Gilt yields jumped after reports the UK government was scrapping plans to raise income tax, casting fresh doubt over how a £30bn gap will be plugged. We expect about half to come from upfront tax hikes, so yields may not climb much further. If we’re wrong, blame the politic
Chinese GDP slowed by less than expected in the third quarter amid the boost from external demand. With China on track to hit this year's growth target, we could see less policy urgency. But weak confidence translating to soft consumption, investment, and a worsening property price downturn still need to be addressed
German 30-year yields are on the rise, with the curve hinting at more to come. German fiscal plans and Dutch pension fund reform are factors in play. The US is in a similar mode, with fiscal and CPI data followed by upward pressure on long yields
Inflation in the Netherlands continued its downward trajectory in July, dropping to 2.5% year-on-year from 2.8% in June. A sustained return to the 2% target is not in sight yet, however, as service inflation remains quite stubborn
The UK jobs market is undoubtedly cooling, though a more modest fall in payroll employment suggests that the worst may be behind us, following big tax and Living Wage hikes. Better news on wage growth suggests the Bank can still afford to cut rates in November, though after last week's hawkish meeting, this call has become less clear-cut
Moment of clarity
– Risk assets rallied in July as trade uncertainty eased, despite a continued rise in the effective tariff rate.
– With policy uncertainty fading, market attention is shifting to economic data. Friday’s employment report underscores that the economic consequences of recent policy shifts are only now becoming visible.
Norway’s central bank surprised with a cut in June. However, we are much more confident that it will keep rates on hold at this week’s meeting, following a rebound in inflation and a significant weakening of the krone. We believe EUR/NOK is approaching an inflection point and anticipate NOK strengthening into year-end
The week starts with gains in most Asian indices, and futures are in the positive in the early hours of the trading week. The S&P 500 posted its strongest week since late June on the back of robust earnings, further appetite for technology stocks, and hopes of progress in the Ukrainian war.
Today's huge turn in the US stocks have sent another round of confusion in the daily cross-asset picture.
European equity markets gained recently on hopes that Donald Trump might broker a meeting between Vladimir Putin and Volodymyr Zelensky. However, Putin has not yet agreed to dialogue with Kyiv. Regardless, US crude is below a key support level (and falling) this morning on rising hope of progress – a move that could rapidly reverse as Russia looks much less enthusiastic to end the Ukrainian war then Trump is.
The Philippines' GDP growth picked up in the second quarter compared to the first, largely driven by a surge in goods exports ahead of tariffs being implemented. We don't believe that the relative strength in today’s data will deter the central bank from cutting rates in August, as CPI inflation remains firmly below the inflation targe
The incoming industrial and retail data for June did not alter the overall picture of the recent dichotomy in trends. Industrial production continues to decline, while retail sales are rising. We do not expect these trends to change significantly for the remainder of the year
'Tariff' may be the most beautiful word in Donald Trump's dictionary. And while tariffs will continue to dominate headlines for the rest of the year, let me introduce my economic term of the summer: Power Play
Industrial production in Italy has likely reached a bottom, edging up slightly in June. However, a clear recovery is not imminent. It might come when the German infrastructure investment plan is implemented
Industrial production continued to expand in June, although new orders fell short of expectations, particularly given the decline in foreign orders. Meanwhile, the construction upturn is likely to continue, driving the Czech recovery and bolstering household budgets. Wage growth picked up in both manufacturing and construction
Retail sales increased by 0.3% in June, with the year-on-year growth pace accelerating from 1.9% to 3.1%. This suggests that household consumption is likely to underpin growth in the second half of the year
While the Reserve Bank of India held rates steady, it significantly lowered its inflation outlook. The combination of softer inflation and emerging downside risks to growth suggests there is still room for further rate cuts - particularly if monetary policy transmission improves. Meanwhile, a stable rate differential should be supportive of the rupee
President Trump hinted that Kevin Warsh, Kevin Hassett and two others are leading the race for the next Fed Chair and might be announced soon after Governor Adriana Kugler’s early exit. We think the dollar would welcome Warsh, but would get hit by Hassett’s nomination. We retain a short-term USD bearish bias as FX has room to catch up with Fed pricing swings.
