Trump Calls for 100% Tariffs from the EU We should get ready for possible market instability. It’s wise to buy call options on volatility indexes like the VIX and Europe’s VSTOXX, as the market isn’t fully reflecting this level of geopolitical risk. This situation reminds us of the 2018 tariff escalation when the VIX more than doubled in just two months. We need to protect our investments in Europe, especially in Germany, which relies heavily on exports. Buying put options on the German DAX index or on ETFs that track European car manufacturers is a smart move. In 2024, China was the EU’s second-largest trading partner with goods trade worth over €700 billion. With Germany’s economy already showing weakness last year, this could trigger a significant downturn. Strategies for Asian Markets We should also take similar protective measures for Asian markets. Buying protective puts on China’s A50 index and India’s Nifty 50 is necessary due to risks to their export sectors. India, with a projected growth rate of over 6% this year, is particularly susceptible to disruptions in trade with the EU. In currency trading, the best move is to buy the U.S. dollar against the euro, offshore Chinese yuan, and Indian rupee. We expect a shift towards safer investments, which will strengthen the dollar. Buying puts on currency futures for the euro or rupee is a straightforward way to prepare for their expected weakness in the coming weeks. We also need to consider the “mirror” tariff threat to U.S. companies. This makes broad short positions on the S&P 500 risky. Instead, we should focus on purchasing puts for specific U.S. tech and retail companies that rely heavily on Chinese supply chains. In 2024, over one-fifth of S&P 500 companies identified this reliance as a key operational risk. Create your live VT Markets account and start trading now.

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US Treasury Secretary Bessent is confident that the Supreme Court will uphold Trump’s tariffs. He also has a plan to strengthen the US dollar’s position in the market. Bessent will write about ways to keep the US dollar strong while the Supreme Court fast-tracks Trump’s case regarding the tariffs.

Market Impact and Volatility

With the Treasury Secretary’s belief in the tariffs being supported, we expect market volatility to increase. This Supreme Court case is the biggest upcoming event for traders. We recommend that clients look into protective measures against sudden market moves, especially in sectors like technology and manufacturing, which depend on global supply chains. If the court reinstates tariffs, it could lead to inflation, similar to what we saw between 2018 and 2019 when the Producer Price Index for imported goods spiked. Traders are already adjusting their positions in interest rate futures, anticipating a lower chance of a Federal Reserve rate cut this year. Companies unable to pass on higher costs to consumers may face renewed pressure. Bessent’s comments about maintaining the US dollar’s dominance are also important. Although the dollar’s share of global reserves has decreased slightly over the years, it still makes up nearly 59% of all central bank holdings, according to the latest IMF data. This strong commitment from the Treasury is likely to support the dollar’s position, leading to increased interest in options that favor the dollar’s strength against the Euro and Yen.

Managing Binary Court Decision Risk

In the coming weeks, the key strategy will be to manage the risks surrounding the court decision. Traders are using options on exchange-traded funds like the SPY to limit their risk ahead of the announcement. We are also examining VIX futures, as the expected volatility index may not fully account for the disruptions from a potential return to broad tariffs. Create your live VT Markets account and start trading now.

