Research shows that inflation is sticking around while growth expectations are weak, making it tough for policymakers. Inflation still poses risks, indicating a stricter approach may be needed than what the market expects. Keeping the Bank Rate high is seen as necessary to combat inflation. However, if domestic demand takes a hit, we could see swift Bank Rate cuts.

Current Market Conditions

Currently, GBPUSD is trading between the 100-hour and 200-hour moving averages, at 1.34624 and 1.34944, respectively. The price is slightly up today but stays within these ranges, showing a neutral technical view. As of August 26, 2025, the UK faces a challenging mix of stubborn inflation and weak growth. The latest CPI data from July 2025 shows inflation at 3.1%, still above the 2% target, raising concerns about price pressures. This suggests that the Bank of England will not rush to cut interest rates. The main point is that monetary policy could end up being much stricter than the market currently believes. While GDP growth was flat at just 0.1% last quarter, inflation risk remains the primary focus. This implies that any expectations for a rate cut before the year’s end may need reassessment.

Monetary Policy Outlook

This uncertainty around policy is keeping GBPUSD in a steady trading range between 1.3460 and 1.3490. For traders, this situation points to strategies that can profit from either low volatility or a sudden price movement. The market’s current uncertainty mirrors the central bank’s own challenges. While the key message is to keep interest rates “higher for longer,” there’s also the potential for quick cuts if the economy sharply declines. This introduces a two-sided risk; any unexpectedly weak retail or employment data could lead to a swift change in outlook. Traders should prepare for increased volatility around these crucial data points. Reflecting on the high inflation of 2022 and 2023, it’s clear that policymakers want to avoid easing measures too early this time. Therefore, keeping a tight policy is likely the best approach for now. This suggests that bets on a significant rise in UK gilts or a continued drop in the pound face serious obstacles. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

In August, US consumer confidence hit 97.4, beating the forecast of 96.2. The previous month’s figure was also adjusted up from 97.2 to 98.7. When it comes to current business conditions, 22.0% of consumers described them as “good,” up from 20.5% in July. Meanwhile, 14.2% viewed them as “bad,” an increase from 13.6%. In the job market, 29.7% felt that jobs were “plentiful,” a slight drop from 29.9% in July, while 20.0% found jobs “hard to get,” rising from 18.9%.

Consumer Expectations and Job Market Outlook

Looking ahead six months, 19.5% expect business conditions to get better, slightly up from July’s 19.0%. On the other hand, 21.9% predict a decline, down from 22.7%. In terms of job availability, 17.9% think there will be more jobs, a slight decrease from 18.0%, while 26.8% expect fewer jobs, up from 25.1%. Expectations for income growth went down to 18.3% from 18.7%, and 12.6% expect a decrease, up from 11.8%. Additionally, consumers reported a rise in mentions of tariffs and ongoing worries about price increases. Inflation expectations climbed, with a 12-month forecast of 6.2%, up from 5.7% in July, though still lower than April’s peak of 7.0%. While consumer confidence exceeded expectations, the details reveal growing unease. Although views on current business conditions improved, the outlook on the job market has worsened for eight consecutive months. This mixed information suggests increased market volatility in the weeks to come. The key point is the rise in inflation expectations to 6.2%, breaking a three-month trend of cooling. Core PCE inflation has stubbornly stayed above the Fed’s target, around 2.7% last quarter. This shift in consumer sentiment raises concerns. If inflation expectations stay high, the Federal Reserve may have to adopt a more aggressive approach than the market currently predicts.

The Impact of Inflation and Market Strategy

Worries about future jobs and income are clear warning signs for consumer spending, which has been a crucial part of the economy. This report aligns with recent data showing job openings steadily declining and falling below 8.4 million in the latest report. This indicates that shorting consumer discretionary sectors while favoring defensive staples could be a smart strategy. Given the conflicting indicators of business optimism and personal anxiety, preparing for higher volatility seems wise. Strategies like purchasing VIX call options or index straddles could benefit from significant market moves in either direction. The experience from 2022-2023 shows how quickly sentiment can change, suggesting that the market’s recent calm may be coming to an end. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Richmond Fed’s composite index for August was -7, which is better than the expected -11 and an improvement from last month’s -20. The services index rose to 4, up from 2 the previous month, while manufacturing shipments improved to -5 from -18. In the business sector, eight indicators went up month-over-month, three went down, and one stayed the same. Employment and wages grew compared to last month; however, there was a decline in the availability of necessary skills.

