RBA meeting, inflation print from the US, employment data from the UK and Australia, GDP from the UK and Japan as well as retail sales from the US and China will highlight this news packed week ahead of us. Additionally, August 12 is the end date for US China trade deal. Although new 90-day extension is expected it may still cause ripples in markets.
USD
ISM services PMI for the month of July missed expectations of 51.5 and came in barely in expansion with 50.1 print compared to 50.8 in June. Employment component fell deeper into contraction (46.4 vs 47.2 previously) as was seen in the NFP last Friday. Both new orders and new export orders declined with former managing to stay in expansion while latter dropped further into contraction. Business activity is holding well in expansion but it also dropped heavily from June reading. There was a big surge in prices paid component which almost reached 70 level, highest since October of 2022. This is for sure tariff-induced and Powell said he would be looking through it.
President Trump stated that there are four candidates for the position of next Fed Chair. He called them two Kevins and two others. He put additional 25% tariffs on India for imports of Russian oil aiming thus to weaken Russian economy. Additionally, he is mulling putting extra tariffs to China for imports of Russian oil. Reports are circulating that Japan could be hit with additional 15% tariffs on all imports after Japan’s top trading negotiator Akizawa called agreement with the US non-legally binding. Trump imposed new tariffs on gold bullions of 1kg and 100 oz. Steven Miran, current CEA (Council of Economic Advisors) Chair, will be appointed as the new Fed Governor. He will take Adriana Kugler’s place until January 2026. Miran is Trump’s ally and he will vote for rate cuts at every meeting. Betting markets are putting highest chances of Governor Waller becoming new Fed Chair. Rumors were spread on Friday that former St. Louis Fed Chair Bullard could be nominated for the next Fed Chair which given his hawkish stance while at the Fed seems very odd.
The yield on a 10y Treasury started the week at 4.23%, rose to 4.28% and finished the week at around 4.27%. The yield on 2y Treasury started the week at 3.70%, rose to 3.77% and finished the week at around 3.76%. Spread between 2y and 10y Treasuries started the week at 54bp and finished the week at 51bp as curve continues to meander between steepening and flattening. We had 10y and 30y Treasury auctions tail which suggests that markets are looking for higher yields and steeper curve. FedWatchTool sees the probability of a 25bp rate cut at September meeting around 90%, while probability of a no cut is around 10%. NASDAQ has reached new ATH due to surge in Apple stocks after Tim Cook’s visit to president Trump.
This week we will have July inflation data, expected to tick up, US China deadline on August 12 and retail sales data.
Important news for USD:
Tuesday:
CPI
US China Trade Deadline
Friday:
Retail Sales
EUR
July final services PMI was revised down to 51 from 51.2 as preliminary reported but still an improvement from 50.5 in June. Spain and Germany beat expectations and came in revised higher while Italy missed expectations and French reading was revised lower. The report highlights that employment continues to increase while inflation pressures are waning as costs are coming down. Even lower inflation prints in the coming months open doors for ECB to deliver one more rate cut by the end of the year. Composite ticked down to 50.9 from 51 as preliminary reported but it also showed an improvement from 50.6 the previous month.
GBP
Final July services PMI was revised up to 51.8 from 51.2 as preliminary reported thus showing smaller decline from 52.8 in June. The report notes issues with new orders coming down citing risk aversion and low client confidence. Employment has completely stalled as the index showed biggest fall since February. Input costs, wages, are on the rise and are being transferred to the consumers through export prices thus keeping inflation elevated. Ultimately, business confidence is still holding and rising as optimism among companies is on the move up. Composite was revised up to 51.5 from 51 as preliminary reported but still down from 52 the previous month.
BoE has delivered a widely expected 25bp rate cut and brought rate down to 4%. The vote was interesting 5-4 and it took two rounds of voting. Lombardelli, Mann, Greene and Pill voted to keep bank rate unchanged while Taylor voted for a 50bp rate cut in first vote which made vote 1-4-4 and then changed her vote to 25bp rate cut in second vote to get a final 5-4 decision. This is the first time that BoE had to go through two rounds of voting before deciding on how to proceed with rates. Members expect inflation to peak at around 4% in September and then fall towards the 2% target, but upward price pressures have moved higher since May. The statement shows that “The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease“. Gradual and careful approach to removal of monetary policy restrictions is necessary as monetary policy is no longer as restrictive after recent cuts to bank rate. GDP for Q3 is expected to print 0.3%.
BoE Governor Bailey emphasized importance of gradual and careful approach to rate cuts at the press conference adding that they are not on a pre-set path. He sees monetary policy as still being restrictive and clarified that it is too uncertain to speculate where neutral rate is. Ramsden stated that they see neutral rates in 2-4% range. Bailey stated that pay growth came in weaker than expected in May and consumption was also weaker. Overall, this meeting can be seen as hawkish, as they are not in a hurry to cut rates and GBP strengthened as a result. September will be a pause and November is open for the next cut which would keep BoE on a quarterly rate cut path. Inflation prints will be the main data points to watch to gauge bank’s next moves.
