The Russian central bank is thinking about lowering interest rates if inflation goes down. However, it might keep the rate at 18% for the rest of the year because of ongoing geopolitical risks. A high-ranking official from the bank indicated that if inflation falls quickly, the rate could decrease this year. However, the bank’s outlook also suggests that the rate might stay at 18% until the end of the year.

Geopolitical Factors

Geopolitical issues remain a concern, potentially causing inflation to rise. The bank is careful about these inflationary risks, which affect its interest rate choices. The Russian central bank is sending mixed messages, creating a unique opportunity in the derivatives market. They hinted at a possible rate cut, but may also maintain the 18% rate because of ongoing risks. This uncertainty is something traders need to pay attention to in the upcoming weeks. Recently, inflation in Russia has improved, with July 2025 figures showing a drop to an 8.5% annual rate, down from over 11% earlier this year. This supports a potential rate cut since the central bank has noted that lower inflation is necessary for a more relaxed policy. However, a rate cut might put short-term pressure on the ruble. Yet, the geopolitical situation is still a significant risk that could lead the bank to keep rates high to protect the currency. Ongoing talks about tightening energy sanctions have kept the markets on edge. In 2022, the central bank quickly raised rates to stabilize the ruble, reminding us of how rapidly they can act.

Market Volatility

This uncertain outlook is causing increased price volatility. One-month implied volatility for USD/RUB options has surged to over 35%, a jump from the low 20s just a month ago. This increase shows that the market expects considerable movement for the ruble, but is unsure which way it will go. Given this high volatility, traders might want to explore strategies that benefit from significant price changes in either direction. Buying option straddles or strangles on the ruble could be effective, as they would gain from either a surprise rate cut or a geopolitical shock causing a sharp move. The current pricing indicates that a period of calm is not likely. For those focused on interest rates, this uncertainty offers clear opportunities. Traders are engaging in interest rate swaps that would profit if the central bank keeps rates steady at 18% through the end of the year. Others, however, are betting on a series of cuts starting as soon as the next meeting. Create your live VT Markets account and start trading now.

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Implied volatility levels for GBP and EUR currency pairs are important to watch before the release of the EU and UK flash PMI data. Key levels for pairs like GBPUSD, EURUSD, and EURGBP give clues about potential market movements. For EURUSD, resistance is at 1.1700 and support is at 1.1600. In EURGBP, resistance is 0.8680 and support is 0.8630. EURJPY has resistance at 172.400 and support at 170.900. GBPUSD shows resistance at 1.3520 and support at 1.3400. The GBPCHF pair has resistance at 1.0850 and support at 1.0760, while GBPJPY lists resistance at 199.00 and support at 197.00.

Dynamic Indicators Of Support And Resistance

These levels come from 1-month implied volatility, which acts as dynamic indicators of support and resistance. When combined with technical analysis tools like pivot points and Fibonacci retracements, they help to pinpoint potential entry, profit-taking, or stop-loss levels. Implied volatility provides a data-driven price range that supports technical analysis. Implied volatility ranges are tightening as we approach today’s key flash PMI data from the UK and Eurozone. These reports serve as a crucial economic check for August and will shape expectations for the central bank meetings in September. For derivative traders, the 1-month volatility levels indicate expected limits for currency fluctuations in the coming weeks. The market is especially focused on the Eurozone’s manufacturing PMI. This has struggled to stay above the vital 50-point mark for most of the past year. Earlier, in early 2025, a weak PMI reading of 46.5 led EURUSD to break through its expected support level. With the ECB set to decide on rates on September 11th, a poor reading today might drive traders to buy put options below the 1.1600 support level in EURUSD. For the pound, the scenario differs slightly. The recent UK services PMI data has shown resilience, often exceeding forecasts. The one-month range for GBPUSD between 1.3400 and 1.3520 suggests uncertainty in the market’s direction. If the UK services number is strong while the EU manufacturing figure weakens, we could explore strategies that capitalize on EURGBP dropping below its 0.8630 support.