Surge In Prices Paid

Prices paid saw a significant increase, jumping from 5.65 to 7.24. In contrast, prices received remained steady at 3.14. The August 2025 data from the Richmond Fed is better than expected, showing that economic activity is slowing down less than before. However, the critical point is that the costs companies are paying for goods have risen sharply. This situation puts pressure on corporate profits, as the prices they receive for their products have not changed. This report complicates the outlook for interest rates and the Federal Reserve’s decisions. National inflation is sticking around 3.4% this year, and the sharp rise in regional input costs may make the Fed hesitant to lower rates. Traders should expect lower chances of a rate cut before the end of 2025, which might strengthen the dollar and put pressure on bonds. For S&P 500 equity index options, this creates a challenging situation. A similar period of margin compression hurt stocks in 2022, so it seems wise to hedge against a possible drop in corporate earnings. This could involve buying put options or selling call spreads to protect against downside risks from disappointing profit reports next quarter.

Sector Performance Divergence

There is a noticeable divide between the improving services sector and the struggling manufacturing sector. The report suggests that services are growing, indicating ongoing strength in consumer-focused areas of the economy. This may lead us to prefer bullish positions on consumer discretionary stocks rather than industrial ones in the upcoming weeks. Overall, this combination of rising activity and cost pressures increases uncertainty. The VIX, a measure of expected market volatility, has been around historic lows of about 13 for most of the summer. This report could trigger a spike in volatility, making long positions in VIX call options a potentially good hedge against broader market turbulence. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

In early trading, US stock indices are showing only slight changes. The Dow Industrial Average and the S&P Index are up by 0.01%, while the NASDAQ Index stays the same. US bond yields are mixed. Short-term yields are going down, while long-term yields are going up, making the yield curve steeper. The 2-year yield drops to 3.695%, down 3.4 basis points. Meanwhile, the 10-year yield is steady at 4.282%, and the 30-year yield rises to 4.928%, up 4 basis points.

Upcoming Economic Data

The US consumer confidence and Richmond Fed index data are set to be released at 10 AM. Consumer confidence is expected to tick down to 96.2 from last month’s 97.2. The Richmond Fed index is forecasted to improve to -11 from -20 last month. In commodity markets, crude oil prices are down by $0.96, now at $63.84. With major indices not showing a clear trend, this reflects market uncertainty ahead of the Federal Reserve’s Jackson Hole symposium later this week. The VIX, which measures expected market volatility, is around 17, making it a good time to buy options. Traders might want to consider straddles or strangles on indices like the SPX to profit from any big price movements, no matter what the Fed decides.

Market Strategies and Economic Indicators

The yield curve steepening, where short-term yields fall and long-term yields rise, is an important trend to watch. This change indicates a return to normal from the deep inversions seen in 2023 and 2024. It suggests the market expects short-term economic weakness but has concerns about inflation in the long run. Traders can take advantage of this trend by going long on 30-year Treasury bond futures and short on 2-year Treasury note futures. We are also seeing mixed economic signals. Falling oil prices are at odds with the implications of the steeper yield curve. The drop in crude oil to around $63 a barrel, due to a surprise rise in inventory reported last week, shows weakening global demand. This makes puts on energy sector ETFs like XLE a smart hedge against further slowdowns. While today’s consumer confidence figures are usually not major news, any significant changes could influence a market seeking clarity. After the July 2025 CPI report revealed persistent inflation at 2.8%, weak consumer data might increase speculation about a Fed policy shift. Given this uncertainty, buying protective puts on the SPY or QQQ is a wise strategy to protect portfolios from a potential downturn in the coming weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Market-on-close (MOC) order imbalances show how money flows as the stock market closes. They indicate whether large institutions are buying or selling, which influences market sentiment and direction. At InvestingLive.com, we analyze MOC data to better understand market trends. Recent data shows a positive net flow of about +$200 million over the last 10 sessions, with more money coming in than going out. The 20-day moving average also points to an upward trend. However, data from August 25 revealed a steep outflow of $192 million, suggesting that caution is increasing and impacting market momentum.

