In the European session, the Eurozone Q2 GDP second estimate is released. However, this data is not very relevant for the market since the ECB has completed its easing cycle. A rate hike is more likely in 2026, unless something significant changes. During the American session, focus shifts to US PPI and Jobless Claims data. The US Core PPI Year-over-Year is expected to rise to 2.9% from 2.6%. For the Month-over-Month measure, a 0.2% increase is anticipated, up from 0.0%. Markets are particularly interested in components influencing the PCE calculation, with expectations of a 0.3% Month-over-Month and a 3.0% Year-over-Year rise in Core PCE.

US Jobless Claims Overview

US Initial Claims are forecasted at 228K, slightly above the previous 226K. Meanwhile, Continuing Claims may drop to 1,964K from 1,974K. These claims offer current insights into the labor market, revealing a trend of “low firing, low hiring.” As we approach the September NFP, attention will be on various labor data, including jobless claims, ADP figures, and employment indices from ISM reports. We are closely monitoring the upcoming US Producer Price Index as it indicates persistent inflation. Current data suggests that the core Personal Consumption Expenditures index, which the Fed tracks, is projected to show a 3.0% annual rise. This makes a rate cut by the Federal Reserve in the near future very unlikely. This is a significant shift from the cooling trend we observed throughout much of 2024 when core PCE was as low as 2.6% year-over-year. The recent uptick suggests that inflation may be more persistent than the market anticipated. Derivative traders should be prepared for the Fed to maintain its stance and possibly adopt a more hawkish tone. Steady jobless claims data reflects a balanced labor market, with initial claims around 230,000, aligning with figures from the past year. This “low firing, low hiring” condition indicates that the labor market is stable enough that the Fed is unlikely to cut rates, allowing officials to concentrate on combating inflation.

European Central Bank Policy Outlook

In Europe, there is little reason to expect major policy changes. The European Central Bank has completed its easing cycle, including rate cuts in 2024, and is now on hold. With a rate hike more likely in 2026 rather than another cut, the gap between US and European policies is widening. This divergence suggests a stronger US dollar against the euro in the coming weeks. Traders might consider using options on the EUR/USD pair to position themselves, possibly buying puts or setting up bearish spreads. A more hawkish Fed could also elevate stock market volatility, making long positions on the VIX index a potential hedge against sudden market shifts. Create your live VT Markets account and start trading now.

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Eurostoxx futures are down 0.2% in early European trading, indicating a break after recent gains. German DAX futures also dropped by 0.2%, while UK FTSE futures saw a slight rise of 0.1%.

US Futures Performance

The mixed trends follow a strong showing in US futures, where the Dow rose by 1.0%. However, the Nasdaq had a modest increase of just 0.1%. S&P 500 futures have decreased by about 0.2% ahead of today’s trading session. Investors are looking forward to important US economic data releases, including the Producer Price Index (PPI) and initial jobless claims scheduled for later today. This morning, the markets are taking a short pause, which is usual after the significant gains we’ve seen this week. We’re awaiting crucial US data on PPI and initial jobless claims, which could influence the Federal Reserve’s decisions on interest rates. The market is currently shaped by persistent inflation. Recent data from July 2025 shows inflation still at 3.1% year-over-year. This has caused a shift toward Dow-style value stocks and away from the rate-sensitive names in the Nasdaq. If today’s PPI numbers are strong, we may see this trend continue.

Volatility and Protection

Market volatility, indicated by the VIX index, is relatively calm at around 14. This calmness makes protective options more affordable, so it’s a wise time to think about downside protection. Using put options on major indices can be a cost-effective strategy to safeguard long portfolios against potential declines in the coming weeks. In Europe, the economic outlook seems weaker. Recent industrial data from Germany in June 2025 indicates a slowdown. This might prompt the European Central Bank to lower interest rates before the Fed, creating potential trading opportunities between the Eurostoxx and S&P 500. We need to stay alert for this growing policy difference. This market hesitation is similar to what we experienced in 2023, when markets would surge and then pause to await new inflation data before choosing a direction. Back then, periods of calm often led to increased volatility once the Federal Reserve’s strategy became clearer. History suggests we should prepare for similar movement in the market after this quiet phase. Create your live VT Markets account and start trading now.

