This week, all eyes are on the Federal Reserve meeting on Wednesday, where we expect some updates. The average forecast for 2025 suggests two rate cuts may still be on the table, and the 2026 prediction could be lowered by 25 basis points.

Countering Expectations

Chair Powell is likely to push back against market hopes for softer policies. He may stress that future decisions will rely on economic data. This could temporarily strengthen the dollar, even with weak labor and inflation numbers. The Fed meeting on Wednesday is crucial, and we think the market has overly optimistic expectations for rate cuts this year. Currently, the futures market estimates a 65% chance of a rate cut by December, which may lead to disappointment. We believe Chair Powell will highlight that any decisions depend on new data, countering bets on cuts in October or December. For traders focused on interest rates, this means the short end of the yield curve might need to be adjusted. Strategies that anticipate no immediate rate cuts, like selling December SOFR futures, could be effective if Powell’s stance is strong. This approach would benefit as the market shifts its outlook for a more patient Federal Reserve. Powell has reason to wait because the data doesn’t urgently call for cuts. The last Consumer Price Index report from August 2025 showed inflation at 2.9%. While it’s slowly decreasing, it’s still above the target of 2%. The latest jobs report revealed an increase of 190,000 jobs, showing the labor market is softening, but not collapsing.

Market Implications

If the prospect of lower rates gets pushed back, it might create challenges for stocks. With the VIX volatility index around 17, it’s wise to buy some near-term protection using S&P 500 put options. This hedge could be beneficial if the market dips after Wednesday’s cautious message. We’ve seen similar behavior before, especially in late 2023 and early 2024. During that time, the market consistently anticipated quicker rate cuts than the Fed was ready for. Each time Powell disagreed, it led to quick adjustments in bond yields and strengthened the dollar. As a result, a patient Fed should keep the U.S. dollar strong against other currencies. If this week’s message is indeed “higher for longer,” call options on the dollar index (DXY) might be worth considering. This perspective is supported by the fact that other major central banks seem closer to easing their policies than the Fed. Create your live VT Markets account and start trading now.

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Deutsche Bank believes that the European Central Bank (ECB) has reached its highest interest rate after the September meeting. Markets are now seeing less chance of further cuts. It’s expected that the ECB will keep a stable 2% rate until late 2026, when a rate increase might happen.

Market Consensus

Following the ECB’s September meeting, Deutsche Bank noted that many in the market agree that policy rates have peaked. The ECB’s message indicated satisfaction with a long-term 2% rate, which helps manage economic uncertainties and fluctuations, while allowing some flexibility with its 2% inflation target. Market reactions showed a lower chance of further cuts, matching Deutsche Bank’s expectations. The bank had already predicted a 2% terminal rate after the announcement of the EU-US trade deal. While there’s still a slight chance of cuts—especially if inflation expectations lower in early 2026—Deutsche Bank thinks the likelihood of further cuts has grown. In summary, Deutsche Bank suggests the ECB’s next move will be a rate increase by the end of 2026, and the September meeting raised the chances of policy changes. We view the ECB as having hit its peak rate after the September meeting, signaling a time of policy stability. This implies that fluctuations in short-term interest rates should lessen in the coming weeks. Traders might consider strategies that take advantage of this, such as selling straddles on short-term Euribor futures to earn premium from the expected stability. This outlook is backed by recent economic data showing persistent inflation. For example, the Eurozone’s flash CPI estimate for August 2025 was 2.4%, remaining above the ECB’s 2% target. This makes it clear that achieving rate cuts will not be easy, supporting the idea of stable rates.

