Central Banks and Preliminary July Purchasing Manager Surveys Share the Spotlight Today – Currency Thoughts

Central Banks and Preliminary July Purchasing Manager Surveys Share the Spotlight Today

July 24, 2025

U.S. President Trump and his entourage will tour the controversial Federal Reserve Board renovation site in Washington today in a confrontation sure to deliver a further blow to America’s claim to keeping monetary policy free from political interference.

Announced central bank decisions by the European Central Bank, Central Bank of Ukraine and Central bank of Turkey respectively left the ECB deposit and refinancing rates unchanged at 2.0% and 2.15%, retained a double-digit policy rate of 15.5% in war-torn Ukraine, and reduced Turkey’s key interest rate by a greater-than-anticipated 300 basis points from 46% to 43%.

• Over the eight scheduled policy reviews between June 2024 and June 2025, the ECB refinancing rate had been reduced from 4.50% to 2.15%, and the deposit rate was halved to 2.0%, its lowest level since late 2022. Reduction were made at each of those meetings, but at today’s Governing Council meeting as was expected by market participants, officials agreed to pause the sequence. A released statement says that information since early June’s meeting had aligned with the committee’s expectations and notes that “the economy has so far proven resilient overall in a challenging global environment. At the same time, the environment remains exceptionally uncertain, especially because of trade disputes.” Analysts expect another cuts this year and quite plausibly as soon as September.
• The 15.5% central bank policy rate in Ukraine after three increases totaling 250 basis points between December and March that returned the rate to its greatest elevation since late 2023, although below the wartime peak of 25% from June 2022 until July 2023. The initial dose of extreme monetary restraint had cratered domestic inflation to 3.2% in April 2023, but such subsequently swelled to what central bank officials believe will be the peak of 15.9% in May 2025. June saw a drop to 14.3%, and officials project a further inflation decline to 6.6% next year and the 5.0% medium-term target during 2027. Ukraine is dealing with unusually high uncertainty. According to the bank’s statement released today, “the NBU sees no need to raise the key policy rate further. However, given the slower-than-expected decline in inflation and the balance of risks to price developments, the NBU currently sees no room for easing its interest rate policy either.”
• Today’s three percentage point cut in the Central Bank of Turkey‘s interest rate to 43.0% exceeded analyst expectations somewhat and almost reversed the entire 350-basis point hike done in April. Turkish CPI inflation of 35% last month was at a 43-month low and eight percentage points below the new central bank rate level. Officials felt comfortable making such a large reduction because the real interest rate level remains quite positive, and “recent data indicate that the disinflationary impact of demand conditions has strengthened.” But the statement warns that July inflation might tick higher and assures that “potential effects of the geopolitical developments and the rising trade protectionism on the disinflation process are closely monitored.” Turkey’s erratic monetary policy in recent years is often cited by analysts worried about Trump’s relentless pot shots at Federal Reserve policy at what can happen when central bank independence gets compromised.

Almost 90 minutes before the opening bell on the NY stock exchange, U.S. stock futures were trading slightly below yesterday’s robust closing levels. The U.S. and EU trade negotiators were reportedly making progress toward a deal similar to the one with Japan. The Japanese Nikkei had closed 1.6% higher, and share prices had closed up in China, Hong Kong, Singapore, and Indonesia. Ten-year sovereign debt yields had risen overnight by four basis points in France, Italy and Spain and by three basis points in the United States, Japan and Germany. The dollar was up 0.3% against sterling and 0.2% versus the euro and Swiss franc but down a bit relative to the Australian and New Zealand dollars. Gold‘s price was 0.9% weaker, while oil strengthened around 0.9%. Bitcoin was unchanged.

Thursday’s overnight data menu featured preliminary purchasing manager survey results from July.

• Japan’s composite PMI matched June’s 11-month high of 51.5, as faster service sector growth offset a return of the manufacturing index to sub-50 territory that implies renewed contraction. Inflation and business optimism softened.
• India’s composite PMI dipped marginally but, at 60.7, remained near June’s 14-month high. Inflation picked up.
• Australia’s composite PMI of 53.6 constitutes a 39-month high. Both manufacturing and services had readings above 50 and above those in June.
• Euroland’s composite index rose to an 11-month high of 51.0. The manufacturing subindex was again below the 50 threshold but to the smallest degree in three years. Price developments were favorable, supporting hopes that the ECB’s pause may be short-lived as growth now seems a bigger long-term risk than inflation.
• Within the euro area, the early-bird composite PMIsof Germany printed at a 2-month low of 50.3, while France’s reading of 49.6 represents an 11-month high.
• Britain’s composite PMI fell a full point to a 2-month low of 51.0, reflecting adverse economic and political news.

Among other non-U.S. economic indicators reported overnight, Spanish producer price inflation accelerated to 0.8% in June, and Finnish PPI inflation stayed negative at -1.8% in the same month. Icelandic consumer price inflation dipped to a 2-month low of 4.0%.

German consumer confidence, at 4-month low of -21.5 in late July as been hovering narrowly at a weak latitude all year.

South Korean data reports were mixed, with GDP rising 0.6% last quarter, which slightly exceeded expectations but resulted in year-on-year growth of just 0.5%, down from 2.3% in the second quarter of 2024. Meanwhile, business sentiment fell to an 8-month low.

French business sentiment printed at 96.0 in both July and June, stable but a gloomy 4% below its long-term average. The retail sub-index slid to a 6-month low, while services and manufacturing were stable. Employment faltered a bit.

A 7.3% on-year drop in car sales in the European Union in June was greater than the average decline of 1.9% in the first half of 2025.

The U.S. data reported this morning included fewer-than-forecast new jobless insurance claims last week of 217k, which also was below its 4-week average; a third straight negative reading in the Chicago Fed National Activity index, which at -1.0 was not as much in the red as the April and May scores; and evidence of a widening gap between the U.S. manufacturing and service sector performances. The S&P Global-compiled U.S. manufacturing purchasing managers index dropped 2.5 points to a lower-than-forecast 49.5, weakest in 7 months. The companion services PMI, however, rose to a 7-month high of 55.2, lifting the composite index to a 7-month high as well of 54.0.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Central Bank of Turkey, Central Bank of Ukraine, European Central Bank, French business sentiment, German consumer confidence, July preliminary purchasing managers surveys

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on Thursday, July 24th, 2025 at 7:00 am and is filed under New Overnight Developments Abroad – Daily Update.
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