July 18, 2025

“After a hectic week in which the US data has generally been strong but rumours around Powell’s firing nearly triggered a wave of selling in US assets, the dollar is set to clinch its second consecutive week of gains today.”

Tim Hallinan – Trading Director

USD

The dollar slightly weakened off again overnight, likely related to Fed Gov Waller’s speech titled ‘The Case for Cutting Now’, but it is stronger overall for the second consecutive week as some broadly solid data have trimmed expectations for rate cuts. Waller’s argument was that it is standard practice to ‘look through’ one-time price level rises (i.e. from tariffs) and that ‘we should not wait until the labour market deteriorates before we cut the policy rate’. While he and Bowman are the only ones within the Fed to steer away from Powell’s more cautious rhetoric, the emerging dissent underpins the market’s expectation for a September rate cut. Today, the main data is a UoM consumer sentiment survey for July, which is expected to continue to improve following its sharp drop in the aftermath of ‘liberation day’. Next week, the PMIs will be the main event.

GBP

Sterling has gained half a percent against both the dollar and the euro since it hit a three-month low on Wednesday afternoon. Yesterday’s labour market report, despite signalling a fifth consecutive month of negative payrolls growth, seemed to be enough to assuage the market’s worst fears and to about the Bank of England’s constraints given the still high levels of inflation and wage growth.

EUR

A dollar recovery has pushed EURUSD down by 1.5% so far in July. The euro has regained some upward momentum this morning, but it is heading for its second week of losses in a row this week. There is little to go off in the eurozone right now beyond the early stages of a budget deliberation process – it is still all about the US economic data and Trump’s policy whims.

Markets

Stocks have shown few signs of stopping in the last couple of days, with the S&P 500 up 0.5% and the Nasdaq by 0.8% yesterday alongside broad gains in Europe and Asia.

Main Economic Events (All Times CET)

10:00am: Eurozone Current Account
4:00pm: US UoM Consumer Sentiment

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