US equity futures and foreign exchange are mostly steady, with a minor reversal in the yen. Treasury yields have slightly increased after three consecutive days of decline. Federal Reserve Chair, Powell, resumes his testimony at the Senate at 10 am ET. His consistent wait-and-see approach has set anticipations low for any market disruptions. Support for this approach was echoed by KC Fed President Schmidt in a recent speech.

Economic Calendar

The economic calendar today includes minimal data releases. New home sales figures are due at 10 am ET, followed by US weekly oil inventory data 30 minutes later. Following three uneven trading sessions, financial markets appear momentarily calm on the surface, though tensions beneath still tug at direction. With US equities barely moving and foreign exchange showing little deviation—aside from a slight retreat in the yen—markets are taking a breather. That pause, however, is unlikely to last. Yields on Treasuries have nudged higher, albeit modestly. That marks a shift from the slide seen earlier this week. It doesn’t suggest a newfound appetite for risk, but rather a quiet exit from safer investments, likely driven more by positioning than conviction. The move itself doesn’t demand a broad response, but the pattern deserves monitoring, especially ahead of month-end where rebalancing flows can distort underlying sentiment. Powell’s return for his second day of Congressional testimony today hasn’t unnerved traders, primarily because his recent strategy—to remain patient on rate moves—has already been well communicated. That expectation of steadiness was underscored by Schmidt earlier in the week, as she backed a cautious stance. We interpret this alignment as a green light for those watching the dot plot more than headlines. There remains no appetite within the Fed to pre-empt a rate move before further confirmation from the inflation path.

Trading Perspective

With little in the way of new economic data on the docket today, especially during morning trading hours, attention naturally drifts to secondary indicators. New home sales may carry nominal influence but are unlikely to shift core rate assumptions unless wildly out of consensus. Crude oil inventories, shortly after, could generate volatility around energy names, but that too is unlikely to spread broadly unless accompanied by a large miss or confounding factors. From a trading perspective, we continue to see suppressed implied volatility across most asset classes, particularly in short-dated metrics. That condition suggests premium sellers remain comfortable, though they may be increasingly exposed should any unexpected data miss land or a policy miscommunication occur. We aren’t reallocating risk broadly but are staying flexible. Directional strategies are likely to suffer in this slower environment, making short gamma positions more attractive in the near term, provided one can manage the headline risk. Create your live VT Markets account and start trading now.

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