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Pound Sterling strengthens by 0.2% against the US Dollar, outperforming G10 currencies due to strong employment data
The Pound Sterling has risen by 0.2% against the US Dollar, performing better than other major currencies. This increase follows employment data that exceeded expectations, showing the highest job changes over the last three months since September.
Stock indices target record closes as NASDAQ reaches intraday high and airlines perform well
Major stock indices are close to setting new records. The S&P index hit a high of 6408.05 on July 31 and is currently at 6422.93, up 49.47 points (0.78%). The NASDAQ index reached 21523.43 on August 11 and is now at 21553.10, topping the earlier intraday high of 21549.73 from yesterday.
Airlines Perform Well
Airlines are having a good day, fueled by Delta’s strong earnings. Delta reported earnings per share of $2.10, which exceeded the expected $2.06. Revenue also rose to $15.5 billion, beating expectations of $15.46 billion. As a result, Delta’s shares jumped 9.09% to $58.35, close to its previous high of $58.33. The key trading range between $56.52 and $58.33 suggests that breaking above could strengthen its upward trend. Other airlines are benefiting too: American Airlines is up 9.72%, United Airlines increased by 8.87%, and Southwest Airlines rose by 4.3%. Apple’s shares recovered after a prior decline. They are trading at $230, and increased by $2.75, or 1.2%, reaching a high of $230.59 today. Following a dip and a positive earnings report earlier this month, Apple’s price has surged by 14.10%. Although it’s down 8.35% for the year and closed 2024 at $250.42, it is still approaching its all-time high of $260.10. With the S&P 500 and NASDAQ nearing records, the outlook remains positive for the next few weeks. This could be a good time to consider call options or bull call spreads on broad market ETFs to capitalize on this momentum. The market has improved significantly since the volatility caused by rate hikes in 2023, showing strong investor confidence.Delta’s Positive Influence
Delta’s impressive earnings represent a positive signal for the airline industry, making call options on DAL, AAL, and UAL appealing. We are paying close attention to Delta at the $58.33 resistance level, as a breakout here could lead to a significant upward movement. This strength continues to build on the post-pandemic recovery, with global air traffic surpassing 2019 levels according to IATA reports from 2024. For Apple, its recovery this month reflects renewed interest after struggling during the AI-driven rally late last year and early this year. There’s an opportunity to use call options to join this rally, aiming for late 2024 highs around the $250 mark. However, we should monitor for resistance as the price approaches this important level. Despite this optimism, it’s crucial to safeguard our gains, especially with indices at record levels. Buying out-of-the-money put options on the SPX or call options on the VIX can serve as affordable insurance against sudden market shifts. The market hasn’t faced a significant correction over 10% since a brief downturn in spring 2024, so exercising caution is advisable. Create your live VT Markets account and start trading now.The tech sector thrived despite mixed results, while semiconductors struggled with cautious investor sentiment.
Today, the U.S. stock market displayed a mix of hope and caution, particularly in the semiconductor industry. Technology stocks performed well, with Microsoft up 0.85% and Apple rising 0.63%. Meanwhile, Oracle and Palantir had slight declines, yet they still contributed to a positive atmosphere in the sector.
On the other hand, Nvidia experienced a 0.50% drop, indicating some caution. However, Texas Instruments saw a remarkable gain of 4.52%, and Micron Technology rose by 1.84%. These movements offered a balanced outlook for the semiconductor sector, despite its ongoing issues.
