Daily Market Outlook, July 16, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

Asian markets declined as traders lowered their expectations for a Fed interest rate cut following US inflation data indicating that companies are starting to pass some tariff-related costs onto consumers. The MSCI regional index dropped 0.1%, although Hong Kong technology stocks rose amid hopes that certain chip shipments to China will resume. Hong Kong's overall market index is on track for its highest closing level since February 2022. Traders are now pricing in lower chances that the Fed will implement more than one rate cut this year, with the likelihood of a September move just above 50%. While policymakers will likely need to maintain stable interest rates for a longer period to effectively manage inflation, they may have to consider cuts if inflation and labour markets weaken, as noted by Fed's Logan.

Asian pharmaceutical stocks declined after Trump indicated that he may impose tariffs on pharmaceuticals by the end of the month, alongside levies on semiconductors, suggesting that these import duties could be combined with more extensive "reciprocal" rates set to take effect on August 1st. Trump reignited speculation when asked about cost overruns tied to the refurbishment of the Fed’s offices, remarking, “I think it sort of is” a fireable offence. With the 30-year US Treasury yield hovering around the critical 5% mark and market-implied breakeven inflation rates climbing, markets have acknowledged the risk but remain vulnerable to heightened volatility should uncertainty over Powell’s future intensify further.

The Mansion House speeches provided relatively limited market-moving content. Governor Andrew Bailey, in his new role as Chair of the global Financial Stability Board, adopted an international outlook, advocating for measures to strengthen the IMF’s role in identifying and addressing global economic imbalances. Additionally, he pledged the Bank of England’s commitment to developing the next generation of UK retail payments infrastructure by leveraging digital technology. The Chancellor’s speech highlighted the recently unveiled ‘Leeds reforms’ to financial services, which aim to streamline certain regulations, encourage retail savings and investments, and reassess the ringfencing framework for banks. On fiscal policy, the Chancellor briefly reiterated adherence to ‘non-negotiable’ fiscal rules without offering further details. 

The ONS reported June CPI inflation at 3.6% y/y, 0.2ppts above market consensus and BoE forecasts, with similar overshoots in core CPI (3.6%) and services CPI (4.7%). Food inflation at 4.5% y/y accounted for half of the headline CPI overshoot, exceeding the BoE's May forecast of 3.4%. Despite weak labour market dynamics, this inflation surprise is unlikely to derail an August Bank Rate cut but may influence the vote split. Hawkish member Mann remains cautious, citing inflation above the 2% target, while food prices hold particular weight in shaping inflation expectations. A 25bp rate cut is still expected, but a divided vote with nuanced commentary is probable.

June's US CPI report offered mixed signals. Headline inflation rose 0.29% m/m (vs. 0.3% expected), lifting y/y to 2.7% (above the 2.6% forecast). Core inflation edged up 0.23% m/m (vs. 0.3% expected), raising y/y to 2.9%. Shelter inflation slowed to 3.8% y/y, its lowest since Oct '21, while weak airfare and vehicle prices provided relief. However, firmer goods prices—like apparel and household furnishings—hinted at mild tariff pass-through. A small uptick in the supercore measure underscored inflation's persistence, keeping the Fed cautious. Tariff threats from Trump, tied to trade agreements by Aug 1, add uncertainty, limiting the Fed's ability to act decisively.

Overnight Headlines

  • BoE To Find Replacement For UK’s Outdated Payment System

  • UK Chancellor Vows City Deregulation Will Extend Across Economy

  • Germany, France To Bolster Startup Access To Capital

  • Trump Warns Drug Tariffs Likely By August 1, Dismisses More Trade Deals

  • Hassett Now Frontrunner To Replace Powell As Trump’s Fed Chair Pick

  • Trump Touts $92B In AI, Energy Investments For Pennsylvania Hub

  • Dimon Defends Fed Independence After Trump Attacks

  • Fed’s Inflation Concerns Validated As CPI Rises; Sept Cut Bets Hold

  • Canada June CPI Beats Estimates; BoC Expected To Stay On Hold

  • JB Hunt Profit Drops As Costs Weigh On Margins

  • Omnicom Earnings Fall Amid Interpublic Acquisition Transition

  • Nvidia, AMD Surge As AI Chip Export Curbs To China Lifted

  • BlackRock Hit By $52B Redemption; Shares Fall Despite Steady Inflows

  • Oil Gains On Seasonal Demand Hopes As OPEC Holds Outlook Steady

FX Options Expiries For 10am New York Cut 

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

  • EUR/USD: 1.1600-05 (1.8BLN), 1.1625 (1.2BLN), 1.1650 (307M), 1.1700 (834M)

  • USD/CHF: 0.7900 (805M)

  • EUR/GBP: 0.8630-35 (400M), 0.8650 (236M)

  • AUD/USD: 0.6475-80 (355M), 0.6500 (310M), 0.6550 (608M), 0.6575 (670M)

  • NZD/USD: 0.5975 (188M), 0.6000 (382M)

  • USD/CAD: 1.3685-95 (317M), 1.3700-10 (537M), 1.3800-05 (795M)

  • USD/JPY: 148.50 (224M), 149.00 (910M), 149.45 (224M)

CFTC Positions as of the Week Ending July 11th 

  • Speculators have raised their net short position in CBOT US 5-year Treasury futures by 39,785 contracts, bringing the total to 2,516,787. They have also increased the net short position in CBOT US 10-year Treasury futures by 56,917 contracts, now totaling 840,579. Conversely, speculators have reduced their net short position in CBOT US 2-year Treasury futures by 14,515 contracts, resulting in a total of 1,266,133. The net short position for CBOT US UltraBond Treasury futures has been trimmed by 4,138 contracts, now at 222,824. Additionally, there is an increase in the net short position for CBOT US Treasury bonds futures by 4,301 contracts, reaching 108,758. 

  • In the equity sector, fund speculators have raised their net short position in S&P 500 CME by 39,349 contracts to a total of 338,212, while equity fund managers have increased their net long position in the same index by 20,105 contracts, now totaling 864,681. 

  • The FX net long positions are as follows: Japanese yen at 116,155 contracts, Euro at 120,596 contracts, British pound at 33,194 contracts. On the other hand, the Swiss franc has a net short position of -22,196 contracts, and Bitcoin shows a net short position of -2,436 contracts.

Technical & Trade Views

SP500

  • Daily VWAP Bearish Above 6260 Target 6400

  • Weekly VWAP Bullish Above 6100 Target 6515

EURUSD 

  • Daily VWAP Bearish Below 1.1710 Target 1.16

  • Weekly VWAP Bullish Above 1.1640 Target 1.19

GBPUSD 

  • Daily VWAP Bearish Below 1.3580 Target 1.3450

  • Weekly VWAP Bearish Below 1.3580 Target 1.3450

USDJPY 

  • Daily VWAP Bullish Above 1.45 Target 1.48

  • Weekly VWAP Bullish Above 1.45 Target 1.51

XAUUSD

  • Daily VWAP Bullish Above 3320 Target 3420

  • Weekly VWAP Bearish Below 3350 Target 3290

BTCUSD 

  • Daily VWAP Bearish Above 113k Target 120k

  • Weekly VWAP Bullish Above 108k Target 130k