Geopolitical tensions dominated the news in Asia, particularly concerns about a possible Israeli strike on Iran. The U.S. advised its citizens to leave the region, highlighting these worries, even as U.S.-Iran talks are set for Sunday. Oil prices increased but couldn’t hold on to those gains due to the ongoing uncertainty. In Japan, a Ministry of Finance survey revealed a drop in business sentiment for the first time in over a year. The Business Sentiment Index for large firms fell to -1.9 in Q2, while non-manufacturers dipped to -0.5, marking their first negative reading since late 2022.

Australian Inflation And Currency Fluctuations

In Australia, consumer inflation expectations jumped sharply to 5.0% in June, up from 4.1% in May, the highest level since July 2023. Meanwhile, the U.S. dollar weakened, allowing the euro, yen, Swiss franc, and British pound to gain ground, while the Canadian dollar remained stable. The Australian and New Zealand dollars struggled, and gold prices hit $3,375, boosted by safe-haven investing. As geopolitical tensions rise, especially in the Middle East, we can see market jitters affecting global trading. Although no direct actions have been taken, the U.S. warning for its citizens shows how serious the perceived threat is. Market participants reacted quickly, driving temporary gains in oil and gold. Eventually, energy prices stabilized, indicating that while the threat is real, traders are not yet bracing for long-term supply issues. The rise in gold prices highlights how quickly investors move toward safer assets during uncertain times. Surpassing the $3,300 mark shows strong backing for this trend. The strength of precious metals and safe-haven currencies indicates a phase of reduced risk appetite. For those involved with commodity-related assets or currencies sensitive to risk, a cautious approach is advisable. This unease does not seem to be short-lived.

Business Sentiment And Interest Rate Movements

Japan’s drop in business sentiment is important not only because of the negative figures but also because it occurs amidst stable economic data. The Ministry of Finance Index’s decline suggests growing fears about export demand and increasing costs, especially with a weaker yen making imports pricier. It’s crucial to separate overall growth from corporate confidence, as this gap often foreshadows reduced spending or changes in the labor market. Equities and interest rate futures reflect this divergence. Likewise, rising inflation expectations in Australia indicate potential adjustments in short-term rates. If households sense rising prices, it could prompt the central bank to act sooner than anticipated. Fixed income experts might need to realign yield curves to reflect a higher and longer-lasting inflation outlook. This shift could delay any easing of policies and challenge high-risk currencies in the area. In the currency markets, investors are leaning toward safer options. The U.S. dollar has fallen against most G10 currencies, signaling a lack of confidence in its protective role. Gains in the Swiss franc and yen are particularly noteworthy, as these currencies often gain traction during stressful times, not just due to interest rates. Weaker commodity-linked currencies show that the quest for yield is receding. While North American markets did not set the tone, they supported wider trends. The Canadian dollar’s steady performance serves as a reference point for evaluating regional shifts. It seems capital is flowing toward places where stability is seen as more valuable than yield. In the coming sessions, we can expect further reallocations, especially in short-term interest rate products and cross-currency pairs. We are spotting initial movements in volatility futures, signaling expectations of widening spreads. With current implied volatility still below historical norms in some areas, there’s room for change. Patience is reasonable, but it carries risks—strategies must remain adaptable. Be prepared for directional movements that may not align with recent trends, particularly as fund flows seem reactive. What we’re witnessing reflects not only responses to macroeconomic data but also adjustments driven by perceived political and economic risks. This requires careful monitoring of skew pricing and relative costs across various maturities. Create your live VT Markets account and start trading now.

