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Australia’s monthly CPI report starts in November, improving inflation data and supporting RBA decisions
Starting from November 26, Australia will begin releasing a complete monthly inflation report, joining most OECD countries. The Australian Bureau of Statistics (ABS) will publish this detailed monthly Consumer Price Index (CPI) report, which will gradually replace the quarterly CPI that the Reserve Bank of Australia (RBA) has utilized since the 1990s.
The lack of full monthly data has created uncertainty in making rate decisions. For example, the May 2025 monthly CPI reported a 2.1% inflation rate, aligning with the RBA’s goal of 2–3%. In contrast, the March 2025 quarterly CPI showed a rate of 2.4%, suggesting ongoing inflation. This difference influenced the RBA’s unexpected choice to keep the interest rate at 3.85%.
Bank of Canada’s latest business surveys ease concerns about tariff impacts
The Bank of Canada has reported that tariffs and uncertainties are affecting business outlooks. According to the Q2 Business Outlook Survey, the direct impact of tariffs has decreased compared to Q1. Fewer companies focused on exports expect the worst tariff scenarios.
Most companies plan to maintain their current staffing levels and limit their investments to necessary maintenance. About 23% of businesses expect inflation to stay above 3%, while 43% expect lower labor costs in the next year, leaving 9% expecting higher costs.
Consumer Expectations of Recession
Consumers are predicting a recession, with 64.5% expecting one within the next year, down slightly from 66.5% in Q1. Sales figures show that 24% of firms reported a drop in sales in the past year, down from 28% in Q1. For inflation, consumer expectations over the next five years rose to 3.45%. Additionally, 28% of firms believe Canada will face a recession in the upcoming year, a decrease from 32% last quarter. Despite some improvements, a significant number of Canadian consumers still foresee recessionary conditions in the next year. The outlook for future sales indicators has dramatically dropped from +22 in Q1 to -6.Economic Uncertainty Ahead
The mixed signals between business and consumer attitudes indicate increased market volatility. The unexpected drop in the sales forecast from +22 to -6, even with other small improvements, points to ongoing economic uncertainty. In this environment, buying options to capitalize on price changes may offer better opportunities than straightforward bets. With nearly two-thirds of consumers expecting a recession, adopting a bearish outlook seems wise. The Bank of Canada already reduced rates to 4.75% in June, the first cut in four years, recognizing the slowing economy. We see value in purchasing put options on broad market ETFs, such as the iShares S&P/TSX 60 Index ETF (XIU), to safeguard against possible downturns. The difference between consumer expectations for five-year inflation at 3.45% and the actual annual inflation rate, which slowed to 2.7% in May, leads to uncertainty about interest rates. This gap suggests that future rate cuts are not guaranteed. Derivatives tied to the Canadian Dollar Offered Rate (CDOR) or bond futures may be beneficial for speculating on how quickly the central bank will adjust its policies. Firms planning to limit investments and anticipating lower labor costs align with a cooling economy. This is supported by the latest Statistics Canada report showing the national unemployment rate has increased to 6.2%. Such data back strategies that limit risk, like selling out-of-the-money call option spreads in key Canadian sectors, such as financials or energy. The difference in monetary policy with the United States, where the Federal Reserve is keeping interest rates steady, creates downward pressure on the Canadian dollar. If Canada continues to lower rates to support its economy, the currency may weaken further against the US dollar. Therefore, buying call options on the USD/CAD currency pair looks promising. Create your live VT Markets account and start trading now.The US dollar weakens against the Japanese yen due to falling Treasury yields and market caution.
The Japanese Yen rose against the US Dollar, which weakened due to falling US Treasury yields. This shift comes amid political uncertainty in Japan after the ruling coalition lost its majority, potentially affecting expected economic reforms.
There are growing concerns about how Japan’s political situation may impact economic policies and coordination with the Bank of Japan. The USD/JPY rate fell to around 147.30 as the US Dollar Index dropped below 98.00, decreasing by nearly 0.75%.
