In July, the United States’ Producer Price Index excluding food and energy rose by 0.9% month-on-month, exceeding the anticipated 0.2%. This metric serves as an indicator of inflation at the wholesale level, potentially influencing future economic policies.
The EUR/USD pair is under pressure, slipping to lows near 1.1640 due to the US Dollar’s resurgence driven by robust US inflation and labour market data. Similarly, the GBP/USD rate has eased to daily troughs around 1.3520 amid the Greenback’s rise and despite favourable UK statistics earlier.
Gold And The Strength Of The Us Dollar
Gold remains weak near $3,330 per troy ounce due to persistent selling pressure. Its decline parallels the US Dollar’s strength and rising US yields, affecting wealth preservation preferences.
Bitcoin experienced a correction after hitting a new record high of $124,474, settling at $121,615. This trend influenced altcoin prices, with Ethereum nearing its previous peak above $4,800 from November 2021.
Economic conditions hint at potential intensification in US trade tensions, with expected global output reductions by 0.7 percentage points in the medium term. Markets remain cautious, given the evolving trade dynamics and fiscal policies.
The unexpected 0.9% jump in the core Producer Price Index for July 2025 is a serious signal for us. We saw similar wholesale price pressures back in late 2021, which preceded a major cycle of Federal Reserve rate hikes throughout 2022 and 2023. This stronger-than-expected inflation suggests we should prepare for a more aggressive stance from the Fed in the coming weeks.
Expectations For The Us Dollar And Precious Metals
Given this data, we expect the US Dollar to continue its rally. The latest CME FedWatch Tool data, updated this morning, now shows a 65% probability of a 25-basis-point rate hike at the September meeting, up from just 30% last week. We should consider buying put options on the EUR/USD, especially as it tests lows near 1.1640, a level not seen since last quarter.
The strength in the US dollar and rising bond yields are creating significant headwinds for precious metals. With the US 10-year Treasury yield pushing back above 4.75%, the appeal of non-yielding gold is fading fast. We should maintain a bearish stance on gold, using put options or bear call spreads to target a move below the $3,300 support level.
Bitcoin’s rejection from its new record high above $124,000 suggests short-term exhaustion, and we might see a consolidation period. Derivative funding rates on major exchanges have also cooled from their recent highs, indicating a decrease in leveraged long positions. This environment makes selling covered calls against existing Bitcoin holdings an attractive strategy to generate income while waiting for the next directional move.
Ethereum’s approach towards its historical November 2021 peak of around $4,800 is a critical test. This price level could trigger significant profit-taking from long-term holders, creating major resistance. We should be cautious about opening new long positions here and could even consider protective puts as it nears this key psychological barrier.
Finally, the possibility of intensifying trade tensions adds a layer of uncertainty across all markets. We are watching the CBOE Volatility Index (VIX), which has climbed back over 20 this past week, reflecting rising investor anxiety. It may be prudent to hedge our broader equity exposure by purchasing put options on major indices like the S&P 500.
