Insights 
VT 
Top US trade officials to engage with China in London for trade negotiations
Top trade officials from the US and China will meet in London on Monday. The US delegation includes Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Ambassador Jamieson Greer.
This meeting, set for June 9, 2025, aims to discuss the ongoing trade deal. Following the announcement, US stocks have risen sharply.
Nomura predicts that USD/JPY may decrease to 136 due to repatriation and local bond yields.
Nomura forecasts a drop in the USD/JPY exchange rate, expecting it to decline from 144.92 to 136 by the end of September. This prediction is influenced by Japanese investors bringing funds back home and potential pressure from Washington for Tokyo to strengthen the yen.
If the Bank of Japan takes a more aggressive stance, local yields could rise. This might lead domestic investors to prefer local bonds over foreign ones.
MUFG offers a slightly different forecast, estimating that the USD/JPY might reach 138.30. Both reports hint at a possible change in exchange rates due to various economic factors.
Major players in the market are indicating downward pressure on the USD/JPY over the medium term, with targets in the high 130s. Nomura highlights two important reasons for this expected change, both related to how domestic capital behaves and international diplomatic relations.
The first reason involves Japanese investors moving funds. As interest rates between countries start to equalize, the incentive to keep foreign assets decreases. When these funds come back home — usually by selling foreign currencies to buy yen — it creates steady demand for the yen. This process builds momentum over time.
The second reason, which may have a stronger immediate impact, is external pressure. If the dollar-yen rate approaches long-term highs, it could become a political issue. If Washington expresses concerns about a strong dollar, it might create obstacles for this currency pair.
Meanwhile, the Bank of Japan has suggested it might adjust its monetary policy. If domestic yields rise even slightly, Japanese institutions may be more inclined to invest in local bonds. This is particularly relevant for pension funds and insurers that seek yield without currency risk.
MUFG has a less pessimistic estimate, but both forecasts agree that the yen is undervalued due to domestic changes and external factors. The difference lies in timing and the extent of adjustment.
From our viewpoint, the combination of these factors calls for a shift in strategy. With spot levels near 145, there is significant potential for a decline. Implied volatilities are stable, making it a good time to establish short delta positions. Keep an eye on longer-dated JGBs, as they may signal shifts in capital flows.
It’s not just about current spot levels. The forward curve hasn’t fully accounted for the potential adjustments. The gap between current values and institutional forecasts could widen if risk aversion increases or interest in cross-border investments decreases. We should closely monitor spreads between local and foreign bonds. Although cross-currency basis swaps are stabilizing, any widening could indicate larger capital flows.
Options structures can be adjusted to benefit from a weakening dollar against the yen. Risk-reversals currently favor yen strength, supporting this strategy. Premiums are mostly balanced, providing an opportunity for layered entries through the end of Q3.
Overall, the current setup suggests it’s time to rebalance positions that have been too focused on dollar strength this year. Although we aren’t at a point where long yen positions are widely accepted, sharp rebounds often start in these quieter moments. Keep an eye on short-term yield differences and any shifts in policy commentary.
The trend of one-sided trades seems to be diminishing. We will adjust our strategies accordingly.
Amazon pauses corporate hiring budget for retail, impacting more than just warehouses and cloud services
Amazon is pausing its hiring, raising questions about the economy and workforce strategy. Despite increasing wages for over half a million employees by 50 cents to $3 an hour, the company is stopping hiring in its main retail sector. This news comes from internal communications reported by Business Insider.
The hiring pause mainly affects corporate jobs; however, it does not impact warehouse and cloud computing staff. This is important for Amazon’s online marketplace, logistics, and grocery operations.
