With July 4th celebrations, there was very little trading activity on Friday, resulting in a notably subdued market. Bank of England (BoE) member Alan Taylor (a dove) was on the wires in the afternoon suggesting that the bank should cut interest rates as a form of ‘insurance’ against a deteriorating economy.
Earlier in the day we had comments from European Central Bank (ECB) member Villeroy, stating that the recent ascent of the euro is having a clear disinflationary effect and that a strong euro may increase the risk of inflation undershooting, potentially signalling the ECB is done with interest rate cuts.
Read more about the Bank of England and European Central Bank's interest rate decisions here:
*Daily move - against G10 rates at 7:00 am, 07.07.25
** Indicative rates - interbank rates at 7:00 am, 07.07.25
The US dollar is marginally stronger this morning as market sentiment turned cautious ahead of the July 9th tariff deadline. Treasury Secretary Scott Bessant said on Sunday that the letters being sent to trading partners aren’t the final word on immediate tariff rates. Donald Trump also signalled an extra 10% tariffs on any country aligning itself “with the Anti-American policies of BRICS”. The BRICS nations met this weekend slamming Trump's tariffs as well as condemning the strikes on Iran.
So much of the market focus will fall on the tariffs deadline on 9th July, where it is widely expected the new tariff reality will be 10% as a minimum for most countries beginning from 1st August. We expect trade deals to be announced ahead of Wednesday's deadline.
On the data front, we have the FOMC minutes from the latest Federal reserve (Fed) meeting, which should give more details around revisions to the Fed’s dot plot. Then on Friday we have May's GDP numbers in the UK, where we are expecting an uptick in growth from -0.3% in April to 0.1% in May. We saw a change in sentiment in the pound last week and a lower number on Friday will likely weigh on the pound further.
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