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Markets

From economic data to the Fed over to trade and some back and fourth switching in between: this is a week that’s keeping markets on edge. The economic calendar yesterday offered no more than some second tier eco data, resulting in relatively small market moves. Core bond yields changed less than 2-3 bps across the curve en both the dollar and euro kept each other balanced around but north of 1.14. JPY underperformed. It wasn’t until after the market close that we were treated with some actual news though. Going into the August 1 deadline, a White House document released a slew of unilateral tariffs announcements. President Trump kept a 10% minimum reciprocal tariff rate globally. Many countries faced higher rates though, including New Zealand (15%), Taiwan (20%), South Africa (30%) and Thailand and Cambodia (both 19%). Switzerland is looking at a whopping 39% and Trump raised the tariff for Canada to 35% from 25%. Goods traded under the rules of the US-Mexico-Canada trade agreement (covering the vast majority of US-Canadian trade) are exempted tough. With the announcement, there’s at least some kind of clarity: worst case scenario’s were largely avoided and there’s a clear starting point. Countries that haven’t struck a deal yet can now try to bring their rates down through negotiations. Uncertainty is not at all gone though with sectoral tariffs still a pending matter. Talks with China are also ongoing and likely to be extended beyond the August 12 deadline. But all things considered, the Asian market response could have been worse. SK stands out (cfr. infra) but most other indices cap losses to less than 1% with some even trading in the green. European futures do suggest further losses after yesterday’s -1.3% drop, also catching up with a late-session swoon on WS. The euro holds a tiny upper hand over the dollar while CHF along with NZD is lagging.

And from trade it’s back to the data again. US July payrolls are closely watched today to check whether they vindicate the Fed’s cautious stance. Yesterday’s June PCE price deflators already did so. The bar is set at a relatively low 104k for employment growth and at 4.2%, up from 4.1% in June, for the unemployment rate. A beat would further reduce Fed easing bets, in particular for September although we don’t expect markets to fully let go on the idea. Front-end underperformance of the US yield curve may trigger further dollar strength even as we’re now seeing some signs of bottoming out in EUR/USD. Technically, next meaningful support in EUR/USD only pops up at 1.1214/1.1184 but going this far would require a massive upside payrolls surprise and could also be prevented by intermediate support at the 2023 high of 1.1276.

News & Views

Germany’s finance minister Klingbeil warned that the country is facing a budget gap of as much as €170bn by 2029, posing what he calls a “massive challenge”. Germany lifted the constitutional debt brake (capping German deficits at 0.35% of GDP) but this only applied for defence spending. Other areas of the federal budget are still subjected to it, meaning Germany is now forced to either hike taxes (already ruled out by the government coalition) or cut spending across ministries and reform the welfare system. One potential windfall could come from growth though. Germany has pencilled in conservative growth forecasts of 0% this year and 1% annually between 2026-2029. Stronger than expected growth could help close the shortfall.

South Korean stock markets hugely underperform regional peers this morning. It follows government plans to hike the capital gains tax by lowering the threshold to KRW 1bn from KRW 5bn as well as increase the transaction tax. Other measures include a reversal of the previous administration’s cut to 24% from 25% of the top corporate tax rate. South Korea’s major stock indices decline almost 4%.

Daily Pivots: (S1) 0.6407; (P) 0.6442; (R1) 0.6459; More...

Intraday bias in AUD/USD stays on the downside at this point. Fall from 0.6624 short term top is at least correcting the rally from 0.5913. Deeper decline would be seen to 38.2% retracement of 0.5913 to 0.6624 at 0.6352. Strong support is expected from 0.6352 to bring rebound. On the upside, above 0.6475 minor resistance will turn intraday bias neutral first.

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, even in case of another fall through 0.5913, downside should be contained above 0.5506 (2020 low).

Daily Pivots: (S1) 1.3828; (P) 1.3843; (R1) 1.3873; More...

USD/CAD's rally is in progress and intraday bias stays on the upside. Rise from 1.3538 is seen as correcting the decline from 1.4791 and would target 1.4014 cluster resistance (38.2% retracement of 1.4791 to 1.3538 at 14017). But strong resistance should be seen there to limit upside. On the downside, below 1.3812 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.

Asian equities slipped slight today after U.S. President Donald Trump issued a long-anticipated executive order updating tariff rates following the August 1 trade truce deadline. But losses were relatively restrained as many of Asia’s key exporters avoided the harshest duties. While tariffs now top out at 41%, nations like Thailand, Malaysia, and Taiwan saw their rates reduced from previous threats. US equity futures were also little changed while the currency markets are largely stable. As the latest trade war escalation may already be well priced in, traders are now turning attention to upcoming U.S. non-farm payroll data.