A Changing Workforce Strategy
Between 2019 and 2021, Amazon’s workforce grew to 1.6 million. However, it dropped to 1.55 million the following year, with more than 27,000 jobs cut since late 2022. This reflects uncertainty in the economy, as hiring has slowed without direct layoffs. Although the wage increases are small, they don’t necessarily show confidence in sustainable growth. Instead, they might be a response to inflation, competition, or industry standards. Amazon’s retail operations are very sensitive to changes in demand, especially with ongoing challenges in consumer spending due to high interest rates and tight credit conditions. The internal communications from Olsavsky and the corporate hiring freeze indicate that the focus is on stability rather than growth in key revenue areas. While jobs in warehouses and cloud computing are safe, this decision shows a strategic shift towards caution.Market Reactions and Strategic Changes
Experts observing market trends interpret management’s cautious approach as a sign to tighten trading limits in the short term. Amazon’s hiring pause, without significant layoffs, suggests they are adjusting rather than facing a crisis. This adjustment might go unnoticed unless confirmed by broader economic indicators like nonfarm payroll and CPI data. In the derivatives market, these strategic signals appear in wage-linked assets showing shifts and compression. Current trades imply expectations of stable responses in high-risk retail and logistics stocks. Structural hedges can be expensive, and sudden changes can affect potential profits before market headlines change. Amazon’s selective hiring pause highlights a focus on executing current operations rather than pursuing long-term growth. The emphasis on wage hikes foregrounds the company’s commitment to operational effectiveness over expansion, prompting strategic adjustments in trading techniques. Reducing exposure to large-cap e-commerce and shifting towards more stable positions can help manage volatility during retail earnings reports and economic commentary cycles. Understanding these workforce decisions can provide valuable insights into expected sector performance. Create your live VT Markets account and start trading now.Oil prices rise by 6.5% this week due to OPEC production changes and trade optimism
Oil prices have jumped unexpectedly, increasing by 6.5% over the past week, surprising many investors. This rise occurs even though the Organisation of the Petroleum Exporting Countries (OPEC) is adding more barrels, with Saudi Arabia planning to increase production by 411,000 barrels per day soon.
There’s a potential inverted head-and-shoulders pattern forming, which could indicate a breakout. A key resistance level is at $65, and market charts suggest a quick rise to $70-71 due to short market positioning.
Time spreads show a surprisingly bullish trend, fueled by trade optimism. Potential trade agreements with lower tariffs may help oil and other risk assets.
Recently, West Texas Intermediate (WTI) crude oil climbed by $1.34 to $64.72, reaching a session high. The sentiment was also influenced by a drop in the Baker Hughes US oil rig count, which decreased by nine, bringing the total to 442. This indicates a rapid decline in active rigs.
This sharp increase in oil prices amid rising OPEC supply, especially from Saudi Arabia, creates an unusual scenario in a market many thought was stabilizing. The current market response indicates a shift in trader sentiment and highlights the impact of anticipation and market positioning on short-term trends.
Looking at the bullish time spreads, traders seem to expect stronger demand or a tightening supply in the near term. This is significant since the increased output isn’t fully present in the market yet. Right now, it’s more about how the futures market reacts to expectations rather than the physical supply of oil.
The potential inverted head-and-shoulders pattern reflects a possible change in trend. With resistance around the $65 point and quick short covering, there’s a chance that prices could rise to $70.71, especially if liquidity and follow-through confirm the breakout. Current positioning in the derivatives market may make it vulnerable to fast upward movements.
The decline in the Baker Hughes rig count adds another dimension. A drop of nine rigs in one week suggests producers might be pulling back on new drilling, whether intentionally or not. When one region increases production while another reduces it, it creates perceived scarcity that traders respond to. This situation influences the overall tone of supply uncertainty, which is crucial in such a tightly wound market where sentiment drives volatility.
Trade policy optimism is also supporting riskier assets. Headlines about potential tariff reductions and agreements have already influenced price expectations before any official announcements. If expectations for simplified trade routes and lower tariffs continue to grow, short-duration contracts are likely to respond first, before any long-term shifts in production or consumption.
Additionally, options activity is leaning towards higher strike prices, indicating that larger holders are hedging against rapid price increases rather than preparing for a downturn. This shift suggests that the balance of fear is changing, although it may be temporary.
In markets like this, where price movements occur faster than fundamentals can adjust, taking action often outweighs waiting for clarity. Speed can be rewarding, while hesitation can lead to risks. Although it’s uncertain whether these price levels will hold, the current momentum is significant and shouldn’t be overlooked.
Patrick Harker, retiring Philly Fed president, discusses potential Fed cuts due to economic uncertainties and data issues
Patrick Harker, the President of the Philadelphia Federal Reserve, is retiring at the end of the month. He mentioned that the Federal Reserve might lower interest rates later this year.