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In the last six hours, NASDAQ futures have gone through two different phases. First, buyers drove prices up from a dip. However, this rise quickly reversed when sellers stepped in, pushing the market below the session’s VWAP (Volume Weighted Average Price) and the point of control. This suggests that the earlier increase was just a short-lived recovery, not the beginning of a prolonged rally.

Importance Of Market Levels

OrderFlow Intel uses real-time order flow data along with market structure levels to reveal who is in charge of the market. This approach looks at actual trades instead of just charts, providing hints about possible future moves. The bearish mood remains as long as prices stay below the VWAP, benefiting sellers. Traders are paying attention to key levels like 23,862, 23,796, and 23,750. These numbers are likely to influence price movements and could trigger counter-moves due to outstanding buy orders. Those already short might think about taking partial profits near these levels. If the price gets back above the VWAP at 23,960, it could quickly change the market outlook. On August 14th, 2025, today’s order flow clearly shows sellers are in control as long as the Nasdaq stays under 23,960. The previous rally seems to be losing momentum, indicating it was just a brief bounce rather than the start of a new upward trend. This situation presents an opportunity for traders expecting the market to dip. This bearish sentiment is further supported by the economic landscape we’ve seen shape up over the last two weeks. The CPI report for July 2025 was slightly higher than expected at 3.4%, raising concerns that the Federal Reserve’s battle against inflation is not finished. This data strongly contributes to the selling pressure we see in growth-sensitive tech stocks. Additionally, the recent jobs report from early August signaled a slowdown in hiring, raising doubts about the economy’s health. We think this mix of persistent inflation and weakening growth is making the market anxious ahead of the Federal Reserve’s September meetings. This scenario typically leads to heightened market volatility.

Trading Strategies In A Bearish Market

We have seen similar late-summer weakness before, as traders often reduce risk during this time. For instance, in the third quarter of 2023, the Nasdaq experienced a significant correction of over 10% after a strong first half. The current market dynamics feel familiar, suggesting that traders should proceed cautiously. For those trading derivatives, it may be a good time to explore strategies that profit from price declines or sideways movement. Buying put options on Nasdaq 100 tracking ETFs could offer downside protection and profit opportunities if the index tests support levels like 23,862 and 23,750. This is a simple way to act on the current bearish outlook. Another strategy is to sell out-of-the-money call spreads, allowing you to collect premiums while betting that the Nasdaq won’t rise past a certain level. For futures traders, taking a short position is recommended, but watching the 23,960 mark is crucial. If the market surpasses this price, it would negate the immediate bearish outlook. Create your live VT Markets account and start trading now.

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The UK’s GDP rose by 0.4% in June, surpassing the forecast of 0.1%, according to data from the ONS released on 14 August 2025. This comes after a previous decline of 0.1%. In the services sector, output increased by 0.3%, beating the expected 0.2%, following a prior increase of 0.1%. Industrial output grew by 0.7%, much higher than the forecasted 0.2%. The earlier figure was revised from -0.9% to -1.3%.

Manufacturing and Construction Performance

Manufacturing output met expectations, growing by 0.5% after a previous decline of 1.0%. Construction output rose by 0.3%, higher than the predicted no change, with the earlier figure revised from -0.6% to -0.5%. These growth figures show a stronger performance across various sectors, helping to boost the overall GDP. Services contributed about 0.25%, production 0.08%, and construction 0.02% to GDP growth. This suggests that the UK economy is more resilient as Q2 comes to a close, giving the Bank of England more options in its monetary policy. Given the surprising strength of this morning’s UK growth data, we should rethink the Bank of England’s next steps. The economy appears more resilient than previously thought, allowing policymakers to keep interest rates higher for longer. This lowers the likelihood of a rate cut soon.