Policy Implications for Currency Derivatives

With short-term rates expected to stay at 2%, the yield curve may start to steepen as the market looks ahead. We recall the significant steepening in 2022 when markets began to anticipate future rate hikes after a long pause. A similar but slower trend could develop, making trades that bet on long-term rates increasing faster than short-term rates, like paying fixed on a 5-year swap while receiving on a 2-year swap, appealing. This policy approach also affects currency derivatives, especially against the US dollar. The recent US jobs report from August 2025 indicates a slowdown, making it more likely that the Federal Reserve will cut rates compared to the ECB. This difference in policies should support the Euro, making long EUR/USD forward contracts or call options sensible positions to consider. Create your live VT Markets account and start trading now.

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The Bank of England is likely to keep its interest rate at 4% on September 18, based on a Reuters survey of 67 economists. While many expect a quarter-point cut in late 2023 or early 2024, more experts think the Bank might hold off on further cuts in 2025. Inflation is rising and is predicted to reach 4% in September. The goal of getting inflation back to 2% won’t happen until around mid-2027. Every economist surveyed agrees on keeping the rate steady this September, with 42 anticipating a cut later in the year. Key inflation and job data set to be released on September 16-17 will play a crucial role in the Bank’s November decisions.

Wage Growth and Inflation Trends

Wage growth remains strong at 5%. Inflation is expected to average 3.8% this quarter and 3.6% in the next. Some economists warn that ongoing inflation makes cutting rates risky, suggesting that expectations may drift. The UK economy is anticipated to grow modestly, by 0.2–0.4% each quarter through 2026, with annual growth staying just above 1%. The Bank of England is also working to shrink its balance sheet, with plans to reduce bond holdings by £50–100 billion in the coming year. This Thursday, the Bank of England is expected to keep the rate at 4%. This pause is important because it comes after several reductions from the peak of 5.25% in 2023. The real concern now is not just this week’s meeting but how to prepare for the uncertain outlook for November and beyond. Inflation remains a central issue, with predictions showing it will reach 4% this month. We saw a similar pattern in spring 2024 when inflation briefly hit the 2% target, only to rise again. This history supports the Bank’s current cautious stance. With high wage growth at 5%, nearly one-third of analysts believe that rate cuts for this year are over. Due to all this uncertainty, we can expect increased market volatility leading up to the November meeting. Key data points to monitor are the inflation and labor market numbers coming out tomorrow and Wednesday. Any surprises in this data could lead to significant changes in short-sterling or SONIA futures for the fourth quarter.

Opportunities in Currency Derivatives

There are potential opportunities in currency derivatives, especially for the British Pound. If the Bank’s statement this week expresses more concern about inflation than economic growth, the GBP could strengthen, making call options appealing. However, if there are hints that a rate cut in November is still likely, the pound might weaken, benefiting those holding puts on GBP/USD. All of this is occurring against the backdrop of a weak economy, only expected to grow around 0.3% each quarter. The Bank is also continuing to cut its bond holdings, creating a form of tighter policy that conflicts with the need for lower rates. This sets up a challenging situation where combating inflation clashes with the need to support slow economic growth. Create your live VT Markets account and start trading now.

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James Bullard, the former president of the St. Louis Fed and now the dean at Purdue University, is interested in becoming the next chair of the Federal Reserve. He discussed this role with Treasury Secretary Scott Bessent, emphasizing the need to protect the dollar’s reserve currency status, keep inflation stable, and ensure the Federal Reserve’s independence. The Trump administration is on the lookout for candidates to replace Jerome Powell, whose term ends in May but could extend to 2028. Both Trump and Bessent have criticized Powell’s strategies, calling for major rate cuts. This week, the Federal Reserve is expected to reduce its benchmark interest rate by 25 basis points because of slower job growth and inflation worries.

