Sample Category Title

Daily Pivots: (S1) 0.8031; (P) 0.8052; (R1) 0.8076; More….

Range trading continues in USD/CHF and intraday bias stays neutral. On the downside, break of 0.7984 will resume the fall from 0.8170 to 0.7910 support first, and then retest of 0.7871 low. However, break of 0.8103 resistance will turn bias to the upside to resume the rebound from 0.7871 through 0.8170.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8475 resistance holds.

Daily Pivots: (S1) 147.91; (P) 148.35; (R1) 148.90; More...

Intraday bias in USD/JPY remains neutral and outlook is unchanged. On the upside, above 149.12 will resume the rebound from 146.20 to retest 150.90 high. Break there will resume the rise from 139.87 to 151.22 fibonacci level. However, on the downside, break of 146.65 support will resume the decline from 150.90 through 146.20 instead.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

The foreign exchange market remains largely range-bound as traders await today’s U.S. non-farm payrolls report. Recent labor indicators, including ISM employment components, point to downside risk for NFP. Both manufacturing and services sub-indexes remain in contractionary territory, while ADP payrolls growth slowed sharply in August. This suggests a soft report is more likely than not.

Besides, the implications for Dollar are asymmetric. A weak payrolls print—particularly a sizeable miss—could spark a sustained wave of Dollar selling as traders price in more aggressive Fed action, including the possibility of back-to-back cuts. By contrast, a stronger report may only limit the pace of easing rather than shift the direction, implying any lift for the dollar would be temporary.

Canada’s employment report is also in focus, with markets watching closely to see if the data justify expectations that BoC could resume rate cuts this month.

On trade, US President Donald Trump signed an executive order Thursday to finalize the July agreement with Japan, imposing a 15% baseline tariff on most Japanese imports, including autos. The confirmation removes a significant uncertainty for the BoJ, which can now reassess the scope for further rate hikes later this year.

Trump also signaled fresh pressure on the tech sector, warning that “fairly substantial” tariffs are coming on semiconductor imports from firms that refuse to relocate production to the U.S. Companies with domestic expansion plans, such as Apple, would be spared.

For the week so far, Dollar remains the best performer. Aussie and Euro follow, while Yen lags as the weakest major. Kiwi and Swiss Franc also underperform, while Sterling and Loonie sit mid-table.

In Asia, Nikkei rose 1.06%. Hong Kong HSI is up 1.29%. China Shanghai SSE is up 1.21%. Singapore Strait Times is up 0.32%. Japan 10-year JGB yield fell -0.03 to 1.575. Overnight, DOW rose 0.77%. S&P 500 rose 0.83%. NASDAQ rose 0.98%. 10-year yield fell -0.035 to 4.176.

Dollar on watch as NFP looms, risks tilt to downside

All attention is on U.S. non-farm payrolls today, with markets bracing for heightened volatility. Consensus expectations point to job growth of 78k in August, an uptick in the unemployment rate to 4.3%, and average hourly earnings at 0.3% mom. Risks appear skewed to the downside for Dollar, with potentially larger reaction if the data disappoints.

While some policymakers, including Chicago Fed President Austan Goolsbee, remain undecided, the broader consensus is that the Fed will cut rates by 25 bps later this month. A slightly stronger-than-expected NFP print could temper expectations for additional easing but is unlikely to derail the September cut.

In fact, a robust report would most likely reduce odds of a follow-up move in October, currently priced at just above 50%. Any Dollar bounce on strong payrolls may prove temporary, as the Fed remains on a path toward lower rates, albeit at a slower pace.

Conversely, a weaker-than-expected report could spark fears that the Fed is already falling behind the curve. In such a scenario, traders may begin to price in the possibility of a 50 bps cut this month—currently given a zero chance—or boost bets on back-to-back cuts in October and December. That would almost certainly trigger renewed dollar selling.

Supporting the downside risk narrative, recent labor indicators have softened. The ISM services employment subindex held at 46.5, while manufacturing employment edged only slightly higher to 43.8. The ADP private payrolls report showed just 54k new jobs in August, down sharply from 106k in July. Initial jobless claims have also trended higher, with the four-week average rising to 231k from 221k.