Investment Strategies Based On Volatility

Given the current uncertainty, placing trades that profit from a significant price change—regardless of its direction—could be wise. This is particularly true for pairs like GBPJPY, which has an expected range of 200 pips between 197.00 and 199.00. A surprise in the PMI data could lead these currency pairs to break out of their implied volatility bands, benefiting traders prepared for such movements. These volatility-based levels are most useful for determining option strike prices for the month ahead. For example, if we anticipate weakness in the pound following the Bank of England’s meeting on September 18th, the 1.3400 level in GBPUSD could be a critical strike price for put options. Merging these objective data points with our technical insights allows us to create a stronger trading strategy. Create your live VT Markets account and start trading now.

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Trade Management Principles

Trade management involves a few key methods to help minimize risk and secure profits. One strategy is to take partial profits at logical points. Another important step is to move stop-loss orders to the entry point after hitting the second profit target. This method focuses on protecting profits and reducing exposure, rather than chasing the market. TradeCompass’s approach, used by investingLive.com, encourages trading discipline and clarity without giving financial advice. Traders need to keep an eye on their risk and capital, making independent trades that align with their risk tolerance. Currently, gold futures are around 3384.6. Our immediate direction is influenced by the 3388.9 level. As long as we are below this level, we expect prices to go down. The first targets to watch are at 3383.1 and the value marker from yesterday at 3377.4. This short-term decline should be viewed as a part of a larger rally, with gold still up over 28% since the start of 2025. The current dip seems like a healthy pause after such a big rise, indicating that the market is taking a break rather than reversing its trend.

Impact of Economic Indicators

The recent pullback is linked to last week’s US CPI data, which showed inflation at 3.1%, slightly below the 3.3% that economists expected. This eased inflation worries and caused the dollar to strengthen temporarily, which affected gold prices. Additionally, comments from the central bank last month suggested that rate cuts may not happen as soon as the market anticipated. For traders in derivatives, this situation offers multiple opportunities in the upcoming weeks. Bears might consider short dated puts targeting the 3350 level, while bulls might see this as a chance to sell puts at lower levels, like 3320, to earn premiums during this dip. If prices break above 3394.5, it would change the current bearish outlook and indicate that the consolidation phase has ended. We’ve observed similar patterns in the past, especially during the surge we saw in 2020. Sharp rallies were often followed by brief pullbacks that served as buy opportunities for those who had a longer-term positive outlook. This historical pattern suggests that being patient could pay off once this selling pressure eases. Therefore, we need to stick to our strategy and treat the 3394.5 level as a crucial pivot point. Until we reclaim that level, we should adhere to the short-term bearish trend and manage our risk appropriately. A rise above it would indicate that bulls are back in charge and the larger upward trend could continue. Create your live VT Markets account and start trading now.

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The People’s Bank of China (PBOC) has set the USD/CNY midpoint at 7.1287, which is higher than the expected 7.1748. The yuan uses a managed floating exchange rate system, allowing its value to change within a +/- 2% range from this midpoint. The previous closing rate for the yuan was 7.1834. The central bank plays a key role in setting this midpoint to keep the currency stable.

Central Bank’s Strong Signal

The much stronger yuan fixing at 7.1287 sends a clear message from the central bank. This action aims to stop the yuan’s recent decline and sets a boundary against further weakness. Those betting against the yuan now face increased risks in the coming weeks. This strong defense follows recent reports showing that China’s industrial production for July 2025 increased by only 3.1%, which fell short of expectations and raised concerns about the economy. Additionally, the US Federal Reserve has indicated it will maintain a strict monetary policy, adding pressure on the yuan. The PBOC is clearly countering these market forces. Given this strong signal, now might be a good time to sell short-dated call options on USD/CNY. The central bank has essentially put a temporary cap on the exchange rate, making it unlikely to rise significantly in the near term. This strategy could benefit from the expected drop in upward volatility.

Historical Context

We’ve seen similar tactics before, especially in late 2023 when the PBOC used strong fixes to defend the 7.30 level. History shows that when the central bank takes such decisive action, it can maintain this position for weeks or even months. This historical pattern suggests we shouldn’t expect a quick return to yuan weakness. For those looking to follow the central bank’s direction, buying put options on USD/CNY could be a smart move. This approach allows investors to profit from a possible further rise in the yuan, as guided by the PBOC’s strong intervention. It’s a direct bet that the PBOC will successfully push the exchange rate lower. Create your live VT Markets account and start trading now.