Bullard’s Predictions

Bullard, known for his adaptable policy views, expects a total of 75 basis points in rate cuts by the year’s end. He considers tariffs a temporary factor in inflation. He also noted the weakening labor market, linking it partly to changes in immigration. Bullard reinforced the importance of the Federal Reserve’s independence and supported Governor Lisa Cook’s right to due process amidst the allegations against her. Market trends show a belief in a more dovish Federal Reserve, with a 25 basis point cut expected this week and a possible additional 75 basis points by the year’s end. The dollar is weak, Treasury yields have fallen, and stock prices are stable amid these predictions. With markets already anticipating the 25 basis point cut this week, attention now turns to future rates. Fed funds futures for December 2025 and January 2026 indicate a strong likelihood of a total of 75 basis points in cuts by the year’s end. We believe that a potential nomination of someone like Bullard, who is known for being dovish, reinforces this outlook and suggests further cuts are likely.

Opportunities and Risks

This guidance points toward a steeper yield curve. We see a chance to profit from trades where short-term rates drop faster than long-term rates, such as buying 2-year Treasury note futures and selling 10-year Treasury note futures. Historical trends show that the yield curve often steepens during the beginning of an easing cycle, a trend we began observing in late 2023. Although the equity market remains strong, the uncertainty over the Fed’s leadership transition poses a political risk. The CBOE Volatility Index (VIX) is currently around a low 14, which may not fully reflect the potential for market fluctuations during the appointment process. We suggest considering VIX calls or out-of-the-money put options on the SPDR S&P 500 ETF (SPY) as a cost-effective hedge against unexpected events. The dollar is likely to stay under pressure as U.S. interest rates decrease compared to other major economies. The recent cuts in the U.S. make holding dollars less appealing, a trend that has accelerated since the Fed’s shift earlier this year. Derivative traders might explore strategies that benefit from a weaker dollar, such as buying call options on currency ETFs like the Invesco CurrencyShares Euro Trust (FXE). We also need to closely monitor inflation data, as the memory of the high inflation rates from 2022 to 2024 is still vivid. The latest Consumer Price Index (CPI) reading is at 2.9%, above the Fed’s 2% target, meaning any unexpected rise in inflation could quickly change current dovish expectations. Persistent inflation signs would challenge the case for the aggressive rate cuts that the market is pricing in. Create your live VT Markets account and start trading now.

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On September 15, 2025, North American trading highlighted several key economic events. The US Empire Fed released a figure of -8.7, much lower than the expected +5.0. Meanwhile, Canadian manufacturing sales for July rose by 2.5%, surpassing the 1.8% estimate. In business news, Cameco’s shares jumped as the US considered boosting its uranium stockpile, and a framework involving China and TikTok was set up. Ongoing talks about tariffs and possible trade actions between the US and China continue. In financial markets, gold prices rose by $39, hitting a record price of $3,681, while US 10-year yields fell slightly. Oil prices and major stock indices, including the S&P 500 and Nasdaq, also showed gains. The Canadian dollar reached a 10-day high, thanks to positive manufacturing data easing worries about NAFTA disruptions. The rise in gold prices supported commodity exporters like Canada.

Federal Reserve Speculations

As markets anticipate potential Federal Reserve actions, speculation about a rate cut is increasing. This led to gains in risk assets but had a mixed effect on the US dollar. Investors are gearing up for a “sell the fact” situation, although a surprising 50 basis point rate cut now seems less likely. The focus this week is entirely on the Federal Reserve’s rate decision. With a 25 basis point cut already factored in, traders should look for a “sell the fact” reaction on Wednesday if the Fed’s message isn’t accommodating enough. It’s wise to use options to protect against a potentially hawkish surprise that could quickly dampen current optimism. The ongoing rally in stocks, especially the Nasdaq which logged its ninth straight gain, is reminiscent of previous tech surges, like the AI-driven increase in 2023 when the Nasdaq 100 rose over 50%. Many are using call options on the QQQ or individual tech stocks as part of their strategy. However, given the high premiums, implementing bull call spreads can help manage costs and limit risk.

