Newsquawk European Market Wrap - 17th July 2025

• Stocks higher, DXY up, US curve flattened, crude rose


• US retail sales beat expectations, claims below forecast


• UK jobs market weakening, not enough to accelerate BoE rate cuts

EQUITIES

• European bourses opened firmer across the board and traded with a slight downward bias up until US Retail Sales metrics, which sparked some modest upside to take indies back towards earlier highs. To recap the US data; Retail Sales significantly topped expectations printing at 0.6% (exp. 0.1%); Jobless Claims fell from the prior, but Pantheon Macro suggests that this is largely due to summer auto plan shutdowns becoming more widespread than usual.


• 
  OMX Stockholm outperformed, buoyed by ABB (+8.2%, also listed in Switzerland) after it reported stronger-than-expected revenue figures and record orders. In the SMI, Novartis sits at the bottom of the index after results. Though Q2 metrics were strong, weakness was attributed to the departure of CFO Kirsch, considered one of the best in the industry; other desks also highlight weaker-than-expected figures within the drug breakdown of the total Sales figure. The AEX is also set to finish with gains of over a percent, lifted by ASML’s (+2.6%) TSMC (+3.7%) read across.


• In terms of sectors, they held a strong positive bias for the entire session. Industrials took the top spot, lifted by earnings strength from ABB, and Construction followed closely behind, bolstered by a positive earnings report from Sweden's Assa Abloy (+5.9%). Tech and Autos also performed well, with ASML (+2.6%) and Volvo (+7.3%) firmer.


• Stateside, indices opened with modest gains. YM (+0.3%) outperforms on post-earnings strength from Travellers (+1.6%), tech-heavy NQ (+0.2%) also does well, with broad gains in the sector. RTY (U/C) struggles to gain after strong US data. In terms of some individual movers in the US, PepsiCo’s (+6.4%) EPS & revenue topped, United Airlines (+6%) beat and raised on EPS, and Uber (-0.5%) is to invest USD 300mln in Lucid (+40%) as part of Robotaxi partnership.

FX

• 
  USD - After a volatile session yesterday, USD attempted to recoup lost ground and resume its broader recovery seen since early July. Yesterday saw a soft PPI report followed by reports that US President Trump had drafted a letter to fire Powell. Whilst Trump denied such reports, a level of risk remains embedded in the USD given the political pressure on the Fed to lower the FFR and the subsequent concerns over institutional credibility. This was also seen today with comments from Kevin Warsh, who is in the running to become the next Fed Chair. Warsh stated that a regime change is needed at the Fed and a rate cut would be the first step towards such a change. The DXY was briefly further bolstered by an unambiguously hot US retail sales report, which showed that the US consumer is resilient in the face of tariffs. Weekly claims also came in below expectations. However, the post-release upside in USD faded alongside a pullback in US yields (no obvious driver for the move). Note, TIC data due at 21:00BST will be eyed for any signs of foreign investors shunning US assets. DXY briefly eclipsed yesterday's best @ 98.91 with a session high @ 98.95 before returning back below its 50DMA @ 98.71.


• 
  EUR - It remains the case that the USD leg of the pair is providing the bulk of direction for EUR/USD with incremental drivers from the Eurozone on the light side. Traders await any breakthroughs in EU-US trade talks after US President Trump threatened a 30% tariff on the EU over the weekend. EU Trade Commissioner Sefocvic spoke yesterday with his US counterparts. However, reporting suggests the EU is preparing a list of potential tariffs on US services alongside export controls, should talks fail, via FT sources. From a policy perspective, this could feed into next week's ECB rate decision with reporting earlier in the week suggesting that the GC is to discuss a more negative scenario next week than previously envisaged in June after Trump's latest tariff threat. On the fiscal front, Germany has rejected the EU's proposed EUR 2tln budget, setting up a negotiation phase with the European Parliament and European Council. EUR/USD slipped onto a 1.15 handle and below yesterday's 1.1562 low with a session trough @ 1.1558.


