Newsquawk European Market Wrap - 1st August 2025

• Stocks lower, USD down, US curve steeper, crude lower


• Sentiment started soft after the latest Trump tariff announcement


• NFP missed expectations with the prior revised notably lower


• Odds of a September rate cut jumped from 45% to 90%

EQUITIES

• 
  European bourses began the session entirely in the red, and continued to trickle lower throughout the day - they look to close the European day at lows. This pressure comes as traders digest US President Trump’s newly-imposed tariffs on 92 countries, bringing the average US tariff rate to 15.2% (prev. 13.3%, prev. 2.3% pre-Trump). On the data front, metrics were released from the EZ; highlight was HICP, which came in hotter than expectations, though bang on the ECB’s 2% target of 2.0%; no move seen in stocks on this data, but a bout of pressure was seen on the US jobs report.


• Stateside, NFP mostly disappointed, the July figure printed at 73k (exp. 110k). Moreover, there was a chunky revision lower to the June metric, revised to 14k from 147k. This sparked some modest pressure across the equities complex, and then traded choppily at around pre-release levels thereafter. Do note that the unemployment rate edged a little higher to 4.2% (prev. 4.1%), as expected. This has sparked calls for a cut in September (money markets price in a 91% chance of such a move), though there are still two more inflation reports and another jobs report ahead of the next meeting.


• 
  European sectors traded red across the board for the entire session, given the downbeat mood. The composition deviated from that shown in the morning, with Industrials, Tech and Banks closing as the bottom three. (prev. Media, Tech & Healthcare). Focusing on Healthcare, the initial downside was attributed to US President Trump. He sent letters to 17 pharma companies (in both the US and Europe), asking them to lower drug prices before the end of September. The likes of Novo Nordisk (-2%) and GSK (-1%) were both hit.


• 
  US equity futures are entirely in the red; initially pressured in reaction to the latest trade updates (mentioned above) and then took another leg lower on the weaker-than-expected US NFP report. Thereafter, a disappointing US ISM Manufacturing report sent futures to a new low. As for key movers today; Apple (+1.5%, Rev. beat driven by strong iPhone 16 demand & rebound in China), Amazon (-8%, Light next Q op. income guide; slower AWS growth & lack of visible returns from AI investment weighed on sentiment), Coinbase (-11%, Top line light & transaction rev. -39% Q/Q).

FX

• 
  USD - After a steady start to the session, DXY was slammed lower in the wake of the latest payrolls report. Headline payrolls growth came in at just 73k (vs. Exp. 110k) with the prior revised lower to 14k from 147k. The unemployment rate rose to 4.2% from 4.1% as expected, even as the participation rate declined by 10bps. Accordingly, Fed pricing saw a dramatic shift with odds of a September cut surging to 85% at the time of writing vs. 45% pre-release and two rate reductions fully priced by year-end (vs. circa 35bps of cuts ahead of the figure). Markets are now of the view that more FOMC members will come round to the views of Waller and Bowman, who both justified their dissent this week, 30 minutes before payrolls hit. Upcoming Fed commentary will be parsed to see if policymakers will begin to place greater emphasis on the labour market in spite of the potentially inflationary ramifications of the Trump administration's trade policies. Note, 2026 voter Hammack stated (post-payrolls) confidence in the Fed's decision this week, citing the "pain" of inflation. Elsewhere on the data slate, ISM manufacturing fell short of expectations and the employment component declined, adding further pressure to the USD. DXY pulled back from its 100.25 peak to a 98.67 low but remains higher on the week to the tune of 1.3%.


• 
  EUR - EUR/USD boosted by the aforementioned post-payrolls USD weakness after a contained start to the session, whereby a firmer-than-expected outturn for Eurozone inflation unable to provide much traction for the shared currency. HICP Y/Y for July remained at the 2% target (Exp. 1.9%), whilst both core metrics came in 10bps over consensus, and services declined to 3.1% from 3.3%. From a policy perspective, as stressed at last week's meeting, the ECB is very much of the view that policy is well-positioned to deal with the current uncertainties in the economy. ECB pricing moved in a dovish direction but this was more a by-product of the mechanical impact from US rate repricing than a shift in Eurozone fundamentals. EUR/USD was able to clamber off its weekly low @ 1.1392, topping out @ 1.1588, taking out the 50DMA @ 1.1577.


• 
  GBP - Kicked the session off on the backfoot vs. the USD with Cable initially extending its losing streak to a 7th session in a row. Thereafter, USD weakness managed to see the pair move back into positive territory. It remains the case that macro drivers for the UK remain on the light side, however, next week will see the latest BoE policy announcement and MPR, which is 82% priced for a 25bps reduction. Within the vote split, Morgan Stanley expects a 1:7:1 outcome with Mann voting for a hold and Dhingra voting for a 50bp cut. Additionally, the desk expects unchanged messaging, and an uplift to near-term inflation forecasts. Cable slipped onto a 1.31 handle for the first time since 13th May with a session low @ 1.3142 before briefly reclaiming the 1.33 handle.


