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Gold, yen, euro, and franc rise as Trump’s actions further weaken the US dollar
The US dollar has fallen after Trump’s choice to remove Fed Governor Cook. This change has reduced the dollar’s value, which benefits gold, the euro, the yen, and the Swiss franc.
In other updates, Trump is advocating for a 15-20% minimum tariff on all goods from the EU. He is also threatening tariffs against countries that impose digital taxes.
Trump’s attempt to dismiss Fed Governor Cook has hurt the USD and increased gold prices.
The US dollar has dropped after news that Trump plans to remove Federal Reserve Governor Cook. Cook has been under pressure to resign for over a week, and tensions are escalating.
This fall in the dollar is connected to the increased chance of a rate cut by the Federal Open Market Committee in September. There is also concern that the US may move towards a non-independent monetary policy, similar to Turkey’s recent situation.
Economic Parallels With Turkey
Turkey’s leader, Erdogan, influenced its central bank, leading to a sharp decline in the Turkish Lira. While the US economy may handle changes better, the outlook for the US dollar is still not good. As a result, gold prices have risen. The news regarding Governor Cook has caused a big shock, driving the US dollar down sharply. Today, the Dollar Index (DXY) fell below the key level of 104, marking a new wave of negative sentiment. In the coming weeks, buying put options on USD-tracking ETFs or shorting dollar futures could be effective strategies. This political pressure has changed expectations for the FOMC meeting in September. The CME FedWatch Tool indicates an 85% chance of a 25-basis-point rate cut, a huge jump from the 40% chance just a week ago. Traders should expect increased sensitivity to headlines coming out of Washington.Market Response To Political Tensions
In response, gold has risen sharply, serving as a safe haven amid political instability with the dollar. It easily surpassed the significant $2,500 an ounce mark, a level it struggled with during the inflation spike in 2024. We suggest looking at call options on gold futures (GC) or gold miner ETFs (GDX) to capitalize on this trend. A crucial takeaway for derivative markets is the surge in implied volatility for all dollar-related currency pairs. The Cboe EuroCurrency Volatility Index (EVZ) jumped 15% today, suggesting that options markets are preparing for larger price movements than expected. This makes strategies like long straddles on pairs like EUR/USD or USD/JPY appealing for traders betting on ongoing uncertainty. We’ve seen this scenario before, but in a different market context. When Turkish President Erdogan began asserting control over his central bank before the early 2020s, it triggered a multi-year crisis for the Turkish Lira. While the US dollar is more stable, the move against the Federal Reserve’s independence introduces a new risk that won’t disappear quickly. Create your live VT Markets account and start trading now.Trump targets Fed Governor Cook for replacement, leading to a weaker US dollar and rising gold prices
Trump has announced the removal of Fed Governor Lisa Cook, which has quickly impacted financial markets. This decision has caused the US dollar to drop sharply against other currencies.
In response, gold prices are rising. Trump is trying to push the Federal Reserve to lower interest rates and plans to nominate someone who aligns with his policies if Cook is removed. He shared this news on his social media platform, along with an image of the dismissal letter.
Increased Market Volatility
We are now seeing higher market volatility. Institutional norms are breaking down, leading to larger price swings. The VIX index, which was around 14 last week, could rise into the 20s. Traders should consider strategies like long straddles on the SPX, which benefit from significant moves in either direction, as political news will likely drive market trends. The US dollar is likely to remain weak for the near future. A central bank’s credibility is crucial for its currency’s value, and this is currently under threat. It may be wise to buy call options on major currency pairs against the dollar, like EUR/USD and USD/JPY puts, as reserve managers might reconsider their dollar holdings. Interest rate markets no longer reflect economic data accurately. Even with July 2025’s inflation showing a steady 3.4% core CPI, the market is pricing in aggressive rate cuts because the Fed’s decision-making is compromised. Traders can use SOFR futures or options to bet on a more dovish stance for interest rates through 2026, regardless of upcoming employment or inflation reports.Gold’s Response to Market Chaos
Gold is clearly benefiting from this turmoil. The increase in gold prices is a direct reaction to the falling dollar and the growing risk of inflation if the Fed keeps interest rates low. This situation is similar to the 1970s, when political pressure on the Fed led to a significant rise in precious metal prices. Buying call options on gold futures is a direct way to capitalize on this trend. In the stock market, this new environment poses risks. Generally, lower interest rates are good for stocks, but political and institutional uncertainty is a significant concern. There may be a flight to quality, so hedging is essential. Purchasing protective put options on major indices like the Nasdaq 100 can help guard against a sudden loss of confidence in US markets. We have seen similar situations in other countries, serving as a warning. For instance, the Turkish Lira’s long-term decline got worse each time there was political change in the central bank’s leadership. The market will now keep an eye on whether this is just a one-time event or the start of a trend that could change the perception of risk in US assets. Create your live VT Markets account and start trading now.Japanese services PPI rises 2.9% annually, below the expected 3.2% increase
The Japanese Services Producer Price Index (PPI) rose 2.9% year-on-year in August, but this was below the expected 3.2%. This decline from the previous 3.2% suggests a possible decrease in inflation pressure.
