The recent US-EU trade deal includes a baseline of 15% tariffs and a commitment to purchasing US goods and energy. This is more favourable than the previously threatened 30-50% rates, though it mirrors past universal tariff discussions.<\/p>\n
Markets are anticipating a subdued August, pending the release of results from a pharmaceutical trade investigation. Potential trade deals with Asia, Mexico, and Canada remain on the market\u2019s agenda, and European politicians hope this new deal will spur business investments.<\/p>\n
Upcoming US data, such as jobs reports and GDP figures, could influence the dollar. The Federal Reserve is expected to maintain its stance on interest rates, reducing the likelihood of a September rate cut.<\/p>\n
With the data calendar clearing soon, markets are predicting a quiet August. The dollar is anticipated to consolidate, potentially moving back towards the 98.50\/99.00 range, depending on US data outcomes. The current one-week rates make the dollar less attractive as a funding currency.<\/p>\n
We believe the more favourable US-EU trade terms reduce immediate tail risk for European equities. For instance, after the US suspended steel and aluminum tariffs in late 2021, the Euro Stoxx 50 index saw a period of stability. This precedent suggests selling out-of-the-money puts on European indices could be a viable strategy to collect premium.<\/p>\n
We anticipate a period of lower market volatility, which is a common trend for August. The CBOE Volatility Index (VIX) is currently trading near 13, which is below its historical average and supports the expectation of a quieter market. This environment is favorable for strategies that profit from time decay, such as selling iron condors on broad market indices like the S&P 500.<\/p>\n
Strong US economic data will likely reinforce the central bank’s current policy stance. Recent reports showing Non-Farm Payrolls adding 272,000 jobs far exceeded expectations, making a September rate cut highly improbable. The CME FedWatch tool reflects this, pricing in over a 90% chance that rates will be held steady at the next meeting.<\/p>\n
Given the solid economic indicators, we expect the US dollar to remain supported, making a significant decline below the 104 level on the DXY index unlikely. Traders could therefore consider selling short-dated put spreads on dollar-tracking ETFs to capitalize on this floor. The current interest rate differential continues to make the greenback an unattractive funding currency for carry trades.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US-EU deal sets 15% tariffs, boosts US goods purchases; markets eye data, quiet August expected.<\/p>\n","protected":false},"author":62,"featured_media":16966,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27452","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t