For EUR/USD, technicals reinforce the potential for Dollar weakness. The pair remains supported by its 55 Day EMA, consolidating between 1.1573 and 1.1741. Break above 1.1741 would pave the way toward 1.1829to resume the larger up trend from 1.0176.

Alternatively, a break below 1.1573 would extend the corrective pattern from 1.1829 with another falling leg back towards 1.1390 support. Uptrend resumption is only delayed in this case.

Fed's Williams sees gradual return to neutral rates, tariffs still a drag

New York Fed President John Williams said Thursday that monetary policy is now “modestly restrictive” and appropriate for current conditions, but signaled that rates may eventually be guided back toward neutral if progress continues on inflation and employment. Speaking at the Economic Club of New York, Williams said he sees scope for gradual adjustments if his baseline forecast holds.

Williams projected GDP growth between 1.25% and 1.50% this year, with the unemployment rate edging up from 4.2% currently to 4.5% next year. He noted the job market has cooled, and it's "clearly the case" that hiring risks are tilted to the downside.

On inflation, Williams said tariffs are clearly pushing prices higher, adding an estimated 1.0% to 1.5% to inflation this year. He forecast PCE inflation to average between 3% and 3.25% in 2025 before falling to 2.5% next year and back to the Fed’s 2% goal in 2027. Speaking to reporters, Williams added that upside risks from tariffs have eased “on the margin,” noting that inflation dynamics remain contained despite ongoing trade disruptions.

Separately, Chicago Fed President Austan Goolsbee struck a more cautious tone, saying he has not yet decided whether a cut is appropriate at the September 16–17 FOMC meeting. he described the gathering as a “live meeting,” adding that Friday’s jobs report and upcoming inflation data will be pivotal to his decision.

Bonuses lift Japan’s real wages to growth, but consumption recovery weak

Japan’s wage data showed a notable improvement in July, with real wages rising 0.5% yoy, the first increase in seven months. Nominal cash earnings jumped 4.1% yoy, far above expectations of 3.0% yoy, marking the 43rd consecutive month of annual gains.

Wage growth was boosted by a 7.9% yoy surge in special earnings, primarily reflecting summer bonuses, alongside a 2.5% yoy rise in base salaries and a 3.3% yoy increase in overtime pay, the strongest since late 2022.

However, inflation continues to erode some of those gains. Consumer prices used to calculate real wages rose 3.6% in July, still well above the BoJ’s 2% target. Food prices, especially rice, remained a major driver.

Also released, household spending increased 1.4% yoy, falling short of forecasts, though seasonally adjusted monthly spending posted a stronger 1.7% mom gain. A Ministry official said the uptick in spending was largely due to higher electricity bills and auto-related costs, while purchases of everyday food items remain subdued. “The recovery in consumer spending is not robust,” the official cautioned.

USD/JPY Daily Outlook

Daily Pivots: (S1) 147.91; (P) 148.35; (R1) 148.90; More...

Intraday bias in USD/JPY remains neutral and outlook is unchanged. On the upside, above 149.12 will resume the rebound from 146.20 to retest 150.90 high. Break there will resume the rise from 139.87 to 151.22 fibonacci level. However, on the downside, break of 146.65 support will resume the decline from 150.90 through 146.20 instead.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

Markets

The US services ISM yesterday for August improved from 50.1 to 52, better than the 51 expected. New orders soared to 56 from 50.3 and prices paid hovered near the highest levels in 2.5 years time. Yet, it’s not what markets are paying attention to since Powell’s dovish pivot at Jackson Hole. The labour market is what moves them. The ISM employment component stabilized near the lowest levels in two years. It also slightly missed estimates, just as did the earlier released private ADP job report (a mere 54k) and the jobless claims (237k). They extended this week’s streak of sub-par labour market-related outcomes, including Tuesday’s employment subseries in the manufacturing ISM and Wednesday’s JOLTS job openings. US yields dropped but with the long end of the curve outperforming. Several factors may have contributed to this, ranging from a further (temporary) easing of fiscally-related risk premia over markets catching up in pricing a growth slowdown to technical elements. The 10-year (-5.6 bps) for example lost support at the July-August summer lows around 4.18% to close at 4.16%. The 2-year tenor forfeited the recent low-points by slipping sub 3.6%. German rates eased between -0.2 and -2.1 bps in a similar bull flattening move. If all of the releases earlier this week are to offer any guidance for the payrolls later today, we’re bound to see further UST outperformance today. The bar of 75k isn’t a particularly high one. So a miss to the downside would be telling. The unemployment rate is expected to creep higher to 4.3%. Payrolls reports nowadays come with the disclaimer of potentially huge revisions though. Either way, a soft report cements the case for an already fully priced in September rate cut and raises bets for consecutive moves at the October and December meeting. There’s currently around 2.5 25 bps cuts for this year discounted. We’re watching the 3.43%-3.5% area seen in the aftermath of Liberation Day serving as the next references in the 2-yr yield. The 10-year maturity finds first support in the 4.1-4.12% region. The dollar should lose ground in response but the limited moves over the past couple of days suggest some resilience, against the likes of the euro at least. EUR/USD yesterday and despite the UST outperformance even finished slightly lower. This could be related to nervousness going into Monday’s confidence vote in France. Unless in case of a material downside payrolls surprise, we assume the July multiyear high at 1.1829 a tough nut to crack today.

