US Hassett, a White House Senior Adviser, stated that economic growth is occurring without inflation. He mentioned no knowledge of any Nvidia stake deal similar to Intel’s arrangement, and rare earths were seen as a potential economic bottleneck.
European markets reacted positively, with stocks climbing after the Fed’s decision, but the Bank of England (BoE) holding rates at 4%. The BoE held rates steady amidst a sticky 3.8% inflation, with future cuts uncertain and traders focusing on UK economic data.
Futures Surge On Fed’s Rate Cuts
In the market, futures surged on the prospect of Fed rate cuts, with S&P 500 aiming for 6700 and VIX dropping by 6%. Intel’s stock soared in pre-market trading following news of a partnership with Nvidia for a custom graphics chip.
PENGU saw a 12% upsurge to $0.037, with a 67% likelihood of hitting $0.05, while NFT trading volume increased by 152%. A high-risk warning was issued, stressing the potential losses involved with foreign exchange trading.
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Anticipate A Continued Rally In Equities
With the Federal Reserve signaling a rate cut, we should anticipate a continued rally in equities. This dovish pivot is likely to fuel risk appetite, making long positions through S&P 500 call options or futures attractive for the coming weeks. We saw a similar dynamic after the Fed’s pivot in late 2023, which sparked a multi-month rally into 2024.
The VIX dropping 6% is a clear sign of complacency returning to the market, and we should use this to our advantage. As volatility gets suppressed, selling premium becomes an attractive strategy, perhaps through selling puts on indices or shorting VIX futures. With the VIX likely to trade below 14, this environment rewards those who bet on continued calm.
The policy divergence between a cutting Fed and a holding Bank of England creates a clear trade in the currency market. This setup strongly favors a long position in GBPUSD, as the interest rate differential is set to widen in the pound’s favor. Looking back, the dollar’s massive rally in 2022 was fueled by the Fed hiking rates before other central banks; we may now be seeing the beginning of that trend in reverse.
For EURUSD, the situation is more complex due to the renewed threat of tariffs on EU goods. While a weaker dollar from Fed cuts is supportive, political risk from Washington could easily send the euro lower. We should consider buying volatility through straddles on EURUSD, a strategy that would profit from a significant price move in either direction as these opposing forces play out.
The explosive 28% pre-market jump in Intel (INTC) on the Nvidia deal means its options’ implied volatility will be extremely high. Rather than chasing the stock, we should look to sell this inflated premium by using strategies like covered calls or credit spreads. We saw a similar volatility spike and subsequent crush in Nvidia itself after its monumental earnings report in May 2023, providing a clear blueprint for this trade.
