Economic Stagnation
Bringing you your market update for the week commencing the 14th of July, 2025.
At a Glance
The British Pound lost further ground as markets price in deeper Bank of England rate cuts amid poor growth and fiscal concerns.
The Euro remains supported thanks to ECB caution and Europe’s relative economic resilience.
The U.S. Dollar held steady amid strong economic data and limited expectations for Fed rate cuts.
GBP: The British Pound remains under pressure amid economic stagnation and rising expectations of accelerated Bank of England rate cuts. Weak UK GDP, fiscal concerns, and a cooling labour market have triggered selloffs, particularly against the Euro and Dollar. Markets now expect up to three rate cuts this year, weighing further on Sterling. Ultimately, even inflation surprises may not help, as stagflation fears dominate sentiment.
EUR: The Euro remains supported by cautious ECB messaging, with officials like Isabel Schnabel stressing that further interest rate cuts face a high bar. This firm stance has boosted confidence in the Euro’s stability. Additionally, Europe’s relative economic resilience and geopolitical appeal, particularly amid global uncertainty, continue to underpin the Euro’s strength, with markets responding positively to signals of policy restraint from ECB leadership.
USD: The U.S. Dollar remains firm despite tariff threats from Donald Trump, who has proposed a 30% import levy on European goods. In fact, markets appear unfazed, with attention shifting to upcoming U.S. inflation data. A stronger than expected CPI print could boost the Dollar further. For now, the greenback benefits from resilient U.S. data and relatively restrained Fed rate cut expectations.
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