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Hedge funds cut bullish crude oil positions to their lowest in 17 years due to supply concerns
Hedge funds have cut their investments in crude oil to the lowest level in almost 17 years. With less risk of new sanctions on Russian oil, the focus has turned to worries about too much supply.
Recent CFTC data from Bloomberg shows that money managers reduced their net-long position in West Texas Intermediate (WTI) futures by 19,578 lots, bringing the total down to 29,686 in the week that ended on Tuesday. This is the lowest level since October 2008.
The PBOC sets the yuan midpoint at 7.1161, stronger than previous closing rates and estimates.
The People’s Bank of China (PBOC) has announced a USD/CNY reference rate of 7.1161, compared to the expected 7.1551. This managed floating exchange rate system allows the yuan to vary within a set range of +/- 2% around this midpoint.
This new rate is the strongest since November 6 last year and is lower than the previous close of 7.1666. The PBOC has also injected 288.4 billion yuan through 7-day reverse repos at a rate of 1.40%. With 266.5 billion yuan maturing today, this results in a net injection of 21.9 billion yuan.
Yuan Fixing Announcement
Today’s yuan fixing signals that policymakers intend to stop the currency’s decline. The rate is much stronger than market expectations, indicating clear support for the yuan. This suggests that betting on a weaker yuan or holding long positions in USD/CNY is now a risky move. This comes after China reported a surprising trade surplus of $89 billion for July 2025, a figure that should support the currency. However, the yuan has still weakened due to concerns about the property sector and slowing domestic demand. The PBOC is now stepping in to counter these negative feelings and align the currency with strong trade data. This situation is reminiscent of late 2023 when the central bank defended the 7.30 level against the dollar, creating a stable ceiling for months. We might now be seeing the formation of a new, lower ceiling around 7.15-7.20. This managed stability could reduce volatility in the currency pair, making some trading strategies more appealing.Impacts on Derivatives and Goods
For traders in derivatives, this means that selling short-dated USD/CNY call options could be a smart strategy, as the central bank is limiting the dollar’s potential rise. The yuan’s implied volatility, which hit a six-month peak of 4.8% last week, may now be overvalued due to the bank’s intervention. A more cautious approach would be to use call spreads to bet on limited upside for the dollar. Strengthening the yuan will likely affect Chinese stocks and global commodities. A stronger currency makes Chinese goods costlier abroad, which could hurt export-heavy stocks. On the other hand, it boosts China’s ability to purchase raw materials, potentially supporting commodities like copper and iron ore that have seen price declines recently. Create your live VT Markets account and start trading now.Pantheon predicts that Powell’s comments signal labor market risks and expects Fed rate cuts in 2025.
Powell’s recent comments show a change in the Federal Reserve’s focus from inflation risks that were stressed in July. He noted that weaker labor data, with payroll growth averaging just 35,000 over the last three months—down from 168,000 earlier in 2024—has influenced this shift.
He also highlighted that tariffs still present inflation risks. However, Powell believes that current labor market conditions may limit workers’ ability to demand higher wages, which could help keep inflation from rising due to tariffs.
