We are up for a massive week that will have Fed, BoC and BoJ meetings, preliminary Q2 GDP from the US and Eurozone, as well as Q2 CPI from Australia, PCE from the US and preliminary July CPI from the Eurozone. On top of all that, we get NFP on Friday, which is also a deadline for reciprocal tariffs, for a very eventful week.
USD
CNBC is reporting that India is not willing to make limited deal with the US by August 1 deadline. Additionally, Treasury Secretary Bessent stated that deadlines can be overlooked as quality of a deal is much more important than the timing of the deal. US – Japan trade deal was reached and it will see imports from Japan being hit by 15% reciprocal tariffs. Car imports from Japan will also be slapped with 15% tariffs without any restrictions on number of imported cars. Additionally, Japan will invest around $550bn in the US, mostly by loans from government-backed entities. Japan will buy 100 Boeing planes and increase rice purchases by 75% as the part of the deal. Bessent later on during the week added that tariffs could revert back to 25% if Trump is not satisfied, whatever that means. Additionally, Bessent stated that nominations for a new Fed Chairman will be announced in December or January which should give Powell more breathing space as he has been under constant pressure from the administration to lower rates.
Over the weekend a trade deal was struck between US and EU. EU will face a 15% tariff on all its exports to the US except for steel, aluminum and pharmaceuticals. Additionally, EU has pledged to buy $750bn of energy from the US and invest $600bn in the US. President Trump called it the biggest deal yet while EU Commissioner von der Leyen stated that it is a huge deal. One caveat is that there was no signing of the deal as that has to be done in the EU parliament.
President Trump has went to inspect the site of new Fed building and met with Chair Powell. He tried to state that Fed has crossed the budget from $2.5bn to $3.1bn. He handed the paper to Powell which he studied for a while and stated that increase is due to addition of a third building whose renovation finished in 2021. After that Trump said to the media that he would love Powell to lower rates but there is nothing more he can do about it as removing Powell will prove to be too costly and in Trump’s words “not necessary”. Reality TV show at its finest and we can expect pressures on Powell to continue.
The yield on a 10y Treasury started the week at 4.42%, rose to 4.43% and finished the week at around 4.40%. The yield on 2y Treasury started the week at 3.88%, rose to 3.94% and finished the week at around 3.91%. Spread between 2y and 10y Treasuries started the week at 55bp and finished the week at 49bp as curve experienced flattening. FedWatchTool sees the probability of a 25bp rate cut at July meeting around 3%, 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 23200 while S&P reached a new all time high and crossed the 6400 level. Gold has again crossed the $3400 level before backing down while silver moved above $39.
This week we will have Fed meeting, advanced Q2 GDP reading, Fed’s preferred inflation measure PCE, and NFP data on Friday. Fed is expected to keep the rate unchanged and Powell to stand his ground waiting for more data before deciding to start with rate cuts. NFP is expected to print 110k with the unemployment rate remaining at 4.2%.
Important news for USD:
Wednesday:
Fed Interest Rate Decision
GDP
Thursday:
PCE
Friday:
NFP
Unemployment Rate
ISM Manufacturing PMI
Tariff Deadline
EUR
Preliminary July PMI data showed improvements across the board. Manufacturing rose to 49.8, up from 49.5 in June. It has risen every month in 2025 and it is getting almost to the expansion territory. Services printed 51.2, up from 50.7 the previous month. Disinflation in services sector is continuing thus providing good news for ECB. Composite was lifted to 51 from 50.6 in June. Eurozone economy is gaining momentum and is up to a good start of Q3.
ECB has left key interest rates unchanged as was widely expected. They have delivered seven 25bp rate cuts in a row and brought rates down by 200bp since September of 2023. The statement shows satisfaction with domestic inflation easing and wages growing more slowly. ECB remains data-dependent and will make decisions on meeting-by-meeting basis without pre-committing to any rate path.
Lagarde stated at press conference that economy grew faster than expected in Q1 led mainly by exports rising in order to front run tariffs but also we had higher household spending. Risks to growth remain tilted to the downside and they include further escalation in global trade tensions, geopolitical tensions and a deterioration in financial market sentiment. She has reiterated that ECB does not target exchange rate. Today’s decision gives ECB room to further evaluate trade developments and focus on the inflation outlook, underlying inflation and the strength of monetary policy transmission.
ECB survey of professional forecasters see HICP inflation for 2025 at 2% vs 2.2% in previous forecast with 2026 inflation seen at 1.8% vs 2% as previously forecast. Forecast for growth in 2025 has been revised up to 1.1% from 0.9% previously. Growth for 2026 is also expected to print 1.1% but it is lower than 1.2% as expected previously.
This week we will have preliminary Q2 GDP reading and preliminary July CPI expected to show further slowdown and drop below 2%.