Trading Strategies Amid Market Events

A weak US dollar is another major trend, falling as the likelihood of rate cuts strengthens. Shorting the dollar against commodity-backed currencies, particularly the Canadian dollar, seems appealing due to robust manufacturing data. Traders can use futures or put options on the USD/CAD pair to take advantage of expected dollar weakness. Gold’s rise to a record high of $3,681 is a classic response to a declining dollar and anticipated looser monetary policy. This move is similar to rallies seen during past Fed easing periods, following events like the 2008 financial crisis and the COVID-19 pandemic response. Traders can buy call options on gold futures or ETFs to benefit from this uptrend while managing their capital at risk. As we approach the Fed meeting, implied volatility is high, making options more expensive. This situation opens opportunities for traders who think the market won’t react as dramatically post-announcement as expected. Strategies like iron condors on the S&P 500 could profit as volatility declines after Wednesday. Positive news about US-China relations is boosting the rally, but we must also consider the risk of new tariffs against the EU. While the spotlight is on the Fed, buying some inexpensive, out-of-the-money put options on European indices could serve as a low-cost hedge against any unexpected geopolitical events that might disrupt the current positive trend. Create your live VT Markets account and start trading now.

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The NASDAQ index led the way in U.S. stock gains, rising by 0.93% to reach a new record high. The S&P index also set a new record, climbing about 0.50%. Tesla shares jumped by 3.62%. Meanwhile, Alphabet’s market value topped $3 trillion, up by 4.53%. However, Nvidia shares remained steady due to concerns from China regarding anti-monopoly laws.

Market Closing Figures

– The Dow Jones Industrial Average rose by 49.23 points, or 0.11%, closing at 45,883.45. – The S&P 500 increased by 30.99 points, or 0.47%, finishing at 6,615.28. – The NASDAQ gained 207.65 points, or 0.94%, closing at 22,348.75. The Russell 2000 index, which tracks small-cap stocks, gained 8.069 points, or 0.34%, closing at 2,405.13. Telecom services saw the biggest gains, up 2.34%, while healthcare and consumer staples both dropped by over 1%. In the S&P 500, five sectors, including consumer discretionary and information technology, saw increases. However, six sectors, such as energy, real estate, and materials, fell. As the market prepares for a rate cut announcement on Wednesday, we should be cautious about a potential “sell the news” scenario. Fed funds futures show an over 85% chance of a 25-basis point cut, so a hawkish statement from the Fed could quickly reverse these record highs. It’s crucial to pay attention to any hints about future cuts.

Technology and Market Risks

The NASDAQ’s impressive performance highlights technology as a strong momentum play. With the VIX near a low of 13, options are relatively inexpensive, making this a good time to consider protective puts on broad indexes like the SPX or QQQ. This could provide a cost-effective way to hedge against any disappointment after the FOMC meeting. Alphabet’s entry into the $3 trillion club indicates that large-cap stocks are driving this rally. We can use derivatives to focus on this trend, such as call spreads on individual tech companies, which allow us to benefit from further gains while managing risk. The mixed performance, with six out of eleven S&P sectors declining today, shows that this advance is narrow rather than widespread. This situation is reminiscent of early 2024, when stock indexes surged on the promise of delayed rate cuts. History suggests that the market can react violently to the first cut once the certainty fades. The August 2025 CPI reading of 2.8% gives the Fed a reason to cut, but their future guidance is now crucial. The clear shift away from defensive sectors like Healthcare and Consumer Staples is a significant signal. We should explore strategies that capitalize on this difference, like pairs trades that involve buying calls on discretionary ETFs while simultaneously buying puts on staples. This approach lets us follow the underlying trend with less exposure to broader market risks. Create your live VT Markets account and start trading now.

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The economic calendar for Asia on Tuesday, September 16, 2025, is mostly quiet. There are no major data releases expected that could affect market movements. With few economic updates, financial markets will likely see minor changes. Investors may turn to other global happenings for trading signals during this session.

