Daily Market Outlook, August 4, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

Asian stock markets declined on Monday, mirroring Wall Street's downturn as concerns about the U.S. economy surged again. This led investors to anticipate a nearly guaranteed interest rate reduction in September, putting pressure on the dollar. Early trading indicated that Fed fund futures had priced in 65 basis points of interest rate cuts by December, though this expectation has now decreased to 60 basis points. The current level marks a significant difference from the 33 basis points anticipated prior to Friday's disappointing U.S. payroll report, and there remains an 83% chance for a rate cut in September. In reality, the 25 basis point decrease in two-year yields on Friday effectively represented the market preemptively enacting a Fed rate cut, as U.S. borrowing costs are influenced more by yields than the Fed funds rate. Additionally, ten-year yields also dropped sharply by 14 basis points but faced resistance near the 4.20% mark, a level they have consistently struggled to surpass since last October.

The latest non-farm payrolls report paints a grim picture. The headline figures fell short of expectations, with just 73,000 jobs added compared to the median forecast of 104,000. To make matters worse, prior months were revised sharply downward—June’s job growth was slashed from 147,000 to a mere 14,000, leaving cumulative two-month revisions 258,000 jobs lower. Revisions for the first half of the year now total a staggering -461,000. The weakness extended to the household survey, which showed a 260,000 drop in employment month-over-month. The labor force participation rate also dipped by 0.1 percentage points to 62.2%. While the unemployment rate ticked up by 0.1% to 4.2%, it narrowly avoided being rounded even higher, by just 0.02 percentage points. Long-term unemployment increased, as did the number of people exiting the labor force, while the ranks of multi-job holders and foreign-born workers declined—all indicators of tightening hiring conditions. Structurally, the labor market remains fragile. Of the 73,000 jobs added, education and healthcare accounted for 77,000, meaning other sectors saw net losses. Among productive industries, four recorded month-over-month declines, with manufacturing, natural resources, and professional and business services each shedding jobs for the third consecutive month.  Hourly earnings showed some improvement, rising 0.3% month-over-month and 3.9% year-over-year, but these gains are nominal and reflect backward-looking data. Additionally, surveys suggest a weakening trend in wage growth. While President Trump is likely to assign blame to Federal Reserve Chair Jerome Powell, citing delayed action, the impact of MAGA economic policies cannot be overlooked. These policies have played a significant role in shaping the current labor market challenges and will likely continue to do so.

The economic calendar transitions from an event-heavy week to a quieter one, with minimal high-profile news aside from the Bank of England's (BoE) August Monetary Policy Committee (MPC) decision on Thursday. Final July services PMIs on Tuesday are unlikely to deviate significantly from flash estimates. In the U.S., the ISM on Tuesday will be the key focus. Meanwhile, the euro area will see June PPI data (Tuesday), retail sales figures (Wednesday), the ECB bulletin, and several German data points, including factory orders (Wednesday), industrial production, and trade data (both Thursday). For the BoE, a 25 basis point Bank Rate cut to 4.0% is anticipated, though guidance is expected to remain ambiguous, describing future rate adjustments as "gradual and careful." The MPC may once again deliver a divided vote, potentially 2-5-2, with Dhingra and Taylor favoring a 50bp cut, while Mann and either Pill or Greene may advocate for no change. Since the May Monetary Policy Report, GDP and labor market data have been softer than the BoE’s projections, particularly wage growth, while inflation has remained elevated. This trade-off—above-target inflation versus below-potential output—underpins both the likelihood of a split vote and the cautious policy guidance. The outlook remains complex, leaving room for differing interpretations among policymakers.

Overnight Headlines

  • Trump Seeks Bigger Overhaul At Labour Statistics Bureau

  • BoE Is Probably About To Cut Rates Despite A Spike In Inflation

  • China To Tax Bond Interest Income After Decades Of Exemption

  • Trump Tariffs Are ‘Unsustainable’, Says Mexico’s Auto Sector Chief

  • Boeing Defence Union Rejects 4-Year Contract, Poised To Strike

  • FCA Says Banks Could Face £9B Bill On Car Loans

  • BoJ Gears Up To Hike Again But Leaves Free Hand On Timing

  • Oil Slips After OPEC+ Agrees To Hike Output In September

  • Mastercard Denies Pressuring Game Platforms, Valve Disputes Claim

  • Berkshire Hathaway Earnings Drop On Insurance; FX Headwinds

  • Trump: There Could Be Distribution Of Money From Tariff Revenues

  • Wall Street Banks Lose Ground In Europe As Tariffs Spook Clients

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

  • EURUSD: 1.1500-10 (2.5BLN), 1.1550 (2.8BLN), 1.1560-65 (2.1BLN)

  • 1.1575-85 (1.1BLN), 1.1600 (1.9BLN), 1.1650 (1.5BLN), 1.1670-80 (1.3BLN)

  • USD/CHF: 0.8100 (335M), 0.8115 (300M), 0.8150 (275M)

  • EUR/CHF: 0.9290 (210M). EUR/GBP: 0.8700 (214M)

  • GBP/USD: 1.3300 (200M)

  • AUD/USD: 0.6445-50 (1.1BLN), 0.6465 (873M)

  • NZD/USD: 0.5900-05 (608M), 0.5925 (247M)

  • USD/CAD: 1.3685 (348M), 1.3780 (412M), 1.3790-1.3800 (711M)

  • USD/JPY: 147.00 (800M), 147.50 (473M), 147.75-80 (546M), 148.50 (295M)

  • EUR/JPY: 173.00 (570M)

CFTC Positions as of the Week Ending August 1 

  • The net short position for Bitcoin is -1,008 contracts. The Swiss franc has a net short position of -24,034 contracts. The British pound's net short position stands at -12,028 contracts. In contrast, the euro holds a net long position of 123,359 contracts, while the Japanese yen has a net long position of 89,243 contracts. 

  • Equity fund speculators increased their S&P 500 CME net short position by 32,269 contracts, bringing the total to 363,032. Meanwhile, equity fund managers raised their S&P 500 CME net long position by 18,743 contracts to a total of 869,641. Speculators raised the net short position for CBOT US 5-year Treasury futures by 41,959 contracts, resulting in 2,511,883 contracts. Additionally, they increased the net short position for CBOT US 10-year Treasury futures by 147,096 contracts, totaling 896,630. On the other hand, speculators reduced their net short position for CBOT US 2-year Treasury futures by 45,415 contracts to 1,203,237 contracts and trimmed the net short position for CBOT US UltraBond Treasury futures by 15,530 contracts, resulting in 216,813 contracts..

Technical & Trade Views

SP500

  • Daily VWAP Bearish Below 6330 Target 6150

  • Weekly VWAP Bearish Above 6300 Target 6150

EURUSD 

  • Daily VWAP Bullish Above 1.15 Target 1.1640

  • Weekly VWAP Bearish Below 1.1640 Target 1.14

GBPUSD 

  • Daily VWAP Bullish above 1.3260 Target 1.34

  • Weekly VWAP Bearish Below 1.3360 Target 1.3050

USDJPY 

  • Daily VWAP Bearish Below 1.4880 Target 1.45

  • Weekly VWAP Bearish Below 1.4770 Target 1.45

XAUUSD

  • Daily VWAP Bullish Above 3320 Target 3500

  • Weekly VWAP Bullish Above 3350 Target 3600

BTCUSD 

  • Daily VWAP Bullish Above 114k Target 118k

  • Weekly VWAP Bearish Below 118k Target 110k