Fin-X Weekly 21st July 2025
- Brett Careedy
- Jul 21
- 5 min read
Australia’s unemployment rate rose to 4.3%, reinforcing expectations for an RBA rate cut in August.
Reports of Jerome Powell’s early exit from the Fed were subsequently denied. But Governor Waller made a clear bid to take over as Chair.
US trade rhetoric intensified, with new tariff threats against Russia. The EU mulled retaliation, while President Trump's stance may be softening towards China. New sectoral tariffs are due to be announced soon.
In the week ahead, investors will focus on central bank decisions, further earnings reports, the latest flash PMIs, and developments in trade policy.
Global equities notched another week of gains, with many indices reaching record highs as investors welcomed a solid start to the second-quarter earnings season. Several large US banks reported strong profit growth, buoyed by elevated trading activity following the market swings that followed the April 2nd tariff announcements. Technology names also impressed, with ASML and Netflix posting better-than-expected results. Risk sentiment was further supported by steady bond yields and the perception that interest rate cuts remain likely in the coming months.
Digital assets also had a landmark week. Bitcoin briefly surpassed US$120,000, while the US Congress passed the first major federal legislation to regulate stablecoins. The bill, now likely to become law, is seen as a key step in legitimising crypto markets and may spur further demand for US Treasury bills, as stablecoin reserves are likely to require backing with short-dated government paper.
In Australia, equities followed the global lead higher, with the S&P/ASX All Ordinaries Index closing above 9,000 for the first time.
Local interest rate expectations shifted after June’s employment report showed a larger-than-expected rise in the unemployment rate from 4.1% to 4.3%. Although monthly jobs data are often volatile, underlying indicators suggest a gradual cooling in the labour market. Markets now fully price a -0.25% cut to the cash rate at the RBA’s August meeting to 3.6%.
Documents accidentally leaked to the ABC revealed that the Treasury had advised the government to raise taxes and cut spending. Instead, Labor opted for a mildly expansive budget. Softer employment data undermines the case for fiscal tightening and alleviates some pressure on the Treasurer.
In the US, reports surfaced that White House officials had discussed removing Federal Reserve Chair Jerome Powell before the end of his term. Although President Trump later downplayed the idea, his comments did little to dispel speculation.
Fed Governor Christopher Waller subsequently made clear in an interview on Bloomberg television that he would be prepared to lead if asked. He also made the case for a July interest rate cut, a view supported by the administration. In his view, private sector activity is weaker than many anticipate, as the public sector has driven a high proportion of recent job gains. His FOMC colleagues remain comparatively hawkish but still expect the next likely move to be a cut.
Headline consumer price inflation came in above expectations at +2.7% yoy, up from +2.4% yoy in May, but producer price inflation slowed from a revised +2.7% yoy to +2.3% yoy.
Tariff effects were evident in the CPI release, but Governor Waller argued that they would not lead to sustained inflationary pressures. Longer-dated market inflation expectations are nonetheless beginning to factor in some upward risks stemming from fiscal stimulus and a more accommodative Fed.
Other indicators, including the Fed’s Beige Book and regional manufacturing surveys, reflected ongoing cost pressures for businesses but also suggested a modest pick-up in activity. The temporary suspension of new tariffs until 1st August may have provided some relief, although further developments remain uncertain.
Geopolitical tensions continued to centre on US trade policy. President Trump warned that he would impose 100% tariffs on Russian imports unless a ceasefire is agreed within 50 days, and pledged to send more military support to Ukraine through NATO partners.
Meanwhile, proposals for a 30% tariff on European Union goods triggered sharp responses from EU officials, who hinted at potential retaliatory measures. Negotiations with major partners, including Canada and Japan, may form part of a broader European response.
Despite the hard rhetoric, Trump also signalled willingness to negotiate, with the Financial Times reporting that a lower rate of 15–20% on European imports might be acceptable under a new deal. New tariffs targeting key sectors, including pharmaceuticals, semiconductors, and lumber, are expected to be announced shortly. However, there were also reports of renewed talks with China, which could open the door to resumed exports of Nvidia’s China-specific H20 chip, reversing earlier positions taken by US officials.
China’s latest economic data showed resilience in export volumes and industrial activity. June exports rose +5.8% in US dollar terms, supported by a +60.3% annual surge in rare earth shipments. Imports also rose, ending a run of declines. However, the headline GDP growth rate slowed slightly in the second quarter from an annual increase of +5.4% in Q1 to +5.2%. Retail sales softened (+4.8% yoy), while industrial production accelerated (+6.8% yoy). China housing still remains in a significant slump.
Elsewhere, inflation pressures remain a concern. UK CPI surprised to the upside at an annual pace of +3.6%, and investors are becoming more wary of rising fiscal deficits in developed markets. Long-term bond yields in the UK, Germany, France, and Japan moved higher. In Europe, the proposed €2 trillion EU budget includes significantly higher defence spending, equivalent to 1.26% of average gross national income. The proposal will require approval from the European Parliament and all member states.
The European Central Bank and PBOC are expected to hold rates steady this week, and the July RBA minutes will be published tomorrow. Attention in the US will focus on further trade news and any suggestion that Jerome Powell will be removed from office. Investors will also closely follow the next round of global earnings reports and the flash PMI surveys due out on Thursday.
This week is relatively quiet on the economic data, however a number of companies in the US are reporting this week, including Lockheed Martin, Alphabet, Tesla, Blackstone & Intel.
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