On the FX board, Dollar is easily the strongest performer for the week so far. Better-than-expected ADP and jobless claims data earlier in recent weeks have raised the likelihood of a firm NFP print. A stronger jobs number would likely reinforce the Fed’s hold stance and put further pressure on expectations for multiple cuts this year. Also in focus is ISM manufacturing report for July.

Loonie has also held up well. Trump's threat to penalize Ottawa with new tariffs over its foreign policy was shrugged off by traders, given that affected goods are outside the USMCA framework. Sterling remains solid as well, with no major data shocks and the BoE maintaining its slow-but-steady easing path.

At the weaker end, Euro leads losses, but it;s; just largely correcting its late-July rally. Swiss Franc and Kiwi are not far behind. Aussie and Japanese are trading in mid-pack territory. Yen has settled after a volatile week dominated by mixed interpretation on BoJ's stance on future rate hikes.

On the trade front, Trump’s new tariff order imposes reciprocal duties between 10% and 41% on dozens of nations. In addition, a 40% duty will apply to any transshipped goods designed to circumvent tariffs. Unlisted nations automatically fall under a 10% surcharge. These tariffs will begin on August 7 to give US customs officials time to prepare.

Among major takeaways, Switzerland and South Africa face sharp tariffs of 39% and 30%, respectively. In contrast, Thailand and Malaysia see their rates trimmed to 19%, down from 36% and 24% respectively. Taiwan will face a 20% tariff, cut from the earlier 32% level. Importantly, China remains untouched under this directive, as both sides continue to negotiate toward a longer-term deal after the 90-day truce expires on August 12.

In Asia, at the time of writing, Nikkei is down -0.64%. Hong Kong HSI is down -0.77%. China Shanghai SSE is down -0.49%. Singapore Strait Times is down -0.28%. Japan 10-year JGB yield is down -0.001 at 1.555. Overnight, DOW fell -0.74%. S&P 500 fell -0.37%. NASDAQ fell -0.03%. 10-year yield fell -0.016 to 4.360.

Gold and Silver vulnerable as strong NFP could supercharge Dollar rally

Copper’s collapse this week has triggered renewed weakness across metals, with Silver and Gold also on the back foot. However, underlying, it’s Dollar’s unrelenting strength that’s proving most punishing for precious metals. The next catalyst? The July US non-farm payroll report due today.

NFP is expected to show 102k job growth, a slight rise in the unemployment rate from 4.1% to 4.2%, and solid wage gains of 0.3% mom.

This month, only two of the usual four leading indicators are available to help guide expectations. The ADP report posted a 104k rise in private jobs, a bounce from last month’s downward surprise. Meanwhile, the 4-week moving average of initial jobless claims fell to 221k.

Taken together, these suggest a decent chance of an upside surprise in today's payrolls release. That would likely trigger further hawkish adjustment in Fed expectations. After this week’s solid GDP and Powell’s cautious tone, markets have already dialed back bets on aggressive easing.

Fed fund futures are pricing just a .2% chance of a September rate cut, and only 40.1% chance of two cuts this year. A robust NFP report could shift expectations further toward a single cut in 2025, providing fresh tailwinds for the Dollar and keeping downward pressure on Gold and Silver.

Technically, Silver's extended fall this week should confirm completion of the five-wave rally from 28.28, on bearish divergence condition in D MACD. While 55 D EMA (now at 36.33) might provide interim support, the correction from 39.49 should at least extend to 38.2% retracement of 28.28 to 39.49 at 35.20 before completion.

Gold is extending the medium term corrective pattern from 3499.79 high. Immediate focus is on 3248.21 support. Firm break there will open up deeper fall to test 38.2% retracement of 2584.24 to 3499.79 at 3150.04 again.

China Caixin PMI manufacturing contracts again as export demand falters

China’s Caixin Manufacturing PMI dropped from 50.4 to 49.5 in July, signaling renewed contraction in factory activity and marking the second sub-50 reading in the past three months.

S&P Global’s Jingyi Pan noted that manufacturing production declined for only the second time since October 2023, as firms pulled back operations amid cautious demand outlook heading into H2 2025.

Weaker foreign demand was again a key drag, with export orders remaining sluggish amid global trade tensions. Domestic sales saw some resilience thanks to business development efforts, but overall growth was described as “only fractional.”

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3828; (P) 1.3843; (R1) 1.3873; More...

