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A new White House report will focus on cryptocurrency policy and Bitcoin reserves.
The White House will release its cryptocurrency policy report on July 30. This comes after the President’s Working Group on Digital Assets finished a 180-day review based on an executive order from January.
A major part of the report is the Strategic Bitcoin Reserve. This reserve will serve as a stockpile of Bitcoin for the U.S. government. The report will likely include details about current Bitcoin holdings, mostly obtained through legal seizures, and discuss how to formalize this reserve in the national digital asset strategy.
Bessent warns Japan of possible 25% tariffs from Trump, leading to a decline in USD/JPY
Reports on social media indicate that U.S. Treasury Secretary Bessent has suggested that tariffs on Japan could rise to 25% if former President Trump is unhappy. As a result, the USD/JPY currency pair has fallen below 146.00.
The potential return of these tariffs adds more uncertainty to an already complicated trade relationship. Increased tariffs could affect the global economy, trade flows, and currency markets.
Market Reaction and Opportunities
The initial response in the currency market shows a typical flight to safety, rather than a real concern for the Japanese economy. Traders are flocking to the yen as a safe haven due to the sudden uncertainty created by these remarks. This immediate reaction offers a chance for those ready for the next step. The main takeaway for us isn’t the market direction but the volatility. The unpredictable nature of this situation suggests we should brace for significant swings in the coming weeks. Thus, we believe buying options on USD/JPY is the best way to profit from the expected price fluctuations. Our view is reinforced by a sharp increase in implied volatility for yen options, which jumped from around 8% to over 12% in a single day. A similar trend was seen during the 2018-2019 trade disputes, where currency volatility stayed high for months. History indicates this is just the start of a more turbulent time for foreign exchange markets.Strategies for Navigating the Volatility
We are also looking beyond currencies to the Japanese stock market. The U.S. is one of Japan’s major export destinations, with over $140 billion worth of goods shipped each year. A tariff could significantly impact large companies. Therefore, we are considering buying put options on the Nikkei 225 index to shield ourselves from a likely drop in stock prices. This uncertainty is not only a concern for Asia; it will also affect American markets. A flight to quality will likely boost demand for U.S. government debt, driving bond prices up and yields down. We are positioning ourselves for this by exploring long-dated U.S. Treasury futures, expecting yields to test the lows seen during prior global trade tensions. The subjective nature of these potential tariffs—based on someone’s feelings—makes the situation particularly complex. Since a simple comment or tweet could trigger changes, we prefer strategies like long strangles, which benefit from large moves in either direction. This approach helps us avoid guessing the outcome in a highly unpredictable political landscape. Create your live VT Markets account and start trading now.Conway raises concerns that tariffs could weaken global demand and negatively affect New Zealand’s economy.
The RBNZ Chief Economist, Conway, says the full impact of US tariffs is unknown. The central bank is constantly reviewing data. He believes these tariffs could hurt business investment and reduce inflation in New Zealand.
Global Economic Outlook
Conway expects a slower global economy and less demand due to the tariffs. The Q2 CPI data met RBNZ’s predictions, and if inflation keeps falling, there may be more rate cuts. New data shows that New Zealand’s economic growth slowed in the June quarter. According to Mr. Conway’s outlook, the Reserve Bank of New Zealand is clearly leaning towards lowering interest rates. His concerns about tariffs weakening global demand suggest that the next move for the Official Cash Rate, currently at 5.50%, will likely be downward. Derivative traders should prepare for declining rates, possibly through interest rate swaps or going long on 90-day bank bill futures.Currency Market Implications
Conway’s comments hint at a weaker New Zealand dollar ahead. Lower interest rates make a currency less attractive. We should explore strategies that benefit from a drop in the NZD/USD pair, which has been struggling to stay above 0.6200. This might involve buying put options on the currency to hedge against or profit from a decline. His statements about reduced business investment and slower growth are already showing up in the data. Stats NZ has confirmed a contraction of 0.1% in the March 2024 quarter, marking a technical recession. We expect more market volatility. Buying options contracts, instead of outright futures, could be a smart move in this uncertain environment, as their value rises with market fluctuations. This situation is similar to the lead-up to the RBNZ’s unexpected 50-basis-point rate cut in August 2019, which was influenced by global trade concerns and slowing domestic momentum. After that decision, the kiwi dollar dropped sharply against major currencies. We might see a similar, though possibly more gradual, reaction in the currency markets in the coming weeks as expectations for rate cuts grow stronger. Create your live VT Markets account and start trading now.Goldman Sachs keeps optimistic 2026 forecast for U.S. natural gas, sees potential price risks
Goldman Sachs is upbeat about U.S. natural gas prices, projecting a target of $4.50/mmBtu for Summer 2026 at Henry Hub. However, the bank notes that this forecast could be at risk if producers delay their investments.
