The dollar has decreased some of its gains following the US PPI data from the previous day, with the US Federal Reserve reducing expectations for a 50 bps rate cut in September, sticking to a 25 bps reduction. The market session witnessed the yen strengthening with USD\/JPY down 0.5% to 146.95, prompted by robust Japan Q2 GDP figures. Simultaneously, the EUR\/USD rose by 0.3% to 1.1687.<\/p>\n
European equities experienced slight gains, with S&P 500 futures inching up by 0.1%. Switzerland’s Q2 GDP showed minor growth at 0.1% compared to the prior 0.8%. Meanwhile, gold marked a 0.2% rise to $3,342.17, and Bitcoin increased by 0.9% to $119,065. <\/p>\n
USD pairings saw mixed movements, with USD\/CHF down 0.2% to 0.8055, GBP\/USD growing 0.2% to 1.3555, and AUD\/USD increasing by 0.3% to 0.6510. The market activity was subdued due to a bank holiday across most of Europe, with attention shifting to upcoming US retail sales data. Overall, both US and European equities maintained steadiness, riding on previous week’s upward momentum.<\/p>\n
We see the market has almost fully priced in a 25 basis point Fed rate cut for September. The CME FedWatch tool is showing probabilities around 88%, which explains why the dollar’s recent rally has paused. This suggests selling out-of-the-money options that bet on a larger 50 bps cut could be a viable strategy to collect premium.<\/p>\n
With Wall Street near record highs, the upcoming US retail sales report is a key risk point. Economists are forecasting a headline print of around 0.6% for July, but a miss could easily spook investors. The VIX index is hovering near 14, making protective put options on the S&P 500 relatively inexpensive as a hedge against a market downturn.<\/p>\n
The divergence between central banks is creating opportunities in currency options. Japan’s strong Q2 GDP, reported earlier this week at an annualized 2.5%, contrasts with Switzerland’s weak 0.1% quarterly growth and the Fed’s easing stance. This makes put options on USD\/JPY attractive to position for further yen strength against a softening dollar.<\/p>\n
China’s commitment to a looser monetary policy is a significant signal for commodity traders. This follows last week’s disappointing industrial production figures, suggesting authorities are keen to support growth. While this could support assets like copper and oil in the medium term, the immediate focus on a potential US consumer slowdown is keeping WTI crude near $63.<\/p>\n
Looking ahead, the main theme is trading the transition from a data-watch phase to a confirmed easing cycle. We saw back in late 2023 how markets rallied for months in anticipation of the first rate cut, often ignoring mixed data along the way. Therefore, any dip on strong economic news could be viewed as a positioning opportunity in rate-sensitive assets.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Dollar slips amid Fed rate shift; yen, euro gain; markets stable ahead of US retail sales data.<\/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-29176","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/29176","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=29176"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/29176\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16966"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=29176"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=29176"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=29176"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}