The oil market is awaiting greater clarity on the potential for secondary tariffs on buyers of Russian oil, with President Trump’s deadline for a Russia-Ukraine peace deal scheduled for Friday
Equity markets rebounded after Friday’s falls as investors looked to ‘buy the dip.’ Tech stocks led the market higher. The rally in globally treasuries was extended which also supported stock valuations.
We are upgrading W to Buy. We had downgraded to Neutral after initial tariff announcements and missed real upside, but still upgrade to Buy as the tariff macro has been less of an impact than expected, execution has continued (we never doubted this), and Wayfair has demonstrated that it’s very well positioned to capture share amidst market disruption.
GS Basics - Moving On. ISM Services. Systematic Length FICC and Equities | 5 August 2025 | 6:18AM UTC Overnight, Japan futures were unchanged. The JGB auction was a bit underwhelming, but fixed income remains well-supported, likely a reflection of last week’s softer U.S. data.
Consumer prices maintain solid growth, with persistent core inflation outweighed by softer food price dynamics. Both headline and core inflation may hover close to the 3% upper bound of the tolerance band around year-end, which should foster a hawkish stance by the Czech National Bank. Pro-inflationary scenarios take the stage for now
One could be forgiven for thinking that President Trump has now turned his attention to disassembling the BRICS political grouping. India, Russia and Brazil are squarely in focus currently. And benign market conditions in August clearly rely on no deterioration in the current US-China detente. Away from geopolitics, the focus today is on US ISM services
With South Korean consumer inflation near 2% and GDP projected to rise, the Bank of Korea is likely to wait for clearer signs of housing market stability before easing. We still prefer an October rate cut over August.
As discussed in the USD section, new 'reciprocal' tariffs are having little market impact. Canada deserves special attention in our view, though, especially after Mexico secured another pause extension yesterday.
An increase in Japanese exports in the first half of 2025 isn’t shielding profit margins from tariff pain. Exports spiked in the first quarter amid front-loading, but it led to a significant technical correction in the second quarter. Cutting prices might have helped absorb some tariff impacts, but it’s sacrificing profit margins
The main events of the week will be key data reports from China, Japan, South Korea and Taiwan as economists try to assess trade-war effects across Asia. Also, we expect the Reserve Bank of India to hold interest rates steady
If the FX options market is any guide, and once this week's big event risks are out of the way, investors are pricing a quiet August for markets. Low levels of volatility inevitably draw focus to the carry trade – a very popular strategy over recent months. Here, we back test strategies and evaluate the risks and opportunities in the EMFX space
Headline inflation remained unchanged at 2% year-on-year. Looking ahead, German and eurozone inflation are likely to fulfil the ECB's old target of 'below but close to 2%'
The slowdown in energy prices was offset by rising costs in food and certain services, leaving headline inflation unchanged. Given the current subdued economic environment, we expect inflation to hover around current levels, with a temporary deceleration likely
Headline inflation fell to 3.1% year-on-year in July from 4.1% in June, yet this was higher than our forecast and market expectations. We don't think this will derail the rate-cut train as disinflation remains on track. We think the National Bank of Poland will continue monetary easing and deliver a rate cut at the next meeting in September
The unemployment rate remained stable at 6.2% in May, with the number of unemployed people trending down by 62,000 people. Even though economic growth slowed again in the second quarter and uncertainty remained high, the labour market continued to show resilience
Despite two dissenting votes, the Fed delivered a broadly hawkish hold, with Chair Powell remaining firm on his inflation call and forcing markets to trim September cut bets. The dollar’s rally may have a bit more to run as today’s core PCE figures may come in above consensus and tomorrow’s jobs figures prove good enough to endorse the Fed’s prolonged pause
China's official manufacturing purchasing managers’ index slowed to a three-month low of 49.3, as new orders swung back into contraction
Consensus expects zero GDP growth from the eurozone in the second quarter, but the outlook remains positive, supporting our bearish take on rates. The Fed will most likely hold today, which could intensify Trump's campaign against Powell. This would feed the bearish narrative on longer-dated USTs. We still see the Fed cutting by the end of this year
The Canadian dollar has dropped less than other G10 currencies during this round of USD appreciation. For the moment, domestic factors aren’t playing much of a role, and markets remain quite conservative on Bank of Canada rate cuts, pricing in only 15bp by year-end.