Future Trends

The future direction depends on whether big outflows continue or if we see strong inflows again, like those on August 18, 21, and 22. The medium-term outlook is mostly positive, but recent outflows signal caution. It’s essential to watch for signs of stability in flow or if another outflow suggests deepening market weakness. Using MOC data helps gauge market sentiment, but it’s not the only indicator. The current analysis shows a slight bullish trend, but the recent outflows hint at a shaky foundation. Keeping an eye on future imbalances could shed light on market directions. Recent money flow presents mixed signals for derivative traders. Although the trend has been positive recently, yesterday’s large outflow of $192 million indicates hesitation among big institutions. This situation suggests it might not be the best time for bold, one-sided market bets. This cautious attitude from institutions makes sense given the current economic conditions. The latest inflation report from July 2025 shows a steady Consumer Price Index at 3.4%. All attention is now on the upcoming Jackson Hole symposium for insights on interest rate policies. Such uncertainty can lead to volatile price movements, complicating straightforward directional trades.

Volatility and Trading Strategies

The CBOE Volatility Index (VIX) is currently around a low level of 15, signaling a lack of immediate fear in the market. However, the recent selling pressure suggests that this low volatility could change if institutional outflows continue. For derivative traders, this might be a good time to consider inexpensive protection, such as out-of-the-money puts on major indices like the S&P 500. In this uncertain environment, options strategies like spread trades may be useful in the coming weeks. A bearish put spread can take advantage of a potential slight downturn while limiting risk if the market suddenly rises. Conversely, a bullish call spread could bet on a return to inflows without the risk of unlimited losses from shorting puts. We observed a similar situation in the summer of 2023, when institutional flows turned unpredictable after a strong period. That phase led to sideways trading with higher volatility for several weeks. History suggests that when large players are uncertain, the market often remains stagnant. Consequently, the most crucial data will be the next few MOC imbalance figures. If we see another significant outflow today or tomorrow, it would confirm that institutions are pulling back and justify seeking more downside protection. If strong buying returns, it could mean yesterday’s outflow was just a temporary dip, making selling put premiums a viable strategy once more. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The growth of the US workforce has nearly come to a halt without immigration. This situation presents challenges for economic growth. A stagnant workforce means that GDP growth must depend on improving productivity instead of bringing in new workers. The economy can only grow if productivity increases through innovation or new technology. If productivity doesn’t improve, GDP can stall since there aren’t enough workers to produce goods and services. Over time, a stable or declining workforce must support more retirees, which increases financial pressure. While a tighter labor supply may raise wages, the economy as a whole may grow more slowly. Therefore, improving productivity is crucial to keep the economy moving forward.

Impact on Various Industries

Immigrants are essential in many sectors, including both high-skill and vital jobs. Without them, we may see shortages in industries such as agriculture, construction, healthcare, hospitality, manufacturing, and technology. These sectors might face labor shortages, higher costs, and reduced output. For instance, the agriculture industry heavily relies on immigrant workers, which could lead to higher food prices if they are not available. In healthcare, an aging population is increasing demand, leading to even more staffing challenges. The hospitality industry might see business closures or less service, while technology sectors rely on immigrant talent for innovation. Recent comments from the Federal Reserve show that US workforce growth is nearly zero without immigration. This could increase market volatility and make GDP growth heavily reliant on productivity gains, which aren’t guaranteed. Any news related to immigration policy or labor participation rates is likely to create sharp shifts in the market. This environment makes options betting on volatility, such as VIX call options, a potential consideration. We’ve seen similar situations after the COVID-19 labor shortages of 2021 and 2022, which led to persistent inflation. As a result, the market might begin to consider the risk that inflation won’t drop as expected, potentially forcing the Federal Reserve to postpone rate cuts or remain cautious. This scenario suggests that traders might consider options on treasury ETFs like TLT to prepare for changes in interest rate expectations.