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The Bureau of Labor Statistics has revised the US employment numbers for March, reducing them by 911,000 jobs. This is the largest revision ever recorded. As a result, total US employment dropped by 0.6%. While this was a significant change, analysts expected a smaller cut of about 682,000 jobs. Initially, the US dollar fell, but it soon bounced back, and Treasury yields increased as well. **Market Reactions** After the revision, expectations for a 50 basis point cut in interest rates next week decreased. The S&P 500 rose by 18 points to reach 6513, and the Nasdaq reached another all-time high. In the foreign exchange market, the euro faced some pressure due to political issues in France but managed to outperform the Swiss franc. Key economic reports are coming, including the US Producer Price Index and the Consumer Price Index report on Wednesday. Meanwhile, President Trump is advocating for a 15-20% tariff on all EU goods, impacting the EUR/USD exchange rate. In commodities, gold fell by $5 to $3630, while West Texas Intermediate crude oil gained 50 cents, reaching $62.76 per barrel. The Japanese yen appreciated, but the Swiss franc lagged. Despite the big job revision, the market is not betting on a more aggressive rate cut from the Federal Reserve. Traders seem to consider this information outdated and are focusing on the upcoming CPI inflation report instead. They might need to prepare for significant moves in interest rate derivatives, as high inflation could overshadow concerns about the weak labor market. Traders are cautious about anticipating a big rate cut due to recent data, such as the Core PCE Price Index, which stood at 3.5% in July 2025—far above the Fed’s target of 2%. A similar situation occurred in 2023 when the Fed continued raising rates despite weaker economic signals because inflation remained a priority. Thus, betting on a dovish shift from the Fed before the CPI data might pose substantial risks. **Economic Indicators To Watch** With the S&P 500 at 6513 and rising bond yields, there’s a noticeable disconnect that derivative traders should monitor closely. This situation suggests that purchasing protective put options on major stock indices could be a smart way to guard against a possible market downturn. If inflation surprises on the upside, the Fed may need to stay firm, making current equity highs unsustainable. The low cost of this kind of protection is particularly attractive right now. The VIX, which measures market anxiety, has been low at around 12, indicating complacency. Historically, such low volatility, as seen in late 2021, can precede sharp market shifts. In currency markets, the US dollar shows strength due to better yields, allowing it to withstand unfavorable domestic news. Meanwhile, the euro struggles with political uncertainty in France and potential tariffs from the US. This scenario makes bearish positions on the EUR/USD pair, possibly through put options, a sensible strategy for the coming weeks. Create your live VT Markets account and start trading now.

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China’s Consumer Price Index (CPI) for August 2025 is expected to show ongoing deflation, predicted at -0.2% year-on-year, compared to 0% in July. Despite continuous government support and stimulus efforts, domestic demand in China remains weak. The Producer Price Index (PPI) is also likely to continue its deflationary trend. In an initiative called “Anti-involution,” policymakers are now focused on reducing intense and unproductive competition, particularly in industries like solar power, electric vehicles, and steel.

Preventing Inefficiency

This policy aims to curb inefficiency caused by excessive competition with little progress. There is still overcapacity in private-sector industries, presenting ongoing challenges. The data will be released at 0130 GMT, which is 2130 US Eastern time. We are keeping a close eye on the upcoming Chinese inflation data set to be released tomorrow, September 10th. The market expects another month of deflation, suggesting that weak domestic demand is becoming entrenched despite government efforts. This trend creates a cautious outlook for assets connected to Chinese and global growth. This situation sends clear signals to currency markets, especially for commodity-linked currencies. Historically, we’ve seen the Australian dollar weaken against the US dollar following weak Chinese industrial data, similar to trends during the slowdowns of 2023 and 2024. Therefore, taking bearish positions on the AUD/USD pair or buying put options on Australian dollar futures may provide a smart hedge against worse-than-expected data.

Market Implications

The ongoing decline in producer prices points directly to industrial overcapacity and diminishing demand for raw materials. Iron ore prices have struggled to stay above $110 per ton for most of 2025 and are especially vulnerable to further drops. We expect traders to increase short positions in commodity futures for industrial metals like copper and iron ore in the upcoming weeks. Global stocks that rely heavily on sales to China may face downward pressure. Companies in sectors such as European luxury goods, German automotive, and US technology have seen their valuations heavily influenced by Chinese consumer sentiment. For example, Apple generated nearly 20% of its revenue from Greater China in 2024. Any confirmation of continued consumer weakness justifies buying protective puts on these specific stocks. The broader trend suggests a potential increase in market volatility, especially if the data disappoints. The “Anti-involution” policy is a long-term goal, but right now, the price wars it aims to stop are contributing to this deflationary pressure. Traders might prepare for more market turbulence by purchasing options on ETFs that track the Hang Seng Index or other China-focused funds. Create your live VT Markets account and start trading now.

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Crude oil prices have risen today but are still struggling to bounce back from last week’s drop, which began with rumors of an OPEC+ production increase. Those rumors are now confirmed, with an extra 137,000 barrels per day expected in the market next month. The pace of this output increase might continue until all voluntary cuts are either reversed or exceeded. The current crude price chart indicates a delicate situation. The $60 support level may need to be tested, and if it fails, prices could fall back to earlier lows.