However, predicting future monetary policy is complicated by uncertainties, especially concerning the declining quality of economic data.
Challenges in Decision Making
Harker pointed out that making decisions has become harder due to a lack of reliable data. His successor will take over next year and will have voting rights. Harker’s remarks highlight the difficulty of establishing clear short-term monetary policy. The Federal Reserve depends on accurate data to gauge inflation, employment, and overall economic activity. However, he noted that the tools used to track these trends are starting to show problems. Data revisions are now more frequent, survey results are less reliable, and traditional indicators no longer provide the same certainty. When a leader like Harker talks about declining data quality, it suggests a need for caution rather than a clear direction. If the data isn’t trustworthy, decision-makers may hesitate or delay actions. As a result, they might wait longer or seek more evidence before changing interest rates, even if conditions seem to warrant action. This uncertainty affects views on rate adjustments for the rest of the year. Usually, the likelihood of lowering rates increases when inflation appears to be falling convincingly, or when growth is slowing consistently. But if the data is incomplete or inconsistent, it becomes harder to feel confident about such decisions. Consequently, there may be fewer rate cuts than anticipated, or they could happen later than the current market forecasts expect.Effects on Market Dynamics
This situation also changes who we focus on. With Harker retiring, attention will not only be on his successor but also on how the broader voting committee analyzes low-quality data. Caution will prevail, and it will take more convincing evidence to change the current interest rate path. For those of us watching derivative markets, the main takeaway is that uncertainty could lead to unpredictable outcomes. We might see more frequent mispricing in the timing and pace of policy changes, creating opportunities for strategic positioning, especially around meetings and significant data releases. The environment is not static. Every Federal Reserve speaker, inflation report, and wage data will carry more weight when confidence in the long-term outlook is shaky. Traders should keep an eye on this dynamic rather than just focusing on individual headlines. Yields may rise before falling back if markets become overly optimistic without strong data to back it up. We’ve seen situations where a weak jobs report raises expectations, only for a subsequent revision to disrupt the entire outlook. In this climate, shorter-term instruments may offer more stable pricing and less risk of sudden swings. Volatility may not increase continuously but will likely remain higher than before. We should recognize this rather than ignore it. A calm attitude toward implied rates often fades when actual events exceed expectations, and currently, there are more variables at play, causing implied rates to fluctuate for good reason. This period is marked by uncertainty rather than clarity. Rather than focusing on specific comments or scheduling notes, that uncertainty should be the primary concern for those involved in derivative positioning. Create your live VT Markets account and start trading now.Two opposing views on the future highlight potential benefits for stocks and commodities amid economic changes
There are two main views on how AI will affect government debt and deficits.
One view believes that AI will greatly improve productivity and efficiency, making government debt less of an issue. This optimistic outlook is based on past advancements in technology, which have often led to economic growth.
The other perspective is more cautious, asserting that fiscal limits are being ignored. Some even suggest removing the debt ceiling and allowing high deficits related to GDP. This viewpoint raises concerns about how an aging population and increased welfare commitments may challenge fiscal stability. The shift away from gold-backed currencies could also lead to a weakening of fiat currencies.
Despite these differing perspectives, both sides agree on one thing: investing in stocks is a smart move. Stocks can provide protection against inflation because well-managed companies can adjust their prices in changing economies. Also, an increase in productivity driven by AI might boost demand for commodities, especially industrial metals. If currency value drops, tangible assets like commodities may hold their worth better.
The earlier paragraphs outlined two contrasting views on the fiscal future with AI. The first argues that productivity gains from AI will offset worries about rising public debt. Historically, major technological advancements have improved output while lowering costs. The belief is that greater productivity will lead to increased tax revenues, easing the burden of deficits over time.
The second view is more cautious, suggesting that fiscal policy has crossed into uncharted territory. With fewer restrictions on government spending and a relaxed approach to high deficits, there is a risk of worsening financial imbalances. Factors like an aging population and growing welfare costs only add to the worries. Moving away from commodity-backed currencies, particularly gold, removes a natural limit on debt and could eventually erode the value of fiat currencies.
Both views point to stocks and commodities as protective investments, albeit for different reasons. On one hand, it’s about growth and profit potential in an AI-boosted economy. On the other, it’s about safeguarding against losing purchasing power.
