Morning Report
June 30, 2025
“The dollar remains soft heading into this week, with a lot of important events ahead in the US. Non-farm payrolls in the US and inflation in the eurozone are the key pieces of data, and eyes will be on Trump’s big bill and impending tariff deadline.”
Sam Cornford – Head of Trading
USD
The dollar is consolidating at three-year lows, this time driven primarily by more dovish rate expectations in the US that have developed over the last week or two. Several members of the FOMC have signalled their openness to bringing forward the next cuts, and Powell’s testimony to the House and Senate last week were interpreted as skewing marginally more dovish. A rate cut is now fully priced by September, and markets are leaning towards three, rather than two, by the end of the year. Trump’s spat with Canadian PM Carney over a digital services tax and his continued pressure on the Fed Chair have not helped the dollar either.
Thursday’s non-farm payrolls report is the main event this week for FX, and any signs of further softening would validate the dollar’s most recent move lower. There are also a couple of critical dates coming up. Trump is looking to finally get his One Big Beautiful Bill Act approved by both the Senate and the House by July 4th, though that might be difficult to pull off. Deficit concerns might resurface if it goes through, with the Congressional Budget Office estimating that the current form of the bill would add $3.3tn to the national debt over the next decade, rather than the initial estimate of $2.8bn. July 9th is also the deadline for the ‘liberation day’ tariffs to be reimposed after a 90-day delay – investors will be praying for some leniency or an extension here, especially if the White House cannot get trade deals over the line in time.
GBP
GBPUSD is hovering around its highest levels since early 2022, but sterling has struggled to meaningfully recover against the euro. There has been some political news in the background that has been weighing on UK sentiment, with Starmer now needing to plug a £4.25bn gap in his budget after a rebellion forced him to water down his welfare cuts. The data calendar is limited to some mortgage approvals data this morning and a speech from Gov Bailey tomorrow, so news out of the US is likely to remain a dominant driver this week.
EUR
After weeks of following US and global narratives higher, domestic eurozone developments are going to be key this week. German CPI inflation is due this afternoon and then the bloc-wide figure is expected to rise slightly to 2.0% tomorrow morning. At the same time, the ECB kicks off its annual central banking forum in Sintra, where we will get a long list of speakers, including President Lagarde tonight. The market is pricing in only one further cut for the cycle, likely in October or December. With the fight against inflation effectively finished, the focus now is on whether extra cuts are needed to support the eurozone economy or to prevent inflation settling below the target.
Markets
The S&P500 and the Nasdaq both hit record highs on Friday for the first time since February, as investors cheered expectations for a quicker pace of Fed rate cuts. Risk appetite is broadly higher across the globe this morning, with Japan’s Nikkei 225 surging 0.8% and the open looking positive for Europe.
Main Economic Events (All Times CET)
8:00am: UK Final Q1 GDP
10:30am: UK Mortgage Approvals & Consumer Credit
2:00pm: German CPI Inflation
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