Goldman predicts that to achieve steady U.S. gas production growth until 2026, more drilling activity will be essential. Current investment levels may not suffice to meet the rising demand.
Goldman Sachs Recommendation
The bank advises taking a long position in April 2026 Henry Hub contracts, as they see favorable conditions and limited supply response. Henry Hub, located in Erath, Louisiana, is the main price reference for U.S. natural gas. It is the delivery site for futures contracts traded on the New York Mercantile Exchange (NYMEX). The $4.50/mmBtu target represents the expected price per million British thermal units at Henry Hub. This pricing benchmark is akin to “WTI crude” for oil in the natural gas market. We believe that the outlook for U.S. natural gas is solid, warranting the $4.50/mmBtu target for Summer 2026 contracts. The main risk lies in whether producers can ramp up investments in time to meet future demand. This creates opportunity for traders who align with our long-term view.Short Term Strategy
In the short term, we see any price dips as buying opportunities. The latest report from the U.S. Energy Information Administration shows natural gas storage at 2,893 billion cubic feet, which is over 25% higher than the five-year average and is currently putting downward pressure on prices. This situation offers a good entry point for longer-term investments. Concerns about investment levels reflect the current state of drilling activity. The Baker Hughes rig count from early June 2024 indicates that there are only about 98 active natural gas rigs, a significant reduction from over 150 a year earlier. This lagging investment poses challenges for the supply to quickly meet the anticipated demand surge. Looking ahead, a significant boost in demand is almost certain because new liquefied natural gas (LNG) export facilities like Plaquemines and Golden Pass are set to open by 2025. This expected rise in demand will conflict with slow production growth from current low drilling rates. We see this as a main driver for higher prices. History shows how rapidly this market can tighten. For example, prices soared to over $9.00/mmBtu in 2022 due to supply concerns. While we aren’t predicting another sharp spike, it highlights the considerable upside if production can’t keep up with demand. Current market complacency about future supply could be an opportunity for us. Traders should capitalize on today’s soft prices over the next few weeks to build long positions in deferred contracts like the April 2026 Henry Hub futures. We recommend using options or futures to adopt a bullish stance, taking advantage of what we believe is a temporary gap between current prices and future realities. Create your live VT Markets account and start trading now.PBOC sets USD/CNY midpoint at 7.1385, below the expected 7.1503, with 331 billion yuan injected.
The People’s Bank of China (PBOC) has set the USD/CNY reference rate at 7.1385, which is lower than the expected 7.1503. The previous closing rate was 7.1547. This reference rate is part of China’s managed floating exchange rate system, allowing the yuan to move within a 2% range around a central rate.
In other news, the PBOC added 331 billion yuan into the market through seven-day reverse repos at an interest rate of 1.40%. Today, 211.5 billion yuan will mature, leading to a net outflow of 119.5 billion yuan from the market. These actions are important for maintaining liquidity and ensuring stability.
Central Banks Currency Management
The actions of the central bank clearly indicate they are managing the yuan’s decline. By setting the reference rate stronger than expected, they aim to prevent the currency from weakening too fast. This indicates they are establishing a solid floor for the yuan’s value. This isn’t just a one-time event; it fits into a broader trend we’ve observed. Throughout May 2024, China’s monetary authority has consistently set the daily midpoint over 1,000 pips stronger than market forecasts, showing a strong commitment to stability. We believe this pattern will continue, helping to anchor market expectations and counter speculative pressure. For derivative traders, betting on a sharp decline of the yuan poses high risks in the coming weeks. Ongoing interventions create an environment where strategies that profit from low volatility or stable currency pairs might be wiser. The central bank seems to be effectively providing insurance against a currency collapse, which traders can leverage. The economic landscape supports this managed approach. Recent data shows a mixed picture that requires intervention. China’s trade surplus grew to $82.62 billion in May 2024, as exports surpassed imports, which supports the yuan. However, weak domestic demand remains a challenge, indicating the need for official guidance to maintain currency stability.Historical Context And Market Impact
Historically, this careful and transparent guidance contrasts sharply with the sudden 2015 devaluation, which shocked global markets. The current strategy aims to avoid panic and foster stability by managing the exchange rate instead of allowing it to drop freely. This historical difference suggests that predictable, managed actions are the preferred policy tool at this moment. As a result, we’ve seen implied volatility for one-month USD/CNH options decrease from earlier highs, showing that the market expects a lower chance of a sudden breakout. While the PBOC’s actions provide clear guidance, traders should remain aware of comments from figures like Mr. Trump about potential tariffs. These external factors could still introduce unexpected volatility. Create your live VT Markets account and start trading now.Japan’s manufacturing activity decreased in July, while the services sector thrived due to strong domestic demand.
