The session has been slow due to limited news and anticipation of the US-China trade talks outcome. The UK labour market report revealed the largest job loss since May 2020 and lower than expected wage gains. This resulted in traders adjusting expectations for the Bank of England’s interest rate cuts from November to September.

Expectations for the US-China negotiations are for some positive developments with potential reciprocal concessions and plans for future talks. A significant breakthrough or deal appears unlikely at this point.

Market Steadiness Amidst Anticipation

The markets are steady as traders await new catalysts such as the US-China negotiations and the US Consumer Price Index report tomorrow. Until these events, price action is expected to remain consistent.

For the American session, the main activities include the US Redbook data and the 3-year auction, which are not expected to impact market expectations. The focus will stay on the US-China negotiations, with traders watching for market-moving headlines. Bitcoin remains an outlier, having surged to new highs after a crucial technical breakout.

Given the restrained movement in today’s markets, it’s worth unpacking what this all means for those of us navigating short-term instruments tied to underlying prices. The earlier revelation of worsening UK employment figures, with the sharpest job cuts since spring 2020, provides a clearer path for monetary policy expectations to shift. Lower wage growth adds to that conviction. With those data points in mind, a recalibration has occurred in how soon we could see the Bank of England opt to pause or reverse its previous monetary tightening steps. We’ve now brought forward the forecast for cuts by a couple of months — no longer a distant prospect.

The American and Chinese officials engaging in trade talks have set a modest tone in terms of expectations. No bombshells are likely — no ink on a finalized treaty — but even a soft pledge to continue discussions or remove limited barriers would be enough to inject momentum. What matters here isn’t just the tone of the communiqué, but also the degree of commitment to follow-through. If that’s visible, short-dated contracts may reprice with some aggression.

Waiting for US Consumer Price Index

We are likely to tread water until the US Consumer Price Index figures are released. Inflation remains key to any forward-looking stance from the Federal Reserve, particularly as housing and services inflation have been sticky. Should the data suggest continued moderation, the longer end of the rate curve may begin to factor in more accommodation than it currently does.

For now, activity in American hours seems confined to secondary releases, including retail tracking and a government bond sale that rarely moves markets. Still, we keep half an eye on headline risk — anything leaked or speculated about from the negotiation rooms could stir up volatility, especially in currency and rate products sensitive to forward-looking policy expectations.

Bitcoin, meanwhile, appears to be on its own trajectory. Its latest burst upward, driven by technical patterns completing as forecasted, has reminded us that correlation with traditional risk assets currently wavers and at times disappears entirely.

Price ranges in the short term have held, but this balance hinges heavily on what comes next. Those of us exposed to near-term derivatives will need to position in case the data, or a sudden pivot in rhetoric, triggers a directional push. Patterns suggest that when direction emerges, it tends to follow through with speed.

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