News and views

NBP governor Glapinski didn’t completely shut the door for another rate cut at the October policy meeting after the NBP cut its policy rate by 25 bps on Wednesday to 4.75%. During yesterday’s press conference, Glapinski sounded more concerned that the disinflationary process might stall compared to in July with upside risks coming from fiscal policy, economic conditions, the labour market and uncertainty around energy prices. The NBP currently assumes that inflation could rise again above the upper tolerance band (3.5%) around the 2.5% inflation target if the government doesn’t extend its energy price freeze beyond the current end date (end 2025). Should they opt to keep energy prices longer in check, Glapinski expressed a cautious will within the MPC to cut rates again given that they are still high in real terms. The Polish zloty was unmoved by the press conference with EUR/PLN holding within an extremely tight range near 4.25.

Japanese labour cash earnings accelerated from an upwardly revised 3.1% Y/Y in June to a consensus-smashing 4.1% Y/Y in July. Real cash earnings, adjusted for inflation, rose by 0.5% Y/Y (vs -0.6% Y/Y expected and first increase since December 2024). Special cash earnings (summer bonuses) increased by 7.9% Y/Y with base pay climbing by 2.8% Y/Y (from 2.6%). The Bank of Japan’s preferred metric (base salaries for full-time workers in the same-sample) picked up from 2.3% Y/Y to 2.4% with a technical quirk preventing a stronger uptick. Wage date suggest ongoing momentum in Japan which will result in sticky core inflation and keeps the Bank of Japan on track to implement another rate hike this year. Japanese money markets currently discount a 1/3 probability that the BoJ lift s its policy rate from 0.50% to 0.75% at the end of October meeting when the central bank updates its quarterly growth and inflation projections.

Sentiment among US equity investors improved yesterday after the ADP report for August came in weaker than expected, showing only 54K new private job additions versus around 73K expected by analysts, while initial jobless claims also printed a higher-than-expected figure. Separately, the ISM non-manufacturing data hinted at faster-than-expected expansion in services, with softer price pressures but a weakening employment component. Putting the pieces of the US labour data together, the numbers overall point to a weakening jobs market. And that, for those less familiar with financial markets’ logic, boosted appetite for risk assets by fueling dovish Federal Reserve (Fed) expectations and bets for lower rates in the coming months.

As such, the US 2-year yield sank below 3.60% level for the first time since April’s turmoil. The S&P 500 rebounded 0.83% and closed just shy of last week’s all-time high, while the small-cap index jumped 1.26% on the session. The US dollar index remained steady between its 50- and 100-DMAs. The weaker ADP figure also pressured the long end of the curve, sending the US 30-year down to 4.84% this morning. Today, softer-than-expected jobs numbers could weigh further on the US 2-year yield and extend the breather on the long end after weeks of selloff.

So, all eyes are therefore on the official jobs data, and revisions to prior months. Recall that last month’s large revisions already shifted the Fed’s narrative from ‘a healthy jobs market’ to ‘a weakening labour market that requires a policy response.’ That pivot brought forward the possibility of a September rate cut, from no cut previously expected. Investors now look for final confirmation that the weakening trend is entrenched and justifies a Fed cut – or two.