Oil Market Overview

Right now, the oil market shows some strength, but talks of increased Chinese stockpiling suggest this may not last. This could lead to a serious market downturn. Still, lower oil prices could create opportunities, as prices around $55 per barrel are likely not sustainable. Globally, exploration spending is near $10 billion a year and may decrease further. Moreover, US shale operations are running low on Tier 1 inventory, and drilling activity is dropping. We could see a supply shortage in late 2026 or 2027, when OPEC might have little to no extra capacity available, marking a key moment for the market. We are now in a market where increased supply is a confirmed reality, not just hearsay. OPEC+’s decision to add 137,000 barrels per day next month is putting pressure on prices, which haven’t bounced back from last week’s losses. This hints at a bearish outlook for the near term. The crude oil price chart is in a weak position after breaking a key support level. We need to keep a close eye on the $60 per barrel mark. If prices drop below this, we could see a swift sell-off similar to the “Liberation Day” plunge we noticed in bond yields earlier in 2025. Strong demand, partly from Chinese stockpiling, has been a key support for prices, but that seems to be fading. Recent customs data indicated that China’s crude imports for August 2025 fell by 2% to 10.8 million bpd, suggesting their strategic buying may be slowing down, which removes significant support for the market.

Preparing for Future Market Trends

Looking ahead, the path of least resistance seems to point downward, making bearish positions appealing. Traders might consider buying put options with strike prices at or below $60 to profit from potential price declines. Selling call spreads could also express this outlook while managing risk. However, we must remember that prices around $55 are not sustainable in the long run. The recent EIA report from early September 2025 noted that productivity from new wells in the Permian Basin has dropped for five consecutive months. This decline in US shale inventory is critical and sets the stage for a future supply crunch. While the short-term outlook is bearish, we should prepare for a significant market reversal in 2026 or 2027. Savvy traders might look to slowly buy long-dated call options during any significant price drops in the next few weeks. These options could be very affordable if panic drives prices down but hold great potential for profit when supply shortages finally hit. Create your live VT Markets account and start trading now.

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The Canadian economy is facing challenges, especially in the Toronto housing market, which is declining. This downturn could increase pressure as fewer pre-built homes and condos are sold. Furthermore, uncertainty looms over upcoming US-Canada trade talks. The USMCA agreement will be renegotiated next summer, which may lead to a 15% tariff on goods from Canada and Mexico. While retail sales are strong, job reports are weak, and business investment is dropping. On the bright side, future court decisions that could nullify tariffs might help Canada, but new tariffs could complicate matters.

Exchange Rates and Their Impact

Any new trade deal may not be as beneficial as past agreements. Exchange rates have remained stable between 1.37 and 1.39 since August, largely influenced by Canadian employment figures. However, the Canadian dollar is trending downward, and shifts in the exchange rate could happen if it surpasses 1.3940 into the mid-1.40s. A key factor to watch is the central bank meeting coming up, where a rate cut is highly expected. Experts predict a 53 basis points cut this year, with more cuts likely to keep inflation in check, impacting the Canadian dollar and exchange rates. It’s wise to keep an eye on the Bank of Canada (BOC) as it operates within the 1.37-1.39 range. The market has almost fully priced in a rate cut from the Bank of Canada on September 17. Yet, signs of weakness in the economy suggest we may see more cuts ahead. This creates anxiety for the Canadian dollar. The economy is clearly under pressure, strengthening the case for further rate cuts. Last month alone saw a loss of 15,000 jobs, raising the unemployment rate to 6.4%. This situation is worsened by the troubled Toronto housing market, seeing an 18% drop in sales compared to last year. Adding to these domestic concerns is the uncertainty over US-Canada trade relations. The upcoming renegotiation of the USMCA agreement next summer casts a long shadow. The possibility of a 15% baseline tariff is enough to keep businesses from investing for now.

Trading Strategy and Market Movements

In terms of trading, the USD/CAD pair has been stable within the 1.37 to 1.39 range since August. This consolidation indicates the market’s indecision as we await central bank meetings. We’re waiting for a catalyst to push past this stalemate. Focusing on the 1.37-1.39 range is key, with the BOC and Federal Open Market Committee (FOMC) meetings on September 17 likely to trigger movements. A significant push above 1.3940, especially if spurred by a dovish BOC, could indicate a good time to buy USD calls or call spreads, with a target in the mid-1.40s. This projection suggests the market may need to account for an extra 50 to 100 basis points of cuts next year. Looking back to 2015 may offer some insight. The Bank of Canada cut rates twice to respond to oil price drops while the Federal Reserve raised rates. This policy divergence saw USD/CAD rise dramatically from below 1.20 to above 1.45 in about a year. A similar divergence, even a slight one, could lead to a significant rise in the pair. Create your live VT Markets account and start trading now.