Market Reactions and Predictions

The July 2025 inflation figures are still stubbornly at 3.1%, but this growth report allows the Bank to continue fighting rising prices. They no longer have to worry as much about pushing the economy into a recession in the process. This situation is similar to what occurred in 2023, when strong economic data consistently postponed expectations of a policy change. For interest rate traders, we should expect the SONIA futures curve to adjust sharply in the coming days. The market had been anticipating a 25 basis point cut by November 2025, but this now seems very unlikely. The wise approach is to withdraw bets on falling rates and prepare for short-term yields to stay elevated or potentially rise. This shift in rate expectations should support the pound. We expect the market to factor in a more hawkish Bank of England policy, making sterling more appealing. Traders might consider buying call options on GBP/USD, hoping for a move towards the 1.30 level, which was last seen in early 2025. However, it’s important to note that the strength of the economy isn’t as strong as the headlines suggest, with services doing most of the heavy lifting. Contributions from production and construction were positive but minimal. This indicates that the recovery is still narrow and may not maintain this pace. For those trading the FTSE 100, the situation is more complicated. A stronger economy is good for company profits, but long-lasting high-interest rates could be a challenge for stock valuations. We should expect more volatility, making strategies that benefit from price changes, like buying straddles, potentially useful in the upcoming weeks. Create your live VT Markets account and start trading now.

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The UK’s GDP for Q2 increased by 0.3%, beating the expected growth of 0.1%. In the previous quarter, growth was 0.7%, and the annual GDP growth reached 1.2%, compared to the predicted 1.0%. June saw strong results across all sectors, helping boost the economy after slower activity in April and May. However, business investment dropped by 4% from Q1, a significant decline.

Bank Of England Flexibility

The better-than-expected growth figures give the Bank of England more flexibility. This makes an interest rate cut in September less likely. Before, the market thought there was a good chance of a cut, but this report allows the Bank to wait for more inflation data. For interest rate traders, this suggests that UK rates may stay higher for a bit longer. The odds of a September cut have dropped from nearly 50% to around 20%. Traders might look to sell near-term SONIA futures while still expecting cuts by the end of 2025. However, there is a significant warning in the report. The 4% drop in business investment is the steepest since the pandemic lockdowns in 2020. This shows a serious lack of confidence in the business community regarding the future economy.

Implications For The Pound Sterling

This weakness could limit any strength in the Pound Sterling. The initial rise in GBP after the headline number might be viewed as a chance to brace for future declines. In the coming weeks, the disappointing investment data will likely take the spotlight, putting pressure on the currency. The mixed data creates a challenging environment for the FTSE 100. While better growth is a positive sign, higher rates for longer and falling business investment could hurt corporate profits. We expect this to keep stock market volatility lower, favoring strategies that benefit from stable price movements. Looking at 2024, there was a period when persistent inflation prevented the Bank from cutting rates despite weak growth. That experience suggests the Bank will focus on controlling inflation until it hits its target. So, this GDP report reinforces the idea they won’t rush to lower borrowing costs. Create your live VT Markets account and start trading now.

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The UK’s GDP growth in Q1 was +0.7% compared to the previous quarter, driven by a surge in exports before US tariffs. However, this growth is likely to reverse in Q2 due to difficulties in the manufacturing sector. Forecasts for Q2 GDP suggest minimal growth of +0.1% compared to Q1. This cautious outlook may affect the Bank of England’s monetary policy. Barclays analysts predict a slightly better growth of +0.2%, assuming no changes to previous data, citing that Q1’s strong performance was due to temporary factors such as higher US demand and a change in the stamp duty in April.

Predictions From Morgan Stanley

Morgan Stanley forecasts a flat growth rate of 0.0% for Q2, with a chance it could rise to +0.1%. This prediction accounts for a possible decrease in May’s figures and a moderate uptick in June. The preliminary Q2 GDP results for the UK will be released tomorrow, August 15, 2025. The market expects a slowdown, with a consensus growth estimate of just +0.1%, a significant drop from the export boost of +0.7% in Q1. This expectation is likely to create increased volatility in the pound and UK stocks. Data from July 2025 has already shown signs of weakness, with the S&P Global/CIPS Manufacturing PMI falling to 48.5, signaling contraction. Additionally, inflation remains stubbornly high at 2.3%, leaving the Bank of England with limited options. These economic factors are expected to restrict any positive surprises. For traders bracing for disappointment, buying short-dated puts on the FTSE 100 or the GBP/USD pair could be a direct way to capitalize on a negative response. If GDP is reported at 0.0% or lower, the pound may drop below the 1.2400 level it has been testing. Bear put spreads can also be employed to reduce the entry costs for such trades.