Investment Strategies and Market Implications

The analysis highlights industries most affected by labor shortages, including construction, hospitality, and agriculture. The July 2025 jobs report indicated increasing wage pressures in these areas, showing that companies are raising salaries to attract limited workers. It might be wise to buy put options on specific sector ETFs, like the homebuilders ETF (XHB) or the leisure and entertainment ETF (PEJ), to protect against falling profit margins. On the other hand, the only way out of this economic slowdown is a boost in productivity. This situation highlights companies focused on automation, robotics, and artificial intelligence. As businesses seek to improve efficiency due to worker shortages, the technology sector could outperform. Thus, buying call options on automation-focused ETFs could be a strong long-term strategy. Everyone will be watching the upcoming reports on productivity and labor costs for the third quarter of 2025. Last quarter’s productivity growth of just 0.7% in Q2 2025 was disappointing and far below what is necessary for sustainable economic growth in a low workforce growth environment. Any further weakness in these reports could signal economic stagnation, creating challenges for the overall market indices. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

In June 2025, the Case Schiller home price index dropped by 0.3% from the previous month, just slightly more than the expected decrease of 0.2%. On a yearly basis, home prices rose by 2.1%, which matched predictions but was lower than last month’s increase of 2.8%. New York City had the highest year-on-year growth at 7.03%. In contrast, Tampa experienced the most significant drop at -2.38%. Monthly changes varied, with Chicago seeing the largest increase of 1.03%, while San Francisco had the biggest decrease at -1.05%.

Cities With Positive Month-On-Month Growth

Cities that showed month-on-month increases included: – Minneapolis: 0.67% – Detroit: 0.58% – Charlotte: 0.47% On the other hand, cities like Seattle, Los Angeles, and Washington saw declines, with Los Angeles dropping by 0.43% and Washington by 0.52%. For year-on-year changes, Chicago rose by 6.09% and Cleveland by 4.47%. Denver, San Diego, and Dallas, however, experienced declines, with Dallas at -0.95% and San Francisco down by -1.98%. The lowest year-on-year change was Tampa’s -2.38%. The June data indicates a month-over-month price drop that was a bit more significant than expected. This trend highlights that the housing market’s momentum is slowing down. It suggests that housing-related assets may continue to decline in the coming weeks. This June information is supported by additional reports from August. In July, existing home sales dropped by 3.5%, and housing inventory rose to 4.1 months of supply, the highest since 2019. High 30-year mortgage rates have climbed back to around 7.2%, affecting affordability and lowering buyer demand.

The Broader Economic Picture

The overall economic outlook offers little relief for the housing sector, likely impacting the Federal Reserve’s decisions. The July CPI report shows core inflation still stubborn at 3.8%, which means we don’t foresee interest rate cuts soon. This stance will likely keep borrowing costs high, acting as a continued challenge for home prices this autumn. Given this situation, we recommend bearish positions on homebuilder ETFs like ITB and XHB. Ongoing weakness in once-popular markets, including San Francisco, Phoenix, and Tampa, signals that builder margins and order books could face pressure. We could buy put options on these ETFs, expecting their stock prices to drop as negative sentiment grows. The data also reveals a distinct divide, with cities like Chicago and New York performing surprisingly well, while places like San Francisco face sharp monthly declines. This divergence suggests a pairs trading strategy could work. We might short a group of companies tied to the struggling West Coast and Sun Belt regions while going long on those in more stable Midwestern markets. Finally, the decline in year-over-year price growth from 2.8% to 2.1% signals rising market uncertainty and potential volatility. This environment makes options that profit from sharp price movements, such as straddles on the XHB homebuilder ETF, a promising strategy. It allows us to benefit from significant price changes as the market reacts to this clear slowdown. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Market activity is slowing down as traders await Nvidia’s (NVDA) earnings report. Total notional volume fell from $13.4 billion to $2.7 billion, and premarket volume dropped by 58%. The number of active stocks also fell by 54%, indicating a cautious approach among traders. Expensive stocks are gradually declining, with down movers at $9.1 billion compared to $4.3 billion for up movers, even though up movers make up 67% of traded shares. Currently, dollar flows are nearly equal between down and up movers, but there’s a trend of investors moving away from higher-priced stocks in favor of lower-priced options.