Broader Market Environment

With a calm data calendar in Asia, we shift our attention from short-term reactions to the overall market environment. Without immediate triggers, trading will likely be guided by technical levels and general sentiment. It’s a good time to analyze charts instead of focuses on news updates. Implied volatility remains low, with the VIX around 15. This is a big change from the high levels we experienced in 2022 and 2023. It indicates the market isn’t anticipating any significant surprises soon. For options traders, this situation makes selling premium through strategies like iron condors on stable indices appealing. Overall, we are in a holding pattern as we wait for significant updates from central banks. The last U.S. CPI reading was 2.8%, suggesting the Federal Reserve isn’t rushing to make a decision. The FOMC meeting next week will be key to watch for any changes in outlook.

Market Outlook

Given the current situation, we expect major currency pairs and equity indices to remain within established limits in the coming days. Traders should think about using options to manage risk around important support and resistance levels, especially for the S&P 500. This approach allows them to participate while limiting risk before next week’s potential market fluctuations. This situation resembles the consolidation periods we saw in mid-2024 before crucial inflation data releases. Back then, markets moved sideways for weeks until a clear fundamental reason emerged. We expect a similar scenario now, where patience is likely to pay off over more aggressive trading strategies. Create your live VT Markets account and start trading now.

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The Canadian Prime Minister has insisted that Anglo American move the headquarters of its merged company to Canada in order to approve its takeover of Teck Resources. Anglo American has agreed to shift its office to Vancouver while still being registered in the UK. This requirement makes it harder for other large mining companies to take over Teck Resources, as most have headquarters outside Canada, which reduces their chances for a successful bid. Analysts believe that the current proposal from Anglo American may fail because it needs 66 2/3% support from Teck’s class B shareholders. Starting in 2024, the Canadian government announced that takeovers of important mining companies will only be approved under special circumstances. Despite the ongoing merger talks, Teck’s shares have not decreased in value. However, there are ongoing issues with Teck’s QB2 project in Chile, raising doubts about its future. The problems with QB2 highlight the challenges in developing copper deposits, which could boost copper’s long-term outlook. The current situation adds further complexity to the proposed merger amid industry pressures and Canada’s strict regulations. With significant political challenges, the Anglo American takeover of Teck Resources has a low chance of success in its current form. The government’s demand for a Canadian headquarters effectively excludes other foreign bidders, leaving Teck’s shareholders with only one controversial offer. As of today, September 15, 2025, this situation creates a lot of uncertainty for the company’s future. In the past, Canadian regulators have blocked major foreign takeovers, such as when BHP attempted to buy PotashCorp in 2010, leading to a sharp decline in the target’s stock price after the deal was rejected. Current market prices reflect skepticism, as Teck’s class B shares trade near C$65, significantly below the implied C$72 all-stock offer from Anglo American. This difference suggests that traders are not convinced the merger will receive approval from either the government or the majority of shareholders. A crucial upcoming event is Teck’s operational update on the QB2 copper project in Chile, expected next month in October. Concerns about a significant write-down or permanent impairment on this key project pose a serious risk, regardless of the merger discussions. A negative announcement could lead to a steep drop in stock price, as the project’s success is vital to Teck’s long-term value. With these risks in mind, we believe that implied volatility on Teck options is an important aspect to monitor. Implied volatility for October contracts is already high, exceeding 45%, indicating that the market expects a significant price change after the QB2 update. Strategies such as long straddles or strangles, which can profit from high volatility, seem attractive for taking advantage of this anticipated price movement. This uncertainty comes amid strong copper prices, around $4.50 per pound, driven by ongoing global supply shortages and growing demand from the electric vehicle and renewable energy sectors. The challenges at crucial projects like QB2 further support a bullish long-term outlook for copper by demonstrating the difficulties in increasing supply. While the strength in copper prices supports Teck’s valuation, it won’t protect the stock from any major failures related to its projects. For existing Teck shareholders, the risk of both a failed deal and a negative update on QB2 is significant. Therefore, it is wise to consider hedging strategies to guard against a potential drop below the C$60 mark. Buying out-of-the-money put options set to expire in October or November could be a smart way to limit possible losses in the coming weeks.