This week we will have employment data and first look at Q2 GDP.
Important news for GBP:
Tuesday:
Payrolls Change
Unemployment Rate
Thursday:
GDP
AUD
July Caixin services PMI surged to 52.6 from 50.6 in June while markets were expecting a decline to 50.2. This is the highest reading since May of 2024 and was driven by domestic demand as new orders increased sharply. New export orders also saw improvement coming in mainly from tourism. Employment component rose, very positive sign, with business confidence improving further. Both input and output costs increased which will put some upward pressure on very low inflation in China. Given that manufacturing PMI dropped into contraction composite declined to 50.8 from 51.3 the previous month.
Chinese trade balance shrank in July to $98.24bn from $114.8bn in June but the details are encouraging. Exports rose 7.2% y/y vs 5.4% y/y as expected and are up from 5.8% y/y in June while imports rose 4.1% y/y with expectations of them coming in at -1% y/y after a 1.1% y/y print the previous month. Rising imports indicate stronger domestic demand which could be a great impulse for the economy and Q3 GDP. Exports to the US are down 21.6% in July but with transshipping real exports are much less down.
This week we will have RBA meeting and employment data from Australia as well as economic data from China. After a benign quarterly inflation print last week RBA will deliver a 25bp rate cut. Investors will be looking for more information regarding future path of rate cuts.
Important news for AUD:
Tuesday:
RBA Interest Rate Decision
Thursday:
Employment Change
Unemployment Rate
Friday:
Industrial Production (China)
Retail Sales (China)
NZD
Q2 employment report showed weakness mounting in the labour market. Employment change declined by 0.1% q/q after rising 0.1% q/q in the first quarter. The unemployment rate ticked up to 5.2% while markets were expecting a 5.3% print, but participation rate plunged to 70.5%, lowest since 2021, from 70.8% in previous quarter and falling over full percentage point since Q2 of 2024. Private sector wages rose 2.2% y/y vs 2.3% y/y as expected and down from 2.6% y/y increase seen in Q1. Rising employment and falling wages will push RBNZ towards a cut a their August meeting.
CAD
July employment report was filled with weaknesses. Economy lost 40.8k jobs vs adding 13.5k jobs as expected. The unemployment rate stayed at 6.9% while markets were seeing it tick up to 7% but it was only due to a drop in participation rate to 65.2% form 65.4%. Composition of jobs presents adds to the weakness of the report as economy lost 51k full-time jobs while it added 10.3k lower paying part-time jobs. Wages have ticked up to 3.3% y/y. BoC is focused on inflation and given where it stands it is hard to see them cutting but with jobs market weakness chances of future rate cuts are increasing.
JPY
Final services PMI print for the month of July was revised up to 53.6 and shows a huge jump from 51.7 in June. Surge was led by domestic demand as new orders improved at the fastest pace in three months. New export orders declined for the first time in 2025 and fell at the quickest rate in three years. Employment was flat while both input and output prices eased. Composite ticked up to 51.6 from 51.5 the previous month.
Japan Government has cut GDP forecast for 2025 to 0.7% from 1.2% as seen in January due to negative effects of US tariffs. They remain hopeful for the rebound in 2026 and leave GDP unchanged at 0.9%. Average wages rose by 2.5% y/y in June, lower than 3.2% y/y increase markets were expecting. When inflation is taken into account real wages declined 1.3% y/y making it sixth consecutive month of falling real wages. Household spending in June rose by 1.3% y/y vs 2.6% y/y increase as expected and down from 4.7% y/y in May. No wage growth, no spending, no sustained economic recovery.
Summary of Opinions from the July meeting showed that although decision to keep rates at 0.5% was unanimous there are divisions within the BoJ. Some members want rate hikes to occur as soon as conditions for it are met warning that waiting too long to deliver rate hikes could have negative consequences for the economy. Different group of members stated that current path of accommodative monetary policy should continue as uncertainties are mounting. Effects of tariffs are closely monitored but time is needed to fully assess negative effects they will have. Inflation remains at the center of debate as it has been running above the 2% target for over three years. Some members warned that underlying inflation is accelerating and that second-round effects are taking hold.
This week we will have preliminary Q2 GDP reading.
Important news for JPY:
Friday:
GDP
CHF
SNB total sight deposits for the week ending August 1 came in at CHF468.5bn vs CHF474.7bn the previous week. Sight deposits returning back into the range. July inflation report saw headline number print 0.2% y/y vs 0.1% y/y in June while core CPI printed 0.8% y/y vs 0.6% y/y the previous month. Inflation is at the very low levels but it has been rising for the second consecutive month so perhaps Switzerland is on a good path to avoid deflation. It certainly provides more breathing room for SNB taken into account that rates are at 0%.