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TD Securities has taken a strategic long position in gold due to rising tensions in the Middle East. In times of potential instability, gold is seen as a safe haven with low risk. The firm has a one-month price target for gold set at $3,650 per ounce. This reflects their strategy to minimize risks in an uncertain geopolitical environment. The recent decision highlights a tactical approach focused on immediate events rather than a long-term evaluation of gold’s value. The one-month timeframe shows confidence in gold’s ability to provide safety as regional tensions rise. This isn’t a long-term view but a brief opportunity to seize gains tied to current events. This clearly indicates that people are becoming more cautious. It’s not because of a general economic downturn but due to sudden shocks that could quickly affect various investments. In these situations, gold often responds first and reliably. Choosing to invest now suggests a short window for safe investments that may not last long. Markets have started to adjust to scenarios that once seemed unlikely. You can see this in not just metals but also rising volatility indexes and the yields that don’t align with inflation-adjusted expectations. This outside pressure reduces the margin for error in investment decisions. From our viewpoint, the best approach is to reevaluate exposure to risks that might be too vulnerable to geopolitical changes. We’ve adjusted our short-term gamma to a neutral position and are now focusing on strategies that provide downside protection without tying up too much capital. Volatility sellers are more active than expected, yet the pricing doesn’t fully account for the risks associated with safe-haven demand. As tensions remained high last week, we noticed that the gold forward curve has flattened a bit. This is significant. Traders seem to be focused on a short time frame rather than the long-term outlook. Today’s pricing reflects the belief that next month will be different from the last. It’s also important to note that stop-loss levels are likely to tighten. This will make leveraged positions react more quickly to headlines. In a market influenced by sentiment, liquidity gaps can widen when large hedging activities occur. We have already seen slippage in the options markets this week, suggesting a staggered execution strategy for new entries or exits is necessary. Once the situation in the region clarifies—whether it improves or worsens—gold’s appeal might fade faster than expected. History shows that safe havens lose value quickly once headlines stabilize. Timing is crucial. For this reason, we’ve decided to manage duration risk outside of precious metals altogether. Ultimately, the takeaway is not that gold is undervalued. Instead, it’s insulated for now. During a week filled with uncertainty, this insulation continues to attract investors who prefer quick returns and are sensitive to rapid changes in news.

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Traders interested in the Australian Dollar should pay attention to an important event today involving the Reserve Bank of Australia. At 5:20 PM Sydney time, David Jacobs, the Head of the Domestic Markets Department, will give a speech.

Australia Bond Market Volatility

Jacobs’ speech will cover “Australia’s Bond Market in a Volatile World.” This talk is part of the Australian Government Fixed Income Forum happening in Tokyo. It is also set to begin at 07:20 GMT and 03:20 US Eastern Time. Jacobs discussing global bond market volatility at an overseas forum is significant. It shows that monetary policymakers are alert to risk factors that can impact domestic funding and, in turn, affect currency values. Bond market behavior, especially during times of stress, can influence derivative pricing, hedging behavior, and overall market sentiment. Jacobs probably won’t provide direct advice on interest rate changes. His role suggests he will take a more operational and descriptive approach, possibly looking at funding patterns, liquidity issues, and market structure. While we may not get direct policy hints, we can gain operational insights into how the Reserve Bank views recent disruptions and the tools it might consider using in response.

Impact On Trading Strategies

In the short term, this speech may impact funding spreads and the yield curve. Traders will likely pay attention to any comments regarding stress indicators, such as bid-ask spreads in short-term government debt or shifts in repo markets. These elements are important because changes can influence rates futures, options expiry, and strategies relying on mean-reversion. Those monitoring implied volatility in AUD pairs already see that recent global rate concerns have widened daily ranges. If Jacobs discusses market function—possibly addressing internal RBA liquidity tools or operations—this could further shape our views on swap spreads and carry costs. While Jacobs is unlikely to change expectations for policy direction, his remarks on the stability of domestic bond markets could lead us to reassess premium estimations in OIS markets. It’s also wise to keep an eye on commentary from Japanese institutional investors since the speech is taking place in Tokyo, putting Australian fixed income on their radar. Traders should consider how updates on issuance profiles or changes to sovereign debt management might alter short-term expectations for AUD demand. Those holding long gamma or short basis risk should think about adjusting their positions around the timing of his remarks. A sharp market move isn’t guaranteed, but market makers often adjust quotes before unpredictable RBA events, especially those discussing liquidity. Monitoring correlations between 10-year ACGBs and currency pairs has been helpful in recent weeks. If this correlation tightens after the speech, it could justify reallocating delta exposure in cross-currency swaps or adjusting duration hedges in regional portfolios. 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.

Please note that the following aspects might be affected during the maintenance:

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3. 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.

The above data is for reference only. Please refer to the MT4 / MT5 / VT App for the specific maintenance completion and marketing opening time.