Given this context, investors should consider two main factors in the near term. First, policy discussions are evolving rapidly, even in traditionally conservative economies. This shift could result in either higher deficits or significant budget cuts. Consequently, it’s important to monitor government announcements, especially those related to employment, healthcare spending, and key industries like energy and semiconductors. Traders should pay attention to the financing methods proposed—such as longer-term bonds, inflation-linked securities, or reliance on central banks.
Second, there’s a growing link between AI advancements and industrial supplies—not because machines need raw materials, but because the tech infrastructure requires substantial manufacturing outputs. The demand for hardware is closely tied to software needs, affecting commodities like copper, nickel, and aluminum. If technology rollout accelerates, as indicated by recent cloud infrastructure developments, supply chains could face growing pressures. Traders should evaluate current commodity prices against historical inventory levels beyond just inflation metrics.
As government bonds become less appealing for long-term investors, alternative assets—such as company shares or certain raw materials—might gain value. This isn’t due to market hype, but rather because these assets are expected to maintain worth when cash and bonds might lose value. The strategy here isn’t speculative but adaptive. We’ve seen this happen before when monetary policies were lax, leading investors to tangible assets that resist price drops.
In stocks, focusing on forward margins and consistent pricing is more informative than just looking at revenue growth forecasts. Companies with solid pricing strategies—like subscription models or unique intellectual property—are better equipped to handle rising costs or wage pressures. In times of unpredictable inflation, these businesses can adapt faster than those relying solely on volume production.
In derivatives markets, there’s already a shift away from low-volatility conditions. The expectation for stable rates or consistent inflation is dwindling. Volatility for longer-term equity options is increasing, suggesting uncertainty about stock price direction and the reliability of valuation methods. This situation requires more complex hedging strategies, with traders potentially adjusting exposure on both ends, rather than sticking to one position.
Finally, the risk associated with bond durations needs reassessment. If policies remain relaxed and AI aids economic growth while disrupting jobs, bond markets may experience fluctuating sentiments. We could observe shifts between worries about deflation due to automation and inflationary shocks resulting from fiscal spending or global commodity issues. This situation calls for closer management of hedging strategies across different bond maturities.
Timing is crucial, but it’s not just about making strict choices. It’s important to notice how quickly things are changing—not just in economic indicators, but in the foundational aspects of productivity. The best strategy might not be the one most aligned with AI benefits but rather one that can adapt to the challenges that arise. By looking at correlation trends and volatility, we can create more nuanced strategies. Both optimism and caution are necessary, but they must be used together.
European stocks show modest gains this week with steady increases across major indices and markets.
European stock markets moved steadily during the last trading day. The STOXX 600 rose by 0.3%, while Germany’s DAX slipped by 0.1%. France’s CAC and the UK’s FTSE 100 both increased by 0.1%. Spain’s IBEX climbed by 0.25%, and Italy’s FTSE MIB gained 0.5%.
Throughout the week, European markets showed positive trends. The STOXX 600 went up by 0.9%, and Germany’s DAX rose by 1.2%. France’s CAC and the UK’s FTSE 100 each saw growth of 0.7%. Spain’s IBEX gained 0.6%, while Italy’s FTSE MIB increased by 1.2%. Overall, European markets consistently progressed.