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FanDuel is teaming up with CME Group to launch affordable event contracts by late 2025. This will allow people to bet on financial metrics like the S&P 500 or oil prices for as little as $1. The project will be carried out through a new joint venture that acts as a non-clearing futures commission merchant. These contracts will cover daily changes in prices for the S&P 500, oil, gold, and other economic indicators. Interest in event contracts surged after the 2024 U.S. presidential election, attracting more attention from everyday investors and the industry.

Flutter Expertise

Flutter, the parent company of FanDuel, brings experience from Betfair, which is known for its innovative betting exchange similar to event contracts. However, event contracts have drawn regulatory attention. For example, KalshiEX faced legal issues with the CFTC concerning election contracts, and Robinhood halted Super Bowl-related contracts after a CFTC intervention. Critics believe that event contracts might confuse financial trading with gambling, potentially harming public trust. This model is similar to binary options, which offer set payouts for yes/no outcomes and have also faced regulatory hurdles. However, they could provide valuable insights into retail investor sentiment, which can be beneficial for those looking to go against retail trends, depending on how data and odds are presented. With the introduction of FanDuel and CME Group event contracts expected in late 2025, a new flow of market data will emerge. These low-cost contracts on indices like the S&P 500 will attract a crowd of everyday investors, distinct from standard futures traders. The main advantage for us will be using this platform as a real-time measure of Main Street sentiments. We should consider using this as a contrarian signal. For instance, data from Vanda Research shows that spikes in retail investor net flows into instruments like the SPY ETF often happen right before short-term market peaks. If we observe a very bullish sentiment on this new platform—like 90% of contracts betting on the S&P 500 to rise—it could indicate a chance to counter that optimism.

The Trend Toward Micro-Speculation

The trend of micro-speculation isn’t new, but this partnership brings it to a larger scale. Products like CME’s Micro E-mini futures have become popular, regularly exceeding 2 million contracts in daily trading. This venture makes the same gambling impulse accessible to a wider audience, offering a clearer yet noisier sentiment signal. Looking back, there was a spike in prediction market volume during the 2024 U.S. election, showing retail interest in event-based outcomes. We can anticipate a similar influx into these financial contracts, providing a rich dataset on retail biases from the start. This raw data could be as useful for our short-term strategies as traditional sentiment surveys. However, we must keep in mind the regulatory risks. The history of binary options in the U.S. includes many crackdowns, and we witnessed the CFTC intervene in similar event contracts as recently as early 2025. Any sudden regulatory actions could quickly eliminate this data source and lead to unpredictable market reactions. In the upcoming weeks, we must determine how to access and analyze the odds and volume data from this new joint venture. We should be prepared to integrate this sentiment information into our models as soon as it launches. This proactive approach will be crucial for understanding the predictable behaviors of retail market participants. Create your live VT Markets account and start trading now.

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Nomura expects the USD to weaken further if Powell hints at a sluggish labor market during the Jackson Hole event. Recent weaker data on NFP and CPI suggests that the Fed may reduce rates, with a 25 basis point cut in September as a likely scenario. The stronger July PPI is considered a temporary issue.

Market Positioning

Market positioning looks manageable, indicating the dollar could drop if Powell indicates a softer policy or if new data remains weak. Risks include stronger-than-expected August data, more foreign investments in US assets, or an increase in USD demand related to China. At Jackson Hole, if Powell mentions a weaker labor market, we could see further dollar decline. If not, markets may wait for September NFP and CPI data for direction. Right now, our position is short on the USD, while staying aware of potential risks from upcoming events and data that could change market sentiment soon. We firmly believe the dollar will weaken more as the Federal Reserve plans to cut rates. July’s jobs report, which showed only 155,000 new jobs, backs our view that the labor market is slowing. Core inflation has also dropped to a two-year low of 2.8%, making a September rate cut likely. In the coming weeks, purchasing put options on the US dollar index (DXY) with a September expiration provides a way to limit risk while positioning for a possible sharp drop after the Jackson Hole symposium. This method helps us profit from a potential decline while keeping our losses limited to the option premium, making it a safer choice than directly shorting futures given the short-term risks.