Consumer Cyclical Sector Gains
In the consumer cyclical and communication sectors, Meta rose by 2.69%, reflecting strong enthusiasm, while Google increased by 0.71%. Positive confidence in communication services keeps this sector looking bright. In finance, the picture was mixed. JPMorgan Chase grew by 1.75%, but ICE fell by 2.03%, highlighting differences within the sector. Overall, today’s market had a strong tech sector but faced challenges in semiconductors, creating a fluctuating landscape for traders. For those looking to diversify, focusing on solid tech companies and keeping an eye on the semiconductor sector may be wise, as caution remains in the market. There is a noticeable divide: big tech companies are thriving while the semiconductor sector struggles. This suggests that targeted strategies will be more effective than broad market approaches in the upcoming weeks. Derivative traders should consider focusing on individual stock options instead of just index futures.Meta’s Bullish Momentum
Meta’s impressive 2.69% rise indicates strong bullish momentum that may continue, especially since the Q2 earnings season has largely favored advertisers. We recommend buying call options expiring in September to benefit from this upward trend. A bull call spread could also be an efficient way to express this outlook while managing risk. Nvidia’s decline, even as the broader tech sector rises, highlights potential concerns about valuation or competition. This uncertainty makes it suitable for strategies aimed at volatility, such as a long straddle, which benefits from substantial price changes in either direction. Given its history, even a small move, like today’s, could signal the start of a much larger shift. Looking at the broader market, the CBOE Volatility Index (VIX) is around 16, indicating a relatively calm period. Historically, late August can see sharp spikes in volatility as trading volumes decrease. This may be an ideal time to consider inexpensive out-of-the-money VIX calls as protection against unexpected market fluctuations. To take advantage of the performance divide, we are exploring a pairs trade. This could entail going long on a broad tech ETF like the QQQ while simultaneously shorting a semiconductor ETF like the SOXX. This strategy stands to gain as large-cap tech continues to outshine the chip sector, making it less affected by overall market trends. The market is also responding to last week’s inflation report for July, which showed the Consumer Price Index (CPI) fell to 2.9% year-over-year. While this has favored growth stocks, the Federal Reserve remains clear that it wants to see a consistent trend before making decisions. Any unexpected economic data in the coming weeks could quickly change market sentiment. Create your live VT Markets account and start trading now.The Euro stays stable above 1.16 despite disappointing ZEW sentiment survey results, says Scotiabank.
The Euro is holding steady just above 1.16, even though the ZEW sentiment survey results were weaker than expected. With a sparse calendar, the market feels calm and shows little short-term risk in either direction.
The outlook for the Euro looks positive. Yield spreads have improved since late May, and the options market has confirmed this trend since late June.
The relative strength index (RSI) is neutral, sitting around the 50 mark. The 50-day moving average is at 1.1614, showing an upward trend. In the medium term, the Euro ranges from support just below 1.14 to resistance in the lower 1.18s. In the short term, it is between 1.1550 as support and 1.1680 as resistance.
Be aware that forward-looking statements come with risks and uncertainties. This information is for informational purposes only and does not serve as an investment recommendation. Always perform thorough research before making investment choices, as you could lose your initial investment. The accuracy and timeliness of this information are not guaranteed, and we accept no responsibility for errors or omissions.
With the Euro steady above 1.16, the calm summer market suggests a period of consolidation. The immediate risk is low, keeping the currency within a tight range of 1.1550 support and 1.1680 resistance. In this environment, strategies that take advantage of low volatility—like selling out-of-the-money strangles—could work well in the coming days.
We believe the outlook for a stronger Euro remains intact. The latest Eurozone core inflation data for July 2025 is steady at 2.9%, which keeps the European Central Bank on a hawkish track. In contrast, the recent US Non-Farm Payrolls data from early August 2025 showed job growth slowing to a moderate 175,000, indicating a less aggressive Federal Reserve.
This positive sentiment is reflected in the derivatives market, confirming a trend we noticed back in late June 2025. The one-month 25-delta risk reversal, which measures market positioning, has narrowed to just -0.1. This indicates a significant drop in demand for puts that would protect against a decline in the Euro, suggesting that traders might consider buying call options or establishing bull call spreads to aim for a rise.
Historically, this low activity period is typical for August, similar to the quiet summers of 2023 and 2024. The neutral RSI also affirms this lack of immediate directional pressure. However, such calm periods can pave the way for stronger trends when trading volumes return in September.
Given the positive fundamentals and clear medium-term resistance in the lower 1.18s, we think traders should use this quiet time to position themselves for a gradual rise. The upward momentum in the 50-day moving average supports this outlook. Structuring trades to benefit from a move toward the 1.18 resistance in the coming weeks appears to be a smart strategy.
Scotiabank strategists say the Canadian dollar stays steady as markets look forward to US data
The Canadian Dollar (CAD) is holding steady as markets await new U.S. data. The factors affecting the CAD have weakened a bit, with its fair value rising to 1.3685. Even so, the strong U.S. Dollar is preventing the CAD from being severely undervalued.
The Bank of Canada’s Q2 survey suggests two rate cuts of 25 basis points each, with an expectation that the CAD will be at 1.35 by the end of the year. However, current market swaps only indicate one rate cut for the remainder of the year. The forecast for USD/CAD by year-end is set at 1.34, with upcoming data including Canada’s Building Permits for June.