Still, dovish Fed expectations may not slow the selloff in long-dated Treasuries over the medium run. Lower Fed rates today imply higher inflation tomorrow, and the long end must discount that risk. Next week’s inflation data will add more pieces to the puzzle. If tariff-led pressures on input prices start filtering into CPI, long bonds could face renewed selling, as that would imply Fed policy is inflationary. The million-dollar question is how much potential remains above the 5% mark for the 30-year, given that the 20-year breakeven inflation rate is near 2.5%. Beyond inflation and Fed policy, ballooning US debt, rising interest costs and waning foreign appetite for Treasuries could push investors to demand yields well above 5%.

Relief on the US long end echoed globally. The benchmark EU 10-year yield eased, supporting a rebound in the Stoxx 600. Even the problematic French 10-year yield came down and the French-German spread narrowed. Still, with no resolution to France’s political deadlock and the risk that Bayrou’s government collapses by Monday, investors may take risk off the table into the weekend. That would limit EURUSD gains, though the pair’s direction will ultimately depend on the dollar and today’s US jobs numbers. A weak print would revive EURUSD buying, while a stronger print could fuel a USD rebound and keep the pair capped below its 50-DMA.

In Asia, Japanese 20- and 30-year yields also eased, but the Nikkei failed to extend early-session gains despite the bond relief and headlines about a cut in US auto tariffs (to 15% from 27.5%). Toyota briefly tested 3000 before giving back most gains. Appetite faded after data showed nominal wages in Japan rose 4.1%, the highest in seven months, which fuels Bank of Japan (BoJ) hawks and expectations of a rate hike sooner rather than later. The USDJPY remains offered at the 200-DMA, but conviction among yen bulls is still too weak to call a reversal of the post-April uptrend.

In China, the CSI 300 is better bid, though official efforts to prevent a market bubble remind investors that authorities remain close at hand – hardly encouraging.

In commodities, gold consolidates near its all-time high, while US crude failed to hold gains above the $65pb this week as prospects of an OPEC supply increase at Sunday’s meeting encouraged bears to sell into tentative bullish momentum. Geopolitical risks, however, remain elevated, with mounting fears of further Russian attacks on Ukraine. That keeps downside potential in oil limited, likely into the $60–62 range.

In focus today

Today's main data focus will be on the US August Jobs Report. We forecast Nonfarm Payrolls (NFP) growth at +80k (cons: +75k, prior: +73k), average hourly earnings growth at +0.3% m/m SA (prior: +0.3%) and unemployment rate at 4.2% (prior: 4.2%).

In the euro area, we get the third estimate of the national accounts data, which includes many details compared to the previous data. Attention will turn to how domestic demand fared in the second quarter and the labour market. We receive both employment data and wage growth in form of compensation per employee which is the ECB's preferred wage data.

On Sunday, China releases the August PMI's from NBS. Manufacturing PMI disappointed in July with a decline from 49.7 to 49.3 and we look for the index to show a small rise to 49.5 in line with consensus. On Monday, the private PMI is due, with expectations of a slight increase from 49.5 to 49.7. It would confirm a softening of Chinese growth over the summer months, driven by weak domestic demand, which is adding pressure for a step-up in stimulus measures.

Economic and market news

What happened overnight

In Japan, annual real wage growth is back in positive territory, for the first time this year. Real cash earnings increased 0.5% in July compared to -0.8% in June, supported by solid bonuses. This is a good sign for the BoJ in its push for more demand driven inflation, but it is also likely to decline again unless particularly food inflation declines again. Currently about 7 bps worth of hikes is priced for the October meeting, where we expect the next hike.

The US-Japan tariff deal, Trump signed an executive order reducing US tariffs on automobiles and parts from 27.5% to 15%, easing trade tensions. The higher tariffs had dragged down Japan's export, with Toyota alone expecting nearly $10bn in losses. This reduction provides relief to Japan's export heavy economy and lowers trade uncertainty.
What happened yesterday

In Sweden, flash CPI for August came in slightly lower than we expected at 1.1% y/y, while headline CPIF rose to 3.3% from 3.0% y/y, widening the gap to the Riksbank's forecast. The inflation data was mixed, offering no clear conclusions for September. However, the narrowing core inflation gap provides the Riksbank with some confidence that inflation will trend lower. With CPIF still above 3%, we see it as unlikely that the Riksbank will cut rates in September.