Weekly Movements In European Indices
This week’s movements in major European indices demonstrate steady, albeit modest, gains. This pattern doesn’t indicate a drastic change in investor sentiment yet. The small increase in the STOXX 600, along with similar rises in France and the UK, suggests traders are cautiously willing to take on risk. However, Germany’s slight decline despite its stronger weekly performance indicates that short-term sentiment remains sensitive and possibly affected by specific sector pressures rather than broader changes. Spain and Italy outperformed their peers. Their percentage gains, while not dramatic, show solid buying interest, especially in sectors that benefit from a weaker euro, better inflation data, or expectations of interest rate changes. Italy, for instance, attracts interest for its domestically-focused equities that respond well to lower yields, and midcaps have also contributed to this growth. Anyone involved in derivatives should view these movements in the context of recent volatility trends. It’s important to pay attention to how implied volatility has responded—or hasn’t—during this steady rise. A slow buildup in gamma exposure signifies more active hedging, particularly evident in option chains for key European benchmarks leading into Friday’s close.Focus On Option And Futures Market
These market moves might seem like background noise ahead of new economic data, but recent flows into weekly and monthly calls indicate otherwise. There’s a noticeable trend toward upside options, likely as a hedge against missing further gains or managing exposure in other markets. We’ve noticed a compression in skew in the pricing of short-dated futures and options, especially in the DAX and STOXX 600. This indicates buyers are taking a less defensive approach. Even while the DAX closed slightly down, positioning doesn’t seem focused on anticipating a sharp downturn. Instead, buyers appear to be cautiously accumulating rather than reacting strictly to macroeconomic sentiment, which remains uncertain concerning rates and inflation. Tracking the ratio between put and call volumes offers insight as well. This past week, the ratio has gradually approached parity in most indices, with some countries showing more aggressive call activity. This indicates growing confidence in positive market movement rather than positioning for protection. In the coming days, we’ll be watching the open interest in May and early June expiries closely. There’s been a buildup at levels just above current prices, which could indicate a cap or a pin attempt by larger market players. If this pin fails, expect some aggressive trading. To set expectations and construct trades better, it’s important to view this upward movement not as a sign of peak sentiment but as a potential area where short gamma could create fast movements. This may affect poorly positioned portfolios, especially those with downside hedges placed too early. Stay vigilant about range levels and pricing zones. These are crucial, especially in lower-volatility conditions. Keep an eye on weekly skew changes and volume trends; reactions may slow down, but adjustments are becoming sharper. Create your live VT Markets account and start trading now.The Nasdaq mascot may advise against shorting, indicating that bulls are currently dominating market trends.
If the Nasdaq were a mascot, it would symbolize the market’s strength right now. Many believe it’s not the right time to sell short, as market conditions favor buyers.
When investing in Nasdaq or similar stocks, it’s important not to depend entirely on outside opinions. Do your own research, as every financial decision carries personal risk.
ForexLive is changing its name to investingLive.com later this summer, with updates about this coming soon.
The first paragraph clearly shows that confidence is returning to tech-heavy stocks, with the Nasdaq reflecting this overall momentum. It suggests that the current rise in prices might have more room to grow. While short sellers might be tempted to call a peak, the article hints that it might be too early to do so—upward pressure is still strong, and bearish positions seem unsupported.
The second paragraph reminds us that market sentiment shouldn’t replace personal diligence. Many people rely too much on what others say or popular opinions, without checking these against data or their own analysis. This approach often leads to trouble. Risk is personal, and we cannot delegate our responsibility, even during a bullish phase.
The third paragraph, though more administrative, indicates a broader change in content strategy. The ForexLive team, soon to be investingLive.com, is likely planning to offer more comprehensive coverage—not just on currencies but on various investment opportunities. This suggests a refined approach that will be useful for people managing intricate positions or leveraged products.
So, how do we make sense of all this?
First, the strength in tech stocks is steady, not frantic, suggesting there’s no excessive excitement. This type of stable environment allows trend-following strategies to develop over time. For us, this means it’s smart to hold long positions in tech as long as momentum metrics remain strong and surprises in the macroeconomic landscape stay minimal.
However, timing is crucial. The rally is broadening but is also causing lower implied volatility for shorter durations. We’ve seen that option pricing on the Nasdaq-100 has quietly dropped, which might indicate that dealers are positioned short on gamma. In this situation, any sharp daily movement could amplify intraday fluctuations. We should monitor this closely, especially in the next two weeks when liquidity is low due to upcoming economic reports.
Risk protection is still important, particularly as directional positions in short-dated derivatives have become very strong. Traders using weekly options, especially in event-driven situations, should prepare for the potential of a quick market reversal. Some traders have already started using put spreads as a hedge, positioning themselves outside of standard expiration timelines to avoid being caught in crowding.
We should also remember that strong broad indices can lower realized volatility. This might make it challenging for short-term directional bets to be successful. Those using momentum strategies might consider lengthening their lookback periods to avoid being misled by daily fluctuations.
Finally, keep an eye on divergences in breadth indicators. While major indices remain robust, overall participation has begun to thin over the past five sessions. This doesn’t necessarily indicate a reversal, but we should think about reducing exposure if we don’t see confirmation of new highs.