Japan’s manufacturing sector shrank in July, with a preliminary PMI reading of 48.8. This is lower than the expected 50.2 and the previous reading of 50.1. The contraction was driven by uncertainty over U.S. trade policy and new tariffs, leading to a drop in output and new orders.
In contrast, the services sector grew, scoring 53.5. This marks the fastest growth in five months, fueled by strong domestic demand. However, export orders fell for the first time in seven months, and job growth in this sector hit a nearly two-year low.
Divergence Between Sectors
The data shows a clear divide between Japan’s manufacturing and services sectors. The manufacturing contraction, now below the crucial 50-point mark, suggests a bearish outlook for export-focused industries like automakers and electronics. We’re considering buying put options on the Nikkei 225 index or on specific industrial stocks that respond to global demand. This economic weakness may push the Bank of Japan to hold off on significant monetary tightening, keeping the interest rate gap wide with the United States. The yen has already fallen past 160 to the dollar this year, reaching a 34-year low. This report could worsen the yen’s decline. We see potential in buying USD/JPY call options to benefit from further depreciation of the yen. While the services sector seems strong, the details reveal underlying issues. The first drop in export orders in seven months and slow job growth signal that the domestic economy is not immune to global trends. The latest Tankan survey from the central bank also showed a decline in business confidence among large non-manufacturers, supporting a cautious approach.Unusual Economic Situation
Normally, a weak economy drives demand for safe-haven currencies like the yen. However, the current interest rate environment has changed that dynamic. This creates a rare situation where both the yen and the stock market might weaken at the same time. We should be ready for increased volatility and consider trading directly through derivatives linked to market fluctuations. Create your live VT Markets account and start trading now.South Korea-U.S. trade discussions cancelled due to scheduling conflicts
South Korea has canceled the 2+2 trade talks with the United States. This decision was made due to a scheduling conflict involving the U.S. Treasury Secretary.
The U.S. has suggested holding another round of talks soon. South Korea plans to reschedule the discussions as soon as possible.
Potential Market Reactions
We think the cancellation of the trade talks indicates some tension between the two countries. This uncertainty can lead to increased market volatility. Traders in derivatives should not see this as just a delay, but rather as a sign of possible significant disagreements to come. The main issue seems to be the U.S. Inflation Reduction Act, which affects major South Korean electric vehicle companies. South Korea recently reported its first two consecutive annual trade deficits in more than 20 years, making it more sensitive to trade regulations. We interpret the postponement as a signal that negotiators may be further apart on key issues than they publicly claim. We are closely examining the South Korean won, which has become more volatile and recently fell below 1,340 per dollar due to global risk concerns. Any bad news from the rescheduled talks could weaken the currency further. This situation makes buying call options on the USD/KRW pair a smart strategy. It offers a way to potentially profit from a breakdown in negotiations while keeping risk defined.Implications For Equity Markets
We are also monitoring the KOSPI index, especially the semiconductor and automotive sectors that depend heavily on exports. Purchasing put options on a KOSPI-tracking ETF is a direct method to protect against or profit from a market downturn if trade tensions rise. This gives investors downside protection or profit potential if the upcoming talks fail to yield positive results. Historically, the early stages of the U.S.-China trade conflict in 2018 showed how uncertainty in diplomacy can lead to market volatility. During that time, traders who anticipated increased risks and bought protection on Chinese equity indices were well-rewarded. We see a similar, though smaller, opportunity emerging in this situation. Create your live VT Markets account and start trading now.Lisa Su, AMD’s CEO, says U.S.-made chips could be 5% to 20% more expensive than those from Taiwan
AMD’s CEO, Lisa Su, has acknowledged that semiconductor chips made at TSMC’s new Arizona facilities will cost more—5% to 20% higher than those produced in Taiwan. This difference in price is due to variations in labor, infrastructure, and supply chains.
Building these Arizona facilities is part of a larger effort to boost domestic chip manufacturing in the U.S. The goal is to enhance national security and improve supply chain resilience. However, this cost difference highlights the challenges of relocating advanced semiconductor production back to the U.S.