The Swedish government confirmed plans to temporarily cut VAT on food in half from 12% to 6%, between 1 April 2026 to 31 December 2027. Assuming full passthrough, this would lower CPI by 0.8p.p. from April 2026.

In the US, the ADP employment report showed an increase of +54k private sector jobs in August, slightly below expectations of +65k. Manufacturing continued to see minor job losses, while the service sector held up better. Leisure & hospitality remained the strongest sector, as has often been the case in recent years. Meanwhile, the Challenger report revealed a modest rise in layoff announcements in August, though still low by historical standards. These figures align with yesterday's JOLTs report, reinforcing the view that the labour market is cooling, but not collapsing.

Also in the US, the ISM services PMI rose to 52.0 in August (cons: 51.0) from 50.1 in July, signalling stronger activity in the non-manufacturing sector. Business activity and new orders both saw significant gains, firmly in expansion territory (above 50). While prices remained steady, the employment index stayed in contraction. Overall, the report highlights resilient growth in the services sector.

In China, onshore stocks declined last night following reports that financial regulators were looking at measures to cool the market. This follows a strong rally, which has raised concerns about the potential formation of a new bubble. Onshore stocks have surged 17% from mid-June to late August, driven by private investors shifting rising deposits into equities.

In Switzerland, August inflation data came in largely as expected, with headline sticking at 0.2% y/y. Core inflation was slightly below expectations at 0.7% y/y (cons: 0.8%), leading the slight jump higher in EUR/CHF. Overall, inflation remains on track with the SNBs forecast, supporting our call that the SNB has concluded its cutting cycle, maintain the policy rate at 0%.

Equities: Equity performance was solid, with the S&P500 hitting new all-time highs. Up 0.8% on the day, the S&P500 ended just above 6500 yesterday. The Nasdaq rose by 1.0%, with cyclical stocks clearly outperforming defensive stocks by 0.6%. Yesterday's price action suggests a goldilocks narrative for risk.

The common catalyst yesterday was not found in the ISM report, which was strong, but rather in what seemingly reflects anticipation of today's labour market report. Markets seems to expect a report that justifies the first of many rate cuts (since last year) from the Fed in two weeks' time. This flow rotation into equities from bonds, particularly into duration-sensitive small caps and tech stocks, which tend to benefit most from potential monetary easing, performed well. This also drove the VIX lower, back down close to 15, with the USD gaining.

FI&FX: The USD rebounded yesterday against the rest of G10 currencies following a strong ISM non-manufacturing release. Ahead of the jobs report today, the market is fully priced for a cut from the Fed in two weeks. The UK market recovered further yesterday, where GBP gained against all G10 currencies except for the USD and UK yields inched lower. SEK reversed cause on the recent strengthening trend with EUR/SEK rising towards 11.05.

All attention is on U.S. non-farm payrolls today, with markets bracing for heightened volatility. Consensus expectations point to job growth of 78k in August, an uptick in the unemployment rate to 4.3%, and average hourly earnings at 0.3% mom. Risks appear skewed to the downside for Dollar, with potentially larger reaction if the data disappoints.

While some policymakers, including Chicago Fed President Austan Goolsbee, remain undecided, the broader consensus is that the Fed will cut rates by 25 bps later this month. A slightly stronger-than-expected NFP print could temper expectations for additional easing but is unlikely to derail the September cut.

In fact, a robust report would most likely reduce odds of a follow-up move in October, currently priced at just above 50%. Any Dollar bounce on strong payrolls may prove temporary, as the Fed remains on a path toward lower rates, albeit at a slower pace.

Conversely, a weaker-than-expected report could spark fears that the Fed is already falling behind the curve. In such a scenario, traders may begin to price in the possibility of a 50 bps cut this month—currently given a zero chance—or boost bets on back-to-back cuts in October and December. That would almost certainly trigger renewed dollar selling.

Supporting the downside risk narrative, recent labor indicators have softened. The ISM services employment subindex held at 46.5, while manufacturing employment edged only slightly higher to 43.8. The ADP private payrolls report showed just 54k new jobs in August, down sharply from 106k in July. Initial jobless claims have also trended higher, with the four-week average rising to 231k from 221k.

