ECB meeting, preliminary PMI data from the Eurozone and the UK and Q2 CPI data from New Zealand will highlight the week ahead of us as earnings season ramps up with over 100 companies reporting earnings.
USD
June CPI report showed headline number printing 2.7% y/y increase same as markets were expecting and up from 2.4% y/y in May. Monthly print came in at 0.3% as expected (0.287% m/m unrounded). Core CPI came in at 2.9% y/y, up from 2.8% y/y the previous month but weaker than 3% y/y as expected. Monthly figures show 0.2% m/m vs 0.3% m/m as expected (0.228% m/m unrounded). Shelter remained primary driver of inflation with 0.2% m/m and 3.8% y/y. The impact of Trump tariffs has started to appear in core goods measure which rose 0.7% m/m and which would lead to PCE rising 0.35% m/m. Chairman Powell stated that June, July and August inflation reports should contain effects of tariffs and so far we got only data for June. PPI came in lower than expectations and according to measures it will lead to PCE rising around 0.2% m/m.
CBS went out with a report that president Trump asked lawmakers of its party whether he should fire Fed Chairman Powell and they agreed. USD and stock market dropped on the news, former particularly, around 100 pips against EUR, while gold surged. President Trump stated that although Powell is “too late” he is not planning on firing him. This was a warning shot to Powell as Trump now showed him that he has a backing for his decision. Trump is playing a very dangerous game by meddling with Fed’s independence as it could have devastating ramifications on capital flows in US assets. We have already seen that the threat caused longer-term Treasury yields to rise, opposite of what Trump and Bessent want, and curve to steepen further.
June retail sales report saw headline number print 0.6% m/m vs 0.1% m/m as expected and up from -0.9% m/m in May. Control group also improved printing 0.5% m/m vs 0.3% m/m after a downwardly revised print of 0.2% m/m the previous month. Ex autos and ex autos and gas categories printed 0.5% m/m and 0.6% m/m respectively thus giving this report even greater shine. Miscellaneous store retailers and motor vehicles & parts dealers were two biggest contributor to the reading while department stores, furniture stores and electronics stores showed declines. Food and drinking places, a good measure of disposable income spending, rose healthy 0.6% m/m indicating that there is no stress among consumers.
The yield on a 10y Treasury started the week at 4.41%, rose to 4.50% and finished the week at around 4.44%. The yield on 2y Treasury started the week at 3.91%, rose to 3.96% and finished the week at around 3.88%. Spread between 2y and 10y Treasuries started the week at 52bp and finished the week at 56bp as curve continued to steepen. FedWatchTool sees the probability of a 25bp rate cut at July meeting drop to around 3% after NFP report, while probability of a no cuts is around 97%. September still remains the first month with greater than 50% probability of a rate cut but it is barely hanging there after a sharp drop caused by stronger CPI report. BTC has reached new all time high level as it crossed $122k. NASDAQ climbed to new ATH over 23000 while S&P reached a new all time high and crossed the 6300 level.
EUR
Trade deal with the US, which has to be agreed upon by August 1 or 30% tariffs will hit all imports to US from the Eurozone, was the main talking point this week. Talks about last mile being the toughest, etc. were echoed by the trade representatives. EUR had continued to gain ground against the other major currencies, notably JPY while it gave back some ground against the USD.
This week we will have preliminary July PMI data which are expected to show further improvements and ECB meeting. No change is expected at the meeting as members described policy as being in a “good place” with bar for another cut set very high.
Important news for EUR:
Thursday:
ECB Interest Rate Decision
Manufacturing PMI (Eurozone, Germany, France)
Services PMI (Eurozone, Germany, France)
Composite PMI (Eurozone, Germany, France)
GBP
June CPI report saw headline number rise to 3.6% y/y from 3.4% y/y in May while markets were expected no change from May reading. This is the highest headline print since January of 2024. Core reading printed 3.7% y/y, up from 3.5% y/y the previous month with expectations for a 3.5% y/y print as well. Additionally, services inflation, closely monitored by BoE for their decisions on rate, remained unchanged at 4.7% y/y while markets expected a tick down to 4.6% y/y. Food prices have been rising for the third straight month and printed 4.5% y/y. Transport costs were the biggest contributor to rising infltation. BoE Mann warned about inflation coming higher than expected and she will most likely dissent from cutting in August, although that cut is almost certain.