Predictions on Unemployment and Rate Cuts
Pantheon Macroeconomics predicts that employment challenges might push unemployment rates above the Federal Reserve’s forecast of 4.5% by the end of the year, potentially hitting 4.75% by late 2025. They expect inflation from tariffs to mostly affect goods and predict the Federal Reserve will cut rates by 25 basis points in September, November, and December, suggesting more cuts than the market currently expects. There is a noticeable shift in the Fed’s outlook, with Powell now prioritizing concerns about a weakening job market over inflation. The latest BLS report revealed a sharp slowdown in July payrolls, bringing the three-month average down to just 35,000, a significant decline from 168,000 in 2024. This may lead to easier monetary policy sooner than many think. While tariffs were a major worry earlier this year, their impact on inflation seems under control due to softer wage growth, giving the Fed room to act. With July’s annual CPI at a manageable 2.8%, the chance of inflation from tariffs becoming a long-term issue appears low. This view is backed by last month’s unemployment rate increasing to 4.3%, a trend we expect to continue.Opportunities in Rate and Equity Markets
This situation creates a strong opportunity in interest rate markets, as we expect three rate cuts by year-end in September, November, and December. The markets are not fully aligned with this outlook; the CME FedWatch Tool shows only a 55% chance of a single 25-basis-point cut by December. Traders may want to consider strategies that benefit from falling rates, such as buying SOFR futures or call options on Treasury bond futures. This dovish stance is also a positive signal for stocks, reminiscent of the policy change in mid-2019 that led to a significant market rally. We anticipate this could lift stock indices, making long positions with S&P 500 call options an attractive strategy. With the Fed’s change in messaging, we may see increased volatility around the upcoming FOMC meetings, making VIX derivatives worth considering for short-term strategies. Create your live VT Markets account and start trading now.The USD/JPY pair approaches 147.50 after Powell’s comments, with no new updates.
USD/JPY saw a bounce back in the Asian morning, recovering from Friday’s drop following Powell’s comments at Jackson Hole. The pair is now close to 147.50, even without any new news.
Bank of Japan Governor Ueda stressed the need for more women and foreign workers to meet Japan’s labor challenges arising from an ageing population. Friday’s market move is viewed as a ‘gap,’ indicating a potential for pullback, though caution against overstating this is advised.
Trump’s Tariff Plans
In other market updates, Trump is pushing for a 15-20% minimum tariff on EU goods, causing the EUR/USD to fall. Powell’s shift in focus reveals rising job market risks, with the Fed expected to cut rates three times in 2025, according to Pantheon. Trading in foreign exchange comes with high risks, and it may not suit all investors. It is crucial to assess your investment goals and risk tolerance before trading, and seek advice from financial experts. InvestingLive provides links to economic and market data but does not offer investment advice or support specific opinions. Past performance does not guarantee future results, and compensation may be received from website advertisers.USD/JPY Market Caution
The rise of USD/JPY to near 147.50, despite dovish signals from the Fed, shows market hesitation. It’s worth noting that similar levels in late 2023 led to strong warnings from Japanese officials, making this area risky for chasing the dollar higher. A move toward 150 could provoke a stronger reaction from Tokyo. Fed Chairman Powell’s focus on job market risks is significant. With the market anticipating three interest rate cuts in 2025, the dollar’s strength seems fragile. Recent data indicates US core inflation has dropped to 2.8%, and July 2025’s Non-Farm Payrolls report showed only a 150,000 job increase, giving the Fed room to ease its policy. Meanwhile, the Bank of Japan remains silent on policy changes, keeping the yen weak. Historically, Japan’s core inflation, which briefly surged above 2.5% in mid-2024, has struggled to stay elevated, leaving Governor Ueda with little reason to raise rates. This difference in policies is key to keeping USD/JPY high. Global risks are increasing volatility, with talks of new US tariffs and Evergrande’s final delisting creating uncertainty. This is not a moment for a relaxed, one-way bet. The VIX, a measure of stock market volatility, has climbed from a low of 13 to about 17 in the past month, indicating traders are becoming more concerned about sudden market shifts. Given this situation, buying USD/JPY put options for October or November 2025 offers a defined-risk way to bet on a dollar decline. This strategy allows traders to profit if Fed rate cuts weigh on the dollar while limiting potential losses to the premium paid. This is a reasonable approach, with intervention risks limiting any upside. For those anticipating a significant move but uncertain of the direction, a long straddle options strategy could work well. By purchasing both a call and put option at the same strike price and expiration, a trader can profit from a large price swing either way. This is essentially a bet on the rising volatility we expect in the coming weeks. Create your live VT Markets account and start trading now.The PBOC sets the daily USD/CNY reference rate at 7.1551.