• 
  GBP - Softer vs. the USD but to a lesser extent than most peers. Macro focus for the UK was on the labour market with the latest jobs data showing an unexpected uptick in the unemployment rate to 4.7% from 4.6%, another contraction in the HMRC payrolls change and stubborn wage growth. Whilst the labour market is clearly loosening, the extent is not as perilous as some had feared given that the prior HMRC payrolls change metric was revised notably higher (from an originally reported sharpest contraction since May 2020) and expectations are that this month's figure could also be nudged higher in next month's release. This, combined with yesterday's hotter-than-expected, means that whilst the BoE is expected to gradually lower rates, there is no strong case for the MPC to accelerate the pace of reductions from its current quarterly cadence. Odds of an August reduction sit at 78% with a total of 50bps of loosening seen by year-end. Cable slipped back onto a 1.34 handle but held above yesterday's low @ 1.3365.


• 
  JPY - After some fleeting upside vs. the USD on account of the Trump-Powell drama seen yesterday, USD/JPY resumed its recent uptrend. It remains the case that a trade deal between the US and Japan is yet to materialise with both sides currently entrenched in their respective positions. The latest reporting noted that Japanese trade negotiator Akazawa spoke with US Commerce Secretary Lutnick by phone, while Japan and the US reconfirmed each side's position on US tariff measures and engaged in deep interaction. For Japan, the nation is unlikely to cede much ground ahead of Sunday's upper house election. On which, focus remains on the back end of the Japanese curve given expectations that the ruling bloc could lose its majority at this weekend's upper house elections. Such an outcome is expected to lead to looser fiscal policy. USD/JPY remained tucked within yesterday's wide 146.91-149.18 range.


• 
  Antipodeans - Both fell victim to the USD with greater losses seen in AUD following the latest Australian jobs data. The release showed an unexpected jump in the unemployment rate to 4.3% from 4.1%; highest rate in 3.5 years. Employment growth was just 2k (exp. 20k) and accompanied by a notable contraction in full-time employment. The release has further cemented calls for another RBA rate cut next month (priced at 87%) with a total of 66bps of loosening seen by year-end. Accordingly, AUD/USD slipped back onto a 0.64 handle and moved back below its 50DMA @ 0.6491 with a session low @ 0.6455. NZD/USD hit a new low for the month @ 0.5906.

FIXED

• 
  USTs spent the morning lower by a handful of ticks, after gradually drifting from the 110-21+ peak that printed in the US afternoon on Wednesday, following on from the Powell reports.


• In the morning, newsflow was focused firmly on earnings and driven by strong TSMC numbers and Q3 guidance, points that lifted the risk tone and weighed on fixed benchmarks, sending Bunds to a 129.38 base just after the European cash equity open.


• 
  Bearishness for EGBs also came on the trade front, as Trump overnight said a deal with Europe was possible. Amidst this, Gilts opened lower and extended further as the morning’s jobs data was mixed with revisions to many metrics and hotter wage figures offsetting the unexpected increase in the unemployment rate.


• In totality, the data likely does not change the trajectory for the BoE. With around 19bps of easing implied for August before and after the series. However, the hawkish reaction in Gilts is possibly a function of the series not satisfying Governor Bailey’s recently outlined labour market criteria for larger rate reductions.


• As it stands, Gilts are set to end the session in the red by around 20 ticks but clear of the 91.14 trough by a similar margin.


• The US session has, primarily, been focused on data. In brief, Retail Sales came in stronger than expected, as did the Control figure (feeds into GDP), Weekly Claims was a touch softer than the prior and consensus. At the same time, Import Prices came in shy of consensus with the prior revised markedly to negative territory.


• Net, there wasn’t much reaction to the data at the time. Note, markets were also digesting an extensive CNBC interview with former Fed official, and potential future Chair, Warsh; commentary outlined a desire for easing, spoke of a new Treasury-Fed accord and was essentially him publicly making his case for the role.


• Interestingly, USTs picked up significantly after the data lifting from a 110-09+ low to a 110-23+ peak in a c. 90-minute period after the release, with gains of c. three ticks. A move that also lifted Bunds, taking them back towards the earlier 129.76 peak, with gains of c. 10 ticks. No clear driver behind the data, possibly influenced by Warsh, Import Prices and some scrutiny of the Control figure from Retail Sales.


