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Goldman Sachs increases its Q3 US GDP growth forecast to 1.7% due to mixed data
Goldman Sachs has updated its Q3 US GDP estimate from 1.6% to 1.7%. This change is based on new data from recent economic reports.
In August, the ISM manufacturing index showed smaller growth than expected. While new orders and employment increased, production decreased. Additionally, the S&P Global manufacturing PMI was adjusted downward in its final August report.
July’s construction spending fell as predicted, suggesting a 0.5% decline when considering inflation. However, the details in the construction spending report were somewhat better than Goldman Sachs anticipated.
As a result, Goldman raised its Q3 GDP tracking estimate by 0.1 percentage points to 1.7% on an annualized basis. The estimate for domestic final sales also increased by the same amount, reaching 0.7%.
We can expect more economic reports soon, including data on ISM services and non-farm payrolls. These upcoming reports could significantly shift expectations for the actual Q3 GDP results.
While the slight increase in our third-quarter GDP estimate to 1.7% is noted, the details indicate a weak foundation. Manufacturing is showing softness, and there is a real decline in construction spending, leading to a tempered outlook. This suggests that the economy is growing, but without strong momentum as we move into fall.
Given this sluggish trend, the Federal Reserve is likely to hold steady. Over the summer, persistent inflation remained a concern, with the July 2025 CPI data showing a steady 3.3% year-over-year increase, making a rate cut unlikely. Thus, the market’s expectations for a change in the Fed funds rate for the upcoming meeting don’t align with the current economic situation.
We should prepare for increased market volatility, as it is sensitive to new information. The latest August non-farm payrolls report showed a slight cooling, with 165,000 jobs added and an unemployment rate rising to 4.0%. All eyes are on the upcoming ISM services report. The CBOE Volatility Index, or VIX, is around 16, which may not fully reflect potential market fluctuations from this week’s data.
This economic landscape highlights a divergence between sectors. Ongoing weakness in manufacturing, a trend that may continue into parts of 2024, contrasts with the expected stability in the services sector. Traders might consider favoring services-related indexes over industrial ones, potentially using options spreads to take advantage of this performance gap.
European stock markets saw their biggest drop in a month, as bond yields surged.
European stock markets experienced their biggest drop in a month, with the Stoxx 600 index falling by 1.5%. Other indices also declined: Germany’s DAX by 2.2%, France’s CAC by 0.7%, the UK’s FTSE 100 by 0.8%, Spain’s IBEX by 1.5%, and Italy’s FTSE MIB by 1.6%.
In the bond market, yields on 30-year gilts rose to 5.75%, the highest level since 1998.
With European markets struggling, we can expect increased volatility in the weeks ahead. The VSTOXX index, which shows volatility for the Euro Stoxx 50, likely surged past 25 today, marking a high not seen since March 2025. This situation makes buying options, like puts for downside protection, more expensive but possibly essential.
The sharp rise in UK 30-year gilt yields above 5.75% is causing concern across markets. This level hasn’t been seen since the late 1990s and recalls the gilt market crisis from late 2022. There’s growing worry about the UK’s recent fiscal updates and the Bank of England’s ability to manage inflation, which was still high at 4.5% as of August 2025.
As a result, traders are positioning themselves for further declines in stocks, especially in rate-sensitive sectors. Heavy buying of put options on the German DAX is expected, given its vulnerability to industrial slowdowns. The options market now indicates a greater than 50% chance of the DAX hitting its 2024 lows before the year ends.
For fixed-income derivatives, the focus will be on how the Bank of England responds. Traders can use interest rate swaps and SONIA futures to bet on further rate hikes that the market anticipates. Current pricing suggests traders expect at least two additional 25 basis point hikes by December 2025, a significant shift from just a week ago.
The UK’s FTSE 100 is underperforming compared to France’s CAC, creating a trading opportunity. Traders may consider buying CAC futures while selling FTSE 100 futures. This strategy aims to take advantage of the specific political and economic challenges facing the UK market, shielding the trade from overall European trends.
Kiwi currency drops 40 pips after GDT dairy auction shows a 4.3% price decline
The GDT price index in New Zealand has dropped by 4.3%. The New Zealand dollar has lost 40 pips today, and the fall in dairy prices could worsen the situation.
The average dairy price is now $4043, with whole milk powder down by 5.3%. This situation could affect New Zealand’s economic outlook.