Focus On Economic Data
Attention turns to recent comments by Scott Bessent, who criticized the Federal Reserve’s effectiveness and urged for lower interest rates to help the economy. There is also a keen interest in upcoming economic data from Japan and the US, including the Jibun Bank Flash Manufacturing PMI and the US S&P Global PMI. Economic reports, such as the Tokyo Consumer Price Index, could significantly affect the Yen in the short term. The Bank of Japan is shifting away from its ultra-loose policy in 2024, as the Yen depreciated and inflation exceeded the 2% target due to rising global energy prices and wage growth. This policy change has helped the Yen recover strength after its previous decline. We see the current situation as favorable for a bearish outlook on the USD/JPY pair. The main factor is the weakening US Dollar, which is reacting to the drop in Treasury yields. This backdrop suggests that strategies focusing on further declines in the currency pair are wise.Market Intervention And Volatility
It’s important to note that despite strong arguments for Yen strength, the USD/JPY pair recently surged past 160 before suspected government intervention. Japan’s Ministry of Finance indicated interventions exceeding 9 trillion yen in April and May, which adds to market volatility. This situation makes buying put options on the USD/JPY pair an appealing strategy to guard against sudden declines driven by policy changes. A prominent hedge fund manager’s call for lower US rates contrasts with current market behavior, as ongoing inflation keeps the Federal Reserve cautious. The latest US Consumer Price Index reported an annual rate of 3.4% in April 2024, strengthening the central bank’s “higher-for-longer” approach. This tension is a source of volatility, allowing traders expecting a sharp price move to consider straddles or strangles. In Japan, political complexities remain a challenge for aggressive policy tightening. Recently, the “Shunto” spring wage negotiations led to the largest pay increases in over 30 years. However, the latest Tokyo CPI data slightly missed the Bank of Japan’s 2% target. This indicates that the Bank may proceed cautiously, limiting the Yen’s chances for sustained appreciation and capping potential gains for bearish USD/JPY strategies. Create your live VT Markets account and start trading now.Firing Powell could lead to higher prices and a weaker dollar, which would benefit the euro and its credibility.
A study by economist Thomas Drechsel examines how political influence affects Federal Reserve policy. The research uses diary records to track presidential interactions with the Fed. It highlights instances, such as during Nixon and Johnson’s presidencies, when the central bank responded to political pressure. This information is organized into a “political pressure” index.
T.S. Lombard mentions that this study is relevant today. He points out that when the Fed eases policies due to political stress, it often results in higher inflation without improving real GDP. In fact, it can even lead to lower economic output. Additionally, as media attention on this pressure increases, inflation expectations often rise sharply.
Risks of Changing Fed Leadership
The study warns against changing the leadership of the Fed, like replacing the chair with someone more loyal to the president. This could damage trust in the Fed’s independence. Such actions might not be beneficial for risk assets and could destabilize the U.S. dollar. In this context, the euro, backed by a more independent European Central Bank, could gain an advantage. Given the risks of political interference in central bank policy, we advise traders to consider buying protection against market volatility. The VIX, which measures stock market volatility, has recently been around 13, significantly lower than its long-term average of about 20. This means options are currently fairly inexpensive, providing a good opportunity to hedge against potential declines in risk assets. Drechsel’s research shows that past political demands led to ongoing inflation, and we must be ready for similar situations. The current Consumer Price Index shows year-over-year inflation at 3.3%, well above the 2% target. We find value in contracts that benefit from rising prices, such as options on Treasury bond futures, which would increase in value if yields rise due to higher inflation expectations.Impact of Fed Leadership Changes on the Market
If the Fed’s leadership changes, it could shake market confidence and cause a sell-off in stocks. To prepare for this, we’re buying put options on major indices like the S&P 500, directly hedging against a decline in economic output, as the study suggests is possible. Such a situation could also weaken the dollar’s appeal to global investors. We foresee a shift toward currencies supported by more independent central banks. Thus, we are considering long EUR/USD futures or call options to take advantage of potential changes in capital flows away from the U.S. Create your live VT Markets account and start trading now.The Euro stabilizes around 0.8670 against the Pound ahead of central bank events and fiscal concerns.