In other news, the US has finalized a major $50 billion deal with Boeing and GE Aerospace for Korean Air. Also, shop prices in the UK have risen sharply since March 2024, leading to inflation worries for the Bank of England.
Global Economic Challenges
The global economy is facing difficulties due to a new US tariff rule that has disrupted postal services around the world. Additionally, Orsted’s shares have fallen to record lows after the delay of the Revolution Wind farm, raising concerns about policy risks. Bitcoin and Ethereum have dropped by 5-8% due to $900 million in liquidations and general economic fears. Wyoming has introduced the FRNT stablecoin, which is backed by Treasuries, aiming for safety and reduced fraud risk. Wage increases from changing jobs have also dropped significantly, from 20% to just 7%, amid economic uncertainty, especially as Gen Z faces rising unemployment rates. Fed’s Williams has noted that the low R-Star era persists, with global trends suggesting interest rates around 0.5%. The lower-than-expected Japanese services inflation of 2.9% compared to the anticipated 3.2% indicates that the Bank of Japan may not feel the need to tighten monetary policy soon. Strategies that take advantage of a weaker yen, like purchasing USD/JPY call options, could be beneficial. This perspective is becoming more popular, as recent data from the Japan Foreign Exchange Trade Association for July 2025 shows a significant increase in speculative short positions on the yen.New Tariff Threats
New tariff threats against the EU are putting pressure on the euro, causing a drop in the EUR/USD exchange rate. Buying put options on EUR/USD might be a smart way to prepare for further declines as trade tensions rise. We saw similar volatility during the trade disputes of 2018 and 2019, which often led to sharp market moves. In the US, signals of a cooling labor market—evident from job-hopping wage increases falling to 7%—provide the Federal Reserve more incentives to ease their policies. This aligns with UBS’s prediction of a possible rate cut as soon as September, as well as Fed member Williams’ long-term dovish outlook. The CME FedWatch Tool now shows a 68% chance of a rate cut next month, up from 45% at the beginning of August 2025, making S&P 500 call spreads an appealing strategy for potential growth. However, political risks cannot be overlooked, as shown by the steep drop in Orsted shares after a project was halted. This indicates that sectors like renewable energy and those impacted by trade policy may face sudden shocks. Buying VIX call options or futures could serve as a cost-effective shield against broader market instability as we approach the election cycle. The drastic sell-off in Bitcoin and Ethereum indicates a clear risk-off signal, suggesting that speculation is being pulled back from riskier investments. This often foreshadows caution in equity markets, much like the trend seen in late 2021 before the tech sector’s downturn. This movement toward safety strengthens the dollar and calls for caution in high-risk assets. Diverging inflation trends also offer opportunities: UK shop prices are rising while inflation pressures in Japan are lessening. This may keep the Bank of England on a hawkish trajectory, contrasting with a potentially more dovish Fed and BoJ. We may consider pairing a short position in FTSE 100 futures with a long S&P 500 position to capitalize on this policy difference. Create your live VT Markets account and start trading now.Boeing, GE Aerospace, and Korean Air establish a $50 billion agreement
The United States and South Korea are having discussions that could affect global relations. However, the details of these talks remain confidential.
In the stock market, trading ended with only slight changes in stock prices. This stability indicates that traders are being cautious due to global economic conditions.
Market Volatility
The market has not reacted much to the US-South Korea talks, resulting in a decrease in implied volatility. Currently, the VIX is just below 15, suggesting a calm environment that often doesn’t last when geopolitical details are unfolding. This implies that options pricing might be underestimating the chances of a significant market shift once more information is available. This situation presents a chance to focus on specific sectors that could be affected by the news. The semiconductor sector stands out because the SOX index has risen over 22% in 2025, mainly due to positive trade expectations. Any unexpected regulatory news from this agreement could lead to significant profit-taking, making long-dated protective puts or put spreads on key semiconductors seem like good investments at this time. We should also keep an eye on the automotive sector. South Korean brands captured nearly 12% of the U.S. electric vehicle market in 2024. Changes to tariffs or battery sourcing rules could directly affect companies like Hyundai and their U.S. rivals. We are particularly interested in unusual options activity among automakers, as it might indicate where big investors are placing their bets for the upcoming months.Currency Market Dynamics
In addition to stocks, we’re watching the currency market. The Korean won remains steady against the dollar, staying around 1,380. The quiet stock market has kept currency option volatility low, presenting a potential opportunity for a breakout. This situation reminds us of the time after the initial CHIPS Act announcements in 2022, when the market took weeks to understand the long-term effects. For those who have existing long positions in tech or industrial sectors, this is a great time to think about hedging strategies. Selling covered calls against your stock holdings can help generate income while the market remains stable. This strategy allows you to collect premiums as you wait for more clarity on the details of the agreement. Create your live VT Markets account and start trading now.John Williams discusses low interest rates and long-term trends without commenting on policy outlook
Federal Reserve New York Fed President John Williams noted that low neutral interest rates (R-star) are still around due to long-term trends in demographics and productivity. During a speech in Mexico City, Williams stated that growth-adjusted R-star estimates are about 0.5% for the U.S., euro area, U.K., and Canada, aligning with pre-pandemic numbers.
