Daily Market Outlook, August 29, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

Chinese stocks continued to climb as investors looked forward to earnings reports from major banks and corporations, including Alibaba and BYD, which will influence the sustainability of this surge.Goldman Sachs analysts raised their 12-month projection for the CSI 300 Index from 4,500 to 4,900 on Thursday. The index increased by as much as 1.2%, on track for its highest close since March 2022, coinciding with a busy reporting day in China where 441 domestically listed companies announced their results. Asian markets presented a mixed picture ahead of the Fed's key price index report expected on Friday. Oil prices dropped 0.7% following gains in the prior session amidst diminishing hopes for a peace agreement between Russia and Ukraine. The Dollar index appreciated, while Treasury yields fell, with the 10-year yield rising by 1 basis point to 4.21%. China's stock market is poised for a record monthly turnover, underscoring the intensity of a bull market that is increasingly drawing in new investors. There is a strong sense of market optimism in China, even as banks and regulatory bodies suggest they may seek to temper the exuberance, with US tariffs and a lingering real estate crisis weighing on the economy. In the commodities sector, oil prices retraced some of their earlier gains as the likelihood of peace in Ukraine diminished, reducing the chances that more of Russia's supplies will enter wider markets shortly.

Inflation risks remain skewed to the upside in the near term, a concern that Chair Powell has acknowledged. A modest increase in underlying inflation for July, however, is unlikely to alter market expectations regarding US interest rate cuts. Lloyds’ economists anticipate core PCE to rise by 0.3% month-on-month, lifting the year-on-year rate to 2.9% from 2.8%. Meanwhile, the headline rate is expected to hold steady at 2.6% year-on-year. The potential impact of tariff increases will still be a key factor to watch. Goods inflation has been steadily climbing, a trend likely to persist as these costs ripple through supply chains. Despite this, services prices are expected to remain the primary driver of PCE this month, which has been a persistent challenge for the Fed, hovering around 3.5% year-on-year throughout the year. With goods prices also on the rise, the issue becomes increasingly urgent, prompting the Fed to shift its focus to labor market risks when evaluating rate cut prospects. The inflation outlook alone does not justify rate cuts. However, with labor supply growth constrained by immigration restrictions, it remains uncertain what would constitute a sufficiently weaker labor market capable of generating the slack needed to restore demand conditions to equilibrium and achieve the Fed’s inflation targets. In the current environment, the Fed’s dual mandate necessitates trade-offs, which may translate into greater tolerance for inflation.

Following Powell’s dovish tone at Jackson Hole, the primary obstacle to a September rate cut appears to be the US labor market. As a result, all attention will be focused on next Friday’s August payrolls report, with the current median forecast at 80k. This report will also include the preliminary estimate for annual revisions, which may further lower employment growth projections based on the softer trends observed in H1. Given that labor data is typically a lagging indicator, these anticipated downward revisions could significantly influence US rate expectations. The US calendar shifts slightly due to Labor Day on Monday, with manufacturing ISM scheduled for Tuesday, JOLTS and the Beige Book on Wednesday, and ADP data alongside jobless claims and non-manufacturing ISM on Thursday. In the UK, the week begins with money and credit data on Monday and concludes with the delayed July retail sales report on Friday, following final PMIs on Monday and Wednesday.  In Europe, while PMIs will also dominate the week, the preliminary August CPI report on Tuesday is the key focus. However, it is unlikely to spark much reaction, as inflation has stabilized around the 2% target, with core inflation continuing to converge. ECB President Lagarde is set to speak on Wednesday, while the Fed speaker calendar remains light, though more appearances are expected ahead of the blackout period starting September 6.