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Apple is holding a big event where it is launching new products, including the AirPod 3, just before Christmas. At the same time, Apple shares are down slightly. The stock has dropped by $0.78, which is a decrease of -0.34%, now trading at $237. We are witnessing the common “sell the news” pattern. The stock is dropping even with new product announcements. This short-term decline often happens when traders who bought shares expecting a rise are now cashing in their profits. For us, this may be a chance to buy shares for the next quarter. Looking ahead to 2025, this trend is familiar. In the fourth quarter of 2024, the stock rose over 12% from the September product launch to the January earnings report. The new product cycle and the high demand for the AirPod 3 could lead to a similar rise. We should see the current price drop as a temporary pause before the next increase. The next step is to consider call options that expire after the holiday sales figures are released, which will be in late January or February 2026. This strategy helps us take advantage of the full impact of the holiday shopping season. Wall Street expects a record $130 billion in revenue for the upcoming quarter, making a bullish options strategy a good way to capitalize on this. Right now, implied volatility is high due to the event, which makes buying options more expensive. A different approach is to sell out-of-the-money puts, like those with a $225 strike price that expire in October or November 2025. This lets us earn a high premium, and if the stock drops to that price, we could buy shares at a favorable long-term rate. This optimistic view is supported by recent data from the Commerce Department, which showed consumer spending grew by 0.5% in August 2025. This indicates strong consumer demand as we approach the important holiday season. The combination of new products and eager consumers strengthens the case for buying stocks in the coming weeks.

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The U.S. Treasury sold $58 billion in 3-year notes at a high yield of 3.485%. This yield was a bit lower than the market index (WI) level of 3.492% during the auction. The auction had a negative tail of -0.7 basis points, while the six-month average was +0.7 basis points. The bid-to-cover ratio was 2.73, exceeding the six-month average of 2.55.

Dealer And Bidder Participation

Dealer participation was at 8.373%, which is lower than the six-month average of 15.9%. Direct bidders made up 17.4% of the total, while the six-month average was 21.9%. Indirect bidders were 74.24%, surpassing the six-month average of 62.1%. This shows reduced domestic demand but increased international interest, leading to strong overall demand for the notes. The 3-year note auction on September 9th, 2025, demonstrated very strong demand, indicating the market feels comfortable buying U.S. debt at these levels. The yield of 3.485% was lower than expected, suggesting we might see some downward pressure on rates soon. This indicates that major investors, especially abroad, find value in these notes. Given this information, it might be wise to consider trades that benefit from steady or slightly dropping interest rates. Buying futures contracts on 2-year or 5-year Treasury notes could be a straightforward way to take advantage of this trend. The August 2025 inflation report showed a mild CPI of 2.8%, supporting the expectation that the Federal Reserve will likely hold interest rates steady for the remainder of the year.

Impact On Currency And Stock Market

One key takeaway is the high 74.2% participation from indirect bidders, indicating a strong shift toward the U.S. dollar. This response may be linked to recent economic data from Europe, where the manufacturing PMI has now contracted for four months, raising speculation about a possible ECB rate cut. We should consider increasing our long positions in the U.S. dollar, especially against the euro. The stability in the bond market eases a significant challenge for stocks, particularly for technology and growth sectors that are sensitive to interest rates. It could be a good time to sell out-of-the-money put options on the Nasdaq 100 or S&P 500 indexes, allowing us to earn premiums on the belief that this robust auction supports the market. The implied volatility for these equity indexes has recently peaked at a three-month high of 19%, making the premiums appealing. We noticed a similar situation in late 2023 when strong demand for Treasury auctions indicated a peak in interest rates after an extended period of increases. This was followed by a notable rally in both bonds and stocks until the year’s end. Although the current circumstances are different, that historical trend may be worth considering for the weeks ahead. Create your live VT Markets account and start trading now.

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European markets mostly gained, except for Germany’s DAX, which dropped by 0.37%. France’s CAC rose by 0.19%, the UK’s FTSE 100 increased by 0.23%, Spain’s Ibex went up by 0.14%, and Italy’s FTSE MIB grew by 0.68%. In the US, stocks performed steadily, with major indices in the green. The NASDAQ hit a record level earlier, and the S&P hovered near its record close of 6502.08 from September 4. The Dow Jones Industrial Average rose by 115 points or 0.25%, closing at 45630 points. The S&P index increased by 5.94 points or 0.09%, standing at 6501.14. The NASDAQ index climbed by 18.70 points or 0.08%, reaching 21817.