USD/CAD's rally is in progress and intraday bias stays on the upside. Rise from 1.3538 is seen as correcting the decline from 1.4791 and would target 1.4014 cluster resistance (38.2% retracement of 1.4791 to 1.3538 at 14017). But strong resistance should be seen there to limit upside. On the downside, below 1.3812 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.

Copper’s collapse this week has triggered renewed weakness across metals, with Silver and Gold also on the back foot. However, underlying, it’s Dollar’s unrelenting strength that’s proving most punishing for precious metals. The next catalyst? The July US non-farm payroll report due today.

NFP is expected to show 102k job growth, a slight rise in the unemployment rate from 4.1% to 4.2%, and solid wage gains of 0.3% mom.

This month, only two of the usual four leading indicators are available to help guide expectations. The ADP report posted a 104k rise in private jobs, a bounce from last month’s downward surprise. Meanwhile, the 4-week moving average of initial jobless claims fell to 221k.

Taken together, these suggest a decent chance of an upside surprise in today's payrolls release. That would likely trigger further hawkish adjustment in Fed expectations. After this week’s solid GDP and Powell’s cautious tone, markets have already dialed back bets on aggressive easing.

Fed fund futures are pricing just a .2% chance of a September rate cut, and only 40.1% chance of two cuts this year. A robust NFP report could shift expectations further toward a single cut in 2025, providing fresh tailwinds for the Dollar and keeping downward pressure on Gold and Silver.

Technically, Silver's extended fall this week should confirm completion of the five-wave rally from 28.28, on bearish divergence condition in D MACD. While 55 D EMA (now at 36.33) might provide interim support, the correction from 39.49 should at least extend to 38.2% retracement of 28.28 to 39.49 at 35.20 before completion.

Gold is extending the medium term corrective pattern from 3499.79 high. Immediate focus is on 3248.21 support. Firm break there will open up deeper fall to test 38.2% retracement of 2584.24 to 3499.79 at 3150.04 again.

China’s Caixin Manufacturing PMI dropped from 50.4 to 49.5 in July, signaling renewed contraction in factory activity and marking the second sub-50 reading in the past three months.

S&P Global’s Jingyi Pan noted that manufacturing production declined for only the second time since October 2023, as firms pulled back operations amid cautious demand outlook heading into H2 2025.

Weaker foreign demand was again a key drag, with export orders remaining sluggish amid global trade tensions. Domestic sales saw some resilience thanks to business development efforts, but overall growth was described as “only fractional.”

Full China Caixin PMI manufacturing release here.

The upcoming Non-Farm Payrolls (NFP) report will be released tomorrow, the same as last month’s consensus expectation of 110K.

As a reminder, the July NFP release shook markets with another positive surprise, coming in 37K stronger than the 110K Expected (+ 147K). Markets are now awaiting to see if the US can once again surprise with more upside on its Labor data.

For those newer to trading, the NFP is one of the most market-moving data releases globally. It offers insight into the health of the US labor market for the just—concluded month, with the Unemployment Rate also published at the same time.

I strongly invite you to look at our last month’s July Non-Farm Payrolls preview to learn more about why NFP matters so much for Markets (most of the info is in the introductory section).

Market moving flows as July concludes

We are concluding a strongly volatile July trading, with powerful disruptions to what was the 2025 most significant trend of US Dollar selling:

After hitting 96.40 lows on its Dollar Index (DXY), the Greenback made its way back to the 100.00 level just today after Core PCE came in stronger once again (0.3% m/m vs. 0.2% estimate).

The key question for the upcoming month is: Will the US keep beating expectations as they have done since 2024?
The answer to this will help to assess when the first FOMC rate cut of the year will take place.

All participants are getting ready for the session close which brings the usually volatile Month-End flows.

Let’s now explore:

• Seasonal trends for August payrolls
• A small look at the Dollar Index
• What potential reactions traders might expect from this key report

US Data releasing tomorrow morning, including NFP and ISM PMIs

For all Market moving events, check the MarketPulse Economic Calendar

Seasonal trends for the August NFP release

August NFP (where Markets learn more about the prior month's data) averages around 160,000 since 2010, excluding 2020 and 2021 due to COVID recovery numbers significantly influencing typical trends (1.80 Million jobs created in the August 2020 NFP!).

Taking a look at the Dollar Index

Dollar Index 8H Chart, July 31, 2025 – Source: TradingView

The US Dollar is up around 2.60% since last Thursday's lows, which is shaking up FX markets.

In our previous US Dollar analysis, we mentioned a potential Break-Retest pattern from the 2025 Downtrend and after some strong data, the rally took the index from 97.15 to some 100.12 highs in the morning session.