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Australian consumer inflation expectations rose to 5% in June 2025, up from 4.1% in May, according to the Melbourne Institute Survey. This rise indicates that consumers are more worried about future price increases. During this time, the Australian Dollar (AUD) has been weaker against other major currencies like the Euro (EUR), British Pound (GBP), Japanese Yen (JPY), and Swiss Franc (CHF), which have all gained against the USD. The Canadian Dollar (CAD) has remained stable, while both the AUD and New Zealand Dollar (NZD) show signs of weakness. Reports suggest that the Reserve Bank of Australia (RBA) plans to cut its cash rate multiple times, starting in August 2025. Additional cuts are expected in November 2025 and in February and May 2026. These developments tell a clear story. The significant rise in inflation expectations from 4.1% to 5.0% reflects how households believe prices will change in the coming year. This shift can influence actual pricing and wage demands. We closely monitor such sentiment surveys because if people expect higher prices, they behave differently, making it harder for central banks to control inflation. Increasing inflation expectations put pressure on the Reserve Bank. While the economy might benefit from lower borrowing costs as growth slows and global demand drops, rising inflation expectations complicate this. Lowering rates too quickly when people expect prices to rise could disrupt consumer stability goals. The planned timeline of rate cuts, starting in August and extending into 2026, adds to this challenge. The Australian dollar’s current situation is quite clear. It is struggling while other major currencies gain strength. This broad weakness suggests that rate expectations for Australia are diverging from those of other countries. The gains in the euro, pound, and yen imply their economies might be on a more solid path, potentially maintaining higher rates for longer. Meanwhile, the Canadian Dollar remains stable, indicating neutral conditions in Canada. These trends do not occur in isolation. If inflation persists while rate cuts are anticipated, this could further weaken the currency. This could lead to higher import costs, which may reinforce inflation and circle back to impact central bank decisions. Understanding this relationship is key. Inflation expectations, central bank credibility, guidance, and market prices all influence each other. Stevens’ previous comments about planned cuts later this year and into next year suggest a cautious approach to easing. However, each new piece of inflation data adds complexity to our decisions. From a trading perspective, especially for those managing rate differences or currency volatility, clarity at short-term rates remains uncertain. Changes in expectations may lead to adjustments in short-term rates, especially if upcoming data does not ease inflation concerns. In the Forex (FX) markets, we see this anticipation reflected. The Aussie has dropped, even on days without significant news, and the soft performance of the Kiwi indicates the region may be trading on expectations of looser policy. The central bank’s credibility and clarity in communication will be crucial in guiding short-term market positioning. In summary, near-term moves should be driven by inflation data and any shifts in official communications. Investors looking at interest rate differences or currency strengths should closely monitor changes. A single data release or change in statements could quickly realign expectations.

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The S&P 500 lost ground on Thursday, ending the session at 6,012.55 after briefly touching an intraday peak of 6,074. While initial optimism was sparked by softer-than-expected US inflation figures, that enthusiasm proved short-lived as global risk factors and doubts surrounding the US – China trade truce returned to the fore. The index dipped 0.21% on the day, suggesting some exhaustion after edging close to record highs earlier in the week.

Investor attention was firmly on the latest Consumer Price Index (CPI) release, which indicated that US inflation rose at a slower pace than anticipated in May. Although this eased immediate pressure on the Federal Reserve to adjust interest rates, caution prevailed among traders. Eyes now turn to forthcoming producer price data, which could reignite inflationary concerns, particularly given ongoing cost pressures linked to tariffs. This report will also provide insights into the Fed’s preferred inflation gauge, the Personal Consumption Expenditure Index.

Markets are currently factoring in a 70% likelihood of a quarter-point interest rate cut by September, despite expectations that the Fed will hold steady at its upcoming meeting. Shane Oliver, Chief Economist at AMP Capital, noted that tariffs could either stoke inflation or squeeze corporate margins, reinforcing the rationale for the Fed’s careful approach.

Trade policy developments added another layer of uncertainty. President Trump confirmed that within the next fortnight, the US will begin issuing letters to major trade partners, setting out unilateral tariff terms ahead of new negotiations. Although he hailed the recent US – China deal, which includes relaxed restrictions on rare earth exports and student visas, investors remained sceptical. Many are awaiting more concrete details before committing further.

Technical Analysis

The S&P 500 retreated from its high of 6,074 following a volatile trading session, briefly finding support at 5,997.55 before regaining stability. Despite a promising start, momentum weakened during European hours, with MACD indicators turning negative and red histogram bars signalling a decline in bullish strength.

Moving averages have begun to level out, pointing to a period of consolidation. Although the index is attempting a modest recovery above the 6,000 threshold, upward momentum appears fragile unless prices can regain the 6,030 to 6,050 zone. A drop below 5,995 would increase the risk of a deeper pullback in the near term.

With key inflation data, central bank guidance, and further commentary from Washington on the horizon, volatility is likely to rise. Traders should remain alert for sudden shifts in sentiment as geopolitical uncertainties and market expectations begin to align more closely.

