Many Data Releases and Central Bank Interest Rate Announcements – Currency Thoughts
Many Data Releases and Central Bank Interest Rate Announcements
August 7, 2025
Reciprocal tariffs became effective today. The scale of their increase is profound, and reactions in America to the new tax are extremely polarized and aligned with political affiliations. For Trump supporters, today is a great day, heralding a large new source of fiscal revenue and a rebirth of the country’s manufacturing sector. For political opponents, steep tariff hikes arrive at a delicate point in the business cycle, create fresh upside risks to inflation and future supply chain shortages.
Stock markets performed better today in Asia and Europe than they are doing so far in the United States where the DOW and Russell 2000 are each in the red and only the SPX shows more than a trivial rise. Share prices closed up 2.4% in Taiwan, 0.7% in Hong Kong and Singapore and 0.9% in South Korea. The four largest Euroland stock markets currently show an average gain of 0.9%.
The dollar has risen slightly against many currencies today, but a 0.4% drop relative to sterling has been a notable exception.
Ten-year sovereign debt yields have dipped three basis points in Spain, two bps in Italy and a basis point in Germany, Japan and France. The 10-year U.S. Treasury yield is steady, while the 10-year Gilt yield rose two basis points after the Bank of England again cut its interest rate but by the thinnest of voting margins.
Bitcoin got a large lift from news that President Trump plans an executive order to allow investments in crypto to be included in 401-K retirement accounts. Gold’s price has risen 0.4%, while oil is 0.2% softer.
A fresh sign of distress in the U.S. economy where GDP expanded at less than a 1.5% annualized rate during the first half of this year came from a weekly Labor Department report on jobless insurance claims. New claims rose by a larger-than-predicted 7k to 226k, which is still comparatively low from an historical perspective. The real concern involved continuing claims, which at nearly 2 million have climbed to a 45-month high.
On-year growth in U.S. unit labor costs accelerated last quarter to 2.6%. Productivity advanced 1.3% between 2Q 2024 and 2Q 2025, down from a 2.8% on average in calendar 2024 and 1.8% in 2023.
Central bank interest rates were left unchanged as expected after policy reviews in Serbia and the Czech Republic. The National Bank of Serbia’s rate, which peaked at 6.5% from July 2023 until May 2024, has been at 5.75% since a 25-basis point reduction earlier this year in February. Serbian CPI inflation of 4.6% at midyear was hovering around the top of the central bank’s target of 1.5-4.5%. The Czech National Bank’s two-week repo rate crested at 7.0% from June 2022 to December 2023 and has more recently been half that high at 3.5% since a 25-basis point cut this past May. CPI inflation in the Czech Republic of 2.7% last month wasn’t far below the top of the inflation target range of 1-3%, and tariff tensions create a fresh inflationary risk.
On the Bank of England’s Monetary Policy Committee, officials are grappling with a recent reacceleration of inflation but also sluggish growth and higher unemployment. The Committee initially split 4-4-1 with a four-person minority including the bank’s chief economist favoring no change in the former 4.25% Bank Rate, matched against a group of four votes including Governor Bailey’s in favor of a 25-basis point cut to 4.0%. There was also one committee member, Taylor, who voted initially to cut the rate more steeply to 3.75%. An unprecedented second vote in search of a majority consensus split 5-4 in favor of reducing the interest rate by 25 basis points to 4.0%, its lowest level since August 2023. This is the fifth such cut so far, each being aligned with quarterly publications of the Monetary Policy Report. Today’s statement asserts, “the timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease. Monetary policy is not on a pre-set path.”
The National Bank of Moldova’s key interest rate was also reduced by 25 basis points today and becomes 6.25%. That’s still well above the 3.6% level maintained from March 2024 until a 200-bp hike this past January and followed by a 90-basis point increase in February. CPI inflation still remains fairly elevated in Moldova at 8.2% versus the central bank’s long-term objective of 5.0%.
Today’s menu of inflation data reports included
- Estonian consumer prices, which posted a 2-year high year-on-year advance of 5.4% in July.
- Mexican consumer prices, which recorded a 65-month low 3.51% 12-month rate of increase.
- Brazilian producer price inflation of 3.24% as of June constitutes a 13-month low.
- A 0.9% 12-month decrease in Cypriot consumer prices was its most negative pace in 53 months.
- And Swedish consumer price inflation of 0.8% last month was at a 5-month high.
China’s trade surplus narrowed from $115 billion in June to a 7-month low of $98.2 billion last month. The year-to-date surplus of $684 billion exceeds its year-earlier total by 31%.
Germany’s seasonally adjusted trade surplus shrunk in June to an 8-month low of EUR 14.9 billion, having averaged EUR 17.9 billion over the first five months of the year. Separately, German industrial production plunged 1.9% on month and by 3.6% on year in June. Analysts were expecting a drop but not nearly so pronounced given declines also in April and May.
The French current account deficit in the first half of 2025 of EUR 17.58 billion contrasted sharply with a EUR 944 million surplus a year earlier.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England, Czech National Bank, German industrial production, National Bank of Moldova, National Bank of Serbia, U.S. jobless insurance claims and productivity
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