• Ahead, Atlanta Fed’s GDPNow (prev. 2.6%), May’s TIC data and Fed’s Waller the highlights. Waller in particular and is on paper the most interesting as he and Bowman have been open to the concept of a July move


• 
  Spain sells EUR 5.7bln vs exp. EUR 5.0-6.0bln 2.70% 2030, 3.20% 2035 & 2.70% 2048 Bono.


• 
  France sells EUR 12bln vs exp. EUR 10-12bln 2.40% 2028, 2.50% 2030 and 2.70% 2031 OAT.


• 
  UK sells GBP 4.75bln 4.375% 2030 Gilt: b/c 3.12x (prev. 3.26x), average yield 4.078% (prev. 4.06%) & tail 0.2bps (prev. 0.2bps)

COMMODITIES

• 
  WTI and Brent traded choppily today, but looked to close the European day modestly in the green. Earlier, reports of a drone attack on the Taouki oil field (80k bpd) in Iraq’s Kurdistan region, sparked modest upside in the complex – albeit modestly so. Kurdish officials note that the region have lost nearly 200k bpd since the attacks began. Recent reporting suggested that the Iraqi Government decided that Iraq's Kurdistan is to immediately deliver 230k bpd of oil to Somo; comments which sparked some modest downside in the complex. Brent Sept’25 traded in a USD 68.27-69.01/bbl range.


• 
  Precious metals were mixed with modest upside seen in Palladium whilst gold and silver moved lower. Spot gold traded with a downward bias throughout the European session, initially pressured by the positive risk tone seen across the equities complex; the yellow-metal then took another leg lower as the Dollar moved to highs following the hotter-than-expected Retail Sales metric. Spot gold traded in a USD 3,314.11-3,351.47/oz range.


• 
  Base metals held a negative bias, in part due to the firmer Dollar. 3M LME Copper posted very mild losses, in continuation of the rangebound trade seen overnight amid the somewhat mixed risk appetite in APAC trade. 3M LME Copper was incrementally in the red and traded in a USD 9,593.05-9,643.9/t range.


• Indian oil minister sees potential for fuel price cuts if crude remains at current levels for next 2-3 months.


• US natural gas flows to Freeport LNG's export plant in Texas on track to return, in sign plant is heading back to full power, according to LSEG data.


• 
  Iraqi Government decides that Iraq's Kurdistan to immediately deliver 230k bpd of oil to Somo; Iraq allocates 50k bpd of crude for local use in the region, KRG to cover production and transport costs.

TRADE/TARIFFS

• Chinese Foreign Ministry says the responsibility with Fentanyl lies with the US itself, tariffs seriously impacted China's dialogue with the US on drug control.


• Thai adviser says Thailand is to offer no duties on 90% of US goods in an attempt to avert a 36% Trump tariff, according to Bloomberg.


• 
  White House Trade Advisor Navarro tells Fox that non-tariff barriers remain major challenge for the EU. EU VAT is also a subsidy. Would like to see VAT relief and lower tariffs.

EUROPEAN DATA

• UK ILO Unemployment Rate (May) 4.7% vs. Exp. 4.6% (Prev. 4.6%); Employment Change (May) 134k vs. Exp. 46k (Prev. 89k)


• UK Avg Wk Earnings 3M YY (May) 5.0% vs. Exp. 5.0% (Prev. 5.3%, Rev. 5.4%); Ex-Bonus (May) 5.0% vs. Exp. 4.9% (Prev. 5.2%, Rev. 5.3%)


• UK HMRC Payrolls Change (Jun) -41k (Prev. -109k, Rev. -25k); Claimant Count Unem Chng (Jun) 25.9k (Prev. 33.1k, Rev. 15.3k)


• 
  EU HICP Final YY (Jun) 2.0% vs. Exp. 2.0% (Prev. 2.0%); HICP-X F&E MM (Jun) 0.3% (Prev. 0.1%).

EUROPEAN NEWS

• 
  Germany's VCI reports H1 production down 1% Y/Y. Sales decline 0.5% to EUR 107 bln. Producer prices remain flat Y/Y. VCI maintains 2025 outlook. Lack of orders continues to pose a significant challenge for the chemical industry amid ongoing market tension, with no signs of recovery emerging this year.


• EU proposes joint borrowing to France USD 400bln crisis tool, according to Bloomberg.