Speculative Positioning

We see potential for this shift, as the Commitment of Traders reports indicate speculative positioning is not as crowded as it was for shorting the dollar in late 2023. That time offers a useful comparison for how quickly the currency can decline once the market senses a genuine Fed shift towards easing, suggesting that the current trend can extend if data continues to align. However, we must stay alert for risks that might boost the dollar. Strong manufacturing or services PMI reports in August or renewed concerns about China’s economy could prompt a flight to safety. Such scenarios would quickly invalidate bearish positions on the dollar, making stop-losses on futures positions vital. The key moment will be Fed Chair Powell’s speech at Jackson Hole. If he openly acknowledges the softening labor market, we expect the dollar to drop immediately. If he is non-committal, traders in derivatives should prepare for range-bound trading until we receive the next inflation and employment updates in early September. Create your live VT Markets account and start trading now.

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Japan’s flash manufacturing PMI has risen to 49.9, up from 48.9. This shows a small improvement in the manufacturing sector. On the other hand, the flash services PMI has dipped slightly to 52.7, down from 53.5. The composite PMI, however, has increased to 51.9 from 51.5.

Economic Rebalancing

As of August 21, 2025, Japan’s economy shows signs of careful rebalancing. The rise in the manufacturing PMI to 49.9 is a positive sign, indicating the sector is stabilizing after a challenging period. Yet, the slight drop in the services PMI to 52.7 suggests that the domestic recovery may be losing momentum. This mixed report likely means the Bank of Japan will maintain its current course for now. After ending negative interest rates in early 2025, officials will want to see stronger, consistent growth before making any changes. The current data may allow them to be patient, lowering the chances of an immediate rate hike. For traders monitoring the yen, it seems the USD/JPY pair might stay within a range. There is less reason for significant yen weakness, especially since Japan’s core inflation has remained above 2% for over two years. Consider buying short-dated call options on the yen to prepare for any unexpectedly strong data soon.

Equity and Currency Strategies

In the stock market, the strong composite PMI of 51.9 should support the Nikkei 225 index. The better outlook for manufacturing is good news for Japan’s major exporters. Selling out-of-the-money put options on the Nikkei could be a smart way to earn premium, as this report makes a sharp downturn less likely. The main point is that the data does not provide a strong directional signal, which may result in lower implied volatility. This environment favors strategies that benefit from time decay and stable prices. We recommend traders focus on range-trading strategies for both currency and index derivatives until a clearer economic trend appears. Create your live VT Markets account and start trading now.

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The People’s Bank of China (PBOC) sets a daily midpoint for the yuan (RMB) as part of its managed floating exchange rate system. This system allows the yuan to fluctuate by +/- 2% around the midpoint. This method helps manage the yuan’s exchange rate against a group of currencies, focusing especially on the US dollar.

Midpoint Determination

Every morning, the PBOC sets this midpoint by looking at market conditions, supply and demand, economic data, and international currency market changes. This midpoint acts as a reference for trading during the day. The yuan can move within the 2% range around this midpoint. If there’s too much volatility or if the yuan’s value approaches the trading band limits, the PBOC might step in. This means buying or selling the currency to stabilize its value. This intervention allows for a more controlled and gradual change in the yuan’s market value, which aligns with China’s economic conditions and policy goals. The expected USD/CNY midpoint of 7.1748 suggests that the yuan may continue to depreciate slowly. This is likely in response to recent economic data indicating a slowdown. The central bank’s guidance implies that the yuan might move downward in the short term. Given the managed nature of the yuan, it may be wise to buy US dollar call options against it. The PBOC’s daily management within the 2% band generally prevents sharp, unexpected currency fluctuations, keeping implied volatility low. In 2023, even when the yuan dropped below 7.30, daily volatility remained low, benefiting those who anticipated the direction without overspending on protection.

Hedging Strategies

This perspective is backed by the clear difference in policy between the cautious US Federal Reserve and the more lenient PBOC. Recent data from July 2025 showed Chinese exports fell by 3.5% year-over-year, and Q2 GDP growth was slightly below expectations at 4.2%. This pressure makes a weaker yuan a needed tool for supporting the domestic economy. For traders managing corporate exposures, it’s crucial to re-evaluate hedging strategies. If the trend of yuan weakness continues, the cost of hedging using forward contracts is likely to rise. Locking in forward rates now might be a smart move for those with upcoming payments in US dollars. Create your live VT Markets account and start trading now.