The Euro is stable against the British Pound, sitting at 0.8670. Traders are keeping an eye on upcoming decisions from the European Central Bank (ECB) and the Bank of England (BoE), particularly due to rising uncertainties in the UK’s fiscal policies.
The ECB is likely to hold rates steady, with a 62% chance of no change and a 38% chance of a cut. On the other hand, despite increasing inflation, the BoE is expected to lower rates by 25 basis points in August.
Trade Tensions Strategy
The European Union is preparing a strategy to respond to any increasing trade conflicts with the US. Recent economic indicators from the UK present mixed signals, and changes in parliament have raised questions about its fiscal plans. Technical analysis shows that EUR/GBP is consolidating, with important resistance at 0.8738. If this level is broken, we could see further upward movement. However, if it drops below 0.8650, we may see a decline down to 0.8617. The Euro is used by 19 countries in the Eurozone and is the second most traded currency in the world, accounting for 31% of foreign exchange trades. The ECB, based in Frankfurt, oversees monetary policy in the Eurozone mainly by adjusting interest rates to maintain price stability. The Euro’s value is affected by inflation, economic performance, and trade balance. Positive economic news or a strong trade balance usually strengthens the Euro, while negative data can weaken it.Central Bank Divergence
Given the differences between the central banks, we recommend that derivative traders prepare for a possible rise in the Euro against the Pound. The ECB appears reluctant to lower rates, while the BoE seems more inclined to ease. This difference supports a stronger Euro in the medium term. To back this view, recent data shows Eurozone inflation unexpectedly increased to 2.6% in May. This makes it harder for the ECB to justify a rate cut, reinforcing a 62% chance that rates will remain unchanged. Persistent inflation should create a solid floor for the Euro. In contrast, the UK’s inflation reached the 2.0% target in May for the first time in almost three years, reinforcing the argument for a rate cut in August. Additionally, the upcoming general election on July 4th adds to the uncertainty around the UK’s fiscal situation. Together, these factors are putting pressure on the Pound. We recommend traders consider buying call options with strike prices near the 0.8738 resistance level. This strategy takes advantage of potential upward momentum if the pair breaks out of its consolidation. The cost of the option is the maximum risk involved. To manage risk, we could buy put options with a strike price below the significant support level of 0.8650. Historically, this currency pair has experienced large swings, such as the significant rally after the 2016 Brexit vote, highlighting its volatility. A drop below this support could result in a quick decline. Lastly, it’s important to watch for any rising trade tensions between the European Union and the United States. If Brussels implements retaliatory tariffs, it could harm the Eurozone’s trade balance, posing a challenge to our optimistic outlook for the Euro. Create your live VT Markets account and start trading now.JPMorgan warns investors about crowded high-beta stocks amid rising market complacency and risks
JPMorgan strategists have noticed three key trends in stock market styles this year. In January, there was a big rush towards quality growth and large-cap AI-related stocks. By April, investors shifted to low-volatility stocks as worries grew over AI spending and potential risks from tariffs causing a recession.
Right now, high-beta stocks—such as speculative growth and low-value companies—are seeing extreme crowding. This situation has hit the highest level in 30 years, happening in just three months. With short interest dropping significantly, traders have less protection against potential market downturns.