The Commodities Feed: Oil rallies as Trump confirms new deadline for Russia. Oil prices extended their rally yesterday as President Trump confirmed that he will give Russia 10 days to reach a truce with Ukraine
The biggest takeaway from yesterday's sell-off in the euro was that some of this year's highest conviction trades were becoming a little stale. EUR/USD has already had a decent correction even before this week's negative event risks. Expect investors to remain cautious. For today, we'll be focusing on US JOLTS data and some European GDP dataa
US tariffs have had a serious adverse effect on overall South Korean exports, an examination of data indicates. Goods subject to sectoral tariffs showed notable declines. In addition, the heavy reliance on exports to both the US and China further complicates challenges for Korean exporters going forward
Dutch pension reforms are underway, adding to the upward pressure on longer-dated euro rates. The eventual flows are hard to estimate, but the DV01 impact from unwinding interest rate hedges could be €500m. We may also see a broader rebalancing of the fixed income portfolio, whereby government bonds will be reduced. But delays are still a risk
A trade deal between the US and EU proved positive for sentiment this morning in the oil market. However, attention will likely turn to OPEC+ output policy from September
Japanese government efforts to moderate inflation are working, though underlying Tokyo price pressures remain elevated. Even so, the Bank of Japan is expected to stand pat next week. Its quarterly outlook report will be closely watched
Shifts in demographics and labour force participation were key drivers behind the decline in employment in the second quarter of 2025. With labour demand softening alongside supply, a near-term recovery seems unlikel
April's hike in UK payroll taxes and the National Living Wage are squeezing hiring but keeping pressure on inflation. We think the former is a bigger concern than the latter, but for now the bar for faster Bank of England rate cuts appears high. We expect cuts in August and November
The composite PMI increased from 50.6 to 51 in July. With uncertainty all around, an economy showing slight growth, increasing employment and weak inflation sounds surprisingly benign
It has been the second day where North Americans see no particular market-moving data after last week's key releases, but this hasn't stopped the session from being volatile.
South Korea’s real GDP rebounded 0.6% in the second quarter, after shrinking in the January-March period, led by consumption and exports. Consumption is expected to take the lead as main growth driver in the second half thanks to supportive macro policies. Yet the timing of a Bank of Korea rate cut depends on housing prices and a trade deal
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We expect a hold by the ECB on Thursday, but there are risks of a modest dovish tilt given tariff uncertainty and the euro’s recent strength. Ultimately, Fed decisions will drive EUR/USD more than the ECB’s, but signs of discontent with levels above 1.20 can cap the euro’s short-term gains. Expect rates to be particularly sensitive to trade comments
Real retail sales fell short of our and market expectations, but the overall picture for private consumption is still stronger than observed in Q1. Economic growth improved despite soft external demand due to domestic factors. We estimate 2Q25 GDP growth at 3.5% vs. 3.2% posted in the previous quarter, and see the Polish economy rising by 3.5% in 2025
Oil prices showed little reaction to the EU’s latest sanction package against Russia. However, it could lead to further tightening in the European middle distillates market
June’s wage growth surprised to the upside, and readings from both industry and construction brought few signs of any further acceleration for economic growth. Wage increases were mainly due to one-off payments in the mining and energy sectors, and shouldn't prevent further rate cuts over the coming quarters as inflation sees a substantial moderation
This Sunday's Upper House elections in Japan are weighing on Japan's government bonds and the yen. Fears of political uncertainty, looser fiscal policy and also the effects of earlier BoJ policy normalisation have all contributed to JGB weakness. Here, we look at what's at stake and how markets might react
Passing the new budget through the French parliament may prove difficult and generate more rates volatility. EGB spreads look tight given defence spending ambitions. US Treasuries yields decide to test the upside, and for good reason we think
Brazil has opened a 3.5% buffer, which can expand to 5% should the Fed cut. That paves the way for 200bp of cuts, but that can be under or over shot depending on how the fiscal deficit is dealt with. Mexico can cut without the Fed, but by no more than 50bp. But that's a stretch as spreads are tight; far better for the cuts to happen under the cover of Fed cuts
Since early 2023, countries in Southern Europe have seen strong declines in unemployment, while those in the north have seen increases. This is helping eurozone convergence, adding to tighter government bond spreads in the eurozone, and is ultimately making life easier for the European Central Bank
Industrial producer prices extended the series of declines by another month in June, coming in below expectations. That said, consumer goods prices in the industrial segment accelerated, while animal production pricing in agriculture remained robust
Romania has launched a bold fiscal overhaul to fix its record deficit by raising taxes and curbing spending. The short-term hit to growth and inflation will be significant, but the plan could also restore stability, unlock EU funds, and rebuild investor trust
