As we begin the new week, early FX pricing shows minor movements. The euro (EUR) appears slightly stronger, though the change is minimal.
Initial pricing also shows the US dollar (USD) as weaker across the board. However, these early figures could shift as the session progresses.
Soft Start To The Week
We’re seeing a soft start to the week, with the US dollar pulling back just a bit against most currencies. The euro is showing a little bit of strength, but as noted, you have to squint to see any real conviction here. This price action suggests traders are hesitant to place big bets just yet.
This hesitation makes sense given the data we digested last week. The latest US CPI print for July 2025 came in at 3.1%, just below expectations and supporting the view that the Federal Reserve is firmly on hold. Meanwhile, recent comments from European Central Bank officials have kept the door open for one more rate hike in September.
All eyes are now turning to the Jackson Hole symposium at the end of the month. This is the key event we are waiting for, as it will likely provide clearer signals on policy paths for the rest of the year. We expect volatility to remain low until we get more clarity from central bank leaders there.
Opportunities For Derivative Traders
For derivative traders, this quiet period presents an opportunity. Implied volatility in major pairs like EUR/USD has fallen, with one-month vols dropping to just 5.8%, a level we haven’t seen since before the hiking cycles began back in 2022. Buying options, such as straddles or strangles, could be a smart way to position for the price swings we anticipate around the symposium.
We are also watching the growing policy divergence between the Fed and the ECB. With Fed funds futures pricing in a less than 10% chance of another hike in 2025, the path of least resistance for the dollar appears to be sideways to down. Traders could consider longer-dated options that capitalize on potential sustained EUR/USD strength into the fourth quarter.