June payrolls change showed economy losing another 41k jobs after May reading was significantly revised up but still showed a loss of 25k jobs. May ILO unemployment rate ticked higher to 4.7%, the level not seen since May of 2021. Wages continued to decline with both regular and ex-bonus wages rising 5% 3m/y indicating that further inflation pressures will not come from the wages. Increase in the unemployment rate will push chances of a rate cut in August into high 90s.
This week we will have preliminary July PMI data which are expected to show further improvements in manufacturing and slowdown in services.
Important news for GBP:
Thursday:
Manufacturing PMI
Services PMI
Composite PMI
AUD
Employment report for the month of June showed more weaknesses in the labour market. Employment change showed economy added 2k jobs vs 20k as expected. The unemployment rate jumped to 4.3%, highest since November of 2021, from 4.1% in May while participation rate ticked up to 67.1% and getting very close to record high numbers. Composition of jobs added another blow as full-time jobs showed a decline of 38.2k while lower paying part-time jobs increased by 40.2k. This report significantly increases odds of a rate cut in August although the main data point to the decide about rate cut will be quarterly CPI report on July 30.
Chinese June trade balance showed another widening of trade surplus which has now reached $114.77bn as exports rose 5.8% y/y but this time imports rose as well 1.1% y/y. Rising imports are encouraging sign for the rest of the world as they signal improving domestic demand. Exports to the US, in yuan terms, dropped almost 10% YTD as tariffs and trade war take its toll on the activity. Trade surplus for the H1 of 2025 has reached a new record high for the first six months period of $586bn.
China Q2 GDP rose by 1.1% q/q vs 0.9% q/q as expected and slightly down from 1.2% q/q in Q1. Yearly numbers also showed a beat (5.2% y/y vs 5.1% y/y) while being down from 5.4% y/y in the previous quarter. Economy fared much better than feared considering that China was hit hard by tariffs. June economic activity data showed easing of retail sales (4.8% y/y vs 5.4% y/y as expected and down from 6.4% y/y in May) and improvement in industrial production (6.8% y/y vs 5.6% y/y as expected and up from 5.8% y/y the previous month).
NZD
June electronic card retail sales saw increase of 0.5% m/m and a drop of 0.4% y/y compared to both measures dropping 0.1% in May. This data makes up to almost 70% of total retail sales so it is a decent predictor of the quarterly number. Second dairy auction in July showed prices rising 1.1%, for the fire four consecutive auctions of falling prices.
This week we will get Q2 inflation data.
Important news for NZD:
Monday:
CPI
CAD
Inflation report for the month of June showed headline number increase to 1.9% y/y as expected from 1.7% y/y in May. Trim and common core measures remained at 3% y/y and 2.6% y/y respectively while median measure ticked up to 3.1% y/y from 3% y/y the previous month. There is no threat of higher inflation in the June report which should leave BoC on their current path of no change at the next meeting.
JPY
Rumors are swelling that BoJ will increase its inflation forecast for the fiscal year 2025 at their next meeting later this month. The yield on a 30y JGB rose as a result of that speculation to 3.25%, levels not seen since 2023 while yield on a 10y JGB reached 1.60% for the first time since 2009. Despite the troublesome situation with tariffs Tankan survey showed increased sentiment among large manufacturers.
June inflation report for the entire nation saw both headline and ex fresh food print 3.3% y/y down from 3.5% y/y and 3.7% y/y respectively in May. Drop in energy prices was the main reason for slight decline in inflation prints. Ex fresh food and energy, core-core, ticked up to 3.4% y/y from 3.3% y/y the previous month. The numbers are still way above the targeted 2%. Elections for the Upper House will be held on July 20 and according to the polls governing party is not expected to win the majority. This in turn could push country into political instability which could reflect in weaker JPY and higher yields on longer-term JGBs.
CHF
SNB total sight deposits for the week ending July 11 came in at CHF464.1bn vs CHF459.8bn the previous week. Sight deposits are breaking the upper range of a trend for 2025 meaning that SNB is possibly selling Swissy in order to fight its strength and help bring back inflation steadily above the zero level.