The People’s Bank of China (PBOC) sets a daily midpoint for the yuan, known as renminbi (RMB). This is part of a managed floating exchange rate system, which allows the yuan’s value to shift within a range of +/- 2% around this reference rate.
Setting The Daily Midpoint
Every morning, the PBOC calculates this midpoint mainly against the US dollar. They take into account market supply and demand, economic data, and changes in global currency markets. This midpoint serves as a guide for daily trading. The PBOC allows the yuan to move within a +/- 2% band around the midpoint. This band can be adjusted depending on economic conditions and policy goals. If the yuan approaches the limits of this trading band or experiences too much volatility, the PBOC may step in by buying or selling the yuan. This helps to keep the currency’s value stable and ensures a gradual adjustment, promoting stability in the foreign exchange market. The expected reference rate of 7.1551 signals that the People’s Bank of China aims to stabilize or strengthen the yuan. This indicates that the central bank is actively working to prevent further depreciation.Opportunities And Risks
With the yuan able to move only 2% around the daily midpoint, we have a clear trading range. This setup makes selling volatility appealing, especially since one-month implied volatility on USD/CNH options is at a yearly low of 3.8%. Traders may consider selling out-of-the-money puts and calls to earn premiums. This policy direction appears to be backed by recent economic data, boosting our confidence. After a tough 2024, China’s industrial production increased by 4.5% year-over-year in July 2025, and exports are showing steady recovery. A stable currency can attract foreign investment and prevent capital outflows. It’s important to keep in mind the sharp drop we saw in late 2023 when the rate exceeded 7.30. The central bank’s ability to intervene means that while the outlook seems positive, betting on a strong appreciation carries risks. The PBOC prioritizes stability rather than a one-sided rally, which limits profit potential on straightforward trades. Create your live VT Markets account and start trading now.Powell highlights rising job market risks amid slowing GDP growth, says Goldman Sachs
Goldman Sachs’ chief economist, Jan Hatzius, talked about Federal Reserve Chair Jerome Powell’s recent speech that highlighted growing risks in the job market. Powell explained that the labor market is currently balanced, with both the supply and demand for workers dropping. He warned that these employment risks could quickly lead to more layoffs and higher unemployment rates.
Powell also mentioned that GDP growth has significantly slowed down, partly due to a decrease in potential output, not just cyclical demand concerns. This cautious outlook has sparked hopes in the market for a possible rate cut by the Federal Open Market Committee (FOMC) in September.
Federal Reserve Meeting
The FOMC’s next meeting is set for September 16-17, and many expect a 25 basis point cut in the Fed Funds rate. Powell made his remarks at the Jackson Hole symposium, where economists gather to discuss monetary policy and other economic issues. Chair Powell’s remarks from Jackson Hole indicate a notable shift to a more cautious approach regarding the economy. His warning about job market risks supports our belief that a rate cut is imminent. The derivatives market reflects this sentiment, with the CME FedWatch Tool indicating over an 85% chance of a 25-basis-point cut at the September meeting. This scenario indicates we should prepare for lower interest rates soon. We can express this view by using options on SOFR futures, which would benefit us if the Fed cuts rates as expected. This is a straightforward response to the market’s reaction to the Fed’s more dovish stance. Lower borrowing costs should help boost equities, especially growth and tech stocks. We are looking into call options on the Nasdaq 100 index to take advantage of a possible relief rally ahead of the September FOMC meeting. In the easing cycle of 2019, we saw that even the anticipation of rate cuts could drive market gains.Market Implications
Powell’s concerns are valid, as current data supports this cautious outlook. The latest July 2025 JOLTS report revealed a steady decline in job openings, while weekly jobless claims have risen to an average of 240,000. This is a significant shift from the much stronger job market we had just a year ago. The overall economy is also showing signs of slowing down, which gives the Fed more latitude to act. The advance estimate for Q2 2025 GDP growth was only 1.5%, a significant decline from past quarters. With the latest Core PCE inflation reading stable at 2.7%, the Fed has a strong reason to take steps to stimulate growth without worrying about inflation rising. A rate cut would likely weaken the U.S. dollar. Thus, we should consider derivatives that would benefit from a falling dollar compared to other major currencies. Buying call options on the euro or Japanese yen for October expiration could be a smart move to prepare for this situation. Finally, the likelihood of a rate cut may lessen overall market uncertainty in the short term. This could cause a drop in the VIX, the main gauge of market volatility. We see a chance to sell VIX call spreads, a strategy that would profit if market volatility remains low or decreases leading up to the Fed’s September decision. Create your live VT Markets account and start trading now.Keurig Dr Pepper is finalizing an approximately $18 billion agreement for JDE Peet’s.