For EUR/USD, technicals reinforce the potential for Dollar weakness. The pair remains supported by its 55 Day EMA, consolidating between 1.1573 and 1.1741. Break above 1.1741 would pave the way toward 1.1829to resume the larger up trend from 1.0176.

Alternatively, a break below 1.1573 would extend the corrective pattern from 1.1829 with another falling leg back towards 1.1390 support. Uptrend resumption is only delayed in this case.

Key Highlights

• USD/JPY remained stable and climbed above 148.00.
• A few key supports are forming near 147.80 and 147.50 on the 4-hour chart.
• Gold surged toward $3,575 before it faced some resistance.
• WTI Crude Oil prices trimmed gains and traded below $65.00.

USD/JPY Technical Analysis

The US Dollar started a fresh increase from 146.65 against the Japanese Yen. USD/JPY surpassed the 147.50 and 148.00 resistance levels.

Looking at the 4-hour chart, the pair settled above the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour). The pair even spiked above 148.80 before there was a pullback.

The pair dipped below 148.20 and tested the 50% Fib retracement level of the upward move from the 146.65 swing low to the 149.13 high. However, the bulls were active near 148.00.

USD/JPY is again rising and faces resistance near 148.80. The next key hurdle sits at 149.20. A close above 149.20 could set the pace for another increase. In the stated case, the pair could rise toward 150.00, above which the bulls could aim for a move toward 151.20. Any more upsides could send the pair toward 152.00.

On the downside, immediate support is 148.00. The next key area of interest might be 147.90. Any more losses could send the pair toward the 61.8% Fib retracement level of the upward move from the 146.65 swing low to the 149.13 high at 147.60 and the 100 simple moving average (red, 4-hour).

Looking at Gold, the bulls remain in action as they were able to push the price above the $3,550 resistance zone.

Upcoming Key Economic Events:

• US Unemployment Rate for August 2025 - Forecast 4.3%, versus 4.2% previous.
• US nonfarm payrolls for August 2025 – Forecast 75K, versus 73K previous.

Japan’s wage data showed a notable improvement in July, with real wages rising 0.5% yoy, the first increase in seven months. Nominal cash earnings jumped 4.1% yoy, far above expectations of 3.0% yoy, marking the 43rd consecutive month of annual gains.

Wage growth was boosted by a 7.9% yoy surge in special earnings, primarily reflecting summer bonuses, alongside a 2.5% yoy rise in base salaries and a 3.3% yoy increase in overtime pay, the strongest since late 2022.

However, inflation continues to erode some of those gains. Consumer prices used to calculate real wages rose 3.6% in July, still well above the BoJ’s 2% target. Food prices, especially rice, remained a major driver.

Also released, household spending increased 1.4% yoy, falling short of forecasts, though seasonally adjusted monthly spending posted a stronger 1.7% mom gain. A Ministry official said the uptick in spending was largely due to higher electricity bills and auto-related costs, while purchases of everyday food items remain subdued. “The recovery in consumer spending is not robust,” the official cautioned.

The US economy has continued to evolve well in line with our expectations, and we make only small adjustments to the forecasts. While current tariff levels are slightly higher than we expected in early summer, more front-loaded stimulus from the 'Big Beautiful Bill' and recent easing in financial conditions mitigate downside risks to growth.

We forecast 2025 GDP growth at 1.6% (unchanged) and 2026 at 1.4% (from 1.3%). In quarterly terms, we think majority of the negative tariff impact on growth will be felt over Q3 and Q4 and expect sequential growth to recover towards 2026.

Inflation is also developing in line with our earlier forecasts. While strictly tariff-driven inflation has so far been limited, majority of increased costs will be passed through to consumer prices only towards the fall. We maintain our headline inflation forecast at 2.8% in 2025 (unchanged) and 2026 at 2.6% (unchanged), and our 2025 core inflation forecast at 3.0% in 2025 (unchanged) and 2026 at 2.8% (unchanged).

We still expect the Fed to resume 25bp rate cuts from September and follow up with quarterly reductions until a terminal rate of 3.00-3.25% is reached in September 2026. We see increasing two-sided risks around the policy rate outlook. Elevated inflation expectations, easier financial conditions and more supportive fiscal policies could force the Fed to delay rate cuts further, while political pressure could have the opposite effect.

Full report in PDF.