By Dow Jones Newswires Staff
Below are the most important global events likely to affect FX and bond markets in the week starting July 7.
The key event of the week is the July 9 deadline when the 90-day pause in U.S. reciprocal tariffs ends.
"The most severe outcome would be the U.S. imposing the previously announced high tariffs on all trading partners without a trade deal," UBS Global Wealth Management analysts said in a note.
This would spark widespread risk aversion, they said.
If the U.S. postpones the tariffs again, markets might interpret this as a reluctance to implement them and it will support risk appetite, they said.
In Asia, a busy week of central bank decisions and key inflation data lies ahead. Monetary policy decisions will be in focus in Australia, New Zealand, South Korea, Malaysia and Thailand, while fresh price data is expected to shape interest rate trajectories in China, Japan and Taiwan.
Markets will also be closely watching for updates on trade momentum on key U.S. trading partners surrounding the July 9 U.S. tariff deadline.
U.S.
The minutes of the Federal Reserve's latest policy decision on Wednesday will be closely assessed for any further hints on future interest-rate cuts. Last month the Fed left rates in a range of 4.25%-4.5%, where it has been since December. The central bank indicated through its "dot plot" projections that two rate cuts this year remained on the table.
Since the meeting, policymakers Christopher Waller and Michelle Bowman have suggested that a rate cut in July was possible.
"However they appear to be in the minority, with most members including Fed Chair Jerome Powell advocating a 'wait and see' approach, rebuffing pressure from the White House for immediate and large-scale cuts," Investec analysts said in a note.
Moreover, a better-than-expected U.S. nonfarm payrolls report for June prompted markets to trim bets for a rate cut in July.
The market now only sees a 4% chance of a July rate cut and is not fully pricing in a move until October, according to LSEG. The meeting minutes will be key for influencing these expectations.
The outlook for Fed policy remains unclear given uncertainty over U.S. trade policy ahead of the July 9 deadline for reciprocal tariffs. Powell recently said the Fed might have cut rates by now if it weren't for tariffs.
"Should the latest trade deadline pass without major re-escalation of tensions, it could alleviate some further uncertainty for Fed officials," Deutsche Bank analysts said.
However, the Fed's focus could turn decidedly toward inflation, where it could take several months before the fog of the trade war lifts, they said.
Elsewhere, the NFIB small business optimism index is due Tuesday followed by initial jobless claims data on Thursday.
The U.S. Treasury will sell $58 billion in three-year notes on Tuesday, $39 billion in 10-year notes on Wednesday and $22 billion in 30-year bonds on Thursday.
U.K.
The U.K. Halifax House Price index data is due to be released on Monday. The latest report released in June showed house prices fell by 0.4% in May.
The Office for Budget Responsibility will publish the fiscal risks and sustainability report on Tuesday. The report will focus on three current pressures on public finances: climate change, public balance sheet, and pensions. The report will also provide an update on the risk register.
The Bank of England is due to publish the Financial Stability Report on Wednesday. The BOE will hold a press conference at 1000 GMT following the publication of the report, it said on its website.
The U.K. monthly GDP data is set to be released on Friday. The latest release showed the economy contracted by 0.3% month on month in April.
The industrial production data for May is due to be published on Friday as well as the U.K. trade balance data.
The U.K. will sell the September 2049 index-linked gilt on Tuesday and March 2035 gilt on Wednesday.
Eurozone
In a week light of economic data, German industrial production figures for May on Monday could possibly deliver positive news.
"Production in the German manufacturing sector is likely to have picked up quite strongly in May," Ralph Solveen, economist at Commerzbank Research said in a note. "Alongside the slight improvement in business sentiment, this would be a further indication that the industry has passed the worst," he said.
German and French foreign trade figures for May will be released Tuesday. Italian industrial production figures for May are scheduled for Thursday. Second estimate German and French inflation data for June will be released on Friday.
The Eurogroup meeting of eurozone finance ministers is scheduled for Monday, while the ECOFIN meeting of EU finance ministers on Tuesday.
Germany will launch a new October 2030-dated Bobl on Tuesday with 5 billion euros on offer and it will auction 2.5 billion euros in 2041- and 2044-dated Bunds on Wednesday. Other issuers will be the Netherlands and Austria on Tuesday, Portugal on Wednesday and Italy on Friday.
