Insights 
VT 
Monday mornings typically see thin market liquidity, which improves as more Asian centres become active. Prices may fluctuate as a result.
The US and China have made positive comments on trade talk progress, though specific details remain limited. While it’s neither entirely negative nor completely positive, the situation is being observed carefully.
US Futures Reopening
US futures are set to reopen at 6 pm US Eastern time (2200 GMT). Early foreign exchange rates show USD/JPY has increased from Friday’s close, while EUR/USD has decreased. Markets remain cautious about the progress made.
As the week progresses, attention naturally shifts to how these early moves hold up once broader participation enters the market. The general direction of the dollar against its G10 peers hints at some willingness to unwind safe haven bets, though that may prove short-lived if sentiment softens again. Historically, early-week movements often exaggerate reactions, partly due to lower liquidity, especially before European desks begin activity in full.
The bounce in USD/JPY suggests rising demand for risk, even if temporarily. That pairing tends to see movement as investors rotate between safety and yield. Given recent upward price action, positioning in yen may need adjusting to guard against an overly aggressive extension higher. Meanwhile, the move lower in EUR/USD tells a different story. European growth concerns haven’t entirely faded, and pressures on that front tend to act gradually but with consistency. If the figure breaks through the weekly support seen last Friday, we may need to reassess current momentum expectations.
We’re not seeing any large macro catalyst confirmed yet, but piecemeal headlines continue to shape market moves—for now, most of it speculation and posturing. There’s currently an asymmetry in the way assets are pricing possible outcomes. Equity futures, still buoyed by last week’s optimism, don’t seem fully aligned with currency markets, which remain cautious and selective. That dislocation could compress quickly once more trading desks join and electronic flow evens out.
Derivative Positions Handling
Derivative positions—especially short-dated options—will require nimble handling. Implied volatility in many contracts has started to drift lower, reflecting the absence of shocks in the last few sessions. But that calm can be misleading. If there’s going to be any drawdown risk later in the week, it’s likely to stem from an overreaction to a minor data beat or miss. We’ve seen that pattern play out many times in non-farm payroll weeks or ahead of major central bank speak, and the moves tend to accelerate as expiry approaches.
Turnover volumes early in Asia have remained moderate, so today’s direction might not reflect broader conviction yet. We need to allow European and North American flows time to signal whether Friday’s themes are being followed or faded. In terms of forward pricing, the overnight index swaps now price a marginally higher probability of rate stability through the next few months. That in itself suggests optionality is being priced more conservatively, suitable for gamma-neutral strategies but less inviting for directional expressions without tighter control.
Li in Beijing signalled some intention to maintain cooperation in discussions, but without timelines, we treat it as commentary rather than commitment. Lighthizer’s remarks were similarly non-specific. We’ve seen enough rounds of such interactions to determine where follow-through exists and where it doesn’t. For now, the lack of stated targets removes a layer of confidence from potential rebound narratives.
As more cross-asset correlations deepen later this week, we should look at skew ratios and term structures in both STIRs and FX vols for early signs of conviction. These often lead spot re-pricings by at least half a session, which presents possible opportunities for rebalancing. Current conditions favour scalping on wider deltas in options rather than building larger convex views. The bias we hold is situational—not driven by events yet, but by structure and realised data trendlines.
Watch very closely how EMEA sessions handle incoming flow. That often reveals whether the Asia move was dampened or built upon. Price stability through the first two hours of London open frequently sets the tone for at least the US morning window. If that window confirms the levels currently being tested in Japanese yen and euro pairs, roll opportunities will present themselves throughout Wednesday expiry.