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Divergence in Central Bank Policy

Central bank policies are starting to diverge. Norges Bank is likely to lower its interest rate in September after Norway’s July inflation report showed a drop to 2.8%. Meanwhile, the Eurozone’s core inflation remains stubbornly above 3%. This difference could strengthen the euro against the Norwegian krone. For traders, this situation may be an opportunity to buy EUR/NOK call options with later expirations. A notable rise above the 12.00 level would signal a strong bullish trend. Historically, the krone tends to weaken in the last quarter of the year, a trend seen in 6 out of the last 10 years. The krone is also facing challenges from the oil market. OPEC+ has announced a supply increase of 500,000 barrels per day starting in October, which has led to softer crude prices compared to their summer highs. This puts pressure on the Norwegian currency, which is sensitive to oil prices. Regarding the dollar, medium-term weakness against the krone is expected due to fiscal issues in the U.S. The latest Congressional Budget Office report predicts the U.S. deficit will surpass $2.1 trillion this fiscal year. This situation will necessitate a large issuance of Treasury bonds at a time when foreign central banks have been selling off U.S. debt for the last three months.

Capital Flow Dynamics

Given this outlook, a strategy of selling USD/NOK rallies using futures contracts or buying put options near the 10.20–10.30 resistance level could be effective. This tactic aims to benefit from the anticipated dollar weakness in the coming months. The case for a weaker dollar is supported by the significant amount of U.S. liabilities in government bonds, raising the risk of depreciation. Global capital flows are also influencing this dynamic. The higher U.S. tariffs implemented earlier in 2025 are expected to dampen domestic demand. In contrast, the eurozone has launched new green energy infrastructure funds this year, drawing considerable foreign investment. This shift may continue to divert funds away from the dollar. Create your live VT Markets account and start trading now.

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China, Pakistan, and Afghanistan are working together to strengthen their economic, security, and political ties. Their goal is to boost regional cooperation and stability. They plan to enhance development efforts and increase trade and investment. The countries are focused on improving security discussions and working together on law enforcement. Strengthening communication at different levels and building mutual trust are key goals.

Strengthening Bilateral Relations

China is backing Pakistan and Afghanistan in improving their relationship and aligning their interests. This means increasing exchanges and building trust among the three nations. Recently, there have been new commitments for economic and security collaboration among China, Pakistan, and Afghanistan. This shows a long-term plan to stabilize a historically unstable region. For traders, this might reduce the perceived risk related to investments in these countries. In the short term, we should pay attention to changes in volatility in Pakistan-focused ETFs. Historically, implied volatility for funds like the Global X MSCI Pakistan ETF (PAK) was often above 30% during times of uncertainty in the early 2020s. If this cooperation continues, we may see lower volatility, making strategies like selling put options on these ETFs more appealing, even if they carry some risk. The focus on development and investment highlights commodities. Afghanistan has large, untapped mineral resources, especially lithium and copper, which are central to this deal. We might explore long-dated futures strategies that forecast an eventual increase in global supply, potentially lowering prices in the coming years.

China’s Belt and Road Initiative

This agreement is a significant part of China’s broader Belt and Road Initiative (BRI). As reported in early 2025, freight volumes at essential BRI projects, such as Pakistan’s Gwadar Port, increased by 12% compared to the previous year. Traders should consider call options on Chinese construction and logistics companies that may gain contracts from upcoming infrastructure initiatives. From a currency viewpoint, more Chinese investment could support the Pakistani Rupee (PKR). The PKR began to stabilize against the U.S. dollar in the second quarter of 2025, following a tough 2024. Options on currency futures could help position for a less volatile or gradually strengthening rupee in the coming months. However, we must remain cautious since these are only commitments for now. The security situation in the region is still unstable, and similar projects have failed before. Therefore, maintaining some protective positions, like long puts on a broader emerging markets index, could be wise to guard against potential setbacks in these discussions. Create your live VT Markets account and start trading now.

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