The USD/CAD rate remains stable but is showing signs of growth in the short term. The U.S. Dollar is facing resistance between 1.3810 and 1.3830, with major resistance potentially in the upper 1.38 range. Support levels are found at 1.3720/30, but the U.S. needs more effort to break through these resistance areas.
Currently, the USD/CAD pair is trading close to 1.3750. While our models suggest that CAD is undervalued, the strong U.S. dollar is the key influence for now. This situation is reminiscent of late 2023, when strong U.S. economic performance set the market’s direction.
There’s a noticeable gap between what officials say and what the market is pricing in. Canada’s latest July inflation report showed a decrease to 2.8%, along with slow job growth. This strengthens the case for a second Bank of Canada rate cut this year. However, current swaps are only accounting for one cut by October, which might create an opportunity if the central bank shifts to a more dovish stance.
Over the next few weeks, we should pay close attention to the technical boundaries, as they outline the current market landscape. The USD is encountering a tough ceiling in the 1.3810 to 1.3830 range, which has held firm several times this summer. This suggests that selling USD strength with call options or using this level as a stop for short CAD positions could be a smart strategy.
The key reason for this ceiling is the solid strength of the U.S. dollar, backed by recent data. U.S. inflation for July remained high at 3.3%, which keeps the Federal Reserve cautious and supports the greenback. Therefore, long CAD positions are largely a bet against continued U.S. economic strength.
We also need to monitor commodity prices, a usual driver for the loonie. West Texas Intermediate crude oil is stable near $85 a barrel, offering some support for the Canadian currency. This helps counterbalance the interest rate narrative, preventing a significant weakening of the CAD for now.
Jeff Schmid supports a patient and moderately restrictive policy approach during high inflation
The Fed is currently aiming to keep interest rates steady while tackling inflation. Although rates are close to neutral, inflation remains high, which calls for caution. The impact of tariffs on inflation appears limited, which supports the decision to avoid cutting rates.
Fed’s Internal Divide
Fed President Jeff Schmid, who tends to be hawkish, advocates for a careful approach before making any changes to the Fed’s policy rate. There is an acknowledgment that the full effect of tariffs on prices is unclear. If there are signs of reduced demand growth, opinions may change, but the current preference is to maintain policy unless absolutely necessary. Inside the Fed, opinions are divided about future rate changes. Bowman and Waller support cuts, while Musalem and Schmid prefer to keep rates steady. Barkin takes a neutral stance. Even though the market suggests a 90% chance of a cut, Fed Chair Powell’s upcoming speech at the Jackson Hole Economic Symposium could provide more insight into the Fed’s position. There’s a notable gap between market expectations and recent comments from the Federal Reserve. While the CME FedWatch Tool shows a 90% likelihood of a rate cut next month, voting member Jeff Schmid indicates a preference to hold rates steady. This difference between market predictions and the more cautious tone of a Fed official may lead to increased market volatility. Schmid’s cautious stance is supported by recent inflation data, which remains stubbornly above the 2% target. The latest Consumer Price Index (CPI) for July 2025 was 3.3%, indicating that price pressures haven’t eased enough to warrant an immediate shift in policy. This strengthens the case for maintaining current rates more than the market recognizes.Market Reaction Strategies
This uncertainty suggests that options premiums on interest rate futures and major indices might be undervalued. Traders should consider strategies that capitalize on increased volatility, as significant market adjustments could occur following Chair Powell’s speech. The CBOE Volatility Index (VIX) is currently around 14, a level often seen before big market moves during uncertain policy periods. It’s important to recall how Jerome Powell has used the Jackson Hole symposium in the past to reshape market expectations. In August 2022, his brief and straightforward speech dashed hopes for a policy change, resulting in a sharp market decline. A similar hawkish stance on August 23rd this year could disrupt the market’s dovish outlook. If the hawkish viewpoint prevails and the Fed decides to hold rates steady, we could see a quick rise in short-term bond yields. Traders might think about buying puts on Treasury note futures or employing bearish spreads on equity indices like the S&P 500. The market’s strong expectation for a rate cut presents an unusual risk-reward scenario for those ready for a potential hawkish surprise. Create your live VT Markets account and start trading now.Barkin indicates that inflation and unemployment pressures may continue, but economic adjustments could occur as conditions change.
