Economic calendar starts heating up today with the June JOLTS report

Markets

European stocks initially welcomed the US‐EU 15% trade deal but enthusiasm died out gradually through the session. While avoiding a worst‐case no‐deal scenario and offering companies something concrete to deal with (ie less uncertainty), extensive talk of a “lopsided” agreement favouring the US began to weigh on sentiment. The French PM Bayrou said it was an act of submission. German Chancellor Merz welcomed the deal with the US first, mainly because it offers some clarity in a foggy situation first. He dialed back cautiously optimistic tone later and said that the tariffs represent a significant burden on the economy. Germany’s Kiel Institute for the World Economy puts the short‐term price tag of the trade deal for the German economy at 0.1%. A pre‐deal impact analysis by think tank Bruegel showed a hit of around 0.3% on European GDP in various scenarios where tariffs ranged between 10‐25% for all US trading partners. That’s something but it’s no reason for panic. It’s against this backdrop that we view EUR/USD’s 1.3% slide yesterday to sub 1.16 at least partially driven by thinner liquidity circumstances in a technical buy‐the‐rumour, sell‐the‐fact episode. Support at 1.1573 is being tested right now. This neckline of a double top formation could in case of a break pave the way for a return back to the 1.1431 area (23.6% USD recovery on the 2025 decline). The trade‐weighted dollar index rebounded to back north of 98 with eyes set on the July high of 98.95. EUR/GBP’s failed test of the November 2023 high around 0.877 triggered impressive intraday return action, mostly EUR‐inspired. The couple finished in the 0.867 area. Bunds outperformed Treasuries, forfeiting between 1.1‐3.1 bps in a bull steepening move. US rates eked out up to 3 bps at the long end of the curve. A combined $69bn 2‐yr and $70bn 5‐yr auction went smooth and without any intraday movement.

After the trade agreement with Japan and the EU, this Friday’s August 1 deadline becomes increasingly irrelevant. US‐Sino talks are expected to hit extratime beyond the August 12 date. It means the trade narrative – even though a lot of details still need to be hammered out – could move a bit to the background while the eco calendar starts heating up today with the June JOLTS report and July Conference Board consumer confidence. The US also auctions $44bn 7‐year bonds. Strong data could trigger some UST underperformance and a further unwinding of dollar shorts, especially against the euro that lost some momentum short‐term. But we expect the largest investor attention and therefore market reaction to be saved for tomorrow’s FOMC meeting (coinciding with Q2 GDP numbers) and Friday’s payrolls report. The first European national growth figures are scheduled for release, including in Belgium and Spain.

News and views

The British Retail Consortium’s shop price inflation measure quickened to 0.7% y/y from 0.4% in June, well beyond the 0.3% expected. Renewed price pressures were most visible in the foods category, which added 0.4% m/m to be up 4% on a yearly basis. That’s the fastest pace in 17 months which retailers blame to the Labour government’s tax‐ increasing October budget. “Tighter global supplies” for some specific products including tea and meat added to the upward price pressures, BRC said. Non‐food inflation rose by 0.1% m/m, the same pace as the previous two months, thereby reducing the deflationary y/y trend to ‐1% from ‐1.2%. That’s the highest tempo in a year and confirms a bottoming out trend in place since the start of the year.

The US Treasury Department yesterday announced its net marketable borrowing estimates for the July‐September 2025 and October‐December 2025 quarter. It anticipates to borrow roughly $1tn in net debt, assuming an end‐of‐ September cash balance of $850bn. This is $453 bn higher than announced in April 2025, primarily due to the lower beginning‐of‐quarter cash balance and projected lower net cash flows. Excluding the lower than assumed beginning‐ of‐quarter cash balance, the current quarter borrowing estimate is $60 bn higher than announced in April. During the October – December 2025 quarter, Treasury expects to borrow $590 bn in net debt, assuming an end‐of‐ December cash balance of $850 bn. Additional details (including the tenor distribution) will be released later today.

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