Morning Report
July 28, 2025
“The US and EU announced a widely anticipated trade deal over the weekend, but markets do not appear to be too pleased about tariffs being at 15%. This week is jam-packed with data, with Q2 GDP growth in the US and the eurozone the natural highlights alongside non-farm payrolls and a Fed decision.”
Sam Cornford – Head of Trading
USD
Trump and von der Leyen shook hands on a US-EU trade agreement in Scotland over the weekend, and the EU tariff is at 15% rather than the 30% that Trump had threatened for the 1st August. There is still a lot to be ironed out, particularly on spirits and pharmaceuticals, and nothing is fully guaranteed or ironed out, but it has added some much-needed predictability for businesses and avoided an all-out trade war. The dollar seems to be the main beneficiary this morning and has gained 0.6% versus the euro.
While all of this takes the pressure off the 1st August deadline, this week has one of the most packed macro calendars that we have seen for some time: JOLTS job openings and consumer confidence tomorrow; Q2 GDP growth and a Fed decision on Wednesday; core PCE inflation and the employment cost index on Thursday; and non-farm payrolls and the ISM manufacturing index on Friday. The consensus generally expects the US economy to remain quite solid, and non-farms are anticipated to cool a touch to 109K – this all supports a Fed staying on hold on Wednesday night.
GBP
After a bruising few days for sterling, a sparse UK diary means that the flood of data in the eurozone and the US are likely to dominate the price action for sterling this week. We do get some data on mortgage approvals, house prices, and shop price inflation, but investors are going to be more concerned about the heavy-hitting events abroad like Q2 GDP and US payrolls. That is probably a good thing for the pound, given that the recent data has pointed to labour market weakness and generally poor growth prospects.
EUR
The key takeaway from the US-EU trade deal is that it is still a defeat for the EU. Although much lower than some of Trump’s worse threats, a 15% tariff rate is higher than many had expected, and it is still going to hurt European exporters. The general theme from EU officials’ commentary was that it was the price they chose to pay to achieve some certainty for businesses, and not that it was a beneficial deal for the bloc in general. The initial headlines brought some euro strength, but it is struggling now as markets really digest its implications. The two main data points this week are Q2 GDP growth (expected flat) and the July CPI figure, which markets estimate to fall to 1.9% – we might see bets on a September rate cut pick up if these are more disappointing than expected.
Markets
The stock market has broadly cheered the US-EU trade deal, with futures moving higher across the board. As we have seen with the euro, however, the initial euphoria has faded as traders have entered the office, with Germany’s DAX at one point looking like it would jump more than 1% and is now up only 0.3%.
Main Economic Events (All Times CET)
4:30pm: US Dallas Fed Manufacturing Index
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