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The EURUSD is targeting 1.1779, the next goal, with the yearly high at 1.1829. It dropped during the Asian session but bounced back during early European trading. After a brief dip below the 100-hour moving average, buyers helped the pair recover back to a range between 1.1730 and 1.1741. Weaker US Empire manufacturing data added to this rebound, causing US yields to fall. The 10-year yield dropped by 2.3 basis points to 4.0375%, after peaking at 4.087% earlier in the day. The high for the day, 1.1772, is close to last week’s high of 1.1779, which is a short-term resistance point.

Potential Barrier Break

If the pair breaks past this level, it could gain more momentum, aiming for July’s highs at 1.1788 and 1.1829, the latter being the highest EURUSD level since September 2021. The area between 1.1730 and 1.1741 serves as support, while 1.1779 is critical for further progress. This recent rise in EURUSD is tied to signs of a slowing US economy, evident in the weak Empire manufacturing report. Last week’s initial jobless claims also rose to 235,000, a two-month high. This suggests the Federal Reserve might not be as aggressive, which pressures the dollar. With this upward trend, we are considering buying call options with strike prices just above the year’s high, around 1.1850 or 1.1900. One-month implied volatility is at 6.5%, making these options cheaper than earlier this year. This strategy could capture a sharp move upward if we break the significant 1.1829 resistance. However, we need to watch the 1.1829 level closely, as it’s a major barrier that hasn’t been crossed since late 2021. The Euro’s strength may reflect the European Central Bank’s tough stance, especially after last month’s Eurozone HICP inflation data remained high at 4.8%. Selling call spreads with a short strike near 1.1825 could be a cautious way to earn premium if this resistance remains intact.

Trading Strategies and Risk Management

For traders expecting consolidation before the next major move, a range-bound strategy could work well. We might set up an iron condor, selling puts around the 1.1730 support and selling calls near the 1.1829 resistance. This method profits from time decay as long as the pair stays between these two key levels in the coming weeks. Looking ahead, we must brace for volatility around upcoming US inflation data and the next ECB policy statement. Significant changes in these releases could trigger a breakout above resistance or push the pair back down to support. Managing our risk around these important data points is crucial. Create your live VT Markets account and start trading now.

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WTI crude oil prices closed at $63.30, up $0.61 or 0.97%. During the day, prices ranged from a low of $62.52 to a high of $63.67.

Technical Levels and Key Zones

Prices are being influenced by important technical levels on the daily chart. On the downside, swing lows sit between $60.45 and $61.94. On the upside, the 61.8% retracement level since April’s low is at $63.71. The 100-day moving average is at $64.31, which may act as key resistance. These areas are significant for support, resistance, and potential breakouts for traders this week. In the past, when WTI crude hovered around $63.30, traders focused on breakout opportunities from key levels like the 100-day moving average. During those times, the market was indecisive, with both support and resistance holding steady, indicating a need for a catalyst to move in one direction.

Recent Developments and Market Dynamics

Today, the market is in a different situation as we see WTI testing the $95 mark. Recent news from OPEC+ confirmed they will keep production cuts in place until year-end, limiting supply. This is a notable change from the balanced technical scenario of previous years. Demand is also strengthening, especially from abroad. China’s Caixin Manufacturing PMI, an important measure of industrial activity, just reached a three-year high of 52.1, indicating a strong recovery and increased energy use. Additionally, the slow pace of refilling the U.S. Strategic Petroleum Reserve, after significant reductions in 2022, continues to support prices. For those trading derivatives, adopting a bullish outlook seems more fitting than waiting for a simple breakout. Buying call options with strike prices above the key $100 mark may capture upward momentum from current supply and demand trends. We are watching the previous high of $98.50 as the next important hurdle. Create your live VT Markets account and start trading now.

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