Keurig Dr Pepper is close to buying Dutch coffee company JDE Peet’s for about $18 billion. If this deal goes through, the new company will split into two separate parts: beverages and coffee. This would effectively undo the Keurig-Dr Pepper merger from 2018.
Keurig Dr Pepper, located in Texas, has been doing well with its drinks, but its coffee side hasn’t performed as strongly. The company has a market value of nearly $48 billion and owns over 125 brands, including 7-Up, Canada Dry, Snapple, Green Mountain, and Tully’s Coffee.
JDE Peet’s, based in Amsterdam, has a market value of around $15 billion. It owns popular brands like Peet’s Coffee, Stumptown, and Maxwell House. Both companies have not officially commented on the potential deal yet.
The talks about this acquisition may create uncertainty, which could be a chance for options traders. We expect both companies’ stocks to experience more volatility as the market reacts to the potential $18 billion price and the plan to split the companies. Implied volatility on KDP options for October 2025 has already jumped to over 45%, up from a recent average of 28%.
For Keurig Dr Pepper, the goal is to improve its struggling coffee division, which reported a 5% revenue drop in its Q2 2025 earnings. Splitting the company into beverage and coffee units may unlock value, similar to how the market reacted positively to Johnson & Johnson’s spin-off of Kenvue in 2023. Traders might want to use straddles to take advantage of a possible large price swing without betting on a specific outcome just yet.
JDE Peet’s presents a clearer merger arbitrage situation. If the acquisition looks likely, its stock price is likely to move closer to the purchase price. We are already seeing an increase in call option volume for JDE Peet’s, particularly for strike prices just below the expected valuation. Selling out-of-the-money puts on JDE Peet’s could be a way to earn premiums, assuming the deal stabilizes the stock price.
It’s also important to remember the 2018 Keurig-Dr Pepper merger, which didn’t get much market applause at first, with the stock staying mostly flat for the first year. Regulatory reviews and financing details could pose challenges, potentially delaying the deal longer than current options expirations assume. This suggests that buying longer-dated options may be a better way to benefit from the outcome of this deal.
Evergrande’s delisting in Hong Kong signals its downfall, highlighting the company’s financial collapse and turmoil
China Evergrande’s shares will be removed from the Hong Kong stock exchange on Monday, ending more than 15 years of trading. Once worth over $50 billion, the developer’s overwhelming debt has contributed to the ongoing crisis in China’s property market.
