The European market session on September 1, 2025, provided several economic updates. The unemployment rate in the Eurozone for July stayed at 6.2%, meeting expectations. The final manufacturing PMI for August was 50.7, slightly higher than the preliminary reading of 50.5. In the UK, the August final manufacturing PMI recorded at 47.0, which was lower than the anticipated 47.3. However, mortgage approvals for July exceeded expectations at 65.35k. Switzerland’s manufacturing PMI for August was also better than predicted, at 49.0. Market Movements European stocks rose slightly, while S&P 500 futures were steady. Gold prices jumped 0.7% to $3,471.31, and WTI crude oil increased by 1.0%, reaching $64.64. Bitcoin rose by 0.3%, now valued at $108,657. The EUR and NZD currencies were strong today, but the JPY struggled. News of the US federal appeals court ruling against Trump’s tariffs created uncertainties in global markets. In currency trading, there was little action, with the dollar slightly weaker. The EUR/USD increased by 0.3% to 1.1720 but faced resistance around the 1.1730-40 area. Gold reached its highest levels since April, aiming for $3,500, while silver surged to $40, the highest price since 2011. This week’s focus will be on the US labor market report and the upcoming non-farm payrolls data. An important uncertainty we face is the US court ruling on old tariffs, which will go to the Supreme Court. This legal situation could lead to unexpected market fluctuations in the coming weeks. With the VIX, a key indicator of stock market volatility, around a relatively low 18, buying options to protect against sudden drops seems cheaper than usual. Gold Surge Towards 3500 We are closely following gold’s rise towards $3,500 an ounce, as it reflects a strong flight to safety and ongoing inflation worries. The US CPI data from August 2025 shows core inflation stubbornly above 3.5%, a lasting effect of significant stimulus programs from earlier in the decade. This environment makes purchasing call options on gold futures an attractive strategy for capitalizing on the current upward trend. With US markets on holiday, stock movements are muted, but the upcoming US jobs report will be critical. Since S&P 500 futures are stable, traders are waiting for Friday’s non-farm payrolls release before making major decisions. This scenario is ideal for strategies like buying a straddle, which benefits from big price changes in either direction after the announcement. US Economic Data In the currency market, the EUR/USD faces resistance near 1.1740, and the dollar’s next move relies heavily on upcoming US data. We remember the rate hikes by the Fed in 2022 and 2023, and current futures pricing suggests only a 30% chance of a rate cut by the end of the year. Selling call spreads above the current resistance can be a good way to bet that strong US data will enhance dollar strength and keep the pair from rising. While our main focus is the US, we’re also watching the UK’s economic weakness, highlighted by disappointing manufacturing and housing data. This economic gap makes hedging against a downturn in Europe, such as by buying put options on the FTSE 100 index, a sensible strategy. The primary market driver will continue to be the Federal Reserve’s outlook, which will be influenced by the economic reports released over the next two weeks. Create your live VT Markets account and start trading now.

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The EURUSD pair has reverted to levels seen before the Jackson Hole Symposium, shifting focus to upcoming US data. Despite Powell’s dovish comments, the USD ended last week lower. This week, key attention will be on US labor data, culminating in the NFP report on Friday. The market believes there’s an 89% chance of a rate cut in September, with forecasts of 55 basis points of easing by year-end. If the data is strong, the probability of a September cut might drop to 50/50, positively impacting the dollar with more hawkish sentiments. Conversely, weak data could boost expectations for more rate cuts, negatively affecting the dollar. Earlier, the EUR weakened due to French political turmoil but recovered after Powell’s statements. ECB members maintain a neutral stance on rate cuts, with expectations of minimal easing in the near future.

Technical Analysis

On the daily chart, EURUSD has risen to the trendline around 1.1740, where sellers may target a decline to 1.16. Buyers aim for a break above 1.1740 to potentially rise to 1.1790. The 4-hour chart indicates resistance at 1.1740, with sellers waiting below and buyers looking for a breakout. The 1-hour chart shows a minor upward trendline, with both buyers and sellers observing for clear movements. Key upcoming events include Eurozone CPI and US economic data, leading up to Friday’s NFP report. The US dollar seems weaker due to the dovish outlook from last week’s Jackson Hole meeting. The market is almost certain a Federal Reserve rate cut will happen this month, with the CME FedWatch Tool indicating an 89% chance. This expectation has been supported by recent data, including initial jobless claims rising to 245,000 in August, suggesting a softening labor market. This week will focus on several US labor reports, with Non-Farm Payrolls on Friday being the most significant. If the numbers are weak, this will likely solidify expectations for a September rate cut and may lead the market to anticipate a third cut by year-end. Derivative traders might consider positioning for a breakout above the critical 1.1740 resistance level in EURUSD, potentially by buying call options around a strike price of 1.1750.

