Market Expectations

Credit Agricole expects the Federal Reserve to lower interest rates twice before the year ends—once in September and again in December. They predict the target rate will drop to 4.00% after a period of steady policy. This forecast comes from ongoing inflation, which limits the Fed’s ability to make big changes to monetary policy. The US economy is slowing down but not heading into a recession. Credit Agricole finds the job market to be fairly stable. This stability allows the Fed to avoid major reductions in rates. While inflation might temporarily rise due to tariffs, any impact is likely to be brief. As the US awaits the next jobs report, which will help guide the Fed’s decisions, the outlook aligns with expectations for rate cuts beginning in September. We anticipate two rate cuts of 25 basis points each by the year’s end. However, because inflation remained stubborn at 3.4% in July 2025, the Fed won’t be able to make dramatic cuts. This situation indicates a slow, careful approach to reducing rates.

Investment Strategies

We are closely monitoring interest rate futures linked to SOFR, which show a strong chance of the first cut happening next month. The upcoming jobs report, due in early September, could change these expectations. If the report is unexpectedly strong, it might challenge the idea of a rate cut in September and increase short-term market volatility. In this context, we expect a modest rise in stock prices, unlike the sharper market movements we observed in late 2023 when rate cuts were first anticipated. Given the unpredictability, options strategies that thrive on increased volatility, like purchasing straddles on the S&P 500 before major data releases, could be beneficial. The CBOE Volatility Index (VIX) is currently around 15, which is low historically and offers a cost-effective opportunity for volatility trades. The job market remains robust, evidenced by the last Non-Farm Payrolls report, which added 190,000 jobs. This gives policymakers a reason to be patient. Consequently, we see trading strategies heavily reliant on fast rate cuts as risky. Data indicating continued economic strength may pose short-term challenges for both bonds and stocks. Additionally, we must note that tariffs could lead to a temporary increase in inflation later in the year. This complicates straightforward predictions that interest rates will only fall. It may be wise to protect long-term positions against possible short-term spikes in inflation expectations. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Barclays suggests that at the end of the month, there won’t be much selling of the dollar against most major currencies. The model remains neutral regarding the euro and yen. US bonds and stocks are having a bigger impact on market flows than the recent changes discussed at Jackson Hole. Both have seen slight gains this month, which signals weak selling of the dollar against most currencies.

Neutral Outlook for the Euro and Yen

The euro and yen are stable due to the strong performance of European and Japanese bond markets. This helps offset the selling pressure on the dollar. In the upcoming month, we expect selling pressure on the U.S. dollar against most currencies. The S&P 500 has gained 1.5% this August, causing large funds to sell dollar-denominated stocks to balance their portfolios. This selling is likely to influence dollar prices as the month ends. For traders, this indicates a strategy of betting on a weaker dollar, especially against commodity currencies like the Australian and Canadian dollars. Buying short-term call options on AUD/USD or NZD/USD could be a smart way to take advantage of this expected dollar decline. These rebalancing flows are usually predictable and can overshadow other market trends.

Euro and Yen as Exceptions

However, the euro and yen are expected to behave differently, likely staying stable against the dollar. The strong performance of European and Japanese government bonds this month is countering the weaker dollar trend. For example, German 10-year bund yields fell 20 basis points in August, balancing out pressures from US equity markets. This suggests selling short-term volatility in EUR/USD could be a good strategy. Last week’s comments from the Jackson Hole symposium should be seen as a minor factor for now. While the Fed hinted at a possible pause, the market is mainly focused on large month-end liquidity events. The lack of strong policy commitments means that these technical flows will dominate. This pattern is similar to what we observed in parts of 2023, where market flows often influenced currency movements when there were no major economic surprises. We predict this trend will continue over the next week or two. Therefore, opting for strategies that benefit from a gradual decline in the dollar or stable trading ranges is the wisest approach. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