US Dollar strength will be a key to monitor upcoming flows in August – A significant break above the 100.00 to 100.50 Resistance should accelerate the rebuying of Dollar-selling positions.

On the other hand, staying around the 100.00 should lead to some more longer-run consolidation for currencies – A stronger Dollar may also impair Equities a tid-bit, as they are still at record-highs.

FYI, the Weekly RSI on the Dollar Index is back right at neutral levels, coming back from oversold which would re-allow a more balanced buying/selling scenarios – Markets are once again at a tipping point.

What to Expect from this Upcoming Report

This upcoming report will be even more tricky than the previous one.

Seeing the major reversal in the US Dollar, participants will look to spot if this ongoing strength is poised to cancel more of the 2025 "Dollar-selling" flows, or if a weaker employment figure would provide a good point to resume the Dollar-selling trend.

I cannot emphasize enough how important the 100.00 level is in the DXY.

What's priced in:

US Equity markets are at all-time highs and FX Majors have all corrected significantly since their July 1st highs.

Markets have reacted positively to the EU-US and Japan-US Trade Deals – More Deal announcements are expected, particularly with Mexico and China talks getting pushed back – For now, Equities are still trading in the TACO trade

Watch for potential sell-the-news on actual settlement of deals similar to what happened with the Euro.

What to expect (subject to largely different reactions as Markets are tough to predict):

Looking at the current state of pricing, Equities are at an extreme and Forex flows are more balanced after the strong July correction.

A miss would once again prompt the largest reactions, with US Dollar selling resuming in a flash, substantially higher pricing of a September cut (more cuts throughout 2025), and Equities correcting sharply.

A beat would shoot the Dollar higher yet again, with Equities following the same direction, Cuts getting priced out further towards 25 bps in 2025 and Gold would correct strongly.

An as-expected report (~ +/- 5K from the 110K expectations) would lead to a small correction in the USD and Equities, followed by more rangebound action throughout the first part of the month in the waiting of more data (Major focus on CPI).

The extent of such outcomes would depend on how large the beat/miss is.

Safe Trades for the upcoming NFP!

Despite an upward revision in the forecast for inflation, the Bank of Japan remains squarely focussed on demand-side drivers of inflation when considering the timing of the next cut.

The Bank of Japan (BoJ) left its policy settings unchanged at its July meeting, but revised up its inflation outlook, particularly for FY2025 (ending March 2026). Median estimates for CPI (ex. fresh food) were nudged up to 2.7%yr for FY2025 (ending March 2026) from 2.2% previously. The revision was driven primarily by higher rice prices, which are included in the core measure. With the upward revision for FY2025 driven by a supply-side shock, the BoJ remain confident in achieving sustained inflation at their 2.0%yr target by the end of the forecast period. There were minimal adjustments to the GDP outlook despite acknowledging increased uncertainty in the global trade environment.

Through the remainder of FY2025, a tight labour market, alongside elevated profits, are expected to support wage gains, though the Outlook noted that “the growth rate is likely to decelerate somewhat, affected by the decline in corporate profits.” The outlook for business investment is expected to be similar, with profits still supporting critical investment, although the pace of investment is expected to “decelerate”. Beyond FY2025, strengthening profits are anticipated to support both wage and investment growth.

The next rate hike occurring in March 2026 remains our base case, following the outcome of the annual spring wage negotiations. The recent inflation upgrade was supply-driven and therefore does not alter the BoJ’s cautious stance on policy. In our view, the BoJ’s policy reaction function instead remains focused on demand-side dynamics.

That said, the BoJ has signalled that, if incoming data aligns with its projections, they will continue raising rates. If they gain sufficient confidence ahead of March, there is a risk that the next rate hike could come sooner, most likely in January 2026.

We will be paying close attention to summer bonuses data (due late August). If it prints in line with last year, it will suggest firms have both the capacity and willingness to lift wages heading into the spring wage round. This will be assessed alongside the Q2 Financial Statement data, which will provide a more accurate picture of firms’ underlying profitability. If Q2 earnings hold up, it would bolster the BoJ’s confidence that wage growth is sustainable, reinforcing the case for an earlier tightening step.

