Insights 
VT 
The USD started the US trading week mostly lower following the August 2025 U.S. jobs report. The report revealed a slowdown in hiring, with nonfarm payrolls increasing by only 22,000 and the unemployment rate rising to 4.3%. Sectors such as manufacturing, construction, and government saw job losses, only partially offset by increases in healthcare, retail, and leisure. The three-month average of nonfarm payrolls is about 29,000, significantly below the 12-month average of roughly 122,000.
Markets reacted with Treasury yields dropping, and equities and gold rallying, as the USD fell. Futures suggested a near-certain 25 bps Fed rate cut on September 17, with CPI and PPI data affecting further decisions. A look at the USD against major currencies shows mixed results: JPY +0.24%, EUR -0.11%, GBP -0.20%, CHF -0.34%, CAD -0.22%, AUD -0.56%, NZD -0.75%. In Japan, Prime Minister Shigeru Ishiba resigned after electoral defeats for his party, causing political and market shifts.
Economic Indicators and Market Performance
Upcoming key releases include the PPI and CPI data, while the ECB is expected to hold rates. US stock indices started the week higher, with S&P, Dow, and NASDAQ all rising. US debt market yields declined, and other commodities saw increases, including crude oil, gold, and silver. Bitcoin also rose by $852, closing on Friday at $110,669.
The very weak jobs report has almost guaranteed a Fed rate cut on September 17. Looking back, we saw a similar sharp cooling in the labor market in late 2019, which prompted the Federal Reserve to begin an easing cycle that traders are anticipating now. We should therefore position for lower interest rates, using options that will profit from declining yields over the coming weeks.
This dovish shift makes the US dollar fundamentally less attractive, a trend already reflected in its broad decline. According to the CME FedWatch Tool, the market is pricing in over a 95% probability of a 25-basis-point cut, which should continue to weigh on the currency. Options to bet against the dollar, like buying calls on the AUD/USD or EUR/USD, look appealing.
Inflation and Fed Policy
However, we must not ignore this week’s CPI inflation report as the key risk to this view. We all remember how sticky inflation throughout 2023 forced central banks to remain aggressive, and a surprisingly high print of 0.4% or more could complicate the Fed’s decision. A volatility play, such as an options straddle on the S&P 500, could be a smart way to trade the data release.
Gold has surged to a new record high, driven by falling bond yields and expectations of cheaper money. This rally is reminiscent of the one we saw in 2024, which was also fueled by the prospect of Fed easing and geopolitical tensions. We can use call options on gold futures to participate in further upside while managing the risk of a reversal from these historic levels.
In Japan, the Prime Minister’s resignation introduces a new layer of political uncertainty that could weigh on the yen. While the yen is stronger today, such leadership vacuums often lead to currency weakness over the medium term as investors await policy clarity. We could position for this by looking at longer-dated call options on the USD/JPY pair, betting against the yen’s recent strength.
