Week Ahead: Fed, BoJ, BoC rate decisions, US NFP, Earnings, EZ CPI & US-China trade talks 

Weekly Recap

US stocks continued to rise last week, with the S&P 500 and the Nasdaq reaching record highs, while the Dow Jones came close. Earnings season ramped up a gear, with Tesla tumbling as Elon Musk warned of a rough couple of quarters ahead, while Alphabet rose on strong cloud computing growth. 

Trump announced a trade deal with Japan, and another was finally agreed upon with the European Union over the weekend, including 15% tariffs on European exports to America. The agreement avoided a transatlantic trade war, boosting sentiment and keeping Gold prices under pressure. 

There was little in the way of economic data. Instead, attention was on the ECB, which, in line with expectations, left interest rates unchanged until there was more clarity over trade tariffs and their impact on the EU economy.  

US-China trade talks (Monday / Tuesday) 

Chinese Vice Premier He Lifeng will meet with US Treasury Secretary Scott Bessent in Sweden on Monday and Tuesday to seek an extension of the 90-day US-China ceasefire that expires on August 12th. Following the Geneva and London meetings earlier in the year, the truce lowered tariffs from triple digits. However, without a trade deal, tariffs could return to 145% on US imports and 125% on Chinese imports. In earlier discussions, China agreed to lift export bans on rare earths and magnets while the US restarted shipments of semiconductors and aircraft parts. Bessent had suggested a rolling 90-day deadline, which could boost sentiment and the USD, which has been under pressure since Trump came to power, pulling AUD/USD lower. 

Federal Reserve rate decision (Wednesday) 

The Federal Reserve will announce its interest rate decision on Wednesday and is expected to leave rates unchanged at 4.25% to 4.5%, despite pressure from President Donald Trump. The central bank is waiting to see how tariffs will impact the economy before adjusting rates. That said, some Fed policymakers have been sounding more dovish, which means there could be some dissenters in the meeting. In recent weeks, President Trump has intensified his criticism of Fed Chair Powell for maintaining high interest rates. The US economy may require more rate cuts, but officials have also been waiting to see the economic impacts of Trump’s tariffs first. Fed Chair Powell has emphasised the considerable uncertainty that tariffs are bringing to the economic outlook. So far, the job market has remained resilient, and inflation remains above the Fed’s 2% target. The market is pricing in a 62% chance of a rate cut in September, which will give the Fed July and August jobs reports and inflation data to assess first. A more dovish-sounding Fed could drag on the USD and boost stocks such as the Nasdaq 100, which is already trading at record highs. 

BoC rate decision (Wednesday) 

The BoC is widely expected to leave interest rates unchanged, and could also refrain from providing forward guidance again, given uncertainties regarding the economy’s outlook. The rate is currently at 2.75% which is the midpoint of the BoC’s nominal neutral rate estimate. As a result, the central bank is limited in terms of further rate cuts unless the economy shows signs of deterioration in the face of ongoing trade tensions. At the June meeting, BoC Governor Macklem warned that further rate cuts would be necessary if the impact of tariffs and uncertainty continued to spread through the economy and cost pressures remained contained. However, recent data showed inflation was towards the top end of the BoC’s target, while the labour market has improved. The markets are only pricing in 14 basis points of further easing by the end of the year, implying a 56% probability of one more rate cut this year. Should the BoC raise concerns over the economy’s outlook, CAD could fall, potentially boosting USD/CAD. 

BoJ rate decision (Thursday) 

The BoJ will announce its rate decision on July 31st and is expected to maintain its interest rates at 0.5%. The central bank will also release its latest outlook report, which contains median forecasts for real GDP and core CPI. The central bank has left rates unchanged since hiking them in January and announced in its June meeting that it would reduce the amount of monthly JGB purchases by around ¥200 billion each quarter from April 2026 onwards. Since the June meeting, several major developments have occurred, including the upper house election, in which the ruling coalition lost, which could put pressure on the government to loosen its fiscal position. Japan and the US also reached a trade deal involving 15% tariffs, which is lower than previous threats of 25%. The market is pricing in a 25-basis-point hike this year, expecting just 20 basis points of tightening before the year-end. Should the BoJ sound more hawkish in light of recent developments, USD/JPY could come under further pressure, 

Eurozone inflation (Friday) 

Expectations are for inflation to cool back to 1.8% YoY from 2% YoY in June, as inflation continues to hover around the ECB’s target level. The data comes after the ECB’s rate decision last week, in which policymakers left rates unchanged following seven consecutive rate cuts. Policymakers adopted a wait-and-see stance, as they seek to assess the impact of the EU–US trade deal (agreed after the meeting). At the recent ECB meeting, Lagarde emphasised that inflation is expected to stabilise. The market has scaled back rate cut expectations to 14 basis points this year, down from 21 basis points. Higher-than-expected inflation could lift the EUR/USD, which is showing signs of losing momentum. 

US non-farm payroll (Friday) 

Expectations of the US economy to add 110k jobs in July, down from 147k in June, and a 150k three-month average. The unemployment rate is expected to rise to 4.2%, up from 4.1%, with the jobless rate projected to increase to 4.5% by year-end. Average hourly wages are expected to rise to 0.3% compared to 0.2% in June. The data comes as most Fed officials consider the US labour market to be in a good place, although they see signs that both job growth and labour supply are slowing. Some policymakers consider that the labour market could be weakening even if conditions are solid for now. A weaker-than-expected US non-farm payroll report could fuel expectations of a Fed rate cut sooner rather than later, which could lift stocks and indices such as the Dow Jones and pull the USD lower. 

US earnings season ramps up

Earnings season for Q2 2025 has been a mixed bag, with businesses focused on tech and AI performing well, while those catering to consumers have performed less so. This week sees four of the magnificent 7 (Apple, Amazon, Meta, and Microsoft) reporting, with AI expected to dominate the conversation. The focus will be on continued capital expenditure (capex) spending, examining how these substantial investments are driving new revenue streams. However, Big Tech is also facing a variety of challenges this quarter, including Microsoft’s relationship with OpenAI and Apple’s ongoing struggles with AI. 

Stronger-than-expected earnings could help boost sentiment more broadly, lifting the S&P 500 to fresh record highs. 

Open free account

Trading involves risk.