Adjust hedging strategies, review liquidity, and avoid crowding near weekly strikes. Overall, the next two weeks seem better suited for disciplined trend following instead of contrary positions.
Bank of America expects the euro to appreciate against the USD, CHF, and JPY due to favorable factors
Bank of America is optimistic about the euro’s future, particularly against the USD, CHF, and JPY. This positive outlook stems from geopolitical events and fiscal policies in Europe. Although conventional measures suggest the euro is overvalued, strong structural demand and unique risks related to the USD may support the euro, especially with upcoming NATO and EU summits.
BofA believes the euro has an edge over the USD, CHF, and JPY but remains careful around GBP and Scandinavian currencies. The euro’s perceived overvaluation could signal robust demand, along with specific interest rate and risk sentiment ties. US tariffs might weaken the USD since the Fed’s options are limited, while the ECB has more tools to stimulate growth.
The euro may benefit from potential fiscal stimulus and structural reforms, particularly with increased infrastructure spending in Germany. The euro’s future will depend on announcements made during upcoming summits, which could strengthen EU unity and fiscal policy credibility. Key events to watch include:
– NATO defense ministers’ meeting on June 5
– Full NATO summit on June 24-25
– EU leaders’ summit on June 26-27
Bank of America expects that geopolitical factors and USD risks might push the euro higher, especially after the summits depending on new defense and fiscal policies.
BofA believes the euro could strengthen over the next few months. This isn’t just about currency comparisons but also about favorable structural factors. They recognize that traditional valuation models may suggest the euro is expensive, but they still remain positive due to unique demand sources and geopolitical support that may not yet be reflected in the market.
The idea here is that although the euro may seem overbought based on historical standards, it is strengthened by more significant flows that aren’t likely to diminish with short-term price shifts. These effects tend to grow when there’s clearer policy direction and support for European unity. The euro’s strength against the dollar, yen, and franc comes from both European actions and constraints in the U.S. For example, potential U.S. trade policies, such as tariffs, may not lead to strong monetary responses, given the Federal Reserve’s limited options. In contrast, policymakers in Frankfurt seem ready to take action if needed.
Structural reforms, especially combined with targeted spending in Germany, can show markets that political unity translates into practical support. Such measures often increase foreign interest in euro-denominated assets, particularly from institutional investors who have historically underweighted them.
With three significant political meetings coming up within weeks, all eyes are on potential announcements that could shape long-term investment views. The June defense ministers’ meeting and the NATO summit later could reveal agreements on spending and policies, boosting sentiment around European cooperation—even beyond defense.
For those watching derivatives, recent movements and volatility structures indicate the market is preparing for upward movement, though with some caution. This doesn’t mean chasing higher prices, but rather using volatility around summit dates as indicators for potential breakouts or reversals. Generally, lower volatility before significant events can speed up movements once clarity is achieved.
Analysts imply that the euro’s strength might be less about current data and more about anticipating changes in risk premiums across key G10 currencies. Upcoming political events should be seen as catalysts for long-term shifts in risk preferences, not just as headline risks.
Traders should particularly monitor changes in interest rates, especially if U.S. trade policies come under closer scrutiny. Any hesitation from the Fed—especially in light of new taxes or slowing consumer spending—could make even small EU policy actions seem impactful. A significant rise in German bund yields compared to U.S. Treasury yields may create opportunities for bets favoring the euro.
We are entering a time where it’s crucial to pay attention to volatility trends influenced by headlines rather than solely relying on past data. The cost of options, especially surrounding these political dates, may not fully capture the potential size of expected movements. This insight presents a trading opportunity.
As you prepare for the coming weeks, consider that movements may be driven more by policy unity than by unexpected data releases. These meetings signal political priorities that can lead to announcements, quickly changing sentiment across asset classes. Review option structures, calendar spreads, and positioning related to EU unity with this perspective in mind.
S&P 500 hits highest level since February, surpassing 6000 and signaling strong investor sentiment.
The S&P 500 has surpassed 6000 for the first time since February. While there are some economic concerns, the market shows a willingness to buy during dips, driven by hopes for positive trade deals.
Recent data suggests that a Fed rate cut is unlikely in the near future. However, this hasn’t hurt the stock markets. The index has surged past May highs and is now targeting the February high of 6147.
