Morning Report
July 22, 2025
“The dollar has started the week on the weaker side as markets worry about Fed independence and trade. Sterling is also underperforming this morning after yet more worrying news about the UK’s fiscal challenges.”
Sam Cornford – Head of Trading
USD
The dollar index sank just over 0.6% yesterday, with the move appearing to be related to a) the rising pressure on the Fed’s independence, this time coming from the Treasury Secretary, and b) the lack of positive trade news as we head towards the 1st August tariff deadline. Bessent argued that the Fed was ‘fear-mongering over tariffs’ and that they must start to ‘examine the entire Federal Reserve institution’. The Trump administration continues to search for new angles to push Powell to cut rates (or resign) to save the US government on its interest bill, despite those actions being likely to push up longer term rates. Fed Chair Powell speaks at a conference on bank regulation this afternoon, and we get the Richmond manufacturing index later in the day.
GBP
Sterling is underperforming this morning as UK public borrowing came in £6.6bn higher than expected in June, at £20.7bn. A significant proportion was used to service the UK’s existing debt as high interest rates continue to squeeze on Chancellor Reeves’ budget, and with Starmer reaffirming yesterday that the fiscal rules were ‘iron-clad’, this data just adds to the sense of inevitability in markets around tax rises later this year. The main event for sterling today is Gov Bailey’s testimony on financial stability this morning.
EUR
The euro strengthened yesterday but has struggled to pierce through the 1.17 mark. Swirling media reports about the EU preparing its ‘nuclear option’ in terms of tariff retaliation are probably keeping markets a bit cautious as we continue to see few signs of a trade deal on its way. That is partly because the US has upped its demands for its tariff rate on the EU and other concessions – even Germany has grown frustrated and is in support of preparing for a fight. The main event in the calendar today is the ECB’s Bank Lending Survey.
Markets
European equities continue to struggle as the 1st August tariff deadline approaches with waning optimism around a deal. In the US, meanwhile, the S&P 500 and the Nasdaq hit fresh record highs yesterday as earnings season kicks into gear.
Main Economic Events (All Times CET)
8:00am: UK Public Sector Net Borrowing
To learn more about Ballinger Group, please visit our website or our LinkedIn page.