Currencies Marking Time and Scant Progress Reported on Trade Deal-Making Front – Currency Thoughts
Currencies Marking Time and Scant Progress Reported on Trade Deal-Making Front
July 22, 2025
The clock is winding down to the August 1st imposition of higher U.S. tariffs, and hopes for a slew of last-minute trade deals to modify the planned levy amounts are slipping away. In any case, four potentially important events are lined up ahead of month-end, the first of which is this Thursday’s review of Euroland monetary policy. The ECB Governing Council is widely expected to pause interest rate cuts. The other three hurdles happen a week from tomorrow, July 30: 1) the first estimate of Euroland GDP growth last quarter, 2) the first estimate of U.S. GDP growth in 2Q and 3) the Fed’s interest rate announcement, which like the ECB’s rate decision and in spite of considerable criticism from the Trump Administration is also likely to keep the status quo and preach patience.
In overnight market action, the dollar rose 0.2% against the kiwi and 0.1% versus the yen and Australian dollar, remained unchanged relative to the Canadian dollar and sterling and fell by 0.2% versus the Swiss franc and 0.1% vis-a-vis the euro. Using its Big-Mac purchasing power parity index, the recently-released Economist’s semi-annual report on dollar valuation against a variety of other currencies confirmed a persistent and increasingly overvalued Swiss franc. The euro and sterling are also overvalued to a lesser extent than the franc, while the dollar remains overvalued against a slew of other currencies including the Chinese yuan, Japanese yen and Mexican peso.
Share prices fell this Tuesday by 1.5% in Taiwan, 1.3% in South Korea and 1.0% in New Zealand but rose 0.6% in China and 0.5% in Hong Kong. The German DAX and Paris Cac are showing red so far, and U.S. stock futures are historically high but marginally lower than Monday closing levels. With second quarter corporate earnings exhibiting resilience for the most part, tariphobia has been eliciting diminishing fear on investor sentiment.
Ten-year sovereign debt yields today are up two basis points in the U.K. and down that much in Japan. Net moves in the U.S., Germany, France, Italy and Spain have been even more modest so far today.
Bitcoin‘s price has strengthened 0.9%, while WTI oil is 1.0% softer. Gold is down 0.3%.
The Federal Reserve is hosting a conference today to provide expert perspectives on the key pillars of the regulatory capital framework – including Basel III Endgame, stress testing, the capital surcharge for the largest banks, and leverage requirements. Both Chairman Powell and Board Governor Bowman are slated to speak at the event this morning.
In other central banking developments, minutes from this month’s monetary policy review were published by the Reserve Bank of Australia. Analysts were caught off guard when the Officials Cash Rate was held steady at 3.85% instead of being cut further. It turns out that 3 of 9 policymakers had favored a cut but were overruled by a majority that preferred more clarity on the inflation outlook in the face of rising tariffs. “Members noted that the baseline forecasts already incorporated some deterioration in global economic conditions because of higher tariffs and policy uncertainty, which was consistent with the evidence currently available on how the trade tensions and other factors might be resolved. Moreover, the forecasts had been conditioned on a relatively modest and gradual path of further easing of monetary policy over the period ahead. In light of two 25-basis point cut since February, a pause seemed more consistent with “a relatively modest and gradual” adjustment than doing a third cut this month. In short, policymakers are in full agreement on the direction but not on the timing of further rate changes.
The National Bank of Hungary is reviewing monetary policy today, and officials are expected to leave their base rate again unchanged at 6.5% where such has been since a 25-basis point cut last September.
Producer price inflation in South Korea remained very low at just 0.5% in June, up from May’s 20-month low of 0.3% and far beneath the 10.3% cyclical peak in mid-2022.
Irish wholesale prices posted a fifth straight year-on-year decline in June. The 4.6% drop was its most deflationary in 20 months and considerably more extreme than May’s -1.8% 12-month rate of decline. WPI inflation peaked in Ireland at 13.6% in October 2022.
Malaysian consumer price inflation of 1.1% in June was its lowest in 52 months.
New Zealand’s trade balance swung from a NZD 293 million deficit in the first half of 2024 to a 3.15 billion New Zealand dollar surplus in the first half of this year, but June’s NZD 149 million surplus was smaller than the June 2024 surplus of NZD 585 million.
Belgian consumer sentiment this month held steady at June’s 4-month high.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: RBA minutes, upcoming Fed and ECB monetary policy reviews
ShareThisYou can leave a response, or trackback from your own site.