European Flight to Safety Today, French stocks dropped sharply, signaling a clear move away from risk. The CAC 40 fell by 1.7%, reflecting local fears linked to the ongoing political situation. This decline wipes out the gains made this month, indicating that traders who were once hopeful are now quickly leaving the market. The rising uncertainty has pushed the VSTOXX, Europe’s key fear gauge, up over 25% this week. It’s now trading above 28 for the first time this year. A similar situation occurred in the summer of 2024 when an unexpected election announcement caused the CAC 40 to plummet nearly 7% in just one week. Buying put options on the CAC 40 seems like a simple way to profit from potential further declines in the upcoming weeks. Political Crisis Impact on Trading France is significantly underperforming compared to Germany, creating a chance for a pairs trade. Shorting CAC 40 futures while buying German DAX futures could be beneficial if the political crisis stays confined to France. This strategy relies on the French-German bond spread, which has already widened by 15 basis points, continuing to grow as investors seek higher rewards for holding French assets. If you own French blue-chip stocks like LVMH or TotalEnergies, now is a crucial time to think about protective puts. With options volatility increasing, these hedges are becoming pricier, so it might be wise to act quickly. The pressure building towards the end of the month could lead to more volatile swings as major funds adjust their positions. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Gold prices jumped on Friday after comments from Fed Chair Powell suggested potential changes in interest rates. This sparked increased expectations of interest rate cuts in September, with two cuts predicted by the year’s end. Market participants are now closely watching the upcoming US Non-Farm Payroll (NFP) report, as it could greatly impact interest rate predictions.

Impact of NFP Data

If the NFP data is positive, it might reduce the chances of a September rate cut, which could negatively affect gold prices. On the other hand, weak data could raise expectations for more rate cuts, helping gold prices rise. Although we expect real yields to fall due to Fed easing, any adjustments to short-term interest rates may cause fluctuations in gold’s current upward trend. In the daily gold chart, prices are moving between 3,438 resistance and 3,245 support. The market remains in a range until a clear breakout happens. In the 4-hour chart, gold saw a rise but then fell back to 3,350. Buyers are likely targeting the resistance level. If prices drop further, sellers might look to reach the 3,245 support. Today’s key focus is on the US Consumer Confidence report, followed by US Jobless Claims on Thursday and the US PCE price index on Friday.

FED’S Impact On Gold

The Federal Reserve’s recent dovish shift has changed the outlook, leading us to believe rate cuts are on the way this year. The market is currently forecasting a high chance of a September cut, especially after July’s Core PCE data showed a manageable 2.7%. Attention will be on the upcoming labor market data for direction. Next week, the US Non-Farm Payrolls (NFP) report will be crucial for derivative traders. It could determine the Fed’s next move and influence gold’s short-term direction. Traders should be ready for two different outcomes. If the jobs data is strong, say over 200,000, expectations for a September rate cut will likely fall, putting pressure on gold prices. In this case, traders might consider buying puts on gold futures or ETFs to hedge against or profit from a potential drop to the 3,245 support level. A solid report would challenge the current dovish stance. Conversely, if the jobs report shows less than 150,000 jobs, it would boost expectations for more rate cuts, possibly three by year’s end. This could drive gold prices higher, making call options appealing to capture the upward momentum toward the 3,438 resistance. Such low job numbers would indicate that the economy is slowing sufficiently for the Fed to take action. We saw a similar situation during the aggressive rate hikes of 2022-2023, where consistently strong labor data kept real yields high, putting pressure on gold prices. Now, with the Fed easing, lower real yields should support gold over the long term, though short-term fluctuations will be driven by data surprises. Technically, gold is trading in a defined range between 3,438 resistance and 3,245 support. Before the NFP release, traders might consider volatility plays, like buying straddles, to profit from a breakout in either direction. Until that happens, price movements are likely to stay contained. In the short term, the 3,350 level is a key pivot point. If prices dip toward this level in the coming days, it could be a buying opportunity for tactical traders looking to purchase short-dated call options, expecting a bounce. However, if prices break below this level, it would signal weakness and open the door for a move down to the main 3,245 support. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

French household confidence fell in August, hitting its lowest level since October 2023, according to INSEE on August 26, 2025. The consumer confidence index dropped to 87, falling short of the expected 89. Concerns about unemployment are high, adding to this decline in confidence. People also feel less optimistic about their standard of living, with the sub-index for future living standards dropping two points to -64, the lowest since March 2023.

Key Market Indicators

The decline in French consumer confidence is a major warning sign for the upcoming weeks. This indicates a decrease in domestic demand, which could negatively impact the CAC 40 index, especially retail and luxury goods stocks. To prepare for a potential market downturn, we are considering buying put options on the CAC 40 index. We could also look into individual puts for consumer stocks that are most affected. This strategy will perform well if the market declines, as we expect. This worry isn’t just in France; we noted a disappointing German IFO Business Climate index just last week. The combined weakness from the two largest economies in the Eurozone suggests a larger regional slowdown. This reinforces the need for a cautious or bearish approach to European assets.