Market Breadth And Up-Volume

Market breadth fell from +359 to -212, hitting -6 today. This shows a lack of active trading and a reluctance to take risks. Daily up-volume remains strong, making up 82% on Friday, 67% on Monday, and 72% today, which indicates that buyers are concentrating on lower-priced stocks. Large-cap indices appear somewhat vulnerable since dollar flow is shifting away from pricier stocks. However, the consistent up-volume suggests that there is still interest in cheaper stocks. Traders should keep an eye on dollar flow and market breadth, as unexpected positive results from NVDA could lead to sharp market reactions. As everyone waits for Nvidia’s earnings, participation in the market is dropping. The pre-market activity shows a quiet exit from expensive, large-cap stocks, while buying continues in cheaper ones. For those trading derivatives, this means implied volatility is high, making options more expensive before this significant event. This uncertainty is reflected in the CBOE Volatility Index (VIX), which recently increased to 17.5, up from a low of 14 last month. Moreover, the latest Consumer Price Index (CPI) report from July 2025 came in at 3.4%, slightly above expectations, which keeps the Federal Reserve’s next steps unclear. This environment contributes to a cautious stance on large-cap stocks before Nvidia’s earnings.

Historical Precedents And Strategies

A similar situation occurred ahead of the August 2024 earnings report, where traders also took a conservative stance. After that report surprised positively, the Nasdaq 100 surged over 2% in one day, as capital flowed back into technology stocks. This historical context suggests that positive news from Nvidia could cause a significant reversal in dollar flows. With anticipated market movements, traders might explore options like long straddles or strangles on NVDA to capitalize on volatility, though high premiums pose a risk. A more conservative approach would involve credit spreads to bet that the post-earnings movement won’t exceed a specific range. Clearly defining risk is essential, as poor guidance could erase recent gains. Considering how broader indices are performing, the difference between the tech-focused QQQ and the small-cap IWM is important. A positive NVDA report would likely lead to bullish call options on the QQQ, anticipating a rally in big-cap companies. Conversely, disappointing results could make put options on the QQQ appealing and reverse recent strength in the IWM. In the days following the earnings report, closely monitor dollar flow. If we see significant dollar volume return to high-priced names, it would confirm a bullish outlook. However, if dollar flow remains negative even on a rising day, it could indicate ongoing distribution, suggesting that it’s wise to hedge long positions. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Lael Brainard, a former Federal Reserve Governor, warned that Trump’s policies might increase the chances of higher inflation and long-term interest rates. She emphasized the importance of the Federal Reserve’s independence for both the markets and the economy. The Federal Reserve is likely to lower rates by 25 basis points during its September meeting. Trump’s plan for a 15-20% minimum tariff on all EU goods has contributed to the euro’s decline against the US dollar.

US Durable Goods Data

In July, US durable goods showed a decrease of -2.8%, which is better than the expected -4.0%. Commerce Secretary Lutnick stated that the Trump administration is not looking to provide financial aid. At the start of the trading day, the USD weakened amid ongoing market volatility. European markets are experiencing limited movement due to a lack of new developments, as reported by InvestingLive. There is a significant gap between market expectations and potential political realities. The futures market currently predicts over an 80% chance of a 25-basis-point rate cut in September. However, the most recent Core PCE data for July 2025 showed an increase to 2.9%, making an immediate rate cut less likely if inflation concerns persist. The proposed 15-20% minimum tariff on EU goods directly impacts the euro’s value. We have already seen the EUR/USD exchange rate drop below 1.07 this week following this news. Derivative traders might explore buying puts on EUR/USD or selling call spreads in anticipation of further declines if trade war tensions escalate.

