July 25, 2025

“A busy day yesterday saw both the euro and the dollar make gains, while sterling continues to struggle owing to the bleak growth outlook. Next week will be critical, with the Fed meeting, non-farm payrolls, and eurozone CPI all on the calendar.”

Tim Hallinan – Trading Director

USD

The dollar managed to halt this week’s decline yesterday, thanks in part to the US’ best composite PMI print since last December, at 54.6. A surge in the services index to 55.2 more than offset a surprise decline in manufacturing to 49.5, and jobless claims fell for the third week running to 217K. Trump also reassured markets again that he would not fire Powell after a tense tour of the Fed building renovations in which the two sparred over how much they were costing. Today brings durable goods orders for June, but markets will have their eyes on next week now, when we get the July Fed meeting, non-farm payrolls, and the 1^st August tariff deadline.

GBP

Sterling has had a poor day and a half. It has fallen 0.8% versus the dollar since yesterday and GBPEUR is now trading at its lowest since the ‘liberation day’ meltdown and 2023 before that. It did not help that the dollar and the euro were finding support of their own, but the data this morning has been bleak. Retail sales, after falling 2.7% in May, failed to bounce back as much as expected and only printed at 0.9%, and the GfK consumer confidence survey this morning has suggested that ‘anxious’ British consumers are prioritising saving money more than at any point since the financial crisis. In other words, anticipation for further tax rises in October and the potential for economic turmoil on the trade story have effectively frozen UK consumer spending growth. And lower growth means more tax rises might be necessary to meet the Chancellor’s fiscal rules.

EUR

President Lagarde appeared to be very happy with current policy during the ECB press conference yesterday, and investors are no longer much convinced that any further cuts will be needed. Repeated references to being in ‘a good place’ and comments from the likes of Kazaks that there is little reason for further easing prompted investors to trim their bets on a September cut to only a 15% probability, with around a 60-70% chance that another 25bp rate cut comes at all over the next twelve months. That helped the euro to rally broadly and to consolidate EURUSD in the 1.17s. The German Ifo business climate survey is the main data today.

Markets

While US stocks have continued to plough through record highs, powered by decent earnings releases, there seems to have been some profit-taking in Europe over the last day or two. Futures are pointing to a soft open this morning as the sentiment boost fades.

Main Economic Events (All Times CET)

8:00am: UK Retail Sales
10:00am: German Ifo Business Climate
2:30pm: US Durable Goods Orders

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