Newsquawk European Market Wrap - 4th August 2025

• European stocks higher (ex-SMI) in a catalyst light session


• DXY faltered as US yields pulled back post-NFP on Friday


• Crude lower after OPEC+ backed a 547k BPD production hike

EQUITIES

• 
  Stocks traded in the green for the entire session in a rebound from post-payrolls and trade-induced losses from Friday. Price action was contained amid a lack of newsflow, though recent reports suggest the EU is to suspend its trade countermeasures against the US by six months; there was no move seen on this headline. Elsewhere, US President Trump is expected to announce a new Fed Governor this week, after Kugler resigned last week. For European specific updates today, the Swiss government said it was not considering any countermeasures against the US at this point, and it was ready to make a more attractive offer to the US; SMI continues to underperform, though fares better than earlier.


• 
  Sectors held their positive bias, with Banks propped at the top after UK Court updates helped Lloyds, and Italy's competition authority decided not to open an investigation into Mediobanca’s bid for Banca Generali, helping the associated names. At the bottom of the pile, healthcare underperformed, weighed down by Novartis, with its 13% weighting bringing the sector lower; weighed by broad SMI weakness.


• On Tuesday, Europe expects earning reports from Infineon, BP and Diageo; see the headline feed for a primer.
  


• 
  Stateside, stocks opened firm; tech heavy Nasdaq outperformed at the open, helped by strength in Palantir (+3.3%) after it was awarded a USD 10bln contract by the Pentagon. The name is also expected to report earnings tonight. On the data docket, US factory orders are expected to have declined by 4.8% M/M in June (from +8.2% M/M in May); durable goods revisions are also due.

FX

• 
  USD - DXY's attempted recovery proved to be unsuccessful as opening gains were faded alongside a pullback in US yields. The upside seen at the start of the session were not tied to anything of a fundamental persuasion and appeared more technical in nature, given the heavy selling seen on Friday. Markets modestly added to the dovish repricing at the Fed with a September cut seen at 94% and a total of 61bps of loosening by year-end. The composition of the FOMC remains in focus, given Trump's incessant pressure on Fed Chair Powell to lower rates and the recent departure of Fed's Kugler. That being said, commentary in the wake of the report from the likes of Bostic, Hammack, who placed greater emphasis on the inflation side of the Fed's mandate, suggests that a September cut is far from a done deal. Elsewhere on the personnel front, Trump is also set to announce the replacement for the head of the BLS, who he fired on Friday, claiming that they "faked job numbers" before the election in an attempt to help his political rivals. This move has been viewed as a USD negative by the market, given the ongoing assault on institutional credibility. For today's docket, traders will have the opportunity to digest US Employment Trends, Durable Goods revisions and Factory Orders. ISM services PMI is due tomorrow. DXY ventured as high as 98.98 before pulling back towards Friday's 98.58 low.


• 
  EUR - EUR/USD flat after a choppy week last week, which saw EUR slide against the USD in the wake of the EU-US trade deal before mounting a partial recovery on Friday post-payrolls. The macro narrative surrounding the EU remains as it was and that could remain the case with little in the way of market-moving scheduled releases for the Eurozone this week. As such, near-term direction may be provided more by the USD leg of the equation. That being said, traders are mindful of any further rumblings in the EU that could suggest the ratification of the EU-US trade deal could be in jeopardy. Moving forward, should data hold up in the Eurozone and deteriorate in the US, the potential narrowing in rate differentials could prompt a return to the broader EUR/USD uptrend seen in 2025. EUR/USD failed to crack 1.16 to the upside, topping out at 1.1597, heading out the European session around its 200DMA @ 1.1581.


• 
  GBP - GBP was fractionally firmer vs. the USD with incremental macro drivers from the UK on the light side. That will change on Thursday with 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 initially dipped as low as 1.3254 before eventually reclaiming the 1.33 handle.


• 
  JPY - After a wild week last week, which saw an initial rally in USD/JPY (on account of broad USD strength and a dovish reaction to the BoJ policy announcement) swiftly reversed in the wake of the US NFP report, USD/JPY initially attempted to clamber off the lows. However, a pullback in US yields put to bed this recovery and eventually dragged USD/JPY briefly back onto a 146 handle. Overnight, comments from Japanese Trade Negotiator Akazawa stated that the recently announced trade agreement between the US and Japan is not a legally binding commitment. This has raised some doubt over how rigidly Japan will stick to its existing pledges with the US. On the domestic agenda, it is worth noting that the LDP will hold a joint plenary meeting of both houses on August 8th. GS suggests that the meeting will focus on the recent loss of the working majority in the Upper House. As such, focus on PM Ishiba's position will likely come into focus.