He explained that figuring out R-star is complicated, especially with factors like inflation caused by the pandemic and rising rates worldwide. Williams stressed that structural trends indicate rates will likely stay low. He advised policymakers to be cautious about relying too heavily on exact R-star estimates due to the uncertainties involved. He did not comment on the current situation regarding monetary policy.
The Low Neutral Rate of Interest
The idea that the neutral interest rate remains low, near 0.5%, implies that today’s high-rate environment is not permanent, but rather a temporary reaction to recent inflation shocks. This challenges the market’s view that we are entering a period of higher rates. For traders, this means that when rates eventually go down, the drop could be larger than anticipated. Recent data supports this view, showing a slowing economy. For example, the second-quarter GDP for 2025 was revised down to just 1.2% annualized growth. Although July’s core CPI report indicated that inflation is still stubborn at 2.8%, the slowing economy suggests that policies are already quite restrictive. As a result, we can expect the Federal Reserve to be less willing to keep rates at current levels for much longer. In the coming weeks, this outlook favors trades that anticipate a steeper yield curve, indicating that long-term rates will likely drop faster than short-term rates when easing begins. Reflecting on the deep inversions seen in 2023 and 2024, this would signal a return to a more standard monetary policy. Therefore, positioning in SOFR futures to benefit from potential rate cuts in mid-2026 seems increasingly appealing.For Options Traders
For options traders, this viewpoint suggests that longer-dated call options on Treasury bond futures are currently underpriced. The market might not fully recognize the chance for a quick shift back to a low-rate environment once inflation is under control. Investing in upside exposure to bond prices—which rise as yields fall—could be a valuable opportunity. Create your live VT Markets account and start trading now.UK shop prices rise at fastest rate since March 2024, raising inflation concerns for the BoE
In August, shop prices in the UK rose the most in 17 months, primarily due to higher food costs. The British Retail Consortium reported a 0.9% increase overall, with food prices soaring by 4.2%. This is the biggest jump since February 2024. Key items like butter, eggs, and chocolate became more expensive because of strong demand, higher labor costs, and poor harvests.
The Bank of England is worried that rising food prices might lead to increased inflation expectations, which could push up wage demands. In July, the UK’s Consumer Price Index hit 3.8%, its highest in 18 months. It is expected to rise to 4% in September before it possibly falls again.
UK BRC Shop Price Index
In August 2025, the latest UK BRC Shop Price Index showed a 0.9% Year-over-Year increase. This was slightly below the expected 1.0%, but higher than the previous month’s 0.7% rise. The new shop price data indicates that inflation is lasting longer than many predicted, especially with food prices driving the increase. This puts pressure on the Bank of England to keep a strict approach to control inflation expectations. We think the market may not be fully considering another interest rate hike by the end of the year, a possibility that seemed unlikely just a month ago. Interest rate derivative markets will likely feel the most immediate effects from this news. SONIA futures for the coming months are expected to see increased selling pressure as traders adjust for a higher terminal rate. A similar situation occurred in late 2022 when persistent inflation made markets rethink the Bank of England’s strategy, leading to substantial changes in the short-term yield curve.Investment Strategy Outlook
This situation could continue to support the British pound, especially against currencies from central banks with softer policies. Recent US data indicates a slight cooling in their labor market, giving the Federal Reserve more flexibility to pause, which boosts the case for GBP/USD growth. We believe it’s a good idea to buy call options on Sterling to take advantage of this potential difference in central bank policies over the next month or two. However, the outlook for UK equities may be tougher, as ongoing higher interest rates could negatively affect company valuations. We expect more volatility in the domestically-focused FTSE 250 index, which feels more impact from UK consumer health and borrowing costs compared to the globally-focused FTSE 100. Derivative traders might consider buying put options on UK mid-cap indices as protection against a possible economic slowdown. Create your live VT Markets account and start trading now.UBS says Fed rate cuts will improve equity market outlook over time.