Summary

• The Bank of Japan (BoJ) held its policy rate steady at 0.50% at today's monetary policy meeting, a widely expected outcome.
• Today's meeting was the first decision since the trade deal agreed between the U.S. and Japan in July, meaning there was also significant interest in the BoJ's guidance on future policy. The BoJ upgraded both its GDP growth and inflation forecasts, which we view as consistent as some further eventual monetary policy tightening. At the same time, Governor Ueda made a range of comments that were mixed, but careful and cautious overall—perhaps tempering expectations of how soon the BoJ might raise interest rates.
• We expect the BoJ to hold rates steady at its next meeting in September. So long as Japanese economic activity holds up reasonably well, and a moderation in U.S. and global activity remains gradual and orderly, BoJ policymakers may have enough comfort and clarity to raise interest rates later this year. Our base case remains for the BoJ to raise its policy rate by 25 bps to 0.75% at its October announcement. That said, if Japan's economy slows especially sharply, or wage growth and domestic inflation trends undershoot, the BoJ's next rate hike could be delayed further, until January next year.

Bank Of Japan Holds Rates Steady, Gradual Tightening Still Likely

The Bank of Japan (BoJ) held its policy rate steady at 0.50% at today's monetary policy meeting, in a widely expected outcome. Today's decision was also the first announcement following the trade deal reached between the U.S. and Japan in July, which saw the two countries agree to a tariff rate of 15% on most U.S. imports from Japan, importantly including the auto sector. As a result, there was also significant interest in the central bank's updated economic forecasts, and its accompanying commentary, in terms of providing insight into the potential future path for BoJ monetary policy.

Examining the BoJ's projections, we view the central bank's updated economic forecast as consistent with some further eventual monetary tightening. Policymakers raised their Fiscal Year 2025 (April 2025–March 2026) real GDP forecast to 0.6% from 0.5% previously, but left their projections for FY2026 and FY2027 unchanged at 0.7% and 1.0% respectively. As for underlying price pressures (CPI ex-fresh food inflation), the BoJ kept raised its forecast for FY2025 to 2.7% (previously 2.2%), for FY 2026 to 1.8% (previously 1.7%) and for FY2027 to 2.0% (previously 1.9%). Importantly, the medium-term inflation forecast for fiscal 2027 is right at the BoJ's 2% inflation target. Also of note, the central bank said the risks to its inflation projections were generally balanced, compared to its previous characterization of inflation risks being skewed to the downside. Finally, in referring to economic risks from global trade policy, the central bank described those risks as "highly uncertain" rather than its previous assessment of "extremely uncertain."

In his post-meeting press conference, Governor Ueda made a range of comments that were mixed, but careful and cautious overall—perhaps tempering expectations of how soon the BoJ might raise interest rates. Among his comments, Ueda said:

• Japan's trade deal with the United States represents notable progress, but the central bank doesn't see the fog suddenly lifting over trade.
• The central bank should be able to finally judge data better after the deal, and that it would be important to monitor the impact of tariffs in hard economic data in the period ahead.
• Underlying price trends are coming closer to 2% than previously, and that the likelihood the BoJ's economic outlook will be realized has risen.
• Real interest rates are still very low and monetary policy is accommodative.
• He does not think the central bank is behind the curve in raising interest rates, nor does he think there is a high risk the central bank will fall behind the curve.

In our view, these comments suggest Ueda, and other BoJ policymakers, want to be more sure the economic damage from higher U.S. tariffs is limited overall before raising interest rates further. Among the key trends we think policymakers will want to see are a resumption of positive GDP growth, a continuation of growth in domestic demand and the extent to which negative impact of higher tariffs on Japan's exports is contained. We also anticipate the BoJ may want to see readings on sentiment surveys remain relatively favorable, and perhaps a modest firming in wage growth, and domestic inflation measures such as services inflation.

We view it as unlikely that all of these trends will be apparent by the time of the BoJ's September meeting, and accordingly, we expect the BoJ to hold rates steady at that announcement. So long as Japanese economic activity holds up reasonably well, and a moderation in U.S. and global activity remains gradual and orderly, BoJ policymakers may have enough comfort and clarity to raise interest rates later this year. Our base case remains for the BoJ to raise its policy rate by 25 bps to 0.75% at its October announcement. That said, if Japan's economy slows especially sharply, or wage growth and domestic inflation trends undershoot, the BoJ's next rate hike could be delayed further, until January next year.

USDJPY: ⬆️ Buy

• USDJPY broke resistance zone
• Likely rise to resistance level 152.00

USDJPY currency pair recently broke the resistance zone located between the resistance level 148.85 (which stopped earlier waves A and i) and the 50% Fibonacci correction of the downward impulse from January.

The breakout of this resistance zone accelerated the active impulse wave c, which belongs to medium-term ABC correction (2) from April.

USDJPY currency pair can be expected to rise further to the next resistance level 152.00 (target price for the completion of the active impulse wave C).