In May, real wage growth reached its historical average, which appears weak compared to the double-digit increases seen in previous years. This could potentially harm households' perception of their financial situation and, as a result, diminish consumer confidence
External demand continues to support Chinese economic growth, as the first-half trade surplus surged to a new high of $586bn amid resilient export growth and a year-on-year contraction of imports. While tariffs continue to drag on exports to the US, June data showed a smaller contraction after the tariff de-escalation in May
The outlook for the chemicals sector in the Netherlands remains bleak. American import tariffs have impacted a sizeable portion of production, while structural issues such as global overcapacity and declining competitiveness continue to constrain its growth potential
Industrial data from May suggests that there is more to German industry than just US front-loading. It's too early to give the all-clear, but signs of at least a cyclical rebound, albeit from low levels, are increasing
The -0.7% month-on-month decline in retail sales coincided with a -0.3% decline in overall services activity in April. While surveys had previously indicated potential weakness in eurozone services for the second quarter, this concrete data confirms our expectations that GDP growth between April and June may have been negative
May retail sales data was disappointing. Most sectors saw significant monthly declines, clearly showing that the strong increase in the previous month was a one-off
The dollar benefited from the resulting backup in short-term rates and managed to end near the middle of the G10 performance table for the week. The price action suggests to us that current levels price in a lot of bad news for the US dollar, which has had the worst first half of the year since Nixon took the currency off the gold standard in 1973.
The President of the National Bank of Poland first called yesterday's cut as an adjustment of rates, not the beginning of a cycle of cuts. Finally, he signalled a September cut with the target rate seen in the range of 3-3.5%. We see a 50 basis point cut in September and a target rate of 3.5% in 2026
In spite of a better-than-expected US June jobs report and a 10/12bp jump in short-dated US interest rates, the dollar is barely changed from its soft levels seen this time yesterday. Seemingly, the threat of more tariff-induced FX volatility next week is keeping the outlook fragile. Elsewhere, we think the Polish zloty stays soft on a dovish central bank
The Big Beautiful Bill passed in US Congress, putting even more pressure on the fiscal outlook and thus longer-dated USTs. US payrolls came in better than expected, contributing to higher yields across the curve. The ECB minutes show more members are concerned about undershooting inflation, keeping the 1.75% market-implied landing zone firmly intact
Industrial data for May shows that the positive trends observed in April were a one-off. Furthermore, the number of companies retaining labour is gradually decreasing due to falling demand. The outlook is gloomy, with no sign of a sudden turnaround
US President Donald Trump’s 90-day trade reprieve is ending. Tariff noise is back, but does it really matter? US inflation has stayed surprisingly benign and the economy is holding up, despite the rollercoaster so far. But expect that to change, writes James Smith, as he and the team tackle another big week in the world of macro and markets
Payrolls day remains the most important one for markets. Even going into most pivotal Fed meetings we typically know what's going to happen. For payrolls, we think we know. And even if we did, the print itself can have a perverse effect. The big fear is we get a really bad one sometime soon. Feeling bullish? Fair. But, weak payrolls also means a higher deficit
Czech PMI flips into expansion zone. The manufacturing PMI entered expansion territory in June, coming in stronger than market participants had expected. This is a welcome change, as the index had remained below the neutral threshold for three consecutive years. We see potential implications for rate-setters if the rebound gains pace and proves sustainable, as the economy picks up speed
Asia's manufacturing PMI improves, but trade risks are looming. Manufacturing PMI improved for Asia in June, reflecting a slightly positive business sentiment and helped by a massive reduction in tariffs on China in May. However, looking ahead, we expect Asia export growth to slow, resulting in softer manufacturing and overall GDP growth
US manufacturing continues to struggle, amidst signs of jobs resilience. The ISM manufacturing index remains in contraction territory, but the job vacancy statistics are holding up fairly well and inflation pressures remain elevated. Fed Chair Powell, speaking in Portugal, continues to suggest the committee remains in wait-and-see mode, implying little prospect of a July rate cut
Eurozone unemployment rate edges up in May, but remains at historic low. The unemployment rate increased from 6.2% to 6.3% in May. This increase was mainly driven by a jump in unemployment in Italy, but overall, the labour market remains strong with significant shortages across the eurozone
Is this wishful thinking or a fundamental change? Germany's most prominent leading indicator increased for the sixth consecutive month on hopes that fiscal stimulus will boost growth
Increased defence spending by European countries will hit households hard. We're not overly convinced by the positive effects on GDP growth. But if Europe works more closely together, member states could significantly mitigate the downside. It's another challenge for NATO members, currently meeting in the Hague
Retail sales of goods at constant prices increased by 4.4% year-on-year in May (ING: 5.2%; consensus: 4.3%), following an impressive April (partly due to calendar effects), when retail sales growth reached 7.6% YoY, the highest in nearly three years.
