the S&P 500 is drifting lower. Recent CBOE data shows the VIX index just below 14, meaning options are relatively cheap. This is a good time to prepare for a big price change before the cost of protection rises. All attention is on tomorrow’s US Non-Farm Payrolls report, with economists predicting around 175,000 jobs for August. This is a slight decline from July’s 190,000 and is crucial for the Federal Reserve’s next decision. We saw a similar situation before the August 2024 jobs report, which pleasantly surprised investors and caused a two-day selloff in the Nasdaq. This sets up a perfect opportunity for long volatility strategies in the weeks ahead. Buying straddles or strangles on indices like the SPX allows traders to benefit from significant moves in either direction, without needing to predict if the news will be positive or negative. The current low entry cost makes these strategies especially appealing. The recent bump in the bond market, where the 10-year Treasury yield briefly exceeded 4.3% after last week’s slightly concerning inflation data, highlights how sensitive sentiment can be. A strong jobs report could push yields up and stocks down, while a weak report might spark a rally. The market’s reaction will likely be swift rather than gradual. The main risk with this strategy is a non-event, where the jobs number matches expectations and the market ignores it. This could lead to a “volatility crush,” where option premiums quickly decline. Using defined-risk strategies like debit spreads can help limit potential losses if the data does not lead to a significant breakout.

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Switzerland’s unemployment rate for August is 2.9%, which is exactly what experts predicted. The number of registered unemployed people has risen slightly to 132,105. Last August, the unemployment rate was 2.5%, with 111,354 registered as unemployed. This shows a clear increase in both the percentage and the total number of unemployed individuals. The August rate of 2.9% aligns with expectations, indicating little surprise in the market. However, the trend points to a weakening labor market compared to last year’s 2.5%. This ongoing decline raises questions about the Swiss National Bank’s next steps. With the job market slowing down, it seems unlikely that the Swiss National Bank will raise interest rates soon. They unexpectedly cut rates in March 2024, and new inflation data shows a drop to 1.8% in August 2025, supporting a cautious approach. Traders may consider options that benefit from a weaker Swiss franc, like buying EUR/CHF calls. Interest rate markets share this view, as futures contracts linked to the SARON benchmark show a low chance of a rate hike for the rest of 2025. Some traders are even preparing for a potential rate cut in early 2026 if economic conditions don’t improve. This situation favors strategies that assume stable or falling short-term rates. For the Swiss Market Index (SMI), a weakening labor market could pose challenges for local consumer spending and corporate profits. Although global influences are strong, this local data adds caution. Traders might look into SMI put options to protect their long equity portfolios from potential losses in the near future. Since the unemployment data met expectations, implied volatility in Swiss franc currency pairs may decrease in the short term. However, the contrast between a steady monthly figure and a declining yearly trend introduces uncertainty for upcoming SNB meetings. This may lead to strategies that involve selling short-dated volatility while purchasing longer-dated volatility.

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On September 4 at 10 AM New York time, several EUR/USD FX option expiries are happening. These expiries range from 1.1600 to 1.1700 and may affect price movements. The close grouping of these expiries could lead to limited price action as the market adjusts. This might narrow the daily trading range before the US ADP employment data is released.

Key Option Expiries

Today, there is a significant cluster of EUR/USD option expiries, which should keep the currency pair stable between 1.1600 and 1.1700. This “pinning” effect suggests that range-trading strategies could work well in the short term. Traders should hold off on expecting major breakouts until after the 10 AM New York cut and the release of US ADP employment figures. This brief period of calm comes as central banks’ policies show increasing divergence, likely leading to more volatility in the weeks ahead. Recent data revealed that Eurozone inflation for August dropped to 2.8%, allowing the European Central Bank to pause its rate hikes. Meanwhile, the latest US Core PCE reading remains high at 3.5%, indicating that the Federal Reserve will stick to its strict policy.

Volatility and Strategic Considerations

Given this situation, buying volatility at these low levels seems wise. This calm market, influenced by options, may offer a chance to buy straddles or strangles ahead of significant data. A strong ADP number today, followed by tomorrow’s Non-Farm Payrolls report, could easily break this tranquil period and lead to a significant price move. In contrast to the aggressive rate hikes from central banks in 2023, the current policy divergence is more nuanced. This means that unexpected data could greatly affect currency movements. Therefore, we should be ready for volatility to return sharply once today’s option-related activities settle down. Create your live VT Markets account and start trading now.

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Switzerland’s Consumer Price Index (CPI) for August increased by 0.2% compared to last year, matching expectations. The previous month also recorded a 0.2% rise. The core CPI rose by 0.7% year-on-year, a slight decrease from July’s 0.8%. This small change in core inflation does not affect the Swiss National Bank’s current outlook.

Low Price Pressures in Switzerland

Today’s inflation data confirms that price pressures in Switzerland remain low. The core inflation rate dipped to +0.7%, suggesting there is no immediate inflation concern. This stability supports the Swiss National Bank’s (SNB) current position. The SNB has cut its policy rate twice this year, reducing it to 0.75% in June 2025. Given this inflation report, market expectations indicate about a 60% chance of another 25 basis point cut at the next meeting on September 18th. Thus, there’s little reason to doubt the central bank’s easing approach. For derivatives, this predictability suggests limited implied volatility in the Swiss franc. The three-month implied volatility on EURCHF is currently near yearly lows of 5.5%. This report supports strategies such as selling options to earn premium. We see this as a good opportunity for selling strangles, as a large price breakout seems unlikely.

Interest Rate Differential

The interest rate gap between Switzerland and other major economies, like the United States where rates exceed 4%, continues to put pressure on the franc. Therefore, we should consider positions that benefit from a weaker franc, such as purchasing call options on USDCHF or EURCHF. The gradual policy divergence from the SNB in early 2024 marked the beginning of this ongoing franc weakness. Today’s situation is similar to the years after the 2015 de-pegging when a consistently dovish SNB led to long periods of low franc volatility. With the central bank’s clear direction, sharp and unexpected currency swings are less likely. This historical insight boosts our confidence in maintaining short volatility and short-franc positions. Create your live VT Markets account and start trading now.

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