Market Implications

On the flip side, if the US data is strong, it could disrupt current expectations and trigger a rally in the dollar. A surprising NFP beat back in the first quarter of 2025 caused a quick drop in EURUSD, and a similar occurrence could push the pair back toward the 1.1600 support level. Traders who foresee this possibility might look into buying put options to either hedge against or profit from a decline. Given the upcoming uncertainty, implied volatility on EURUSD options is likely to rise this week. For those anticipating a significant movement but unsure of the direction, a long straddle strategy could be beneficial. This involves purchasing both a call and a put option at the same strike price to profit from substantial price swings in either direction. The European side seems relatively stable, offering less to be concerned about. Recent Eurozone inflation data for August was steady at 2.7%, providing the European Central Bank little reason to hint at further rate cuts. This indicates that the primary factor influencing the EURUSD pair in the coming weeks will likely be US economic data and shifts in Fed policy expectations. Create your live VT Markets account and start trading now.

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September is often a tough month for financial markets, especially for stocks. Over the past 20 years, the S&P 500 has historically struggled in September, making it the worst month on record. Although the market had poor performances from 2020 to 2023, the S&P 500 gained about 2% last year. This year, all eyes are on the Federal Reserve’s decision on September 17, with traders expecting a 25 basis point rate cut. The U.S. labor market report and U.S. consumer price index (CPI) report will play a big role in shaping these expectations. The Nasdaq and MSCI World Index also tend to face challenges in September. Gold usually performs poorly too. In fact, it’s the second worst month for gold over the last 20 years, with prices dropping in eight of the last ten Septembers. However, gold has done well recently and didn’t follow the usual trend in 2024. Oil prices also struggle in September, which falls in the middle of a weak period lasting from August to October/November. Last year continued this trend. Therefore, market participants should keep historical patterns in mind when evaluating commodities and stocks this September. Given that September is typically the worst month for the S&P 500, we should be careful about taking too many risks. The VIX volatility index is currently around a low of 13.5. Buying some inexpensive protective puts or VIX calls could be a smart way to hedge against long positions. This strategy could help shield us if the usual September patterns hold true, especially after the strong rally we saw in 2024 that broke a four-year losing streak for this month. The key event will be the Federal Reserve meeting on September 17, so we will focus on volatility around important data. We are closely watching this Friday’s jobs report and the CPI data on September 11. With fed funds futures reflecting a 90% chance of a rate cut, any surprise decision to keep rates steady could shock the market, making some low-cost out-of-the-money options a potential lottery ticket play. We also need to take gold’s historical performance into account. September has been its second worst month, with prices falling in eight of the last ten years. Since 2005, gold’s average September return has been a negative 1.2%. Although it defied this trend during the 2024 rally, the safest approach might be to look for chances to sell into strength or buy puts. Finally, the seasonal trend for oil points to weakness as we move from the peak summer driving season into fall. The latest Energy Information Administration report highlighted a surprise increase in crude inventories, indicating softening demand. This suggests it might be time to consider short positions in futures or buy puts on oil ETFs if prices can’t maintain important technical support levels in the coming days.

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Gold prices are close to reaching an all-time high after being stable for several months. This increase is partly due to a more relaxed approach from Federal Reserve Chair Jerome Powell. The rise in gold prices mainly comes from the link between real yields and inflation expectations, which are growing faster than nominal Treasury yields. When real yields drop, gold prices usually go up. Conversely, when real yields rise, gold prices tend to fall. Last year, gold prices dropped as the Fed raised interest rates, but recent changes in policy expectations have led to a rally in gold. The Fed’s less aggressive stance, combined with a strengthening economy and rising inflation risks, is boosting gold.

Factors Supporting Gold Prices

Recently, lower real yields have supported gold prices as the Fed hinted at possible rate cuts. This dovish tone may lead to higher inflation for a longer time, which could trigger a recession. There is also ongoing concern about the Federal Reserve’s independence, specifically from the previous Trump administration. If the Fed’s independence is compromised, it could significantly impact the economy and push gold prices up sharply, although such changes would need Congressional approval. After the Fed’s recent dovish signals from the Jackson Hole symposium, gold prices are trending towards all-time highs, currently around $2,425 an ounce. The market sees the Fed’s willingness to cut rates as a major factor driving this change. It looks like more than just a temporary spike, indicating a significant shift in the market. The key reason behind this gold rally is the drop in real yields, with inflation expectations outpacing nominal Treasury yields. The most recent Consumer Price Index report shows inflation steady at 3.5%, while the latest jobs report added a strong 250,000 jobs. The Fed’s easing stance seems inconsistent with these positive economic indicators, which supports rising gold prices.