• 
  Antipodeans - After starting the session off on the backfoot, AUD/USD and NZD/USD managed to claw back losses alongside the pullback in the USD. AUD was slightly more resilient than NZD following a rise in the latest Melbourne Institute Inflation Gauge. For this week's docket, the sole highlight is NZ jobs data on Tuesday. That aside, performance may be gleaned more from the global risk environment and broader USD price action. On the trade front, USTR Greer said the trade truce deadline for China is still under discussion. AUD/USD trades towards the top end of Friday's 0.6419-93 range. NZD/USD held above the 0.59 mark and remained within Friday's 0.5856-0.5929 range.

FIXED

• 
  Bonds spent the majority of the European session in the red, but this reversed in early afternoon trade, to take global fixed income into positive territory. Newsflow was very light today, and nothing quite behind the reversal, but some underlying dovish factors are in focus (discussed in USTs bullet). On trade, Switzerland said it is ready to make a more attractive offer to the US; elsewhere, Bloomberg reported that the EU is said to suspend trade countermeasures on the US by six months – news which had little impact on the fixed income complex.


• 
  USTs were initially lower, attempting to pare back some of the post-NFP upside seen on Friday, but with focus also on the dovish implications of Fed’s Kugler resignation and Trump’s firing of the BLS Chief – it seemed as if these factors took the forefront of traders' minds, helping to boost bonds. Upside, which also came alongside an interview with US NEC Director Hassett, who referred to labour market revision as a "typo" and highlighted the unreliability of BLS data. On that, after US President Trump blamed (and then fired) the BLS Chief for a poor NFP report, Trump confirmed he will be announcing a new appointee in the coming days, suggesting they will be “exceptional”. On the Fed, it was announced that Kugler is to resign from her role at the Fed. Thereafter, US President Trump said he will announce a replacement in the coming days. Traders will keep an eye out for the appointment, as it provides Trump the opportunity to shove in his favoured candidate to replace Powell, once his term ends. Price action looked to close the European day at the top end of a 111-31+ to 112-13 range, notching above the 1st July peak at 112-12+.


• 
  Bunds were initially downbeat, in-fitting with global peers – but traded with a positive bias as the session progressed. Looked to close the European day at the top end of a 129.12 to 130.20 range. Newsflow was very light today, aside from EZ Sentix Index, which printed at -3.7, far below the expected 8.0; the Sentix director manager described the recent EU-US trade deal as a “mood killer”.


• 
  Gilts traded in tandem with peers, up by around 35 ticks into afternoon trade. UK paper was higher by around 35 ticks in a 92.24 to 92.74 range. Newsflow has been exceptionally quiet so far, but all attention will be on Thursday’s BoE policy announcement, where the Bank is expected to cut rates by 25bps.

COMMODITIES

• 
  Crude Futures - Crude futures continued the losses seen on Friday in the wake of the NFP and ISM, with the OPEC+ decision over the weekend largely as expected and failing to keep prices underpinned. To recap, OPEC+ said in a statement that eight members will raise oil output by 547,000 bpd in September (some sources last week suggested it could be lower), citing steady global economic growth, tight inventories, and healthy market fundamentals. This marks a full and early reversal of the group’s largest tranche of output cuts and is part of a broader strategy to regain market share. The move follows a series of accelerated hikes starting in April, with production increases each month. The eight countries are scheduled to meet again on September 7th, where they may consider reinstating another 1.65mln bpd of cuts that are currently in place until the end of 2026, according to Reuters sources. Analysts say OPEC+ has so far managed to return supply without destabilising prices, though navigating the next phase of unwinding cuts will be more complex. In geopolitics, Trump on Friday confirmed the deployment of two US nuclear submarines to the region, without clarifying whether they are nuclear-armed or powered. US President Trump also announced that his special envoy, Witkoff, will travel to Russia this week—likely Wednesday or Thursday—to continue discussions aimed at securing a ceasefire in the Ukraine war. Meanwhile, Ukraine’s military said it struck Russia’s Ryazan oil refinery again. In terms of news on China, USTR Greer said the trade truce deadline for China is still under discussion. Meanwhile, China rejected the US request to stop importing oil from Iran and Russia, according to reports. More domestically, Shanghai Securities News suggested China could step up monetary easing efforts in H2 2025 by cutting benchmark interest rates and banks’ RRR in order to guide overall financing costs lower and support the economy. Elsewhere, BP made its largest oil and gas discovery in 25 years off the coast of Brazil, although the company said it was too early to assess the size or quality of the reserves, but warned elevated CO2 has been detected, which could complicate extraction. WTI resided towards the bottom end of a 66.46-67.74/bbl range while Brent sits in a USD 68.00-69.98/bbl range.