• 
  JPY - Firmer vs. the USD and top of the G10 leaderboard in what had, up until today, been a bruising week for the Yen vs. the dollar. Part of this has been a USD story and part has been stemming from the fallout from the latest Japan deal, political uncertainty and a reticence yesterday from the BoJ in attempting to bolster rate hike bets. The Yen depreciation has not gone unnoticed in Tokyo with the Japanese Finance Minister Kato stating that he is "alarmed over FX moves". On the trade front, the Nikkei reports that Japan is eyeing a 15% rate for the US chip tariff, which would be on par with the EU. Additionally, Japanese Economy Minister Akazawa said Japan will continue to push the US to execute the agreed-upon cut to auto tariffs. After hitting a multi-month high @ 150.91 overnight, USD/JPY pulled back below the 150 mark and its 200DMA @ 149.56, making a new low for the week @ 147.54.


• 
  Antipodeans - Both firmer vs. the USD but with NZD underperforming its antipodean peer in the wake of the latest Trump tariff announcements, which have seen the rate for New Zealand increase to 15% from 10% and Australia hold steady at 10%. NZD/USD has slipped onto a 0.58 handle with a session low @ 0.5857 before returning to a 0.59 handle. AUD/USD took out yesterday's 0.6476 peak but ran out of steam ahead of the 0.65 mark.

FIXED

• 
  USTs spent the morning near-enough flat in a very narrow band holding just below the 111-00 mark. At this point, Bunds were under pressure with downside of as much as 63 ticks, though the benchmark was unreactive to the morning’s Final PMI or a hawkish Flash HICP series; instead, the initial pressure was seemingly tariff driven.


• 
  Gilts underperformed in the morning despite a lack of specific newsflow. Pressure was likely a function of the global inflation implications of the latest tariff measures, and the underperformance a function of the bouts of relative outperformance seen in Gilts over the last few days.


• The dissent letters from Bowman and Waller were published without reaction. Amidst this, Trump stepped up his criticism of Powell and called for the board to “assume control” and do “what everyone knows has to be done”.


• 
  Payrolls were woeful. Overall, a very poor report with significant downward revisions to the June and May priors, with BLS highlighting them as “larger than normal” (two-month net revision -258k). Alongside that, the Unemployment Rate picked up as expected; reminder, Powell said it is the metric to watch. Fed’s Hammack described the series as “disappointing”, and expects the job market to weaken into year end.


• A series that has seen a marked dovish move, an October cut by the Fed now priced (-20.9bps pre-data) and another move implied in December (-34.9bps pre-data). Given the size of the short-end move, the curve is bull-steepening with 2s10s higher by around 10bps on the session while the 2yr yield is lower by over 20bps and on track for its largest single-day move since April.


• For the benchmark itself, USTs were driven higher from 110-27 to 111-09+ before extending to a 112-00 high into ISM Manufacturing. Bunds similarly driven higher from 129.20 to a 129.98 high and Gilts from 91.58 to a 92.56 peak in the hour post-Payrolls.


• 
  ISM came in soft on the headline and saw a lower-than-expected Prices Paid figure, together extending on the bullish bias for benchmarks and lifting USTs to a fresh 112-05 peak; Bunds and Gilts also to new highs of 130.17 and 91.68.


• Leaving benchmarks entering the US afternoon with gains of a full point, 46 and 50 respectively. The schedule includes the latest Atlanta Fed GDPNow tracker, last at 2.3%.

COMMODITIES

• 
  Crude Futures - Choppy trade following yesterday's macro-induced losses as markets awaited Trump's revised tariffs. In terms of the highlights from the announcement, the average US tariff rate has now risen to 15.2% (prev. 13.3%; 2.3% pre-Trump). China was not mentioned; EU/UK/Japan had their rates as agreed; Switzerland, New Zealand, and Canada's tariffs were increased, while Mexico pays a lower tariff for 90 days. All in all, the revisions have resulted in risk aversion across the markets, albeit crude futures are somewhat cushioned as traders anticipate details on the penalties to nations importing Russian crude. On the data front, the latest S&P Global China General Manufacturing PMI (formerly sponsored by Caixin) missed forecasts and surprisingly returned to contractionary territory. Just before the US jobs report, OPEC+ is expected to approve another oil production hike on Sunday, the final size may be 548k bpd "or lower", according to Reuters, citing sources. The "or lower" is a new addition to expectations and helped prices rise. The sub-par US jobs report did little to shift prices at the time. That being said, prices fell once again amid the risk aversion, with another leg lower seen on the ISM Manufacturing miss. WTI resided in a 68.03-69.55/bbl range while Brent sits in a USD 70.38-72.00/bbl range.