Potential ECB Policy Response

We think that these disappointing data will push the European Central Bank to adopt a more cautious approach at its September meeting. With Eurozone inflation easing to 2.1%, these growth worries could stall discussions about tightening policies. This situation might be beneficial for French government bonds (OATs). A cautious ECB, particularly while the US Federal Reserve focuses on its own priorities, could also impact the Euro. Therefore, we are considering strategies that would benefit from a drop in the EUR/USD exchange rate. This includes put options on the Euro and bearish futures positions. This consumer pessimism reminds us of the sentiment from late 2023, which occurred before a notable economic slowdown in early 2024. History tells us that a sharp drop in future expectations usually isn’t isolated; it often leads to a prolonged period of reduced household spending that can extend for several months. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

French CAC 40 futures are down 0.7%, continuing the downward trend from the previous day, when the index closed 1.5% lower. This decline jeopardizes the monthly gains that followed a dip on August 1.

Political Crisis in France

The fall in the market is mainly due to a political crisis. French Prime Minister François Bayrou is under fire for his plans to address public finance issues. Last year’s budget deficit in France hit 5.8% of GDP, nearly double the EU limit of 3%. Bayrou’s proposal to cut €44 billion from the budget for 2026 is not well-received. He has scheduled a vote for September 8 to discuss this plan. If the proposal fails to pass, it could lead to a vote of no confidence in Bayrou, making the political climate in France even more unstable. This type of political turmoil is not new; Barnier’s government collapsed within three months last year. Another government shake-up now appears likely, increasing uncertainty in Europe’s second-largest economy. With the ongoing political instability, we can expect the French stock market to remain weak. The vote on September 8 is critical and will create significant uncertainty for the CAC 40 index. This hints at increased risk for investors holding long positions in French stocks. One way to protect against further declines is to buy put options on the CAC 40 index. The CAC 40 volatility index (VCAC) has risen to 19.5, a notable increase from 14 earlier this month. This rise indicates that the market is anticipating bigger swings.

Broader Economic Implications

France’s economic challenges are serious, which explains the market’s concerns. The country’s public debt has now crossed 112% of its GDP, well above the Eurozone average of around 89%. This makes the proposed budget cuts not just necessary but painful. The economic strain adds to the political tension, complicating potential solutions. We witnessed a similar situation last year when President Macron called for a snap election in June 2024, causing the CAC 40 to drop nearly 7% in just over a week. This recent decline suggests that any further political issues could lead to another sharp sell-off. Traders should prepare for potential volatility if the government fails in the upcoming vote. This instability could also impact the wider European market and the euro. To mitigate broader risks, traders might consider buying put options on the euro, as a crisis in the EU’s second-largest economy would likely weaken it against the US dollar. The EUR/USD exchange rate has already dropped by 0.5% this week, indicating early signs of concern in the currency market. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

In the European session, there are no economic events planned, which may lead to stable market conditions before next week’s labor market reports. Traders are keeping an eye on how markets respond to updates from the Jackson Hole symposium. In the American session, traders will look out for the US Durable Goods Orders and the Consumer Confidence report. The durable goods data often does not affect the market much because it can be volatile, so the focus is primarily on consumer confidence. It is expected to slightly drop to 96.2 from 97.2.

Consumer Confidence Report

The last report showed that consumer confidence had improved, especially in the expectations index. Recent trends indicate good economic progress, as shown by the latest US PMI numbers. While consumer confidence can influence the markets, significant changes in the data are necessary for lasting effects. This week, the main attention will be on US Jobless Claims on Thursday, with key labor market data, including the NFP report, coming next week. Central bank speakers like Fed’s Barkin at 12:30 GMT, BoE’s Mann at 16:00 GMT, and BoC’s Macklem at 18:45 GMT will share their insights. All will speak from a neutral standpoint, with one being an active voter. Today, the spotlight is on the US Consumer Confidence report, which might challenge the current market trend. Last week, the Federal Reserve’s hawkish stance at Jackson Hole led to a slight pullback in Treasury yields and the dollar. A surprise in consumer confidence could either renew that trend or cement the market’s current cautious approach. We anticipate a consumer confidence reading close to the expected 96.2, continuing the gradual decline from the 102.0 peak seen in May 2025. A result below 93 or above 99 could spark a sustained market response. Otherwise, focus will quickly shift to more significant data releases ahead.