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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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The USD is getting weaker due to reduced trade tensions and expectations of more interest rate cuts from the Fed after a drop in the Consumer Price Index (CPI). This has affected currency values worldwide. The EUR/USD has hit a seven-week high, and other currencies like the yen and Swiss franc are also gaining value. In contrast, the Canadian (CAD), Australian (AUD), and New Zealand (NZD) dollars are lagging behind in growth. This shift indicates a rebalancing in major currency pairs, mainly driven by the outlook of U.S. monetary policy. As inflation data softens, the Federal Reserve faces pressure to lower interest rates further. Lower rates make dollar-denominated assets less attractive, weakening the demand for the USD and boosting currencies that are considered safer or where central banks are not likely to cut rates aggressively. The euro’s recent strength aligns with these trends. Rapid changes in the EUR/USD often reflect shifts in broader markets, especially when influenced by rate differentials rather than local economic surprises. When prices reach multi-week highs, like now, we usually see increased activity from macro funds aiming to profit from medium-term trends. This conviction often increases currency volatility, especially around policy decisions or key economic reports. Traders should pay close attention to euro cross-pairs, especially those with lower liquidity. The strength of the yen is also expected, following its typical response during U.S. rate cuts. A drop in Treasury yields tends to attract funds to currencies like the JPY, which has been undervalued. However, movements in the yen can be swift and unpredictable during periods of dollar weakness, leading to broader intraday price swings. Leveraged accounts often act quickly, pushing local resistance levels upward. Concerns about intervention from domestic authorities also mean that trading the yen should be approached cautiously—avoid placing stops too close to core entry points. Similarly, the Swiss franc has gained due to the same lower-rate advantage as the yen, but it tends to be more stable, leading to gentler price movements. Investors often prefer passive allocations into Swiss franc assets, especially during U.S. easing cycles. This passive flow could grow stronger at month-end or quarter-end as reallocations occur. On the other side, commodity-linked currencies like the CAD, AUD, and NZD are struggling to keep up. They seem held back by worries about global demand. Oil prices are sensitive to geopolitical events, and China’s stimulus efforts have disappointed those expecting a commodity rally. Despite the USD’s overall decline, these currencies can’t take advantage because their own monetary policy outlooks face potential downgrades. Traders should focus on both expected rate changes and short-term volatility. When the dollar weakens primarily due to interest rate expectations and there’s no corresponding growth optimism, correlation between assets can become distorted. Many algorithmic strategies perform poorly unless their input weights are adjusted. To navigate this, we typically adopt a longer-term flow bias and decrease leverage until a range break confirms a short-term trend direction. As disparities between regions grow clearer, trade construction becomes crucial. It’s better to focus on relative policy assumptions than on absolute movements. For short-term entries, timing around upcoming economic reports is key. Inflation reports from Europe and policy minutes from Asia-Pacific banks could lead to significant price swings. Keep hedges flexible and be ready to adjust your trading strategy as volatility rises.

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The People’s Bank of China (PBOC) is expected to set the USD/CNY reference rate at 7.1703, as per Reuters. This will be announced around 0115 GMT. The PBOC manages the daily midpoint for the yuan using a floating exchange rate system. This allows the currency to move within a set range around a central reference rate, currently +/- 2%.

Daily Midpoint Determination

Each morning, the PBOC establishes a midpoint for the yuan against a group of currencies, mainly the US dollar. The decision takes into account market supply and demand, economic indicators, and global currency trends. This midpoint serves as the reference for trading that day. The yuan can fluctuate within a designated range around this midpoint. The +/- 2% trading band allows for slight changes in value during trading. Depending on economic factors and policy goals, the PBOC might adjust this range. If the yuan approaches the limits of the trading band or shows unusual volatility, the PBOC may step in. This could involve buying or selling yuan to stabilize its value, allowing for gradual changes. This system promotes daily price stability while enabling some flexibility in response to global and domestic conditions. When the PBOC sets its daily fixing, it considers not only immediate market conditions but also longer-term policy objectives, balancing internal issues and external pressures like economic challenges and a strong US dollar.