Optimism And Market Risks
Analysts believe there’s a “Goldilocks scenario” at play, meaning they see stable growth, lower Federal Reserve rates, and less concern about tariffs. However, they warn that this optimism might lead to greater risks in the market. JPMorgan’s list of crowded high-beta stocks includes companies like Palantir, Coinbase, Nvidia, Super Micro, and Tesla. Strategists suggest moving back to low-volatility stocks for better risk/reward prospects. This advice comes as the August 1 tariff deadlines approach and seasonal market trends start to weaken. The situation with high-beta stocks suggests a crucial time for derivative traders. The quick move into these speculative stocks, now at the 100th percentile, hints that a market reversal is more likely than continued growth. We should brace for a downturn in the riskiest market segments. To prepare, consider buying put options on ETFs that track these crowded high-beta stocks as a hedge against a sharp market drop. Since short interest is low, few are ready for a downturn, meaning any sell-off could be more intense. Getting protection now, while people feel overconfident, is a smart strategy.Positioning For Market Uncertainty
The current market trends support a cautious approach. The CBOE Volatility Index (VIX) recently traded at a low of 13, well below the average of around 20, indicating rising complacency. Additionally, the low equity put-to-call ratio, hovering below 0.70, shows that investors are mainly betting on gains rather than losses. For a more efficient strategy, we recommend using bearish vertical spreads, like put debit spreads, to target a specific downturn in crowded stocks while managing risk and reducing upfront costs. This is a careful way to bet against what the team sees as an “unsustainable” trend. To follow their advice to shift strategies, we can buy call options on low-volatility ETFs, ready for a move towards safer investments. Historical data indicates that these stocks usually perform well during market corrections. Another strategy is selling cash-secured puts on these ETFs to collect premiums while signaling a willingness to purchase quality stocks at lower prices. Timing is crucial as we enter August and September, traditionally the weakest months for equities. This seasonal challenge, combined with the upcoming August tariff deadline on some Chinese imports, presents potential triggers to disrupt the current market stability. We should utilize derivative strategies to prepare for this increased uncertainty. Create your live VT Markets account and start trading now.AstraZeneca plans to invest $50 billion in the US for research and manufacturing expansion
AstraZeneca is planning to invest $50 billion in the United States. This money will go towards expanding their manufacturing and research efforts.
The company is a major British-Swedish player in pharmaceuticals and biotechnology, with its main office in Cambridge, UK.
Their recent commitment, which includes a $1.5 billion manufacturing site in Delaware, is a strong sign of confidence for the future. This large investment shows that management believes in their upcoming drug pipeline and aims to capture a larger share of the US market. Traders should view this as an important development that will help support the stock’s value over time, rather than just a brief increase.
In the coming weeks, we expect the implied volatility of the company’s options to stabilize after the initial news. This makes strategies like selling cash-secured puts at important support levels appealing. This approach allows us to earn premiums while setting a good entry price. A look at past large capital expenditure announcements in the pharma industry shows these often establish a long-term price floor for stocks, rather than leading to immediate, dramatic gains.
This investment is closely linked to increasing production for their successful oncology and rare disease drugs, which saw a 19% revenue growth in the first quarter of 2024. As a result, we are considering longer-term call options that expire in six to twelve months. This approach provides time to benefit from the ongoing growth narrative reinforced by this investment, while minimizing exposure to short-term market fluctuations.
Euro declines against the Japanese Yen amid trade negotiation concerns, despite clarity from Japan’s election
The Euro is weakening against the Japanese Yen due to fresh worries about EU-US trade talks and uncertainty in Japan after the elections. The EUR/JPY pair is stable above the 172.00 support level, although the upward momentum is fading.
Japan’s election results provided a short-term boost to the Yen. Prime Minister Ishiba’s coalition lost its upper-house majority, but his government is expected to stay in power and continue trade discussions with the US.
Post-Election Clarity
The clarity following the elections is positive, as it avoids the risk of a low-tax opposition agenda. Japan is eager to settle trade issues with the US and prevent a 25% mutual tariff that would target many of its exports. The European Union is facing increasing trade risks. Planned US tariffs on EU imports, particularly affect Germany, where the economy relies heavily on exports. A survey from the European Central Bank shows that Eurozone profit margins are under pressure, which may lead to careful decisions from the ECB in the future. The EUR/JPY pair pulled back from its multi-year high of 173.25, currently consolidating above the 172.00 support level. The momentum is easing, as shown by the RSI moving out of the overbought zone. Future price action will depend on crucial levels like the 20-day SMA. Tariffs are imposed to protect local businesses, but they can increase prices and lead to trade conflicts. Donald Trump’s tariffs target imports from Mexico, China, and Canada to help US producers.Trade Tensions And Market Reactions
