The session has been quiet regarding data and news releases. Japan has requested the US amends its executive orders on tariffs, agreeing that the 15% tariff rate is a ceiling and should not be compounded on existing levies. Attention is on Federal Reserve cuts.
Preparations are underway for a Trump-Putin summit, marking the first meeting between the US and Russian presidents since June 2021. Bitcoin advanced following news of an executive order enabling private equity, real estate, cryptocurrencies, and alternative assets in 401(K)s.
Bank Of England Rate Cut
The Bank of England delivered a 25 basis points cut, marking a historic second round of voting to achieve a majority decision on the bank rate. The cut was decided by one vote, with inflation forecasts revised upwards. There is now a 50% possibility of another cut by the end of the year.
In financial markets, the US dollar was weak during the session but later recovered some losses. Stock markets have consistently rallied, extending gains, while bond markets remain stable as they await US jobless claims and CPI data.
With the focus now entirely on the Federal Reserve, the bond markets are quiet ahead of key US inflation data. We have seen the VIX, a measure of expected stock market volatility, hover near yearly lows around 13.5, suggesting complacency before this critical release. Traders should consider buying cheap, short-term options to position for a spike in volatility, as a surprise in the CPI numbers could aggressively move markets.
The executive order allowing alternative assets in 401(k) plans is a structural game-changer for cryptocurrencies. The U.S. 401(k) market holds over $7.5 trillion in assets, and even a minor 1% allocation would represent a $75 billion inflow into these markets. Considering this potential, we believe traders should look at buying long-dated call options on Bitcoin or crypto-exposed stocks to capture the long-term upside.
Impact On British Pound
The Bank of England’s “hawkish cut” creates significant uncertainty for the British pound. With UK inflation recently ticking up to 2.8% in the second quarter of 2025, the central bank is clearly uncomfortable with easing policy further. The market’s pricing of a 50% chance of another cut this year seems too high, so traders could sell GBP puts, betting that sterling will find a floor.
Next week’s planned summit between the US and Russian presidents is the first since the tense meeting back in June 2021. Such high-stakes geopolitical events can trigger sharp, unexpected moves in risk assets and oil prices. We think it is prudent to purchase some downside protection, like cheap puts on the S&P 500, to hedge against any negative surprises.
The US dollar weakness we’ve seen may be temporary as the market awaits a clear signal. Its direction in the coming weeks will likely be decided by the US CPI data versus the outlook for other central banks. If US inflation proves sticky, it will challenge the Fed cut narrative and could cause a sharp reversal higher in the dollar.
