In the European morning session on 8 August 2025, financial markets were mostly steady as they entered the final part of the week. Major currencies saw little movement, with the dollar remaining steady but soft throughout the week. EUR/USD fell 0.15% to 1.1647, USD/JPY rose 0.45% to 147.76, while GBP/USD and AUD/USD experienced minimal changes.
European equities posted slight gains, recovering some losses from the previous week. S&P 500 futures also rose by 0.3%, buoyed by resilient tech shares. In the commodities market, gold spot prices were steady, though gold futures on COMEX surged. Meanwhile, WTI crude increased by 0.6% to $64.27, and Bitcoin declined by 0.3% to $116,864.
Upcoming Economic Data
Market participants are now focusing on the upcoming US CPI report, anticipated to influence the Federal Reserve’s outlook. Interest rates expectations remain a point of discussion, with JP Morgan forecasting consecutive rate cuts from the Fed until the end of the year. Additional events include the Canadian labour market report and updates on potential gold tariffs.
With markets quiet ahead of the US CPI report next week, we see implied volatility on major equity indexes sitting near multi-month lows. We saw a similar setup in late 2023, where a single inflation report shifted rate expectations and caused the VIX to jump over 20% in a matter of days. Buying cheap VIX calls or out-of-the-money options on the SPX could be a smart way to position for the volatility that is likely to come.
The expectation of consecutive Fed rate cuts through the end of the year is now the main driver. This forecast suggests positioning for lower short-term interest rates through derivatives like SOFR futures. We have also seen a significant increase in options trades betting on a steepening of the yield curve, which is currently inverted with the 2-year yield above the 10-year yield.
Currency and Stock Market Dynamics
In currencies, the EUR/USD is being held down by large option expiries at 1.1650, creating a coiled spring ahead of the CPI data. A long strangle, which involves buying an out-of-the-money call and put option, is a viable strategy to profit from a large price move in either direction. For the USD/JPY, which is hitting resistance, we think buying puts is a good hedge against a dovish Fed surprise that would weaken the dollar.
The resilience in tech stocks suggests the market is betting that upcoming Fed cuts will be due to falling inflation, not a failing economy. This supports using call spreads on the Nasdaq 100 to capture further upside while limiting the cost of the trade. Rate-sensitive sectors like utilities and real estate should also be on the radar for bullish option strategies.
Gold’s high price of over $3,300 an ounce is supported by strong underlying demand and the prospect of lower interest rates. Data from the World Gold Council earlier this quarter confirmed that central bank buying in 2025 is on pace to match the record levels we saw in 2024. We believe buying call options on gold futures or ETFs remains a core strategy to ride this momentum.