Important news for EUR:
Wednesday:
GDP
Friday:
CPI
GBP
Preliminary July PMI data showed manufacturing improve for the fourth consecutive month and print 48.2 vs 47.7 in June. Services disappointed as they fell to 51.2 from 52.8 the previous month while markets were expecting a 53 print. Composite was dragged down by services and printed 51 compared to 52 in June. The report shows that output growth weakened significantly and is showing economy on a pace for a 0.1% Q3 GDP with risks tilted to the downside. Input prices increased from their six-month lows in June. Order books are declining and business confidence is deteriorating which all points to an August rate cut.
AUD
Minutes from the July RBA meeting clearly show that bank is on a rate cutting cycle and that focus is on determining when and by how much. The decision to leave rate unchanged was made due to decision by majority of members to wait for confirmation of inflation slowdown, such as in next week’s Q2 CPI report. Monetary policy remains modestly restrictive. Members who voted for a 25bp rate cut stated risks to economic outlook and inflation returning to the mid-point of targeted range as main reasons for their decision.
Governor Bullock characterized easing in the labor market as gradual and added that the rise in the unemployment rate was in line with their projections. Leading indicators now point to significant rise in unemployment in the near-term. She warned that Q2 CPI report next week may show that core inflation has not slowed as much as expected. The bank needs more data to confirm that core inflation will ease towards their mid-target of 2.5%. Gradual easing of monetary policy remains appropriate in current conditions.
This week we will have all-important Q2 CPI report from Australia that will determine RBA’s move at August meeting and official PMI data from China.
Important news for AUD:
Wednesday:
CPI
Thursday:
Manufacturing (China)
Services (China)
Composite (China)
NZD
Q2 inflation data showed 0.5% q/q and 2.7% y/y vs 0.6% q/q and 2.8% y/y as expected. Additionally, both tradeable and non-tradeable inflation came in down from Q1. RBNZ preferred inflation measure, sectoral factor model, ticked down to 2.8% y/y from 2.9% y/y in the first quarter. Softer than expected inflation measures communicate that there is no need for rates to be this high indicating that rate cuts are coming and as a result of that NZD weakened at the start of the week.
CAD
Retail sales in May showed, as expected, drop of 1.1% m/m after they have increased by 0.4% m/m in April. Ex autos category also showed a decline, but much smaller at 0.2% m/m, which comes after a decline of 0.3% m/m the previous month. Motor vehicles and part dealers showed biggest declines followed by gasoline stations while building materials showed biggest increase. Silver lining is that advanced retail sales for the month of June show increase of 1.6% m/m.
This week we will have BoC meeting. No change in rate is expected as bank will opt for pause until it has more information on trade relationship with the US.
Important news for CAD:
Wednesday:
BoC Interest Rate Decision
JPY
Prime Minister’s Ishiba ruling coalition (LDP and Komeito) lost majority in the electronic for the Upper House. Now the ruling coalition has minority in both houses. Ishiba wowed to remain leader of government and lead tariff negotiations with the US. JPY has gapped higher on the market open, then almost gave all of it back in the first couple of hours of Asian trading only to regain strength later on during the day.
BoJ Deputy Governor Uchida stated that bank is in no hurry to raise interest rates and that it wants to see more clarity. He reiterated that if economic outlook improved according to their projections then it would be appropriate to continue with rate hikes. On the inflation front he said that medium and long-term inflation expectations are expected to continue rising but may slow down shortly before increasing again. He added that there are downside risks to the economy but upside risks to wages.
July preliminary PMI data saw manufacturing plunge into contraction with a 48.8 after a 50.1 print in June. New orders and output declined as companies were faced with tariff uncertainties. Now that trade deal has been reached we could expect a bounce in August. Services reading, on the other hand, surged to 53.5 from 51.7 the previous month. This is the highest reading since February and it was spurred by strong domestic demand. Composite was unchanged at 51.5.
Inflation data for the Tokyo area in July showed headline number and ex fresh food number ease to 2.9% y/y from 3.1% y/y in June. Ex fresh food, energy component was unchanged at 3.1% y/y. Inflation continues to run well above BoJ’s 2% target but they continue to claim that underlying inflation is still below the target.
This week we will have BoJ meeting. There will be no change in rate. Language of the statement will be watched carefully for any potential hawkish remarks now that trade deal with the US is achieved and thus that uncertainty is removed. Special attention will be given to BoJ’s Quarterly Outlook.
Important news for JPY:
Thursday:
BoJ Interest Rate Decision
CHF
SNB total sight deposits for the week ending July 18 came in at CHF475.3bn vs CHF464.1bn the previous week. Another jump in the amount of deposits as they have now broken through the upper level of 2025 range and are moving higher.