The Federal Reserve is noticing pressures from both inflation and unemployment, but the current balance between these factors is unclear. The Fed is ready to adapt its policies as new economic information comes in.
A downturn in the economy would require a significant drop in consumer spending. While there has been some softening, a major decline seems unlikely due to low unemployment and rising wages.
Consumer Spending Patterns
Changes in how people spend money could lessen the effects of tariffs on inflation. If consumer spending declines, jobs may be affected, but widespread layoffs are hoped to be avoided. Unemployment may not rise as much as expected because of reduced immigration and slower growth in the labor supply. The labor market and consumer spending show resilience, even with some noted softening. Low unemployment, wage increases, and shifts in consumer behavior are helping to prevent economic weakness. Although inflation could still remain a concern, the Fed is prepared to update its policies as the economic situation becomes clearer. We might still encounter pressure from inflation and unemployment, but the balance is uncertain. The central bank is ready to respond when the economic outlook becomes clearer. For the economy to truly weaken, consumer spending would need to drop more significantly than it has.Inflation and Labor Market
The latest Consumer Price Index (CPI) from July 2025 shows inflation holding steady at 3.1%, still one full point above the Fed’s target. This steady inflation indicates that it’s too early to ease policy, especially since consumer spending, while softer, isn’t crashing. The labor market remains strong according to the July 2025 jobs report, with the unemployment rate steady at 3.8% and wages increasing by 4.0% annually. This strong job market is what supports consumer spending. A major employment setback is not likely unless consumer spending decreases first. For derivative traders, this data-focused environment suggests increased volatility around major economic reports. The VIX index has been low, recently at around 15, which could be a good opportunity to buy volatility ahead of upcoming inflation and employment data. Past market events, like the swings in 2024, show how quickly a single data release can impact the market. We should think about strategies that could benefit from major market movements, regardless of the direction. Buying straddles or strangles on indices like the S&P 500 before these announcements could be a practical strategy. This approach directly addresses the uncertainty surrounding the Fed’s next actions. Currently, Fed funds futures indicate a 50% chance of a rate cut before the year ends. Considering the strong labor market and persistent inflation, this seems overly optimistic. We may see these probabilities adjusted, creating trading opportunities against these expectations. However, we need to keep an eye out for signs of consumer weakness, as this is crucial for a possible downturn. Recently, credit card delinquency rates have risen to 3.5%, their highest since 2022. This could serve as an early warning, so it’s wise to have some downside protection, like out-of-the-money puts on consumer-focused ETFs. Create your live VT Markets account and start trading now.Scotiabank experts: US dollar performs unevenly against major currencies ahead of key data release
The US Dollar is showing mixed results against major currencies as data releases approach. The Pound Sterling and Swiss Franc are doing well, while the Euro and Japanese Yen are slightly down. The Australian Dollar has struggled after the Reserve Bank of Australia cut rates by 25 basis points to 3.60%.
US CPI data will be released soon. It’s expected that July’s headline prices will rise by 0.2% and core CPI by 0.3%. This could change the year-over-year headline inflation rate to 2.8% and core inflation to 3.0%. These figures highlight ongoing challenges due to rising prices, especially for lower-income households, as the Federal Reserve considers its policy amid a potential slowdown in the job market.
Impact On The US Dollar
Strong inflation data could slightly boost the USD, while weak data may hurt it. Rising inflation could negatively impact stock markets and lessen the chances of easing measures by the Federal Reserve. Other factors influencing the market include comments from Fed representatives and upcoming data, like Japan’s PPI figures. The DXY Index is currently stable, with clear support and resistance levels identified. Looking back, the market was focused on a potential headline inflation of 2.8%. This period marked the start of stubborn inflation that has influenced policy for the past year. Now, with the latest July 2025 figures showing a persistent 3.1% annual rate, things have changed. As a result, the Federal Reserve is taking a “higher-for-longer” approach, keeping the federal funds rate between 5.00% and 5.25%. This strategy has strengthened the US Dollar significantly in recent months. The DXY is now trading around 106.5, which is much higher than when the previous data was first released.Central Bank Policy Divergence
Recall that the Reserve Bank of Australia lowered its rate to 3.60%, leading to a divergence in central bank policies. This trend has continued, with the RBA’s cash rate now at 3.10% as of their August 2025 meeting. This ongoing gap suggests that strategies favoring further US Dollar strength against the Australian Dollar remain appealing. In the coming weeks, we expect increased implied volatility among major currency pairs, especially ahead of the late August Jackson Hole symposium. Traders are likely using options to protect against unexpected announcements from Fed officials. Thus, buying straddles or strangles on the EUR/USD could be a smart way to navigate this uncertainty. Create your live VT Markets account and start trading now.US Dollar Index hovers around 98.50 in anticipation of upcoming CPI data
The US Dollar is steady after gaining 0.4% in the last two trading days. Traders are waiting for the US Consumer Price Index (CPI) data to better predict future Federal Reserve actions, which could affect the Dollar’s short-term outlook.
