Morning Report
July 10, 2025
“Trump continued with his tariff letters yesterday, which hurt the target countries’ currencies but left broader FX relatively contained. The next big events are UK GDP on Friday, US CPI inflation on Tuesday, and the new 1st August deadline for the reimposition of higher-rate tariffs.”
Sam Cornford – Head of Trading
USD
The tariff headlines are largely being taken as noise, with the dollar slightly weaker this morning but markets now generally looking towards next week’s data and the 1st August deadline. The most interesting letter that Trump sent yesterday once again showed his willingness to use tariffs for broader foreign policy objectives. He threatened to slap 50% tariffs on Brazil – a country with which the US has a trade surplus – seemingly as punishment for the charges facing ex-president Bolsonaro. The Brazilian real fell more than 2% on the news, but the rest of the market was contained. Yesterday’s Fed minutes referred to only ‘a couple’ of Fed members looking towards a potential rate cut this month, while the rest were sufficiently concerned about the impact of tariffs on inflation to keep expectations steady for a cut in September instead. Today we get the weekly jobless claims data and some commentary from Daly and Musalem at the Fed.
GBP
The pound has been on a slow and steady path of recovery over the past couple of days and is up a few tenths of a percent this morning. Tomorrow’s GDP data will be critical amid all the heat on the UK’s public finances and potential tax hikes later in the year. The figure is expected at 0.1%, up from -0.3% in April, and a downside surprise will probably stoke fears of another shallow recession. We also get a speech from the BoE’s Breeden this afternoon.
EUR
Trade risks for the EU appear to be diminishing and a deal with the US is now expected ‘in the coming days’ which should put tariffs at the 10% baseline level. Whilst clearly a negative for EU exporters, it is much less damaging than the levels of up to 50% that Trump had threatened at various points. It is not yet clear what concessions officials have made to get this deal over the line, but in his first term they largely involved purchase agreements that they could never really enforce. Elsewhere in Europe, a hot underlying inflation print in Norway (3.1% vs 3.0% expected) has wiped out expectations for another cut in August.
Markets
The broad equity market has remained resilient over the last couple of days. In the US, Nvidia became the first company to top $4tn in market cap, putting it at a 30% higher valuation than the entire German market.
Main Economic Events (All Times CET)
8:00am: Norway CPI
2:30pm: US Unemployment Claims
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