Economic Hardship Over Prosperity
This delisting is a major turning point, linking Evergrande to economic struggle instead of growth. This change is a stark contrast to its earlier role as a symbol of China’s prosperity. Founder Hui Ka Yan has seen his wealth drop from $45 billion in 2017 to under $1 billion today. In March 2024, he received a $6.5 million fine and a lifetime ban from capital markets due to inflated revenue claims of $78 billion by Evergrande. Liquidators are now considering actions against his personal assets. When it collapsed, Evergrande was involved in about 1,300 projects across 280 cities. This widespread involvement highlights the severity of its downfall and its effects on the economy. The delisting of Evergrande is not surprising, but it confirms the serious and ongoing crisis in China’s property sector. This solidifies the ongoing negative feelings towards developers, taking away any hope for a sudden recovery. In the next few weeks, we expect increased stress on other heavily indebted developers, making it appealing to place bets against their stocks. New data shows that China’s home prices fell 9.4% year-over-year in July 2025, indicating weakness. We’re also keeping an eye on Exchange-Traded Funds (ETFs) that are tied to the Chinese real estate and banking sectors.Impact on Global Markets
The struggles in the property sector are affecting the global economy, especially commodities like iron ore. With construction demand low, we anticipate further drops in iron ore prices, which have recently gone below $100 per tonne. This situation is more severe than the slowdown we saw in 2015, as it stems from a deep loss of confidence. We are alert for signs of trouble in industries that depend on Chinese consumer spending, such as luxury goods in Europe and car makers in Germany. Germany’s manufacturing PMI recently fell to 48.5, with businesses noting fewer orders from China as a major issue. The drop in wealth, illustrated by Hui Ka Yan’s fall from his 2017 wealth, negatively affects high-end spending. We expect more fluctuations in the Hang Seng Index due to potential unexpected responses from Beijing. Traders should consider using options strategies, like straddles, to profit from significant price changes in either direction. The CBOE China ETF Volatility Index (VXFXI) has already increased by 15% in August 2025, indicating that the market is preparing for bumpy times. Create your live VT Markets account and start trading now.Starbucks to cut U.S. coffee plant operations to five days a week due to declining demand
Starbucks will reduce production at its U.S. coffee plants to a five-day week starting in January. CEO Brian Niccol is implementing this change to cut costs due to falling demand in the U.S.
The company’s five coffee roasting and packaging facilities in the U.S. will shift from a seven-day to a five-day weekly production schedule. This decision is part of a larger strategy to cut costs and reinvest as Starbucks faces a decline in demand for its more expensive drinks.
Along with lowering production, Starbucks will limit annual raises for salaried employees in North America to 2%. The savings gained from these changes will be used to enhance stores and improve customer experience while dealing with slowing sales.
Starbucks moving to a five-day production schedule raises concerns about U.S. demand. This, along with the capped raises, indicates that management expects soft sales to continue into 2026. For investors, this suggests a cautious outlook for the company’s stock in the upcoming weeks.
This trend follows broader economic patterns, as data from the Bureau of Economic Analysis for July 2025 showed a slight decline in real discretionary spending. Additionally, Starbucks’ stock has underperformed the S&P 500 by about 4% this year, reflecting weaker consumer sentiment. The production cut reinforces concerns about the market for higher-priced items.
Investors might consider buying put options to protect against or speculate on further declines. Look for expiration dates between October 2025 and January 2026 to capture market sentiment around the next earnings report and these production cuts. These put options could increase in value if Starbucks’ future guidance worsens.
We can expect an increase in the stock’s implied volatility soon. This means options prices will rise as traders account for a wider range of potential outcomes. Strategies like debit put spreads could help manage some of these rising costs while keeping a bearish stance.
This situation contrasts with the growth narrative from 2022 and 2023 after Howard Schultz returned to the company. That time was focused on growth investments, while the current approach is about safeguarding margins. Historically, similar consumer companies that announced production cuts before a potential downturn faced challenges in their stocks over the next two quarters.
However, some may view this move as essential for improving profitability. If these cost-cutting measures are seen as a proactive way to boost margins, they could create a price floor for the stock. Selling cash-secured puts at a lower strike price could be a strategy for investors looking to benefit from a potential long-term positive outcome.
Retail sales in New Zealand increase by 0.5% quarterly and 2.3% annually, showing modest growth
In the second quarter of 2025, New Zealand’s retail sales rose by 0.5% compared to the previous quarter, exceeding the expected increase of 0.2%. Year-over-year, retail sales grew by 2.3%, up from just 0.7% last year.
According to Stats NZ, most industries showed modest growth during this time. Out of 15 retail sectors, eight reported higher sales in June than in March after adjusting for price changes and seasonal factors.