Opportunities In Volatility

Given the possibility of unexpected results, some traders may prefer strategies that profit from volatility itself. A straddle using at-the-money options on a currency ETF tracking the pound could benefit from significant price moves, regardless of whether the GDP figure is better or worse than expected. This strategy bets on the fragile +0.1% consensus. We experienced a similar trading atmosphere during the economic slowdown of late 2022, when uncertainty surrounding GDP figures caused sharp, short-term movements in the pound. Traders who anticipated volatility ahead of major data releases were rewarded then. History shows that initial reactions to these figures can be exaggerated, leading to further trading opportunities. Looking ahead, a weak GDP report will likely be used by the Bank of England in their September meeting to justify maintaining current policy. This reinforces the belief that UK interest rates have peaked for this cycle, which will keep pressure on gilt yields. Traders in interest rate futures should prepare for a more dovish stance from policymakers. Create your live VT Markets account and start trading now.

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Major Option Expiries for EUR/USD

Today, there are significant FX option expiries for EUR/USD near the 1.1700 level. These expiries are likely to stabilize prices before the US PPI and weekly jobless claims are announced. Additional expiries at 1.1715 and 1.1750 may keep the price action within a narrow range for the session. For GBP/USD, there is an option expiry at the 1.3600 level, which may limit its upward movement. This aligns with the highs from July 23-24, around 1.3584-88. Still, the outlook for this pair remains bullish in the short term, as a weaker dollar drives trade this week. Today, there is a noteworthy cluster of options expiring around 1.1700 for EUR/USD. This concentration is likely to keep the currency pair stable for now. The market is closely monitoring US producer price data and jobless claims. Today’s US PPI for July came in slightly lower than expected at 0.1% month-over-month, causing the dollar to weaken. However, a significant option barrier at 1.1750 is preventing a strong rally in the euro. We suggest that traders consider selling volatility, as EUR/USD is likely to stay within the 1.1680-1.1760 range next week. Looking back at the second quarter of 2025, Eurozone inflation remained above the ECB’s target. This context prevents traders from aggressively selling the euro, even amid signs of a slowing US economy. Selling strangles with strikes outside this expected range could be a good strategy until a stronger catalyst appears.

Impact of Option Expiries on GBP/USD

For GBP/USD, the 1.3600 expiry is acting as a temporary ceiling on prices. This is occurring even as the pair displays a more bullish trend this week, supported by the weaker dollar. The highs from late July 2025 around 1.3585 add to this resistance. Recent UK growth data from the second quarter shows a modest rebound, providing fundamental support for the pound. Traders might see this temporary resistance at 1.3600 as a chance to position for a potential breakout higher. Buying dips near the 1.3550 area or setting up bull call spreads could be wise in the coming weeks. Historically, August has low volatility, with activity picking up in September, a trend seen clearly in 2023 and 2024. Large option expiries are contributing to this seasonal calm. While range-trading strategies are prudent for now, we should prepare for possible increased volatility as we approach next month. Create your live VT Markets account and start trading now.

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The USD/JPY exchange rate has dropped 0.6% to 146.40, hitting a three-week low. This decline follows a break in short-term technical levels and is influenced by US Treasury Secretary Bessent’s remarks encouraging a stronger yen. The US has voiced concerns about Japan’s currency policies, complicating trade talks. However, Japan maintains that exchange rates are not part of these discussions, though this position may change as talks evolve.