• 
  Precious Metals - Firmer following the dollar slide post-NFP, which was overall a very poor report, with significant downward revisions to the June and May priors, with BLS highlighting them as “larger than normal” (two-month net revision -258k). DXY slipped from 100+ levels down to a 98 handle. Spot gold topped its 50 DMA (USD 3,351.96/oz) to trade in a USD 3,281.75-3,354.87/oz parameter.


• 
  Base Metals - Mostly firmer following the aforementioned slide in the dollar, with not really much else for the complex today. Yesterday's copper slide saw the CME-LME arb collapse as the US copper tariff was not as bad as feared, as the 50% tariff applied to copper pipes and wiring, whilst omitting copper input materials such as ores, concentrates and cathodes. Iron ore futures overnight were mixed on Dalian and SGX, but set for weekly losses as traders cited fading Chinese stimulus hopes, whilst there has still not been an update on an extension to the US-China trade truce. 3M LME copper prices reside in a USD 9,582.60-9,696.30/t range.


• 
  OPEC+ is expected to approve another oil production hike on Sunday, final size may be 548k bpd or lower, according to Reuters citing sources.


• 
  Kazakhstan crude oil output fell 2% M/M in July to 1.84mln BPD, according to a source and Reuters' calculations.


• 
  US sanctions force vessels with Russian oil to divert from India, sources cited by Reuters say.

TRADE/TARIFFS

• 
  India is engaged with US for further trade talks; US delegation to visit Delhi on August 24th, according to Reuters sources; India expects USD 40bln exports to impacted by the high US tariffs.


• Swiss Foreign Minister says, on US trade talks, they are not discouraged and continue to strive for an agreement in the interest of both parties.


• Chinese state media People's Daily, on security risks related to NVIDIA (NVDA) chips, says foreign companies must respect Chinese laws, only by providing convincing safety proof can companies eliminate the worries of Chinese users.


• India's Foreign Ministry remains confident that its relationship with the US will continue to progress. Potential for relations to grow further.


• 
  USTR Greer says confident about rate earth flows from China, via Fox Business.


• 
  USTR Greer will be finishing paperwork on deals over the next weeks and months, via Bloomberg TV; tariff levels are based on trade deficit with the US. It is a challenging situation with Switzerland. Switzerland sends a lot of pharmaceuticals to the US.


• German Chancellor Merz says will negotiate on steel with the US and focus is on quotas that Germany can export without having to pay too high tariffs; tariff deal must go into effect on August 7th.


• 
  White House Official says Switzerland refused to make any meaningful concessions by dropping trade barriers with the US, US cannot tolerate a one-sided trade relationship.

EUROPEAN DATA

• 
  EU HICP Flash YY (Jul) 2.0% vs. Exp. 1.9% (Prev. 2.0%); Services 3.1% (prev. 3.3%); YY (Jul) 2.4% vs. Exp. 2.3% (Prev. 2.4%); HICP-X F, E, A & T Flash YY (Jul) 2.3% vs. Exp. 2.2% (Prev. 2.3%).


• 
  EU HCOB Manufacturing Final PMI (Jul) 49.8 vs. Exp. 49.8 (Prev. 49.8)


• Spanish HCOB Manufacturing PMI (Jul) 51.9 vs. Exp. 51.5 (Prev. 51.4)


• Italian HCOB Manufacturing PMI (Jul) 49.8 vs. Exp. 49.0 (Prev. 48.4)


• French HCOB Manufacturing PMI (Jul) 48.2 vs. Exp. 48.4 (Prev. 48.4)


• German HCOB Manufacturing PMI (Jul) 49.1 vs. Exp. 49.2 (Prev. 49.2)


• 
  UK S&P Global Manufacturing PMI (Jul) 48.0 vs. Exp. 48.2 (Prev. 48.2)


• UK Nationwide House Price MM (Jul) 0.6% vs. Exp. 0.3% (Prev. -0.8%, Rev. -0.9%); YY 2.4% vs. Exp. 2.1% (Prev. 2.1%)


• Italian Retail Sales NSA YY (Jun) 1.0% (Prev. 1.3%); Retail Sales SA MM (Jun) 0.6% (Prev. -0.4%)


• Italian budget watchdog cut 2025 GDP growth estimates to 0.5% (prev. 0.6%) and 2026 to 0.5% (prev. 0.7%).