Opportunities in the Gold Market

For traders dealing in derivatives, this situation suggests either maintaining or starting long positions in gold. Buying call options on gold futures or gold-backed ETFs like GLD is a straightforward way to take advantage of the upward trend while managing risk. We expect implied volatility to rise as the market considers the potential for a policy misstep by the Fed. This situation mirrors the time between late 2022 and mid-2023, when the market began to expect an end to Fed tightening. That shift led to a significant rally in gold before a correction. The current environment feels similar, as the market now anticipates rate cuts, with Fed funds futures indicating a strong chance of easing at the next meeting. A long-term risk to watch is the political pressure on the Federal Reserve’s independence. Any significant efforts to undermine the Fed’s autonomy could lead to a rush towards safety, causing gold prices to soar. Buying long-dated, far out-of-the-money call options could be a cost-effective way to hedge against this high-impact risk. Create your live VT Markets account and start trading now.

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The unemployment rate in the Eurozone for July stayed steady at 6.2%, as reported by Eurostat on September 1, 2025. The earlier rate of 6.2% was revised to 6.3%, which is the lowest rate since November of last year. Despite various economic challenges, job conditions in the euro area have remained strong over the past year. These current figures suggest that the job market is stabilizing across the region.

Economic Resilience and ECB Policy

The Eurozone unemployment rate has reached a multi-month low of 6.2%. This is a sign of strong economic resilience, making it tough for the European Central Bank (ECB) to decide on its next steps. A robust labor market hints that wage pressures could continue, which makes it harder for inflation to drop back to the ECB’s target. Because of this, it’s more likely that the ECB will keep its restrictive monetary policy in place for a longer time. The strong employment numbers, combined with the latest inflation estimate for August 2025 at 2.8%, place the ECB in a challenging position. Recently, ECB President Lagarde discussed at the central bank symposium in Jackson Hole her commitment to controlling inflation. A strong jobs market gives the bank the justification it needs to maintain higher interest rates throughout the fall. For traders in European equities, this suggests caution for indices like the Euro Stoxx 50. The possibility of “higher for longer” interest rates could hinder corporate earnings and valuations. It might be wise to use options to protect long positions, such as buying put spreads to guard against a potential downturn before the next ECB meeting.

Impact on Forex and Market Volatility

In the foreign exchange market, this data supports the Euro. A hawkish ECB compared to other central banks, like a potentially pausing US Federal Reserve, should lead to upward momentum for the EUR/USD pair. In the options market, we’ve already noticed the one-month risk reversal for EUR/USD moving in favor of calls, showing a growing institutional bias towards Euro strength. This situation is reminiscent of what we saw in 2023 with the US Federal Reserve, where a surprisingly strong labor market often led to market re-evaluations of rate cut timing. Given this, we can expect continued volatility, with the VSTOXX index measuring Euro Stoxx 50 implied volatility already rising to 18.5, the highest since June 2025. This environment favors strategies that can benefit from price swings rather than a clear trend in the overall market. Create your live VT Markets account and start trading now.

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A U.S. federal appeals court has declared that Trump’s reciprocal tariffs are illegal. This decision may be taken to the U.S. Supreme Court. As a result, there is now more uncertainty in the market, causing the dollar to dip slightly at the beginning of the week. Despite this dip, the USD remains fairly stable, showing only minor changes. The EUR/USD has increased by 0.3% to 1.1720, reaching a peak of 1.1733 earlier, but is facing resistance in the 1.1730-40 range. Other currencies are also experiencing minimal changes, partly because U.S. markets are closed for a long weekend. Gold is gaining attention as the week kicks off. With the U.S. Supreme Court set to review the legality of previous tariffs, we should prepare for increased uncertainty. The dollar’s slow start this week may be misleading, as the ongoing legal issues add significant political risk to currency markets. It’s important to remember that the current calm does not mean the market has fully accounted for possible outcomes. This situation may lead to a rise in currency volatility, which has been at multi-year lows according to the Deutsche Bank Currency Volatility Index (CVIX). With implied volatility relatively low, now could be a good time to buy options straddles on major pairs like EUR/USD or USD/JPY. This approach allows for profit from large price movements in either direction without needing to predict the Supreme Court’s final decision. We recall the sharp currency movements during the 2018-2019 trade disputes, where pairs like USD/CNY experienced significant swings based on tariff news. The current market might be underestimating the potential for similar reactions, especially since last month’s U.S. jobs report already indicated a slowdown in hiring. This new legal challenge could amplify any existing economic weaknesses and pressure the dollar further. For EUR/USD, the pair is currently testing resistance near 1.1740. Traders who think this ruling will weaken the dollar could consider buying call options with strike prices above this level. This strategy limits risk while positioning for a breakout if legal uncertainties increase. The move toward safe-haven assets is another key theme, with gold showing signs of strength. Gold futures are trading around $2,450 an ounce, making call options on gold or gold-backed ETFs more appealing as a hedge against the political instability that this court case introduces into the financial system. For companies with significant dollar-based receivables or payables, it is crucial to review hedging strategies. Locking in forward rates with currency futures or using flexible options collars can help protect balance sheets from unfavorable shifts. We expect this issue will remain a major topic in the market for the next few weeks, making proactive risk management essential.