Overnight Headlines

  • US Economy Grew Faster In Second Quarter, New Estimate Shows

  • Trump Suggests Hosting Pre-Midterm GOP Convention

  • Fed’s Waller: Could Back Jumbo Rate Cut If US Econ. Weakens Sharply

  • Trump Ally Floats Norway Tariffs Over Caterpillar Divestment

  • EU Moves To Slash US Industrial Tariffs To Spare Its Carmakers

  • Denmark Slashes Economic Growth Forecast As Novo Nordisk Slumps

  • Tokyo Inflation Slows On Subsidies As BoJ Stays On Hike Path

  • Japan July Factory Output Falls More Than Est, Retail Sales Disappoint

  • South Korea Plans Record 2026 Bond Sales To Finance Lee’s Budget

  • Nippon Steel Advances Toward 100-Million Ton Capacity Target

  • Dell Falls After Reporting Tighter Profit Margins on AI Servers

  • Caterpillar Lifts 2025 Tariff Cost Estimate To As Much As $1.8 Billion

  • Putin And Zelenskiy Won’t Meet, German Chancellor Says

  • Brazil Starts Formal Process To Assess US Tariff Retaliation

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

  • EUR/USD: 1.1500 (4.6B), 1.1600 (2.2B), 1.1625 (4.4B), 1.1650 (1.1B)

  • EUR/USD: 1.1700 (2.4B), 1.1715 (545M), 1.1720-25 (2.3B), 1.1745 (1.7B)

  • EUR/USD: 1.1750 (655M), 1.1770 (935M), 1.1800 (2.4M)

  • USD/JPY: 145.00 (2.4B), 146.00 (840M), 146.50 (2.0B), 147.00 (1.2B)

  • USD/JPY: 147.50 (1.2B), 148.00 (670M)

  • GBP/USD: 1.3250 (920M). USD/CHF: 0.8100-05 (700M)

  • EUR/GBP: 0.8575 (1.4B), 0.8700-05 (1.5B), 0.8725 (1.1B)

  • AUD/USD: 0.6500 (1.1B), 0.6515 (500M), 0.6560-65 (780M)

  • USD/CAD: 1.3675 (520M), 1.3830 (700M)

CFTC Positions as of the Week Ending August 22 

  • Speculators reduce their net short position in CBOT US 5-year Treasury futures by 57,986 contracts, bringing it down to 2,508,383. They also increase their net short position in CBOT US 10-year Treasury futures by 3,293 contracts, raising it to 945,516. The net short position for CBOT US 2-year Treasury futures is trimmed by 55,058 contracts, now at 1,324,539. Conversely, speculators elevate their net short position in CBOT US UltraBond Treasury futures by 33,030 contracts to 242,162. The net short position in CBOT US Treasury bonds futures decreases by 9,751 contracts, standing at 51,043. 

  • Bitcoin's net short position is at -1,200 contracts, while the Swiss franc shows a net short position of -27,278 contracts. The British pound's net short position is -25,185 contracts, and the Euro has a net long position of 118,745 contracts. The Japanese yen has a net long position of 77,581 contracts. 

  • Equity fund speculators have reduced their S&P 500 CME net short position by 30,327 contracts, bringing it to 365,804, while equity fund managers have cut their S&P 500 CME net long position by 23,237 contracts, now totaling 864,075.

Technical & Trade Views

SP500

  • Daily VWAP Bullish

  • Weekly VWAP Bullish

  • Above 6440 Target 6600

  • Below 6420 Target 6370

EURUSD 

  • Daily VWAP Bullish 

  • Weekly VWAP Bullish

  • Below 1.1750 Target 1.15

  • Above 1.18 Target 1.1910

GBPUSD 

  • Daily VWAP Bullish 

  • Weekly VWAP Bullish

  • Below 1.36 Target 1.30

  • Above 1.3650 Target 1.3850

USDJPY 

  • Daily VWAP Bearish 

  • Weekly VWAP Bearish

  • Below 1.49 Target 1.45

  • Above 1.51 Target 1.54

XAUUSD

  • Daily VWAP Bullish 

  • Weekly VWAP Bullish

  • Above 3380 Target 3415

  • Below 3300 Target 3260

BTCUSD 

  • Daily VWAP Bearish 

  • Weekly VWAP Bearish

  • Above 110k Target 118k

  • Below 109k Target 105k