Bearish Signals In The Dairy Sector
There’s a clear bearish signal with the Global Dairy Trade price index down 4.3%. This decrease lowers the average price to $4043, confirming a decline in our main export sector. The quick 40-pip drop in the kiwi is a direct response we expect will continue. This decline isn’t happening alone; recent data for the second quarter of 2025 shows a 6% drop in dairy imports from key Asian markets. This decline likely indicates weaker global demand, putting more pressure on prices in the near future. This ongoing price weakness seems to be fundamentally driven, not just a temporary fall. Monetary policy-wise, this continual drop in our trade terms makes it tougher for the Reserve Bank of New Zealand to maintain its tough stance. We should consider the possibility that the RBNZ will postpone its next interest rate hike. This potential policy change adds more downward pressure on the New Zealand dollar.Historical Context And Strategic Positioning
Looking back, we saw a similar situation in August 2023 when several GDT price drops caused the NZD/USD to fall over 5% in just one month. This period reminds us of how quickly sentiment can shift against the kiwi when dairy prices drop. If the next auction shows weakness, we should expect sustained selling pressure. Given this outlook, we are preparing for a further decline in the NZD. Buying put options on currency pairs like NZD/USD offers a clear, risk-defined way to benefit from the expected weakness in the coming weeks. We are also thinking about selling out-of-the-money call options to collect premium, as the potential upside for the kiwi seems limited for now. Create your live VT Markets account and start trading now.Sellers regain control in NASDAQ futures after initial rally, driving the market lower again
After a shaky start, NASDAQ futures have fallen back under the control of sellers. An early rally that pushed prices higher didn’t last long, as sellers regained their strength.
During the initial rise, strong buying showed that institutional players were active. Yet, this rally struggled at a double top resistance point, where sellers made a strong reentry.
Understanding Cumulative Delta
Even as the market bounced back, the Cumulative Delta stayed negative. This showed that the buying was mainly short covering rather than a genuine reversal, leading to a lower double top and another decline. OrderFlow Intel analyzes metrics like Delta to tell the difference between real demand and short covering. It also uses AI to help traders see when actual control changes in the market. For traders, spotting real trend changes is key for making decisions. Even with strong intraday bounces, it’s crucial to confirm if control has shifted since sellers have shown they are still in command today. InvestingLive.com uses AI-driven OrderFlow Intel to provide market context beyond just levels and setups. The key levels to observe now are 23,088 and the round figure 23,000, which act as downside targets. The inability of buyers to sustain the morning rally confirms our view that sellers remain in control of the NASDAQ. Although there was a quick bounce from the 23,000 level, we identified this move as short covering rather than new, committed buying. This is a typical sign of a weak market where bounces should be seen as selling opportunities. This technical weakness comes as we digest newly released economic data. The August 2025 CPI report from last week showed core inflation unexpectedly rising to 3.8%, dampening hopes for further rate cuts this year. This macro pressure backs up the seller-dominated order flow we’re currently witnessing.Trading Strategies in a Bearish Market
In the upcoming weeks, derivative traders might look to use brief rallies toward resistance, like the one around 23,282, to initiate bearish positions. Strategies such as buying puts or creating bear call spreads could work well in this environment. The aim is to take advantage of the ongoing downward pressure, not to chase temporary bounces. Market sentiment indicators align with this cautious approach. We’ve seen the VIX index, which indicates expected volatility, rise above 20, a level it hasn’t consistently stayed above since spring 2025. Additionally, the equity put-to-call ratio has increased to 0.85, highlighting a clear preference for downside protection among traders. This trading pattern resembles market conditions from the fall of 2022 when every rally faced heavy selling pressure due to hawkish central bank policies. We seem to be entering a similar stage where prices are capped, and sellers act quickly. As a result, we’re closely monitoring the 23,000 level. A sustained drop below this psychological support could likely spark a new wave of systematic selling. Until buyers can show they can absorb supply and push the cumulative delta positive, any signs of strength should be viewed skeptically. Create your live VT Markets account and start trading now.Gold surpasses $3,500, reaching $3,512, indicating potential for upward trend amid market uncertainty.
Gold has recently broken above its previous Asian high of $3508, reaching a new peak of $3512. This could signal a turning point, as gold has been hovering just below $3500 for several months. If it stays above this level, we may see a longer upward trend.
The US dollar is in a shaky position because of changes at the Federal Reserve and new data from the Bureau of Labor Statistics. These factors add to market ups and downs. September is usually a weak month for gold, but we often see strength from November to February.
There are possible risks, such as legal actions against tariffs and a lack of support from Congress, that may reduce market volatility this year. This could lead to worries about sovereign debt issues. While a pullback might happen, the following months often bring growth opportunities for gold.
Gold is currently breaking through the important $3500 level, hitting a new high following months of steady trading. A breakout after such a long period often indicates the start of a stronger trend. The Cboe Gold Volatility Index (GVZ) has also surged over 15% this past week, showing that traders are factoring in larger price swings ahead.
