Morning Report
July 01, 2025
“EURUSD continues to make new ground as trade headlines and bets on extra Fed rate cuts push the dollar down to levels not seen since 2021. Today brings ISM and JOLTS data in the US, and a wide range of speakers at the ECB forum in Sintra.”
Sam Cornford – Head of Trading
USD
The steady dollar downtrend extended further yesterday as markets continue to shy away from the greenback amid a dovish repricing of Fed expectations, unpredictable policymaking, and disappointing progress in trade talks. While Treasury Secretary Bessent assured that there will be a ‘flurry’ of deals in the lead up to the July 9th deadline for ‘liberation day’ tariffs to be reimposed, negotiations have not gone as smoothly as they would have liked, with the latest clash coming over rice tariffs in Japan. Whether extra time is given to some countries or if tariff rates simply return to April 2nd levels will be at Trump’s discretion.
Rate differentials continue to move against the dollar, and markets are now leaning towards a rate cut at the September, October, and December meetings. Today’s ISM manufacturing and JOLTS job openings data, plus a speech from Chair Powell in Sintra, will provide some clues on this. Any signals that either a) the jobs market is weakening off faster than expected, or b) tariffs are likely to have a relatively subdued effect on inflation would add more fuel to the fire for the dollar. Powell spoke extensively last week and might not break new ground, but he will garner a lot of attention nevertheless.
GBP
Sterling has lagged behind the euro’s gains versus the dollar and is yet to return to the three-year high that it touched last Thursday. Its relative sluggishness comes from both the pricing in of some extra rate cuts from the Bank of England and Labour’s struggle to pass a welfare reform bill without a rebellion. The vote on the amended reforms, which have already put a £4bn hole in Reeves’ budget, is today. The pound might struggle if it does not go through and more spending is required. A speech from Governor Bailey gave it some support this morning as he stuck to the line about cuts being ‘gradual’, though he also admitted his concerns about a weakening labour market.
EUR
The euro is getting a lot of attention at the ECB forum in Sintra, amid calls for Lagarde’s ‘global euro moment’. It hit a fresh near-four-year high again overnight. While Guindos assured that current levels are not too much of a concern, he also warned that a move above 1.20 would be ‘complicated’ for inflation, and his colleague Simkus warned that we must monitor the speed of its appreciation. A stronger euro could depress import prices and increase the risks that the ECB undershoots its 2% target. Today’s CPI report is expected at exactly 2.0%, though, with a 0.3% month-on-month figure.
Markets
The major US stock indexes hit record highs again yesterday and notched their best quarter since 2023 – something that contrasts sharply with the dollar’s inability to recover since the ‘liberation day’ crash. European markets flagged yesterday, however, and have flattened off this week.
Main Economic Events (All Times CET)
9:55am: German Employment Change
11:00am: Eurozone CPI
4:00pm: US ISM Manufacturing PMI & JOLTS Job Openings
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