UBS believes that Federal Reserve Chair Powell will support interest rate cuts at the September FOMC meeting, unless strong job data or unexpected inflation appears. The bank predicts four quarter-point cuts by January 2026, starting this September.
UBS expects U.S. interest rates to fall, while European rates remain very low. They anticipate that global stocks will rise over the next 6–12 months due to Fed easing and strong growth in corporate spending.
Interest Rate Cuts
We think Fed Chair Powell will push for a rate cut at the September FOMC meeting. The recent July 2025 inflation report shows the Consumer Price Index fell to 2.8%, moving closer to the Fed’s target. This, along with a small increase in unemployment to 4.1% last month, supports the case for starting an easing cycle. In light of this, traders in interest rates should consider betting on lower rates. One approach is to buy futures contracts related to Fed Funds or SOFR rates for December 2025 and March 2026. This reflects the expectation that the market hasn’t fully accounted for the four rate cuts we foresee by early 2026. For stock markets, the combination of anticipated Fed easing and strong corporate spending should spark a rally in the next six months. We recommend buying out-of-the-money call options on the S&P 500 and Nasdaq-100 indices, set to expire in late 2025. This strategy allows for potential profits as borrowing costs decline.Market Volatility and Dollar Weakness
In the weeks leading up to the September meeting, we expect increased market volatility as traders prepare for the announcement. A look back at the start of the 2019 easing cycle shows similar spikes in volatility before the first cut. Traders might consider buying VIX futures or options to capitalize on this expected uncertainty. This policy change is likely to weaken the U.S. dollar, especially since European central bank rates are expected to stay low. We see an opportunity to short the dollar against major currencies. Taking a long position in EUR/USD futures could be an effective way to trade on the narrowing interest rate gap between the U.S. and Europe. Create your live VT Markets account and start trading now.International postal services are halting U.S. shipments, affecting global e-commerce and cross-border deliveries.
The end of the U.S. de minimis exemption is shaking up global parcel trade and raising costs for online retailers. This increase in prices will be monitored closely.
Postal services from Europe and Asia are stopping or slowing shipments to the U.S. The de minimis tariff exemption, which let goods valued at $800 or less enter the country duty-free, has ended. This change, which started on August 29, also affected previous exemptions for Chinese parcels. Over 16 European postal services, like Royal Mail and Deutsche Post, along with Asian carriers such as Japan Post, have delayed or limited deliveries due to unclear U.S. Customs guidelines and a lack of time to comply.
Impact On Parcel Disruptions
This situation threatens the flow of millions of small packages, including gifts and e-commerce orders. Last year, 1.3 billion packages entered the U.S. under the de minimis rule, with about 60% coming from China. Discount retailers like Shein and Temu are facing huge cost increases since their operations relied on these exemptions. With the end of the U.S. de minimis rule on August 29, 2025, we expect significant market volatility. The sudden halt in shipments from at least 16 European postal services and several major Asian carriers brings immediate uncertainty. It may be wise to consider protective measures, such as buying call options on the VIX, as the market reacts to this logistical disruption. There is a clear opportunity for a pairs trade between e-commerce and traditional retail. Companies like Shein and Temu, which relied on the tariff exemption, will experience sudden cost hikes and shipping problems. We should explore bearish positions on these online retailers while looking at bullish positions on U.S. companies that will gain from reduced foreign competition.Market Impact And Strategy
The logistics sector is now divided into winners and losers. We expect carriers like FedEx and UPS, which have strong customs brokerage systems, to gain market share from suspended national postal services. The market reflects this expectation, with FDX shares rising nearly 1% in pre-market trading, indicating that they will manage the rerouted volume. This disruption will contribute to inflation since the cost of importing goods into the U.S. is about to rise. Last year’s figures show that over 1.3 billion packages fell under the de minimis rule, highlighting the scale of this change. We are looking back at supply chain issues from 2021 and 2022 as a reference for how this could impact consumer spending. Historically, the 2018-2019 tariff increases showed that initial market reactions can be intense before supply chains adapt. With U.S. Customs yet to provide clear guidance, disruptions in global shipping could last for weeks instead of days. We will closely monitor shipping manifests and U.S. import data for signs of recovery or further decline. Create your live VT Markets account and start trading now.Walgreens Boots Alliance is replaced by Interactive Brokers in the S&P 500 index, showing progress.
Interactive Brokers will replace Walgreens Boots Alliance in the S&P 500. This is a significant change for Interactive Brokers, as it increases its visibility in the financial sector.
S&P Global notes that this change is an important step for Interactive Brokers in the competitive Wall Street arena. It comes at a time when economic policies and tariffs on trade are hot topics.
