August 06, 2025

“Another piece of softer data upped the pressure on the dollar yesterday and increased concerns about next month’s non-farm payrolls print. Many of the headlines today also surround Trump’s pick for the next Fed Chair, who will replace Powell in 2026.”

Sam Cornford – Head of Trading

USD

The dollar was hit by some more disappointing data yesterday, with the ISM service index dropping to 50.1 rather than rising to 51.5 as expected. After Friday’s payrolls report, what will be most concerning is the drop in the employment index to 46.4 (anything below 50 means contraction). This comes after the manufacturing employment figure fell to its weakest level in five years last week. On the other hand, the Fed’s concerns about tariff inflation were validated with a 69.9 prices paid print, though this inflationary impact would likely be short-lived if the labour market begins to crack. In other news, Trump ruled out Treasury Secretary Scott Bessent from consideration for the role of Fed Chair when Powell’s term ends next May. He hinted at a pool of four potential candidates, of which Kevin Warsh is the favourite on Polymarket, followed by Kevin Hassett. The market would probably have more trust in the former to lead an independent and stable Fed. Today, we get speeches from Cook, Collins, and Daly at the Fed.

GBP

Sterling has steadily extended its gains against the dollar through this week, though it has resisted a sustained push above the 1.33 threshold. Today we get a construction PMI that is expected to remain in contraction at 48.8, and the next event then becomes tomorrow’s Bank of England decision. Pricing has been relatively steady at around a 95% chance of a rate cut, and the consensus in the analyst commentary is for a three-way split on the next move (cutting 25 or 50bps, or holding steady).

EUR

The euro again followed the US story yesterday, cooling a touch in the morning and then rising in the hours after the weak ISM print. PPI inflation came in at 0.6% as expected yesterday, and this morning markets are looking for a 0.3% m/m expansion in retail sales for June. EURUSD is likely to continue trading at the mercy of the US leg for this week.

Markets

Equities took a breather yesterday as the US ISM disappointed and several companies warned of the hit that they would take from Trump’s trade tariffs. So far, 80% of the S&P 500 that have released Q2 results have beat expectations this earnings season.

Main Economic Events (All Times CET)

11:00am: Eurozone Retail Sales

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