Daily Market Outlook, July 18, 2025
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
Munnelly’s Macro Minute…
US and European equity-index futures climbed, indicating that the remarkable global stock rally could have further to go as strong economic data eased concerns about the health of the US economy. S&P 500 and Nasdaq 100 contracts rose, both indices hitting new closing highs on Thursday. European futures advanced. In Asia, stocks increased by 0.4% as TSMC reached a new high, boosting confidence in AI spending. Conversely, Japanese markets fell sharply, as did government bond yields, ahead of the highly anticipated elections this weekend. The Dollar recovered most of its early losses and remained stable after Fed's Waller suggested that policymakers should consider cutting interest rates this month to support a struggling labour market. Treasuries rose across the curve. Cryptocurrencies gained after Congress passed the first federal legislation overseeing stablecoins. A recent White House initiative regarding US chip restrictions, impacting Nvidia and AMD, has ignited speculation about a significant tech agreement between Washington and Beijing.
Examining the latest batch of U.S. data through the lens of inflation, the current picture appears stable, though there are hints of hawkishness ahead. Retail sales experienced a rebound in June, which suggests a boost in consumer confidence. However, it's important to note that the month-over-month figures can be somewhat misleading and sometimes provide contradictory signals. For example, advance sales rose by 0.6% m/m, following a -0.9% drop in May. Meanwhile, the control group saw a 0.5% m/m increase, building on a prior 0.2% rise. However, the year-over-year growth rate has slowed from 5.1% in April to 4.8% last month and now to 4.0%. To add clarity, deflating the data to measure sales volumes reveals a flat trend, which might be a positive sign, suggesting minimal impact from tariffs at this stage. Some may interpret low import prices as further evidence of limited tariff effects, but these figures reflect pre-tariff levels. Core import prices (+1.0% y/y) show no indication that foreign exporters are lowering prices to absorb tariff costs within their margins. Supporting this, the Philadelphia Fed’s price indices reveal both paid and received prices rebounding, with expectations for prices received also climbing. This aligns with the Beige Book’s findings that firms anticipate higher costs and plan to pass them along to consumers. Altogether, the data points to a limited initial pass-through of inflationary pressures but suggests rising costs in the future. This outlook aligns with the Federal Reserve's cautious stance, even if political voices challenge its approach.
The US House of Representatives passed a bipartisan bill for regulating US-dollar-pegged stablecoins, sending it to President Trump for signing. This is an important milestone for the digital asset industry, which has sought federal legislation. Additionally, lawmakers approved another bill for crypto regulation, the Clarity Act, which will go to the Senate. Traders are increasingly using stablecoins, designed to maintain a 1:1 dollar value, for fund transfers and instant payments.
Next week's upcoming data slate reflects a somewhat relaxed, summer-like atmosphere, featuring several days with fewer scheduled announcements. However, it’s not entirely devoid of activity. From a UK perspective, the June public finances data (Tuesday) will draw attention, especially given the heightened focus on fiscal constraints. Early indications show the government’s cash requirement for 2025-26 already exceeds projections. On the European front, the ECB Governing Council meeting on Thursday is unlikely to deliver a rate cut, as market expectations remain minimal. Instead, the spotlight will be on the press conference, where divided views regarding a potential September cut may surface. That said, ECB President Lagarde is unlikely to deviate from tradition by making any pre-commitments at this stage. Anticipating a relatively uneventful ECB meeting, Thursday's flash July PMIs are shaping up to be the highlight of the week. For the US and UK, the June PMI indices were comfortably above the 50 mark, signalling expansion, so it would be a significant surprise to push them into contraction as the second half of the year begins. In contrast, the euro area is on a tighter margin, with the final June Composite PMI at 50.6. In the US, the data lineup includes home sales figures (Wednesday/Thursday), regional Fed surveys (Tuesday/Thursday), and durable goods orders (Friday), all scheduled during the Fed’s blackout period. Meanwhile, unscheduled developments in trade or renewed tensions between former President Trump and Fed Chair Powell could still dominate headlines unexpectedly.
Overnight Headlines
Fed’s Waller: Fed Should Cut Now With Labour On Edge
Trump’s Trade War Upends China’s Factory Floors
Netflix Raises Revenue, Margin Forecasts After Strong Q2
Japan’s Ishiba Faces Tough Choices If LDP Suffers Election Blow
Meta Hires Two Key Apple AI Experts After Poaching Their Boss
House Passes ‘Genius Act’ Crypto Bill, Sending It To Trump
Trump Set To Open US Retirement Market To Crypto Investments
Goldman Sachs No Longer Expects BoE Cut In September
China Threatens To Block Panama Ports Deal
White House Prepares Executive Order Targeting ‘Woke AI’
BHP Lifts Iron Ore, Copper Output But Flags Higher Costs
Argentina Wins Second Moody’s Upgrade On Currency Reforms
SEC To Weigh ‘Innovation Exception’ For Crypto
Slovakia Lifts Block On Russia Sanctions After EU Guarantees
Union Pacific Exploring Deal For Norfolk Southern
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.1560-70 (4BLN), 1.1600 (3.3BLN), 1.1650 (2.4BLN)
GBP/USD: 1.3400-10 (1.7BLN), 1.3425 (200M)...
EUR/GBP: 0.8640-50 (307M)
USD/CHF: 0.7900 (451M), 0.7975 (426M)
AUD/USD: 0.6455-60 (1BLN), 0.6480 (950M), 0.6500 (380M), 0.6525 (452M)
NZD/USD: 0.5930-45 (494M)
USD/CAD: 1.3725-30 (1.1BLN), 1.3750 (430M), 1.3800-05 (341M)
USD/JPY: 148.00 (674M), 148.25 (923M), 148.50 (818M), 148.75 (247M)
149.00 (325M)
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
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!