Labor Market Data

For derivatives traders, the lead-up to next week’s important labor data is marked by expectations of volatility. The VIX index is around a low of 14, indicating that options markets do not expect a major surprise from today’s report. This situation may favor strategies benefiting from a stable market, though there is a risk of being caught off guard if the consumer confidence data varies greatly. The key event remains the upcoming labor market data, starting with Thursday’s Jobless Claims and leading to next week’s NFP report. Following July’s solid non-farm payroll increase of 195,000, another strong report for August could pressure the Fed to uphold its careful stance. This jobs data will significantly influence expectations surrounding the Fed’s policy decision in November. We will also tune in to comments from Fed speaker Barkin. However, since he is a non-voter, his remarks are unlikely to have a strong impact unless he indicates a major change in perspective. More critical for currency traders could be the speech from Bank of Canada Governor Macklem, which might affect CAD-related pairs. These speeches will be closely monitored for any new insights on the future direction of interest rates. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Eurostoxx futures fell by 0.4% in early European trading, showing a cautious mood in the stock market this week. German DAX futures and UK FTSE futures also dropped by 0.3%. US futures are mostly stable, reflecting a careful outlook after yesterday’s decline on Wall Street. European stocks ended the day lower, with French shares facing the biggest drops. Despite strong performance in August, the approaching month-end adds more uncertainty for stocks this week.

Protecting Gains

Given the weakness in European markets, it’s wise to protect the profits made during the strong August rally. Buying put options on the Euro Stoxx 50 or DAX can help shield against a possible decline. This approach becomes more appealing as we near the uncertain month-end rebalancing. The cautious mood points to increased market fluctuations, making volatility a potential trading opportunity. The VSTOXX, which tracks Euro Stoxx 50 volatility, is currently around 16.5, a relatively low level that reduces the cost of buying options. We could consider using straddles or strangles to prepare for a significant market shift, whatever direction it may take. This defensive attitude stems from recent economic data. Last week, the German producer price index unexpectedly rose, raising inflation concerns. This brings the European Central Bank’s September meeting into sharp focus for any policy changes. Any hawkish remarks from officials could quickly dampen market sentiment.

Historical Patterns And Volatility

Historically, we should be aware of seasonal patterns as we move out of August. September has often been tough for stocks, and reviewing market corrections in 2023 and 2024 shows they began after summer rallies faded. This history supports the importance of adding downside protection now. In the US, while futures remain flat, we’ve seen a nearly 15% increase in open interest for VIX call options expiring in September over the last week. This suggests that other traders are also preparing for a possible surge in volatility. This crowded trade indicates we should brace for a wider risk-off trend across global markets. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Morgan Stanley has changed its outlook, now predicting two rate cuts by the Federal Reserve before the year ends. They foresee the first cut in September and the second in December. After these cuts, Morgan Stanley expects the Federal Reserve to lower rates quarterly throughout 2026. Their target range is between 2.75% and 3.00%.

Shift in Expectations

There has been a major shift in expectations, with the forecast now indicating two rate cuts this year, starting in September. This change has already increased the CME FedWatch Tool’s prediction for a September cut from 45% to over 70% in just the last 24 hours. With the meeting just weeks away, traders need to adjust their strategies for a more dovish Federal Reserve. This outlook bodes well for stock markets, which have been stable for most of August 2025, weighed down by concerns about “higher-for-longer” rates. Traders may want to buy near-term call options on indexes like the S&P 500 to take advantage of a possible market relief rally. This renewed hope sharply contrasts with sentiments expressed after the Jackson Hole symposium just weeks ago, when the mood was more cautious. For those trading interest rates, focusing on lower yields is now key. The 2-year Treasury yield, which reacts quickly to Fed policy, has already dropped 15 basis points to 3.95% following the news. We suggest going long on December 2025 SOFR futures as a direct way to act on this expectation, as these contracts will increase in value if the market anticipates cuts.

Impact on Market Volatility

We must also think about how this affects market volatility. While the VIX is currently low near 14, we anticipate it will rise as we approach the September 20th FOMC meeting for confirmation. Buying short-dated VIX call options could be a smart way to protect against potential surprises, much like the market dip that occurred after the hawkish comments in spring 2024. This dovish shift will likely weaken the U.S. dollar, which has been strong, trading above 105 on the DXY index for the past month. We see opportunities to position for a weaker dollar against currencies where the central bank is expected to remain steady, such as the Euro. Derivative traders might consider selling DXY futures or buying at-the-money EUR/USD call options. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now