Market Dynamics

Currently, sellers have control as the pair falls below support levels around 146.61-70. If this trend continues, the next target could be the late July low of 145.85, with key focus on the 100-day moving average at 145.50 and a potential target of 145.00. The USD/JPY is facing significant pressure after breaking the 146.70 mark. This shift is driven by US Treasury comments suggesting that a stronger yen could be discussed in trade negotiations. This political influence adds risk for those holding long positions on the dollar. This perspective is supported by the latest US inflation data from July 2025, which reported a 2.8% increase, slightly under expectations. This raises questions about a possible pause in Federal Reserve policies. Meanwhile, Japan’s core inflation remains above the Bank of Japan’s target at 2.3% for the fifth straight month. This growing gap in policies suggests a weaker dollar against the yen.

Strategies for Traders

Given the current outlook, traders should consider strategies that could benefit from further declines in USD/JPY. Buying put options with strike prices close to 145.00 could be a smart, low-risk way to bet on a drop toward the 100-day moving average. Implied volatility for one-month USD/JPY options has risen to 9.2%, its highest in six weeks, indicating increased market uncertainty. Looking back, a similar scenario unfolded in early 2024 when official comments coincided with breaks in key technical levels, leading to a quick 4% drop in the pair over the next month. The current situation, influenced by both political and economic challenges, feels similar. Sellers are now focused on the late July 2025 low of around 145.85 as the next key target. If this level breaks, it could lead to testing the 100-day moving average at 145.50. We will closely monitor price movements around these support levels to look for signs of either a pause or a continuation of the downtrend. Create your live VT Markets account and start trading now.

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The US dollar has weakened as markets expect a rate cut from the Federal Reserve in September. The USD/JPY fell to around 146.40 due to cautious forecasts and comments from US Treasury Secretary Bessent. In contrast, Australian job data strengthened the AUD, while the British pound hit a three-week high. Cryptocurrencies continued to rise, with Bitcoin gaining over 30% this year. Treasury Secretary Bessent urged the Bank of Japan to consider raising rates. Market participants are waiting for China’s July economic data, anticipating a cautious approach from the People’s Bank of China regarding rate cuts. Australia’s unemployment rate for July matched expectations at 4.2%, with significant gains in full-time employment, reducing the likelihood of a September rate cut from the Reserve Bank of Australia (RBA).

Yen Movement and Global Economic Overview

The yen saw upward movement, especially against other currencies, as USD/JPY fell due to general weakness in the US dollar and Bessent’s remarks. Federal Reserve officials are being cautious, wanting reliable inflation data before deciding on any easing. The GBP/USD rose with expectations that the Bank of England may maintain a firm stance compared to potential cuts from the Fed. In Asia-Pacific, stock performances varied. Australia’s S&P/ASX 200 rose 0.55%, while Hong Kong’s Hang Seng increased by 0.05%, and Shanghai Composite gained 0.36%. However, Japan’s Nikkei 225 dropped by 1.5%. Interest in cryptocurrencies grew, driven by optimism regarding the Fed’s potential dovish stance and strong inflows. The market appears to be betting against the Federal Reserve, prompting us to prepare for potential outcomes. Interest rate futures are aggressively predicting a September cut, with increasing bets on a 50-basis point reduction, despite cautious statements from Fed officials. This situation suggests that strategies benefiting from volatility spikes, like straddles on key indices, are becoming appealing ahead of the Jackson Hole meeting. To strengthen this viewpoint, recent data from the CME FedWatch Tool indicates over an 85% probability of at least a 25-basis point cut next month. Although officials reference persistent services inflation in the July CPI report, the market is reacting to three consecutive months of slowing headline inflation since May 2025. This back-and-forth often leads to sharp corrections when one side is proven incorrect, reminiscent of late 2023 debates on pivots.