Policy Uncertainty and Market Volatility

This period of policy uncertainty suggests that market volatility may increase in the coming weeks. Recall how the VIX index, now around 14, surged above 20 during the trade disputes in 2019. Purchasing call options on the VIX or VIX futures could serve as a smart hedge against an unexpected Fed decision or significant political turmoil. The mixed signals make options on SOFR futures particularly intriguing ahead of the September meeting. With the 2s10s yield curve flattening by another 10 basis points this month to just 15 basis points, uncertainty is rising. A long straddle—buying both a call and a put—could be profitable if the Fed keeps rates steady due to inflation concerns or cuts more aggressively than the anticipated 25 basis points. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Durable goods orders in the US dropped by 2.8% in July, which is better than the predicted 4.0% decrease. In June, there was a significant decline of 9.4%. When excluding transportation, durable goods increased by 1.1%, surpassing the 0.2% estimate. Additionally, June’s numbers were revised to show a 0.3% rise, up from the previous estimate of 0.2%. When looking at orders without defense, there was a 2.5% decline, less than the expected 3.6% drop. The decline from the prior month was also slightly revised from -9.4% to -9.5%. Non-defense capital goods excluding aircraft grew by 1.1%, beating the 0.2% projection. June’s figures were updated from a -0.8% to a -0.6% decrease.

Trends In Durable Goods

Durable goods orders have fallen in three of the last four months, with notable weakness in the transportation sector this July. However, when transportation is excluded, orders rose by 1.1%. Overall orders decreased by 2.5% when defense orders are removed. Still, defense orders have risen, possibly due to government strategies aimed at boosting military exports. By focusing on business investments in equipment and ignoring aircraft, analysts can better understand future economic activities and corporate confidence, essential for GDP growth. The increase in core capital goods in July is encouraging, although there is still volatility, particularly in last month’s revisions. As of August 26, 2025, this July report on durable goods suggests that the expected economic slowdown might not be as severe as feared. The headline drop of 2.8% is better than the anticipated 4.0%, providing some relief to equity markets. This positive outcome could ease some of the bearish sentiment that had built up recently. The significant 1.1% rise in core capital goods orders is a strong indicator of business investment. It shows that, despite economic worries, businesses are continuing to invest in equipment, which is a good sign for future corporate earnings and GDP. This counters the narrative that the economy is headed for a hard landing, a view that many had started to embrace.

Implications For Federal Reserve Policy

This resilience complicates the forecast for Federal Reserve policy, making it less likely that interest rate cuts will happen soon. The last Consumer Price Index (CPI) report for July 2025 showed inflation stubbornly at 3.1%. Strong business spending gives the Fed the ability to keep its current policy stance. We may need to adjust strategies that anticipated an immediate shift towards looser monetary policy, such as selling September SOFR futures contracts. The mixed signals—a weak headline number but a strong core—are likely to create more market uncertainty. We’ve noticed the VIX rise to around 19 this past week, and this report will likely keep it stable. This environment is good for traders looking to buy volatility through options, such as straddles on the SPX index, to benefit from potential price swings in either direction. The data also highlights specific sector performance, showing an increase in defense orders. This supports a positive outlook on the aerospace and defense sector, prompting a look at call options on major defense contractor stocks or ETFs like ITA. On the other hand, ongoing weakness in the transportation sector, which pulled the headline number down, calls for caution in that area. It’s essential to remember the volatile nature of this data, as indicated by the fluctuating numbers throughout late 2023 and 2024. One month of strong business investment doesn’t change the broader trend of declining orders over three of the last four months. Therefore, while this report supports some tactical bullish adjustments, it is too soon to bet on a steady economic rebound. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now