Several key factors support this optimistic view, especially moves aimed at weakening the US dollar. The Dollar Index (DXY) is trading around 95.20, and recent changes in the Federal Reserve have led the market to expect an 85% chance of a rate cut by the end of the year. Uncertainty about the reliability of economic data, especially after the new head of the Bureau of Labor Statistics was appointed, is also driving money towards the safety of gold.
However, we should be cautious of seasonal challenges. Historically, September is the worst month for gold prices. Data from 2005 to 2024 shows that gold often loses value during this month, so a pullback wouldn’t be surprising.
For derivative traders, this potential short-term dip could be a chance to get ready for the stronger season that usually runs from November to February. Buying longer-term call options, such as those for December 2025 or March 2026, during any price weakness could be a smart move. We are already noticing a significant rise in open interest for the December $3600 and $3700 call options.
The biggest risk to this overall outlook comes from politics. If the courts or Congress manage to block the president’s proposed tariffs, the market uncertainty that has benefited gold this year could disappear. This would likely strengthen the dollar and decrease the demand for gold as a safe haven, potentially reversing recent gains.
As the dollar weakens, USD/JPY retracement finds support near 148.00 and 147.77 levels
The US dollar has lost some of its earlier strength after a stabilization in market sentiment following the opening of US stocks. Soon after, sellers entered, pushing down Treasury yields, influenced by European bonds.
For the USD/JPY currency pair, the drop just below 148.00 corresponds to a 50% retracement from earlier gains made in the Asian session. The pair has since bounced back to 148.12, with support expected around 147.77, which is the 61.8% retracement level.
Today’s US economic data revealed stagnation in manufacturing, negatively affecting the dollar. Also, last Friday’s court ruling against tariffs has added uncertainty to investment decisions.
Although there’s no significant shift towards ‘risk-off’ trades, partly due to weak historical trends for September, the removal of Trump’s tariffs may enhance global growth and trade clarity. They had little revenue impact, especially given the large US fiscal deficit.
The US dollar is retracting, and the USD/JPY pair is finding it difficult to stay above 148.00. We might consider buying JPY call options or USD put options since falling US Treasury yields make the dollar less attractive. The next important support level to watch in the upcoming weeks is 147.77.
Recent economic data hasn’t favored the dollar. Today’s August ISM manufacturing report showed a contraction at 48.5. High prices in the data raise concerns of stagflation, complicating the Federal Reserve’s aggressive stance. This environment supports purchasing puts on dollar index funds, predicting further weakness.
Despite these challenges, there’s not a rush towards full ‘risk-off’ trades, even with September’s poor track record. The recent ruling against Trump-era tariffs on over $300 billion of Chinese goods is a significant boost for global trade certainty. This situation suggests selling VIX call options with strikes above 20 as a strategy against a major spike in market fear.
Combined with slowing US growth and brighter global trade prospects, we find ourselves in a unique position. This may allow the dollar to weaken while stock markets, particularly in sectors like industrials and technology, thrive. We could look into structuring trades with call options on relevant sector ETFs to capture this potential upside.
US construction spending falls by 0.1%, meeting expectations after a 0.4% decline
US construction spending in July 2025 dropped by 0.1%, which matches what analysts expected. This follows a previous decline of 0.4%.
Sector Cooling Confirmed
The July 2025 construction spending data confirms our prediction of a slight slowdown in the sector. Since the market was expecting this, we are now focusing on what it means for the overall economy. We view this as more evidence that the economy is slowing down. Ongoing weakness in the construction area, along with the August 2025 inflation report showing core CPI around 3.3%, puts the Federal Reserve in a tough spot. The upcoming FOMC meeting this month is crucial for deciding interest rate expectations. We think the Fed will rely on data, creating an uncertainty that can be advantageous for traders. Due to this uncertainty, we are looking at protective strategies for broad market indices. Buying put options on the S&P 500 or Nasdaq 100 can help guard against a possible economic downturn. The VIX, which measures market volatility, has been low, around 14, through late August 2025, making these options relatively cheap.Market Reaction to Economic Slowdown
We’re paying close attention to the housing market, which is affected by these trends. Recently, 30-year mortgage rates remained above 7% through August 2025, and the National Association of Realtors reported a decline in existing home sales for July. This suggests ongoing pressure on homebuilder stocks, making bearish positions on ETFs like XHB an appealing option. The slowdown also suggests a decrease in demand for industrial materials. We expect prices for materials like copper and lumber could struggle in the upcoming weeks. We are considering short positions in copper futures, especially since its price has had trouble staying above $4.50 per pound recently. Create your live VT Markets account and start trading now.US manufacturing ISM for August falls short of expectations, raising concerns over tariffs and economic uncertainty
In August, the US ISM manufacturing index came in at 48.7. This is lower than the expected 49.0 but higher than July’s 48.0. Key points include:
– **Prices Paid**: 63.7, which is below the anticipated 65.3 and last month’s 64.8.