Scandinavia
Norwegian industrial production data for May is due on Monday; while Swedish new orders and industrial production data for May, along with Norwegian and Danish CPI figures for June, are scheduled for Thursday.
Switzerland
A bond auction will be held on Wednesday.
Canada
In Canada, jobs data for June will be released on Friday. The unemployment rate rose to 7% in May, the highest in nine years outside of the pandemic, and the economy added just 8,800 jobs.
Any further signs of a softening in the labor market could boost expectations for further interest-rate cuts by the Bank of Canada.
Australia/New Zealand
Both the Reserve Bank of Australia and the Reserve Bank of New Zealand will hold policy meetings next week, but different outcomes are expected.
The RBA has only cut rates by 50 basis points so far this cycle, leaving the official cash rate in slightly restrictive territory at a time when inflation has returned to target.
Money markets have fully priced in a rate cut on Tuesday, bringing the official cash rate down to 3.60% from 3.85%. Still, there is some risk that the RBA will wait a few more weeks for second-quarter inflation data, which would provide a clearer picture of price pressures ahead of its August meeting.
In contrast, the RBNZ is expected to keep interest rates on hold Wednesday, having already signaled that policy settings have returned to a "neutral zone" amid signs of economic recovery.
Both central banks have indicated that they see U.S. trade policy uncertainty and rising geopolitical tensions as factors likely to slow global growth and ease inflation pressures, rather than ignite them.
China
China's inflation data for June is the key release, expected to show whether deflationary pressures deepened at the end of the second quarter.
The consumer price index has declined for four consecutive months, while the producer price index has remained in negative territory for over two years, raising concerns about weak demand.
Economists at ING don't expect June's data to show any improvement. They forecast that CPI will remain in contraction at -0.1% on year, and that PPI inflation will mark its 33rd consecutive month of decline.
A particularly weak set of data could prompt further policy action from Beijing.
ING noted that extreme price competition, one of the main drivers of deflationary pressure, has drawn the attention of policymakers, who are now aiming to crack down on aggressive pricing strategies.
Also on the data calendar are foreign exchange reserves, as well as credit and lending figures for June.
On the trade front, markets will be watching for further gestures from Beijing and Washington as tensions between the two continue to ease.
Japan
The Bank of Japan is scheduled to hold a branch managers' meeting on Thursday, where it will release its quarterly regional economic report. The report could offer insights into whether economic recovery and wage pressure have become nationwide trends.
Current account data for May and bank lending figures for June are due on Tuesday.
On Friday, the Bank of Japan is set to conduct outright purchases across four segments of the Japanese Government Bond yield curve, including JGBs with maturities of more than five years up to 10 years, and those exceeding 25 years. These purchases are expected to help support the domestic bond market.
The Finance Ministry will hold two bond auctions during the week: approximately 2.4 trillion yen in five-year sovereign notes on Tuesday and about 800 billion yen in 20-year government bonds on Thursday. Of the two, the 20-year bond sale is likely to attract more investor interest due to its higher yield potential.
South Korea
The Bank of Korea is set to hold a rate-setting meeting on Thursday. Most economists don't expect any rate change and instead forecast a wait-and-see approach following May's 25-basis-point cut aimed at supporting the weakening economy.
Analysts say South Korea's resilient export performance, coupled with increased fiscal spending under the new left-leaning administration, may alleviate growth concerns and shift the central bank's tone toward a more hawkish stance.
The stronger-than-expected property market in Seoul and the rising domestic household debt are also likely to deter the central bank from rushing into further rate cuts.
While ING and Citigroup expect the BOK to delay its next rate cut until October, Nomura maintains its outlier forecast that the central bank won't cut rates again this year.
Malaysia
Bank Negara Malaysia is scheduled to announce its interest rate decision on Wednesday afternoon. The outcome could be a close call.
Some analysts expect a 25-basis-point cut at the July meeting, which would bring the policy rate down to 2.75%, citing recent signs of macroeconomic weakness.
This would be the central bank's first policy change since May 2023.
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07-06-25 2014ET
