Daily Market Outlook, July 24, 2025
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
Munnelly’s Macro Minute…
A record-setting stock market surge gained momentum as the U.S. struck a trade deal with Japan, while speculation increased regarding a potential agreement with the European Union. Treasury yields ended a five-day increase, and the dollar weakened as the demand for safe-haven assets diminished. The S&P 500 hit record highs following news that the EU and the U.S. are negotiating a deal that would impose a 15% tariff on the majority of goods. Alphabet reported revenue that surpassed expectations late Wednesday, although it indicated that capital expenditures would exceed earlier projections. Tesla's earnings did not meet expectations.
The MSCI measure of global stocks reached an all-time high, supported by a 1% increase in Asia. Japanese markets surged by as much as 2%, driven by the financial sector, while the yen strengthened as investors anticipated that the trade agreement could lead to a higher likelihood of an interest rate increase. The reduction in global trade tensions has calmed investors, alleviating concerns about an extended trade war and boosting growth in global markets. Investors are hopeful that Washington will take a sensible approach before tariffs significantly affect corporate earnings. Trump indicated that he would not lower rates below 15% as he establishes reciprocal tariff rates ahead of the August 1 deadline.
Investors are paying close attention to the European Central Bank's policy decision scheduled for Thursday, coinciding with ongoing trade negotiations between Washington and Brussels. The central bank is anticipated to maintain interest rates, following a series of seven consecutive cuts. Most investors believe there will be one additional rate reduction from the ECB by the end of this year, probably in December.
Duration has acquired a bearish undertone on a global scale this year. Much of the blame has been attributed to the shift toward expansionary fiscal policies in the immediate term. However, it might also signal the inflection point we are now encountering regarding long-term government debt profiles and sustainability. The 30-year bonds issued today will mature in a world vastly different from the present, as major economies face a structural rise in debt burdens moving forward. Official forecasts, echoing a quiet farewell to the UK's once-sacrosanct fiscal rules, paint a uniformly grim picture. In the United States, the Congressional Budget Office (CBO) projects gross debt to GDP will exceed 118% by 2036 and surge to 157% by 2055. The Yale Budget Lab offers an even bleaker outlook, suggesting that following the passage of the One Big Beautiful Bill, gross debt could surpass 130% within the next decade and climb to 185% of GDP by mid-century. Comparatively, the UK’s Office for Budget Responsibility (OBR) presents a seemingly virtuous forecast, with public sector net debt expected to rise to a relatively modest 135% of GDP by 2055. So why do UK Gilts tend to receive harsher scrutiny? Achieving the OBR’s forecast relies on optimistic assumptions about UK productivity growth, pegged at +1.5% per annum. If we instead apply the more subdued average growth rate of the past decade, closer to +0.5%, the OBR’s model yields a far more concerning scenario—net debt soaring to 253% of GDP. Such a projection significantly raises the stakes and justifies the demand for a higher yield premium.
Overnight Headlines
Trump: Countries Will Face 15% To 50% Tariffs Range
ECB Set To End Cut Streak At 7 Amid US Trade Threats, Stronger EUR
Alphabet Reports Sales Jump, Boosts 2025 Capital Spending
Tesla Profits Slump On Worsening EV Sales
Japan’s Factory Activity Slips Into Contraction In July
RBA’s Bullock Supports ‘Measured And Gradual’ Approach To Easing
BoJ Watchers Still Predict Next Rate Hike In October Or January
UK-India Trade Deal To Be Signed By PM Starmer And PM Modi
Xi To Meet EU Chiefs At Downsized Summit Hit By Trade, Ukraine
Russia And Ukraine Are No Closer To Peace After Trump’s Threats
Walmart Hires Instacart Executive To Speed Up AI Adoption
IBM Posts Lukewarm Software Results, Dimming Investor Enthusiasm
South Korea Weighs US Investment Pledge To Trim Auto Tariff
US Moves On Rare Earths Are Boosting Australian Producer Lynas
Europe Car Sales Drop The Most In 10 Months As EV Growth Slows
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.1700 (3.4BL), 1.1750-60 (2.1BL), 1.1800 (1.4BL), 1.1810-20 (945M)
USD/CHF: 0.7925 (550M)
GBP/USD: 1.3500 (257M), 1.3545-50 (255M)
EUR/GBP: 0.8650 (271M), 0.8700 (551M)
AUD/USD: 0.6575-85 (580M), 0.6600 (1BLN), 0.6625-30 (610M), 0.6650 (516M)
NZD/USD: 0.6010 (598M), 0.6025-30 (360M), 0.6050 (636M)
USD/CAD: 1.3650 (420M), 1.3660-70 (557M)
USD/JPY: 145.20-25 (1.1BLN), 145.50 (948M), 145.75 (300M)
145.90-146.00 (940M), 146.20 (450M), 147.00 (1.4BLN)
AUD/JPY: 97.00 (276M), 98.00 (290M)
CFTC Positions as of the Week Ending July 15th
Speculators have reduced their net short position in CBOT US 5-year Treasury futures by 11,259 contracts, bringing it down to 2,505,528. They've also decreased their net short position in CBOT US 10-year Treasury futures by 68,202 contracts, resulting in a total of 772,377. Conversely, there has been an increase in the net short position for CBOT US 2-year Treasury futures by 33,727 contracts to 1,299,860. Speculators have raised their net short position in CBOT US UltraBond Treasury futures by 5,794 contracts to 228,618 and in CBOT US Treasury bonds futures by 21,386 contracts to 130,144.
Equity fund speculators have cut their net short position in the S&P 500 CME by 8,741 contracts to 329,471, while equity fund managers have decreased their net long position in the S&P 500 CME by 2,265 contracts to 862,416.
The FX net long positions stand at 103,582 contracts for the Japanese yen, 128,221 contracts for the euro, and 29,191 contracts for the British pound. The Swiss franc has a net short position of -22,637 contracts, and Bitcoin's net short position is -2,486 contracts.
Technical & Trade Views
SP500
Daily VWAP Bearish Above 6260 Target 6400
Weekly VWAP Bullish Above 6100 Target 6515
EURUSD
Daily VWAP Bullish Above 1.1710 Target 1.19
Weekly VWAP Bullish Above 1.1640 Target 1.19
GBPUSD
Daily VWAP Bullish Above 1.3580 Target 1.3670
Weekly VWAP Bearish Below 1.3580 Target 1.39
USDJPY
Daily VWAP Bearish Above 1.45 Target 1.48
Weekly VWAP Bullish Above 1.45 Target 1.51
XAUUSD
Daily VWAP Bullish Above 3320 Target 3500
Weekly VWAP Bearish Below 3350 Target 3290
BTCUSD
Daily VWAP Bearish Above 120k Target 124k
Weekly VWAP Bullish Above 114k 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!