May's national economic data has fallen short of consensus expectations. The anticipated recovery remains elusive, although the available data does not include the performance in services and SMEs. The data supports further rate cuts by the National Bank of Poland, but the Middle East conflict complicates July's monetary policy easing
Bank Indonesia (BI) held its policy rate at 5.5%, citing global economic conditions and Indonesian rupiah stability. Despite tariff uncertainties and geopolitical tensions, BI hinted at rate cuts later this year to boost growth
Risk has calmed and Treasury yields are edging higher again, as we head close to a big Wednesday (FOMC, TIC data and 20yr auction). In the eurozone, the 10y EUR swap rate remains confined to its 2.4% to 2.6% range as the Israel/Iran conflict only adds to a long list of uncertainties while at the front-end energy price risks keep the ECB on edge
The Bank of Japan kept its policy rate at 0.5%, reducing Japanese Government Bond purchases from 400bn yen to 200bn yen starting in April 2026. Governor Kazuo Ueda is cautious about US tariffs and their negative impact on investment and wages, while expressing no immediate concerns about inflation. We no longer expect a hike in the third quarter
Czech industrial producer prices continued to decline on both an annual and monthly basis in May, keeping the outlook for industry rather calm. Meanwhile, pricing in the construction and service sectors has become more potent, which will keep consumer inflation above the central bank's target
UK GDP fell faster than expected in April, but these figures have been volatile lately owing to tariff frontloading, coupled with some possible issues with seasonal adjustment. After a strong first quarter, a weaker jobs market and economic uncertainty point to more muted growth rates for the remainder of this year
Despite legal challenges to IEEPA tariffs, US trade policy remains firm. Tariffs on steel and aluminium have doubled, and new sectoral tariffs are expected. Trade deals may emerge, but most will be symbolic. Effective tariff rates will stay high throughout 2025
Dollar consolidates weekly gains, NOK and CAD buck trend in G10, AUD and JPY underperform. RUB and BRL excel in EM, intervention lifts TRY from record lows. 2y UST steady at 3.96%, 10y UST on 200dma (4.23%), US HY credit tightens to 314bp. Oil prices bid after US tightens sanctions on Iran, OPEC+ plans new supply cut to compensate for overproduction.
National Bank of Hungary Review: A hawkish swan song. The National Bank of Hungary kept interest rates on hold in February for the fifth consecutive month. This comes as little surprise given the overriding pro-inflationary risk, which has been well-flagged by the monetary council. Forward guidance points to a stable policy rate ahead
Sustainable Finance: Paint it Green. Green is the colour! We expect sustainable finance issuance to grow in 2025, with fast-approaching interim decarbonisation targets and continuous standardisation driving global growth. This is despite headwinds from the changing political landscape.
We believe interest rates will remain unchanged at the next Monetary Council meeting, the final one under Governor György Matolcsy. This time, macroeconomic factors will play a key role in the decision-making process due to the deteriorating inflation outlook
Governments on both sides of the Atlantic are turning on the taps when it comes to fiscal stimulus. But will that really propel growth and interest rates higher, like we saw after the Covid pandemic? James Smith isn’t so convinced. Buckle up as our team guides you through another big week for marke
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