• 
  Precious Metals - Mixed trade across precious metals with spot gold and palladium initially hampered as the Dollar claws back some ground after Friday's data-induced losses. That being said, the dollar once again trimmed gains and headed lower, whilst providing spot gold and silver with some reprieve. Spot gold on Friday topped its 50 DMA (USD 3,342.70/oz) before reaching a USD 3,363.60/oz peak (from a USD 3,281.75/oz intraday low). Today, spot gold found a footing near its 50 DMA this morning, as the yellow metal resided in a USD 3,345.00-3,364.81/oz range at the time of writing. Meanwhile, reports have suggested that Citi's gold bears have shifted to bullish amid US growth and inflation concerns, and expect the yellow metal to trade between USD 3,300-3,600/oz over the next three months. Note, this week ahead we are on the lookout for US President Trump announcing the new BLS replacement and Fed Kugler's replacement. Trump is expected to use this opportunity to appoint a dovish Governor, someone more closely aligned with his view that interest rates are too high. This appointee could also become a candidate for Fed Chair once Powell's term as Chair expires in May 2026. However, Powell’s term as Governor runs until January 2028, meaning he can remain on the Board even after stepping down as Chair. Note, we may not know Powell's decision until closer to the time.


• 
  Base Metals - Mixed trade across base metals amid quieter weekend newsflow and a relatively uneventful European session thus far in terms of macro impulses. Desks suggest the recent rise in copper is driven by growing concerns over supply disruptions following the disaster at Codelco’s El Teniente mine, dubbed one of the world’s largest underground copper operations. Little move was seen on reports that China could step up monetary easing efforts in H2 2025 by cutting benchmark interest rates and banks’ RRR in order to guide overall financing costs lower and support the economy, according to Shanghai Securities News. 3M LME copper prices resided in a USD 9,635.10-9,741.00/t range.


• 
  Kazmunaygaz says Kazakhstan exports 85k T of oil to Hungary via Croatia for the first time.


• 
  Nigeria oil regulator says Nigeria's oil production at over 1.8bln bpd; current average oil output hovers around 1.78mln bpd.

TRADE/TARIFFS

• 
  US NEC Director Hassett says data shows tariffs are being borne by foreign producers. On tariffs, says finalising some this week, there will be more after that.


• 
  Swiss government says not considering any countermeasures against the US at this point; ready to make a more attractive offer to the US.


• 
  EU is said to suspend trade countermeasures on the US by six months, according to Bloomberg sources.

EUROPEAN DATA

• Germany's engineering association VDMA said engineering orders -5% Y/Y in June (domestic -5%, foreign -5%); engineering orders -2% Y/Y in April-June (domestic -2%, foreign -1%).


• 
  EU said to be awaiting US President Trump's actions on its car tariffs and exemptions this week, according to Bloomberg.


• 
  EZ Sentix Index (Aug) -3.7 vs. Exp. 8.0 (Prev. 4.5)


• Swiss Manufacturing PMI (Jul) 48.8 vs. Exp. 49.7 (Prev. 49.6)


• Turkish CPI MM (Jul) 2.06% vs. Exp. 2.4% (Prev. 1.37%)

GEOPOLITICS

• A senior official from the International Atomic Energy Agency (IAEA) will visit Iran within the next 10 days, according to Iran International cited by the Iranian Foreign Ministry.


• 
  Russia's Kremlin says "We're not talking about any kind of nuclear escalation"; "obvious that US submarines are already on combat duty anyway". Contacts with Witkoff are always useful and important. US mediation efforts in Ukraine conflict are very important. Putin may meet Trump’s envoy Witkoff this week.


• 
  US Special Envoy Witkoff to visit Russia on Wednesday, according to Reuters citing sources.


• 
  Israel reportedly threatening to expand military offensive in Gaza, according to FT; Israeli government said to be in dialogue with US admin over proposal.


• 
  Israeli PM Netanyahu says will instruct the military this week on how to proceed in Gaza to meet war goals.


• China military confirms it conducted patrols in the South China Sea over August 3-4th.

NOTABLE NORTH AMERICAN NEWS

• 
  US NEC Director Hassett says BLS data have become very unreliable; must get a fresh set of eyes at the BLS; thought labour market revisions last week was a "typo"; adds that large revisions in data require transparent explanations. US Treasury Secretary Bessent is compiling a short list for BLS replacement.


• 
  US President Trump reiterates that last week's jobs numbers were "rigged", with record revisions; says the move was politically motivated; "I will pick an exceptional replacement".

04 Aug 2025 - 15:00- ForexEU Research- Source: Newsquawk