Strategic Currency and Options Trades

The clear strategy for the upcoming weeks is to short the U.S. dollar against currencies from central banks that are leaning towards tightening. With expectations of a Fed cut, the dollar is emerging as a low-cost funding currency for carry trades, a strategy highlighted by major banks. We should explore derivative contracts that benefit from a declining dollar, like buying AUD/USD or GBP/USD futures. The yen offers a unique opportunity as the U.S. Treasury pressures the Bank of Japan. A surprise rate hike from the BoJ, its first in nearly 20 years, could result in a significant unwinding of short-yen positions and a plunge in USD/JPY. It would be prudent to buy inexpensive out-of-the-money call options on the yen, as even a small change in BoJ guidance might yield significant profits. This situation is compounded by persistent core inflation in Japan, remaining above the BoJ’s 2% target for over 16 months. A stronger yen is likely to negatively impact Japanese exporters, making futures or put options on the Nikkei 225 a sensible hedge or directional play. The index has already dropped 1.5% based on this news, highlighting its sensitivity. There is a clear opportunity in the Australian dollar due to recent employment data. Positive July figures have reduced the market’s implied odds of an RBA rate cut to just 30%, contrasting sharply with anticipated easing from the Fed. This supports long positions in AUD/USD futures and options, capitalizing on the interest rate differential. Geopolitical risks are rising, with discussions of an “Anti-US summit” and new tariff threats. The Cboe Volatility Index (VIX) is currently around a low 16, which may not completely account for potential political surprises. Buying VIX call options or futures is a smart way to safeguard our portfolios against unexpected market changes in the near term. Even as U.S. stock indices achieve new highs, underlying risks warrant caution. The rally in assets like Bitcoin, now surpassing $123,000, indicates a market rich in liquidity and risk-seeking behavior, which can change quickly. We should employ options to protect our long equity positions, such as purchasing puts on the S&P 500, especially with valuations climbing to heights not seen since the 2021 peak. Create your live VT Markets account and start trading now.

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**China’s July Economic Data Preview** China will release its July economic data on August 15. Expectations are mixed. Some experts see signs of resilience, while others fear a slowdown in domestic activity. Analysts from ANZ Research predict gains in retail sales, industrial production, and fixed-asset investment. They believe these improvements will come from targeted policies and strong exports despite ongoing trade tensions. Conversely, Moody’s Analytics expects a general decline. They foresee retail sales growth slowing to 4% year-on-year, down from 4.8% in June. Industrial production growth may drop to 6.5% from 6.8%. Fixed-asset investment growth is likely to fall to 2.6% from 2.8%. They highlight weak confidence as a factor impacting investment and demand. Recent inflation data revealed a 3.6% year-on-year drop in the producer price index, with consumer prices staying steady. This indicates that deflationary pressures still affect parts of the economy. **Assessing China’s Policy Effectiveness** Many will closely monitor the upcoming data to judge the effectiveness of China’s policy measures. The results might show whether more stimulus is needed to support growth in the second half of the year. With crucial economic data set to be released tomorrow, we may see significant volatility. The split between optimistic and pessimistic forecasts means the market is prepared for surprises. Implied volatility for China-related assets is expected to rise, offering opportunities for options traders in the coming weeks. The overall trend looks weak, lending credibility to a cautious outlook. The recent 3.6% drop in the producer price index suggests that deflation is a persistent issue. We can’t overlook the ongoing challenges in the property sector, where new home sales fell over 25% year-on-year, continuing the trend from earlier in 2025. This potential slowdown impacts commodities directly. If industrial production falls short of expectations, we can expect further downward pressure on copper and iron ore futures. We experienced a similar trend in early 2025 when weak manufacturing data led to a sell-off in industrial metals. Given the uncertainty, using a strategy that profits from large movements, regardless of direction, seems wise. We are considering straddles on ETFs like the FXI, which means buying both a call and a put option with the same strike price and expiry. This strategy bets that the market will react more strongly than currently expected. The currency market is also crucial to watch. If the data disappoints, the offshore yuan (CNH) may weaken against the dollar. The People’s Bank of China has previously intervened to slow the yuan’s decline, as seen in late 2024, so we expect to see fluctuations. Looking back at 2024, we recall that initial market optimism from policy support often faded when economic data showed weaker-than-expected recovery. This history suggests we should be cautious about any early positive market reactions. A relief rally from better-than-expected numbers may present a chance to position for a downturn if underlying weaknesses persist. Create your live VT Markets account and start trading now.

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