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The UK manufacturing PMI for August was finalized at 47.0. This is a slight decrease from the earlier estimate of 47.3 and down from last month’s 48.0. These numbers show that production is still contracting gently, and jobs are still being lost, marking the tenth month in a row of employment declines. Despite facing difficulties, production volumes held up well, with only minor contractions in July and August. However, new orders, including those from abroad, fell sharply, marking one of the fastest declines in two years. Reasons for this include weak market conditions, US tariffs, and low client confidence, which have all affected new contracts. The future of the manufacturing sector is uncertain. Manufacturers are worried about government policies, like potential tax increases, that could hurt competitiveness. The upcoming Budget may influence business confidence for the next year. With a final manufacturing PMI of 47.0, it indicates ongoing contraction in the UK economy, creating a negative short-term outlook. The decline in new orders is particularly worrying because it suggests future weakness will continue. This follows last week’s data from ONS, which showed a surprise 0.2% drop in retail sales for July 2025, indicating broader economic struggles. This ongoing weakness makes a rate cut from the Bank of England likely in the coming months, which would put pressure on the British Pound. In terms of currency derivatives, it may be wise to buy put options on GBP/USD, as the pair could test the 1.24 level seen during market uncertainty in May 2025. Markets are now pricing in nearly a 60% chance of a rate cut by the end of the year, up from 45% just a week ago. For equity traders, this data suggests that UK domestic stocks will likely underperform, putting the FTSE 250 index at greater risk compared to the internationally-focused FTSE 100. We should expect a decline in the industrial and consumer discretionary sectors. Buying puts on ETFs tracking these sectors could be a smart way to prepare for this expected downturn. The report also emphasizes significant uncertainty surrounding the upcoming government Budget, particularly regarding potential tax increases. This raises a clear risk event that will likely increase market volatility in the following weeks. We should consider buying volatility through straddles on the FTSE 250 index to profit from significant price movements in either direction after the Chancellor’s announcement.

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In July, the UK saw mortgage approvals rise to 65,350, exceeding the expected 64,400. The June figure was also updated to 64,570 from 64,170. Meanwhile, net consumer credit climbed to £1.62 billion, surpassing the forecast of £1.35 billion. The previous amount was revised to £1.47 billion.

Net Mortgage Borrowing Drops

Individuals’ net mortgage borrowing fell by £0.9 billion, bringing the total down to £4.5 billion in July. This change came after a £3.2 billion increase in June, which had pushed net borrowing up to £5.4 billion. On an annual basis, consumer credit growth rose to 7.0% year-over-year, up from 6.8% in June. Today’s mortgage and credit numbers are stronger than anticipated, highlighting a surprisingly resilient UK consumer. This goes against the recent view that the economy was slowing as we move into autumn. The data indicates that demand is still strong, even with higher borrowing costs. The rise in annual consumer credit growth to 7.0% is especially significant as it signals inflation. We saw a similar trend during 2022-2023, when ongoing consumer borrowing increased price pressures. This suggests that inflation may remain higher than the Bank of England prefers.

Challenges for the Bank of England

This new information makes the outlook for the Bank of England’s Monetary Policy Committee more complex. With the Bank Rate held at 4.75% through summer 2025, markets may reevaluate and consider whether another rate hike is possible, especially with the latest July CPI data showing inflation at 3.1%. The likelihood of rate cuts in early 2026 now seems uncertain. For interest rate traders, this points toward a more aggressive approach. We could see selling pressure on short-term Sterling Overnight Index Average (SONIA) futures, leading to higher implied yields. The yield on the 2-year UK government gilt, which reacts quickly to Bank Rate expectations, is expected to rise in the coming sessions. In the foreign exchange market, this data is likely to bolster the British Pound. The possibility of prolonged higher UK interest rates could push the GBP/USD pair above the 1.28 level it has been hovering around. Buying call options on GBP could take advantage of potential upward movement against the dollar or euro. The outlook for UK equities is mixed, providing opportunities in options trading. Strong consumer spending is beneficial for stocks in the domestically-focused FTSE 250, but higher interest rates could pose challenges for the broader market. This contrast suggests increased volatility, making strategies like buying straddles on UK stock indices potentially rewarding. Create your live VT Markets account and start trading now.

