Morning Report
July 23, 2025
“A major trade deal was announced by the US and Japan last night, but that has done little to stem the dollar’s mounting losses from this week. Eurozone consumer confidence and US housing data are in the calendar for today, ahead of the PMIs and the ECB decision tomorrow.”
Tim Hallinan – Trading Director
USD
Trump surprised the market with a US-Japan trade deal last night, which involved reducing tariffs on Japanese goods from 25% to 15% in exchange for a pledge to invest $550bn in the US and to buy more US rice, among other things. Interestingly, though, while the equity markets have rejoiced – the Nikkei jumped 3.5% – the dollar is still nursing its losses from the beginning of the week. The reason why is not obvious, though with the Fed’s independence under increasing pressure and a 1st August deadline still a potential cliff-edge for many other countries, investors seem to be keen to steer away from the dollar right now. In any case, the mega $550bn investment from Japan that helped secure the deal does not sound particularly credible, and the tariffs will still be expected to hurt global growth, even if less so now than they could have done. Today, the main data is on home sales and mortgage applications this afternoon.
GBP
GBPUSD has tentatively pushed above the 1.35 mark for the first time in nearly two weeks overnight, as sterling has followed broader US themes and risk sentiment. The pound continues to underperform the euro, and GBPEUR briefly attempted to move below the 1.15 mark yesterday afternoon. Gov Bailey spoke about financial stability and distanced himself from Reeves’ recent comments on the financial regulators, but he did not meaningfully touch on monetary policy. The next big event now is tomorrow morning’s PMI data, which the consensus expects to have cooled slightly in July, to 51.8.
EUR
The euro jumped 0.7% versus the dollar over a couple of hours yesterday afternoon, taking its weekly gain up to 1.1%. It reflects a broader trend of dollar weakness rather than any specific reason to get excited about the euro, but there will be plenty of opportunity over the next few days for a domestic eurozone catalyst to move the dial. Consumer confidence today is set to remain pessimistic overall but to improve slightly, and tomorrow’s PMIs will bring a fresh look on the performance of the economy ahead of the ECB decision in the afternoon.
Markets
Japan’s Nikkei 225 was the natural winner after the US and Japan announced their trade deal, jumping 3.5% by the end of the session. This boost to risk assets looks likely to spread to Europe and the US today, with DAX and CAC 40 futures in particular up over 1%.
Main Economic Events (All Times CET)
4:00pm: Eurozone Consumer Confidence
4:00pm: US Existing Home Sales
To learn more about Ballinger Group, please visit our website or our LinkedIn page.