CENTRAL BANKS

• 
  Pantheon Macro, on the UK labour market data, "So we shift our call. We now look for a one-and-done cut in August. We are still torn.".


• 
  Citi now expects the ECB to lower rates in September and December (vs. previous view of July and September).


• 
  Reuters ECB poll: unanimously expected to hold rates in July, 49/84 see one more rate cut this year.


• 
  ECB's Villeroy says French budget plan still needs to be clarified and savings detailed. General direction of budget plan moves int he right direction towards bringing debt under control.


• 
  ECB's Nagel says if tariffs materialize in August, a recession in Germany in 2025 cannot be ruled out. Sees GDP growth of 0.7% in 2026 would possibly be eaten up by tariffs now on the table.


• 
  Reuters Poll, CBRT: CBRT expected to cut rates by 250bps to 43.5% next week.


• 
  Fed's Kugler (voter) says it is appropriate to keep policy steady "for some time" given low unemployment and increasing pressure from tariffs. Inflation remains above target, labour market is stable and resilient. A restrictive stance is important currently to keep inflation expectations anchored. June PCE estimate is 2.5% vs a target of 2% and core at 2.8%; both higher than in May. CPI shows inflation broadening across core goods. Many reasons to believe that the larger impact of tariffs on inflation is yet to come.

GEOPOLITICS

• 
  New US assessment finds US strikes destroyed just one Iranian nuclear site, according to NBC; strikes degraded two other sites. One of the three sites was mostly destroyed, setting work there back significantly. The two others were not as badly damaged and may have been degraded only to a point where nuclear enrichment could resume in the next several months if Iran wants it to. Officials believe the attack on Fordo, which has long been viewed as a critical component of Iran’s nuclear ambitions, was successful in setting back Iranian enrichment capabilities at that site by as much as two years, according to two of the current officials. Trump rejected a military plan for more comprehensive strikes that would have lasted for weeks.


• Swiss Defence Minister says the US has informed them about a delay in the delivery of the Patriot system.

NOTABLE NORTH AMERICAN NEWS

• Kevin Warsh says he sees AI trends which could reduce costs in the long-run, and a golden opportunity and is concerned the Fed cannot see that. Don't think need continuity, when the central bank does not have credibility. Need regime change at the Fed. When asked whether the next Fed Chair will be independent, says in a word "yes". Independence is essential. The reason Fed has not made the right decision of rates is due to the President and tariffs. Click for full comments.

NORTH AMERICAN DATA

• US Retail Sales MM (Jun) 0.6% vs. Exp. 0.1% (Prev. -0.9%)


• US Retail Sales Ex-Autos MM (Jun) 0.5% vs. Exp. 0.3% (Prev. -0.3%, Rev. -0.2%)


• US Retail Control (Jun) 0.5% vs. Exp. 0.3% (Prev. 0.4%, Rev. 0.2%)


• US Retail Ex Gas/Autos (Jun) 0.6% (Prev. -0.1%)


• US Initial Jobless Claims w/e 221.0k vs. Exp. 235.0k (Prev. 227.0k, Rev. 228k)


• US Continued Jobless Claims w/e 1.956M vs. Exp. 1.965M (Prev. 1.965M, Rev. 1.954M)


• US Philly Fed Business Indx (Jul) 15.9 vs. Exp. -1.0 (Prev. -4.0)


• US Philly Fed Prices Paid (Jul) 58.8 (Prev. 41.4)


• US Philly Fed New Orders (Jul) 18.4 (Prev. 2.3)


• US Philly Fed Employment (Jul) 10.3 (Prev. -9.8)


• US Philly Fed Capex Index (Jul) 17.1 (Prev. 14.5)


• US Philly Fed 6M Index (Jul) 21.5 (Prev. 18.3)


• US Export Prices MM (Jun) 0.5% (Prev. -0.9%, Rev. -0.6%)


• US Import Prices MM (Jun) 0.1% vs. Exp. 0.3% (Rev. -0.4%)


• BofA Institute total card spending (w/e July 12th): +4.5% Y/Y (vs +0.2% June avg.); notes online retail saw largest Y/Y spending growth due to Prime Day timing shift.

17 Jul 2025 - 15:00- ForexEU Research- Source: Newsquawk