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The Swiss National Bank announced that total sight deposits for the week ending August 29 reached CHF 472.3 billion. This is an increase from CHF 469.5 billion the previous week. Domestic sight deposits rose to CHF 444.7 billion, up from CHF 442.5 billion the week before.

Swiss Sight Deposits Update

Swiss sight deposits are now at their highest level since the last week of July. This increase has continued after a decision made in June. The growth in sight deposits shows that the Swiss National Bank is actively engaging in the currency market. They are selling francs to purchase foreign currencies to stop the franc from rising too much. This indicates an ongoing effort to control the currency’s value since their policy meeting in June 2025. This intervention could establish support levels for currency pairs like EUR/CHF and USD/CHF. For traders in derivatives, this means the risk of these pairs dropping significantly may be reduced due to central bank activity. As a result, strategies that benefit from a stable or weaker franc may become more attractive.

Trading Strategy Considerations

Earlier this month, EUR/CHF fell to about 0.9550 before rising again. The central bank’s moves seem intended to protect those levels. With the latest Swiss inflation rate for August 2025 at a mild 1.3%, the SNB aims to prevent a stronger franc that could lower inflation further. This pattern has been consistent since the major rate cuts initiated in 2024. Given this situation, selling out-of-the-money put options on EUR/CHF could be a good strategy for the upcoming weeks. The premium earned provides income, while the SNB’s actions offer protection against a significant drop. Targeting expirations after the SNB policy meeting on September 18, 2025, may help capture any related market movement. Although the SNB’s influence may reduce realized volatility, implied volatility could still be high due to the risk of unexpected policy changes. This creates opportunities for traders who believe the SNB can keep the franc stable. The main risk is a sudden shift in the bank’s policy, a lesson learned from the events of January 2015. Create your live VT Markets account and start trading now.

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In August, the Eurozone manufacturing PMI jumped to 50.7, the highest it has been in 38 months, up from a preliminary 50.5. The output index also increased to 52.5, reaching a 41-month peak. This improvement shows a significant rise in new orders for the first time in over three years, highlighting the euro area’s economic strength. The recovery is widespread, with six out of eight countries reporting better conditions, an increase from four the previous month. This improvement has pushed the Manufacturing PMI above the expansion mark for the first time since mid-2022. Companies are boosting production, and domestic orders are up, balancing out weaker foreign demand. The IMF suggests that non-tariff trade barriers in the EU are equal to 44% tariffs, indicating potential for improvement. However, the recovery remains fragile. Inventory levels are declining, and backlogs of orders are shrinking amid ongoing uncertainty. Current production increases and new orders reflect resilience despite U.S. tariffs and geopolitical tensions. With the Eurozone Manufacturing PMI moving into expansion for the first time since mid-2022, it may be time to invest more in European stocks. The unexpected 50.7 reading questions the narrative of a stagnant industrial sector and points to potential value in call options on indices like the Euro Stoxx 50. This positive trend, especially in the output index, shows that companies are stepping up production. This surprisingly strong data should support the Euro, especially against the U.S. dollar, where trade issues continue. This creates an opportunity for modest long positions in EUR/USD futures or options. The increase in domestic new orders is significant, indicating that the Eurozone is generating its own demand rather than relying heavily on a declining global trade. We should also reassess our expectations for European Central Bank policies, complicating the outlook for interest rate derivatives. With inflation peaking in 2022-2023, the ECB may hesitate to ease policies too quickly if the economic rebound holds firm. August’s Eurostat flash estimate shows inflation rising to 2.7%, making near-term rate cuts less likely and adding appeal to betting against German Bund futures. The report indicates an important trend: stronger domestic demand is countering weak exports, which are affected by U.S. tariffs. This suggests a pair trade strategy that favors local European consumer and industrial stocks over larger, export-driven multinational companies. This approach enables us to benefit from the internal recovery while hedging against ongoing geopolitical trade risks. However, the recovery is delicate, and the ongoing drop in order backlogs serves as a warning sign we should heed. Volatility could stay high despite the positive news, as U.S. trade policy remains unpredictable. It would be wise to protect long positions by buying out-of-the-money puts on major indices or maintaining some exposure to volatility derivatives like VSTOXX futures.

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