Analysts expect July’s inflation to rise to 2.8% annually, up from June’s 2.5%, and core inflation might hit 3%. If inflation is higher than expected, the chances of the Federal Reserve cutting rates in September—currently at 90%—could decrease, which would help the US Dollar.
The Impact Of Nominations On Monetary Policy
Recent US economic data suggests a softer job market, prompting some Federal Reserve officials to support interest rate cuts. Additionally, potential nominations from Trump at the Fed are raising expectations for a more relaxed monetary policy. If inflation is low, it could ease concerns about tariffs and allow for a September rate cut, which could weaken the US Dollar. The US Dollar is the most traded currency worldwide, involved in over 88% of foreign exchange transactions, amounting to $6.6 trillion each day. The Federal Reserve’s monetary policy is crucial for the US Dollar’s value. They manage price stability and full employment mainly by adjusting interest rates. Quantitative easing and tightening also influence the Dollar’s strength. With the US Dollar recently recovering, all attention is on the upcoming CPI report. This data is vital for the market in the next few days as it will directly influence Federal Reserve policy. The results could shape the Dollar’s trends through the end of the quarter. If July’s inflation is high, reaching 2.8% or more, we should expect a stronger Dollar. This might lead the market to reconsider the 90% chance of a September rate cut, as reflected in Fed funds futures. In this case, we could explore buying call options on dollar-focused assets or selling puts on major currency pairs like EUR/USD.Trading Strategies For Upcoming Inflation Data
On the other hand, if inflation falls below 2.5%, the Federal Reserve may feel encouraged to cut rates, especially after soft job data from earlier this summer. This could likely weaken the Dollar, making put options on the US Dollar Index or call options on currencies like the Australian Dollar attractive trades. We are observing a significant rise in implied volatility before the inflation data release. The CBOE Volatility Index (VIX), mostly focused on stocks, shows broad market uncertainty. Additionally, option premiums on currency ETFs have risen by over 15% in the past week. Traders might consider strategies like straddles, which could benefit from large price swings in either direction, regardless of whether the Dollar strengthens or weakens. Reflecting on the high-inflation period from 2022-2023, we recall how aggressively the Fed acted to ensure price stability. The market remembers the rapid rate hikes that pushed the Dollar to multi-decade highs. This suggests the Fed may not cut rates if inflation shows signs of becoming a persistent issue. The political landscape adds complexity to our long-term view. Speculation about Federal Reserve nominations favoring a looser policy could limit potential gains for the Dollar, even with a strong inflation report. We must keep this in mind as it could restrict the Dollar’s strength heading into year-end. In conclusion, we operate within the world’s largest market, where the US Dollar represents over 88% of all transactions. Even minor changes in Fed policy expectations can lead to significant market moves due to the massive volume of daily trading. Our response must be tactical and firmly based on the forthcoming inflation figures while considering the wider political and economic environment. Create your live VT Markets account and start trading now.Miran shares optimism about inflation data, tariffs, and potential disinflation in light of immigration policy changes.
Miran, a nominee for the Federal Reserve, is pleased with the latest Bureau of Labor Statistics data. He claims there’s no proof that tariffs are causing inflation. While data can sometimes show unusual results, he believes current price changes are more about market factors than tariffs. He specifically pointed out that US cars and airfares are not affected by tariffs.
Miran talked about factors contributing to inflation, suggesting illegal immigration might be causing higher rents. He also indicated that changes in immigration policies could lead to lower prices in the service sector. He emphasized that the Consumer Price Index (CPI) data is rarely revised and recommended incentives to improve response rates.