CENTRAL BANKS

• US President Trump posts "Jerome “Too Late” Powell, a stubborn MORON, must substantially lower interest rates, NOW. IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!", via Truth Social.


• US President Trump posts "STRONG DISSENTS ON FED BOARD. IT WILL ONLY GET STRONGER! “TOO LATE!”".


• US President Trump posts "Too Little, Too Late. Jerome “Too Late” Powell is a disaster. DROP THE RATE! The good news is that Tariffs are bringing Billions of Dollars into the USA!".


• 
  Fed's Waller (voter) explains dissent: concluded that cutting by 25bps was the appropriate course of action; views have not changed since the July 17th speech. Click for full comments.


• 
  Fed's Bowman (voter) explains dissent: With growth slowing and a less dynamic labour market; saw it as appropriate to begin gradually moving the moderately restrictive policy stance toward a neutral setting. "I think that we should start putting more weight on risks to our employment mandate". Click for full comments.


• 
  Fed's Hammack (2026 Voter) says the NFP report was disappointing; healthy labour market still in balance; "confident in decision made earlier this week". Expects inflation to tick up. Seeing pressure on inflation side of the mandate. Pain of inflation is biting. Expects job market to weaken into end of the year. Does not think neutral rate is far. Click for full comments.


• US CEA Chair Miran says embarrassing if the Fed catches up to US President Trump's view with a big lag.


• 
  PBoC vows to maintain appropriately loose monetary policy at H2 work meeting. To promote the internationalisation of CNY. Maintain flexibility of exchange rate. Prevent exchange rate overshooting risks. Deepen international financial cooperation. To expand issuance of sci-tech bonds. To set up macroprudential and financial stability committee.

GEOPOLITICS

• Ukrainian Presidential Office head says Ukrainian partners confirm "positive signals" from the White House on Russia sanctions.


• 
  Russia President Putin on talks with Ukraine, views this positively, hundreds of people have returned to their homeland; overall reaction of Ukraine side on forming working groups was positive. Counting that talks will continue. Russian goals in Ukraine have not changed. If anyone is disappointed with peace talks, that is from inflated expectations. Hopes Russia and Ukraine can set up working groups to discuss possible compromises.


• Ukraine President Zelensky says, after statements from Russian President Putin, that Ukraine is ready for a leaders meeting.

NORTH AMERICAN DATA

• US Non-Farm Payrolls (Jul) 73.0k vs. Exp. 110.0k (Prev. 147.0k, Rev. 14k); two month net revisions: -258k (prev. +16k)


• US Private Payrolls (Jul) 83.0k vs. Exp. 100.0k (Prev. 74.0k, Rev. 3k)


• US Manufacturing Payrolls (Jul) -11.0k vs. Exp. -3.0k (Prev. -7.0k, Rev. -15k)


• US Government Payrolls (Jul) -10.0k (Prev. 73.0k, Rev. 11k)


• US Unemployment Rate (Jul) 4.2% vs. Exp. 4.2% (Prev. 4.1%)


• US Average Earnings MM (Jul) 0.3% vs. Exp. 0.3% (Prev. 0.2%)


• US Average Earnings YY (Jul) 3.9% vs. Exp. 3.8% (Prev. 3.7%, Rev. 3.8%)


• US Average Workweek Hrs (Jul) 34.3hrs vs. Exp. 34.2hrs (Prev. 34.2hrs)


• US Labor Force Partic (Jul) 62.2% (Prev. 62.3%)


• US CES Total Net Birth-Death Forecast (Jul): +257k (prev. 24k)


• US S&P Global Manufacturing PMI Final (Jul) 49.8 (Prev. 49.5)


• US ISM Manufacturing PMI (Jul) 48.0 vs. Exp. 49.5 (Prev. 49.0)


• US ISM Manuf New Orders Idx (Jul) 47.1 (Prev. 46.4)


• US ISM Manuf Employment Idx (Jul) 43.4 (Prev. 45.0)


• US ISM Mfg Prices Paid (Jul) 64.8 vs. Exp. 70.0 (Prev. 69.7)


• US U Mich Sentiment Final (Jul) 61.7 vs. Exp. 62.0 (Prev. 61.8)


• US U Mich Expectations Final (Jul) 57.7 (Prev. 58.6)


• US U Mich Conditions Final (Jul) 68.0 (Prev. 66.8)


• US U Mich 1Yr Inf Final (Jul) 4.5% (Prev. 4.4%)


• US U Mich 5-Yr Inf Final (Jul) 3.4% (Prev. 3.6%)


• Canadian S&P Global Manufacturing PMI SA (Jul) 46.1 (Prev. 45.6)

01 Aug 2025 - 15:16- ForexGeopolitical- Source: Newsquawk