Su did not confirm whether AMD would pass these costs on to consumers, but she emphasized their commitment to a diverse global supply chain, which includes U.S. sourcing. She also noted the benefits of having a reliable supply chain with chips produced domestically.
For derivative traders, the most important takeaway from Su’s comments is the increased uncertainty about future profit margins. The acknowledged cost premium adds a new factor that could lead to speculation and price fluctuations in the coming months. We should prepare for larger price movements than the market currently anticipates.
As AMD recently reported a non-GAAP gross margin of 52%, the introduction of these higher-cost chips from Arizona, although initially a small part of total supply, will draw close attention. Traders will be particularly focused on any guidance that could suggest this could impact profitability. This is likely to be a major driver for future stock fluctuations.
However, these effects won’t be felt immediately. Reports indicate that TSMC’s Arizona production is delayed until 2025, with a second facility not expected until 2027 or later. This means cost pressures will be a medium-term issue, allowing implied volatility on shorter-dated options to be potentially undervalued.
We must also consider the U.S. government’s financial support in dealing with these higher costs. TSMC has received $6.6 billion in grants and up to $5 billion in loans through the CHIPS Act to help offset these expenses. This support could soften the financial impact on companies like AMD.
Intel is a competitor to watch closely, as it is also establishing domestic manufacturing with government assistance. Traders will compare the total costs and efficiency of Intel’s U.S. facilities with AMD’s Arizona options. A cost advantage for Intel could lead to trades focused on the relative performance of the two stocks.
Historically, the semiconductor industry shows high volatility, which makes options-based strategies appealing. For example, the VanEck Semiconductor ETF (SMH) has a 5-year monthly standard deviation exceeding 8%, compared to about 5% for the S&P 500. This suggests that significant, news-driven price changes are likely.
Thus, traders should think about buying options that could benefit from a large price movement in either direction, such as straddles or strangles, on AMD. The conflicting narratives of supply chain security and rising costs create an ideal setup for a substantial price adjustment. These strategies would capitalize on the uncertainty highlighted by the conversation with Ludlow.
Bessent expects a new nominee for Fed Chairman to be announced in December or January.
US Treasury Secretary Bessent announced that we can expect a new nominee for Federal Reserve Chairman by December or January. This comes after efforts to persuade President Trump not to remove Fed Chair Powell, as Bessent aims to keep the markets stable.
In response, Trump expressed his frustration and emphasized that he understands market needs. Bessent’s announcement suggests that discussions about the Federal Reserve leadership may soon come to an end.
Increased Uncertainty for Monetary Policy
We think Bessent’s statement points to greater uncertainty regarding monetary policy. A change in Federal Reserve leadership is a major event that can impact the markets significantly. Derivative traders should now prepare for increased market volatility, rather than focusing on a specific market direction. When there’s tension between the president and the central bank, it often leads to sharp market fluctuations. For example, during past pressure on Powell in late 2018, the CBOE Volatility Index (VIX) jumped from the low teens to over 35, indicating strong market anxiety. We expect a similar reaction as this new discussion heats up in the coming weeks. With the VIX trading at low levels recently, often below 15, we see a clear opportunity. Purchasing options is relatively cheap right now, before the market fully accounts for the risks of a leadership change. We are considering long volatility positions, like straddles on the SPX, to capitalize on a significant price movement in either direction.Effect on Interest-Rate-Sensitive Assets
The uncertainty around the nominee creates two possible outcomes for interest-rate-sensitive assets. A more dovish nominee could lead to gains in tech stocks and bonds, while a hawkish choice might result in a sharp decline. Traders can use options on specific sector ETFs to speculate on whom the president may prefer for the position. For those with significant long exposure in their portfolios, this is a crucial time to hedge. The risk of a nominee unfavorable to the market replacing Powell presents a major downside risk. We recommend buying protective put options on broad market indices to safeguard against a negative outcome following the announcement in December or January. Create your live VT Markets account and start trading now.In Asian morning trade, AUD/USD rose to 0.6604 as other currencies gained against the USD.
The AUD/USD has reached its highest point in eight months at 0.6604, thanks to a generally weaker USD during morning trading in Asia. The Australian Dollar is performing well, alongside other currencies like the EUR, NZD, and GBP, which have also gained this morning.
Recent data shows that Australia’s preliminary manufacturing PMI for July 2025 rose to 51.6 from the previous 50.6. This increase signals growth in the manufacturing sector and supports the rise of the AUD.