– **Employment**: 43.8, compared to the expected 44.5 and July’s 43.4.
– **New Orders**: Increased to 51.4 from 47.1 last month.
– **Imports**: Decreased to 46.0 from 47.6.
– **Production**: Dropped to 47.8 from 51.4.
Tariffs are impacting various industries, raising costs for some products like organic cane sugar. Construction is struggling with low activity impacting new sales, while trucking and transportation are significantly down. Despite these challenges, the increase in new orders hints at potential recovery, which has sparked some buying interest in U.S. stock markets.
The latest ISM data presents a mixed picture. While manufacturing is still contracting at 48.7, the rise in new orders to 51.4 suggests it might be leveling off. This uncertainty is likely to keep market volatility high in the coming weeks.
This report adds complexity to the Federal Reserve’s upcoming decisions ahead of their September meeting. The Consumer Price Index (CPI) reading from July 2025 remains stubbornly at 3.5%, and job growth in August’s non-farm payrolls slowed to just 150,000. The Fed is trying to balance fighting inflation against a weakening economy. We saw similar data confusion in late 2023, which caused erratic market movements.
Given this situation, we are considering options strategies that take advantage of market hesitation. The VIX, sitting around 19, appears undervalued given the current risks, making long volatility positions appealing as we await the next inflation report. The weak data in trucking and transport suggests bearish positions on transportation ETFs, which have already dropped over 8% since July 2025.
Protective puts on major indices like the S&P 500 can act as a safeguard against the risk of weak production and employment indicating a deeper economic slowdown. The current dip buying in the market might be short-lived if follow-up data doesn’t confirm the strength of new orders. We also need to keep an eye on the 2-year Treasury yield, as its movements will indicate how the market feels about future Fed policy.
US August S&P Global manufacturing PMI revised to 53.0, driven by rising input costs and inflation
US manufacturing data from S&P Global shows that the final PMI for August is 53.0, slightly down from the initial estimate of 53.3. However, this is an improvement from July’s reading of 49.8, marking a three-year high. Input cost inflation increased, representing the second-highest rise in three years.
New data from the ISM manufacturing survey and construction spending will be released soon. The last three months have seen the strongest growth in production since early 2022, thanks to rising sales. Factories added jobs in August due to new orders and unfinished work.
The sector is expected to support the US economy in the third quarter, partly due to building up inventory. Factories increased their warehouse stock in August because of concerns over future price hikes and supply issues. Tariff impacts are adding to these input price increases. As a result, factories are raising prices for customers. The effect of these price hikes on consumer inflation in the upcoming months is still uncertain.
The August manufacturing report shows that the economy was performing well over the summer, a stark contrast to the slowdown in July. This strong performance, the best since early 2022, suggests potential growth for stocks. However, a key concern is the sharp rise in input costs due to tariffs.
This inflation at the factory level poses a challenge to the Federal Reserve’s current policy. With the latest core CPI still at a high 3.1%, any signs of a further increase could lead to a rate hike before the end of the year. We are therefore considering interest rate derivatives that could benefit from the Fed needing to tighten its policy again.
The tension between strong growth and rising inflation creates uncertainty that we think the market hasn’t fully accounted for. The VIX volatility index recently dipped below 15, making options relatively inexpensive. This is a good opportunity to buy protection or create trades, such as straddles on the SPX, which could profit from significant market moves in either direction.
We also observe that this manufacturing boom is partly due to companies building inventory to stay ahead of price increases. This pattern mirrors what happened during the supply chain disruptions of 2021-2022, when a rapid downturn followed once warehouses filled up and demand declined. This indicates that while industrial sector stocks may benefit in the short term, we should be wary about their performance as we approach 2026.
US stocks decline sharply at market open, with S&P 500 returning to August levels.
US stock markets had a tough day, with the S&P 500 falling by 90 points to levels not seen since August 21. Major companies faced significant losses.
Citi dropped by 3.4%, while Freeport-McMoran slid down 3.3%. Blackstone fell 3.2%, and Vistra decreased by 3.1%. Qualcomm also went down 3.1%, Nvidia dropped 2.5%, and United Airlines dipped by 2.3%. Amazon’s value fell by 2.2%.