Small Cap Divergence

However, the small-cap Russell 2000 declined by 19.61 points or 0.82%, settling at 2375.28. With the S&P 500 close to its all-time high of 6502, the significant drop in the small-cap Russell 2000 raises concerns. This split often indicates economic weaknesses that affect smaller companies more than the largest ones. As a result, we suggest considering VIX call options for volatility, as this divergence can often lead to broader market downturns. Given the situation, buying protective puts on the S&P 500 index seems like a smart move in the coming weeks. September is usually the weakest month for the stock market, and the latest August 2025 US CPI report showed slightly higher inflation at 3.1%. This increases the chance of a hawkish surprise from the Federal Reserve, making short-term downside protection appealing. The Russell 2000’s underperformance suggests a profitable pair trade. We’re looking at going long on NASDAQ 100 futures (NQ) while shorting Russell 2000 futures (RTY). Higher interest rates typically hurt smaller, more indebted companies, which explains the pressure on the Russell index.

European Market Dynamics

In Europe, the weakness of the German DAX stands out amid gains in other markets. Recent data from German manufacturing PMI showed a contraction for the second month in a row, dropping to 49.2 and raising recession fears. However, we see this as a localized issue rather than a continent-wide concern for now. This divergence in Europe makes a relative value trade appealing. We are considering long positions in Italy’s FTSE MIB, which has shown strong momentum, against short positions in the German DAX. This can be executed using options on country-specific ETFs to separate Germany’s economic slowdown from the overall positive sentiment in Europe. This market behavior reminds us of late 2021, just before the major downturn in 2022. During that period, major tech stocks held their highs while the wider market began to weaken. We view that time as a critical historical reference for our strategy over the next month. Create your live VT Markets account and start trading now.

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The U.S. Treasury will auction $58 billion in 3-year notes, and the results will be compared to six-month averages to determine performance. Key parts of the auction include a tail of 0.7 basis points, which shows the difference between the highest accepted yield and the market yield before the auction. The bid-to-cover ratio is 2.55X, indicating the total bids compared to the amount offered for 3-year notes.

Demand Breakdown Of The Auction

The demand for the auction is made up of several types of bids. Direct bids, which reflect domestic interest, account for 21.9% of total demand. Indirect bids, showing international interest, represent 62.1%, indicating strong participation from abroad. Dealers, who act as middlemen, took 15.9% of the total bids. The upcoming auction will test the market’s appetite for U.S. debt. We hope to see if the bid-to-cover ratio surpasses the 2.55X average. A lower ratio could indicate a decline in demand, suggesting that investors may want higher yields to take on more government debt. If demand is strong, particularly if indirect bids exceed the 62.1% average, it would show continued foreign confidence in U.S. Treasuries. This could boost short-term bonds and lead traders to prepare for a more stable interest rate environment. In this case, selling options premium on SOFR or Treasury futures might be a good strategy. On the other hand, a weak auction—indicated by a tail larger than 0.7 basis points and dealers taking more than 15.9%—would send a bearish signal. This would suggest a rise in short-term yields and could lead traders to buy puts on 2-year and 5-year Treasury note futures. It would mean that primary dealers might struggle to absorb what the market can’t.

Importance Of Auction In Current Economic Climate

This auction is particularly important given recent economic data. The August Consumer Price Index report shows inflation at a steady 3.4%, putting pressure on the Federal Reserve to keep a restrictive policy. Additionally, the U.S. debt-to-GDP ratio exceeds 121%, making it crucial for the government to secure good borrowing terms. We remember how sharp yield spikes occurred during the 2023 rate hikes, often following weak auctions that led to market volatility. At that time, a string of poor Treasury auctions raised concerns among investors about inflation and Fed policy. Today’s auction will be seen as a key indicator of current sentiment. Due to this uncertainty, implied volatility on interest rate options may rise in the coming weeks. A disappointing result reflecting lower investor demand could trigger this increase. Traders might use options on Treasury futures to prepare for potential price swings instead of taking a direct bet on rates. Create your live VT Markets account and start trading now.

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