Strategic Implications of the Fix

Recent trends show that the PBOC aims to keep the yuan within a stable range, suggesting a desire for orderly currency movements rather than allowing the market to dictate shifts. The midpoint of 7.1703 indicates a preference for stability amid uncertainty. This strategy appears designed to prevent excessive speculation and ensure that liquidity doesn’t disrupt financial stability. In this context, short-term trades may be more limited. It’s wise to assume range-bound conditions for now in both spot and options markets. Implied volatility is low, and without a significant policy change or new data, breakout strategies may quickly need adjustment. Therefore, keeping a flexible and carefully managed directional bias is essential. Because the fix and intervention policy are methodical, they offer valuable insights. When a central authority consistently nudges values toward a certain range, it suggests more control over market pressures rather than relying on market efficiency. This approach becomes evident when key data—like trade figures or manufacturing surveys—don’t meet expectations, signaling through price action rather than direct announcements that the fix serves a greater purpose. However, volatility might return if unexpected events, such as changes in overseas interest rates or geopolitical tensions, disrupt the current flow. Until then, strategies should lean on the daily fix. Those interested in options should reconsider their timing; there’s little benefit in maintaining optionality in a phase that discourages large intraday price movements without catalysts. Let the fix influence sentiment, rather than responding to second guesses. One advantage of this system is its predictability. Analysts and traders can usually estimate the midpoint accurately, especially without policy-related uncertainties. When the daily fixing aligns with expectations, as anticipated today, it reassures that policy direction remains stable. Short-term trades in yuan pairs may offer limited advantages at this time. However, carry strategies could still be beneficial if carefully structured around expectations. Although significant spot price swings are unlikely, certain structures remain sensitive to changes in interest rates. Factors related to differing inflation rates or future guidance abroad should now inform trading decisions. Ultimately, monitoring the daily midpoint fix is crucial—it defines the parameters for all trading strategies. While some traders may look beyond, the value set at 0115 GMT each day holds the most relevant insights. Create your live VT Markets account and start trading now.

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US officials have learned that Israel might be planning a military operation in Iran. In response, the US has urged Americans to leave the area due to the risk of military actions. The US is also on alert for possible Iranian retaliation against American sites in Iraq if tensions rise. Despite these concerns, diplomat Witkoff intends to go ahead with the sixth round of talks with Iran scheduled for this Sunday. Current events suggest that future developments could significantly influence market expectations, especially in oil. Increasing tensions in the Middle East might affect markets if military action takes place. This article discusses the growing tensions in the Middle East, spotlighting recent intelligence that indicates Israel may be preparing for a military strike on Iran. To address the escalating situation, US officials have recommended that American citizens evacuate the region, citing possible threats of retaliation. There is particular concern that Iran may target US assets, particularly in Iraq, if conflict intensifies. Even with this tense atmosphere, senior diplomat Witkoff plans to proceed with talks involving Tehran. This decision is viewed by some as both meaningful and strategic, showing a commitment to communication despite the worsening situation. It also suggests that diplomatic efforts continue, even when security conditions decline. From our viewpoint, events like these typically put a spotlight on commodity markets, particularly energy. Historically, when military conflicts seem imminent in oil-rich regions, traders adjust their strategies to reflect increased risk in crude oil and future contracts. The concerns involve not just supply disruptions — an obvious worry — but also broader trade complications, shipping insurance costs, and delays in crucial routes like the Strait of Hormuz. Given the intelligence shared publicly and the clear warnings from high-ranking officials, it’s evident that geopolitical instability is increasing. For traders involved in derivatives, this means pricing for volatility could change rapidly and unpredictably, creating both risks and opportunities. Hedging strategies that depend on stable conditions may struggle during potential military conflicts. The options market, often seen as a gauge for uncertainty, is likely to show higher implied volatility in the short term. Patterns from past conflicts indicate that any significant military actions could lead to swift and sharp movements in oil-related contracts. The risks extend beyond just spot prices; the structure of contracts may change considerably depending on the expected length of unrest. Contango structures might flatten or reverse if traders foresee prolonged supply disruptions. We believe this situation requires attention not only to energy exposures but also to broader market connections. Currencies linked to oil, sovereign credit risks, and stocks dependent on energy costs may all experience secondary effects. Currently, liquidity remains stable in most active contracts, but this can shift rapidly as prices adjust to direct military actions. In summary, positioning should be adaptable and responsive. Recent trends in open interest and trading volume suggest that some investors are already making defensive portfolio adjustments. While there is no sign of panic yet, confidence in the broader risk markets appears to be lower than in recent weeks. As we track these developments, it’s clear that the risk from headlines is not a brief concern. This phase is marked by quick political changes that can overshadow slower economic data. Therefore, next week’s events concerning negotiations or government statements will likely have more clout than regular economic indicators. Market reactions associated with diplomacy can often be misleading. What seems like progress one morning might lose relevance by the afternoon. Thus, being responsive and planning for different scenarios is crucial, particularly in leveraged situations. We are observing not only public statements but also market trends that typically respond first: oil futures, credit default swap (CDS) spreads, and regional exchange-traded funds (ETFs). It may be wise to avoid rigid strategies as the weekend unfolds. Financial instruments that allow for quick price adjustments, like weekly options, may become more appealing as traders look to manage their exposure without committing to long-term strategies during an active news cycle. Overall, the next few sessions may require a shift in focus toward relative positioning and understanding where the greatest opportunities lie, especially in energy-linked instruments. Moving forward, carefully interpreting official headlines alongside actual market behaviors may provide the best signals about rising pressures.

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