On September 8, 2025, French Prime Minister Bayrou lost a confidence vote in the national assembly, influencing market activities. In the US, the August consumer inflation expectations rose slightly to 3.2%, while the employment trends indicator fell to 106.41 from 107.55.
In the markets, gold reached a fresh record, climbing $5 to $3636, and WTI crude oil increased by $0.50 to $62.38. US 10-year yields decreased by 3.9 basis points to 4.05%, and the S&P 500 observed a 0.2% rise. The New Zealand dollar led, whereas the Japanese yen lagged behind.
Market Dynamics
Market dynamics were complex with initial yen weakness due to the Japanese Prime Minister’s resignation, though this effect faded. Political instability in France led to euro turbulence before recovery. A broader trend of US dollar weakness was driven by declining yields and potential rate cuts.
Late technical movements also emerged as the euro surpassed Friday’s high of 1.1765 and the pound showed upward momentum. Analysts noted that New York Fed survey results revealed optimism about job prospects had hit a low since the survey’s inception in 2013. Meanwhile, gold recorded its fifth gain in six trading days.
The drop in US Treasury yields is the most important signal, driven by a weakening American job market. Last Friday’s Non-Farm Payroll report supports this, showing a gain of only 95,000 jobs, well below the 150,000 consensus forecast. We should therefore consider using options on SOFR or Fed Funds futures to position for the Federal Reserve cutting interest rates at its September 17th meeting.
This expectation of Fed easing is making the US dollar weaker against other currencies. Data from the CME FedWatch tool now implies an 85% probability of at least a 25 basis point rate cut, giving the dollar little support. Buying call options on the euro or British pound could be an effective way to capitalize on this trend, especially with the euro now trading above recent highs.
Gold’s Ascent
Gold is a clear beneficiary, hitting another record high as the dollar falls and traders seek safety. The move to $3636 is part of a sustained trend, as recent Commitment of Traders reports from the CFTC have shown large speculators increasing their bullish bets for six consecutive weeks. We believe buying gold futures or call options remains a primary strategy to hedge against uncertainty and a devaluing dollar.
While the S&P 500 is slightly higher, the reason for the expected rate cut is a slowing economy, which is a major risk for stocks. This conflict between Fed support and poor economic data often leads to an increase in market volatility. Purchasing VIX futures or call options could be a prudent hedge against a potential stock market drop in the weeks ahead.
Political instability in France and Japan is currently a secondary issue, but it should not be ignored. We saw similar European political stress during the sovereign debt crisis of the early 2010s, which often resulted in a weaker euro. For now, we are watching the spread between French and German 10-year government bond yields; if it widens significantly beyond 60 basis points, it could signal growing risk for European assets.