With the slowing bullish momentum in EUR/JPY, derivative traders should be cautious about long positions. The difficulty in maintaining the recent multi-year highs suggests limited upward potential for now. It’s important to monitor if the 172.00 support level holds against increasing geopolitical and economic pressures. European trade risks are a major concern, especially after German factory orders fell unexpectedly, indicating that the export-driven economy is struggling. The European Central Bank’s survey also highlights profit margin pressures, leading to the likelihood of cautious policies. This suggests continued challenges for the Euro. In contrast, the clarity following the Japanese elections offers more stability for the Yen. Prime Minister Ishiba’s government is keenly focused on trade talks, with the US being Japan’s top export market, accounting for over $14 billion in exports recently. This need to prevent reciprocal tariffs may strengthen the Yen. The tariff plans from the former US president introduce substantial uncertainty, which typically favors safe-haven assets. The market fluctuations during the 2018-2019 trade disputes showed that currencies like the Yen often gained over the Euro. If similar policies are implemented again, the Euro could be at greater risk due to the EU’s larger direct trade surplus with the US. We see a chance to buy EUR/JPY put options to prepare for a potential decline, especially if prices drop below the 172.00 support level. This approach limits risk while allowing for exposure to downward movements driven by rising trade concerns. It’s a more cautious strategy than outright shorting, especially as the RSI leaves the overbought area. Moving forward, we will watch the 20-day SMA as an indicator of the short-term trend. Upcoming inflation data from the Eurozone and any official updates on EU-US trade discussions will be crucial for price movements. A significant drop below the current support zone would confirm our negative outlook for the pair. Create your live VT Markets account and start trading now.As the US dollar weakens, the British pound shows a slight recovery around 1.3480.
The British Pound (GBP) is slowly recovering against the US Dollar (USD), with GBP/USD trading around 1.3480. This recovery is happening as the US Dollar weakens due to falling US Treasury yields and uncertainties about trade talks and the Federal Reserve’s policies.
There’s confusion about future interest rates in the UK, and mixed economic data complicates things further. The Bank of England (BoE) will announce its policy decision in August, and most expect a 25-basis-point rate cut.
US Dollar Index Performance
The US Dollar Index (DXY) has dropped and is trading near 98.10. This decline is a result of trade tensions and mixed signals from Federal Reserve officials. The 10-year US Treasury yield has decreased to 4.40%, which lowers demand for the USD. Though US economic data is generally strong, dovish comments from the Fed and renewed tariff worries are weighing down the Dollar. For the Pound, many expect the BoE to cut rates to 4.00%. UK economic data adds to the uncertainty. Even though inflation is high, unemployment has risen to 4.7% as jobs decline. Upcoming UK reports, such as S&P Global PMIs and Retail Sales, could sway short-term rate expectations and affect the Pound’s movement. Given these mixed signals, we see more potential in market volatility than in clear trends. The anticipation of a rate cut from the UK central bank is at odds with stubborn inflation, creating a tense situation for the Pound. This gap between expectations and the economic reality suggests a sharp price swing is more likely than a slow drift.Focus On August Policy Decision
We recommend that traders pay attention to the upcoming August policy decision from the monetary policy committee. UK unemployment has recently risen to 4.4%, while inflation is still above target, leaving the future uncertain. A strategy like a long straddle, where you buy both a call and a put option on GBP/USD, could benefit from a significant movement in either direction after the announcement. For the US Dollar, its future is also uncertain despite recent strength, which has pushed the relevant index to about 105.5. The 10-year Treasury yield has fallen to around 4.25%, suggesting that the US central bank may need to cut rates sooner than expected. Upcoming US inflation and job data will be critical and could influence the Dollar’s value. Historically, times when these two central banks have diverged in their policies or faced uncertainty have led to increased currency volatility. We are beginning to see signs of a similar situation now, making market pricing sensitive. Therefore, buying options now, while implied volatility remains relatively low, may be a smart strategy. Create your live VT Markets account and start trading now.USD falls against major currencies as S&P and NASDAQ hit record highs
The US dollar fell against all major currencies, dropping 1% against the Japanese yen. This came after recent elections where the ruling party lost its majority, but the Prime Minister assured continued leadership.
Now, all eyes are on the Bank of Japan’s possible shift towards a more aggressive policy, while the Federal Reserve may take a different approach. Last week, USDJPY reached a yearly high of 149.18 but has since dropped below key moving averages. Staying below the 200-hour moving average at 147.72 could keep selling pressure on the dollar.
