Tariff truce boosts markets, robust U.S. data underpins global rally ahead of Japan vote- 18.07.2025

This weekly financial market update highlights key developments across global markets, from the U.S. inflation surge and Fed outlook to China’s GDP growth and Bitcoin’s breakout above $122K. Investors are weighing macro data, central bank clues, and geopolitical risk as equities, commodities, and currencies respond to shifting sentiment.

U.S. Snapshot – Weekly Financial Market Update Insights

Previous Week (14–18 July):

• Retail sales (+) and jobless claims (−) surprised to the upside/downside respectively, underlining consumer strength and labor resilience—this, combined with strong corporate earnings, propelled the S&P 500 and Nasdaq to fresh record highs.
• June CPI rose by 0.3% MoM (core CPI +0.2%), marking the largest monthly jump since January and hinting at tariff-driven inflation.
• Fed’s July Beige Book described the economy as “neutral to slightly pessimistic,” noting tariff-induced price pressures and modest hiring trends.
• Treasury yields climbed modestly (10‑yr at ~4.49%), suggesting that markets now expect the Fed to hold rates at least until September.

Next Week Outlook:

• Focus turns to second-quarter earnings (banks, industrials, tech) and upcoming Fed speakers for clues on rate timing.
• Watch July CPI and retail sales for deeper insights into tariff pass-through and consumption strength.

Eurozone & UK – Key Moves in the Weekly Financial Market Update

Euro Area

Latest CPI (June 2025):

• Flash estimate shows inflation at 2.0% YoY, up from 1.9% in May, in line with expectations.
  • Energy prices continue to ease, while services inflation remains sticky near ~1.5 pp contribution.
• ECB Outlook:
  • Stable-core inflation suggests a pause in rate cuts, but a slight rebound in headline rates keeps policymakers cautious ahead of potential July FX volatility.

Next Week Outlook:

• Market focus moves to July CPI (due August 1) and ECB speakers—especially any hints on a rate cut pause or resumption in September.

 China & Japan – Asia’s Role in the Weekly Financial Market Update

Japan

Previous Week:

• In the lead-up to the upper house election, the yen weakened (to ~¥148–149/$) and the Nikkei lost ~0.2%, reflecting political uncertainty.
• Core inflation remained above target in June, reinforcing the BoJ’s cautious stance ahead of election outcomes.

Next Week Outlook:

• Election results will likely drive volatility in the yen, bond yields, and stock markets.
• The BoJ may deliver commentary on future policy following those results.

China

Previous Week:

• Q2 GDP grew ~5.2%, outperforming forecasts, yet retail sales and industrial output slowed, spotlighting domestic demand weakness.
• Beijing confirmed a tariff truce with Washington, while Nvidia resumed AI chip exports, easing some trade pressure.
• PBOC likely to keep LPR rates unchanged ahead of the Politburo meeting, with hopes for targeted easing later.

Next Week Outlook:

• Markets await the late-July Politburo meeting for signs of fresh fiscal or monetary support.
• Keep an eye on property measures and export/trade data ahead of the August 12 tariff deadline.

Emerging Markets: India, Middle East & EMEA in Focus

• Turkey: Uncertainty around political environment could prompt additional CBRT rate cuts.
• Russia & Hungary: Central banks are expected to announce policy decisions this week, with markets leaning toward easing.

Commodities & Crypto: Oil Steady, Bitcoin Powers Higher

Commodities:

• Oil climbed (~+$0.3–0.5/bbl) on stronger U.S./Chinese data and supply worries after drone attacks in Iraqi Kurdistan; still, weekly returns were mixed.

Crypto:

• Bitcoin surged past $122–123k, driven by ETF inflows and the momentum from U.S. crypto legislation (“Crypto Week”).

Key Headlines and What to Watch Next

1. U.S. retail + jobless data fuel global equity rally.
2. BoE tilt shifting toward cuts amid labor weakness.
3. China’s GDP beats estimates; Politburo meeting next.
4. Yen under pressure pre-Japan election.
5. Oil gains on dual economic and supply signals.
6. Bitcoin hits new highs on regulatory optimism.

Upcoming Week Watchlist

• U.S.: Q2 earnings, July CPI, Fed speakers
• EU/UK: BoE communications, trade/tariff updates
• Japan: Election results, BoJ guidance
• China: Politburo signals, trade/property releases
• Oil & metals: reaction to macro data & tensions
• Crypto: continued momentum post-legislative clarity