Global Economic Outlook, Week 28, 2025

With trade tensions flaring anew, commodity prices remaining volatile, and monetary policy paths uncertain, businesses and investors should prepare for a challenging second half of 2025 as global economic growth risks remain tilted to the downside.

Global Economic Review: June 27 – July 3, 2025

The past week saw the global economy grappling with renewed trade tensions, shifting monetary policy expectations, and diverging signals across major regions. The most consequential development was the U.S. administration’s decision to end its 90-day tariff pause, sending letters to nearly 180 trade partners—including close allies such as Canada, the United Kingdom, and Indonesia—warning of imminent new tariffs, especially on steel and aluminum. The announcement reignited fears of a broader trade war and prompted swift retaliatory responses. The new U.S. steel levy, which could rise to 50%, and the expected countermeasures from the EU and UK disrupted global supply chains, causing businesses to accelerate inventory purchases, while ports faced rising congestion, and freight costs increased sharply. These developments underscored how quickly tariff dynamics can ripple across global trade, impacting production schedules, input prices, and investor confidence.

Despite the escalating policy uncertainty, several indicators suggested that the global economy retains underlying resilience. Goldman Sachs reported that second-quarter GDP growth and key measures of consumer spending and industrial hiring held up better than many had anticipated, showing limited immediate drag from the new wave of trade frictions. The U.S. labor market offered one of the most encouraging signals, as the June jobs report showed nonfarm payrolls rising by 147,000—close to the three-month average—and the unemployment rate falling to 4.1%. These headline numbers surprised to the upside, contributing to rallies in equity markets that saw the S&P 500 and Nasdaq reach record highs during the week.

However, beneath the surface of these strong employment figures lay troubling signs. Job gains were concentrated almost entirely in a few sectors, including state and local education, healthcare, and leisure and hospitality, while hiring in manufacturing and temporary services posted back-to-back monthly declines. Such narrow breadth points to an increasingly uneven labor market that may struggle to maintain momentum if broader demand cools. Even as headline layoffs remain low, the latest data showed continuing jobless claims climbing to their highest level since 2021, reflecting the growing difficulty for unemployed workers to find new opportunities in an economy marked by elevated borrowing costs and lingering uncertainties.

Other U.S. economic data painted a similar picture of resilience tempered by vulnerabilities. The ISM survey revealed that manufacturers are facing softening demand and rising costs for inputs, driven in part by renewed tariff pressures. While the ISM manufacturing index improved modestly in June thanks to a rebound in production and slower inventory drawdowns, concerns about rising prices and global supply chain frictions persisted. Meanwhile, the ISM services index returned to expansion, but the pace of growth remained consistent with subdued activity, as 14 of 18 service industries reported higher input prices. Construction spending continued its steady decline for a seventh consecutive month in May, highlighting how high rates, tariffs, and pervasive economic uncertainty are weighing on investment in the housing and commercial real estate sectors.

Trade flows also reflected these challenges. Both imports and exports fell in May, widening the U.S. trade deficit modestly to $71.5 billion. The decline partly resulted from the unwinding of earlier stockpiling by firms seeking to beat the expiration of the tariff pause, which had temporarily inflated imports in prior months. Despite the strong headline jobs report, these underlying economic signals prompted markets to scale back expectations for an imminent July interest rate cut by the Federal Reserve, instead reinforcing the consensus view of a first cut likely coming in September, as tariffs and softening domestic demand are expected to weigh on growth later in the year.

Across Asia, sentiment surveys painted a cautiously optimistic picture. China’s official June PMIs suggested a gradual stabilization at the end of the second quarter, with the manufacturing index rising to 49.7 and the Caixin manufacturing PMI climbing back into expansion territory at 50.4. The non-manufacturing PMI also improved slightly, while the services PMI, though edging down, remained in expansion. These results indicate a modest rebound in activity, supported by domestic policy measures and easing trade tensions, but China’s growth is still expected to moderate from 5.0% in 2024 to 4.7% in 2025 amid lingering structural challenges and an uncertain external environment.

In Japan, the Q2 Tankan survey provided another positive note, with the diffusion index for large manufacturers rising to +13, exceeding expectations and boosted by strength in industries such as paper products and iron and steel. Confidence among large non-manufacturers remained elevated, though it slipped slightly from previous highs. These readings support forecasts for the Bank of Japan to raise its policy rate by 25 basis points in October, bringing it to 0.75% as gradual progress on inflation and business sentiment continues.

Meanwhile, Europe’s economic data highlighted a steady but fragile environment. The Eurozone’s June inflation data matched expectations, with the headline CPI rising 2% year-over-year—exactly, hitting the European Central Bank’s target—and core inflation holding steady at 2.3%. Services inflation edged up to 3.3%, but overall price dynamics continue to support the ECB’s cautious easing stance. Markets widely expect the ECB to keep rates unchanged at its July meeting and deliver a final 25 basis point cut in September, reflecting ongoing concerns over sluggish growth despite inflation normalizing.

Switzerland offered a small surprise as June CPI returned to positive territory at 0.1% year-over-year, up from May’s -0.1%, while core inflation edged up to 0.6%. This result reassures the Swiss National Bank that disinflationary risks are limited following its June rate cut to 0.00%, reinforcing expectations that further monetary easing is unlikely in the near term.

U.S. Economic Outlook: July 7–13, 2025

Tuesday, July 8

The May Consumer Credit Report will provide valuable insight into trends in consumer borrowing, including credit card balances and auto loans. Strong credit growth could indicate ongoing consumer resilience, but it may also signal rising debt burdens that could weigh on household finances later this year.

Meanwhile, the NFIB Small Business Optimism Index has remained highly volatile. After surging nearly 15 points following the 2024 election, the index reversed sharply in early 2025, giving back two-thirds of its gains by April as the April 2 tariffs dealt a blow to sentiment. Owners’ expectations for economic improvement dropped steeply, from 52% in December to just 15% by April. Although the index recovered somewhat in May when U.S.-China trade tensions eased, the NFIB’s uncertainty index climbed to 94, reflecting elevated anxiety among small business owners.

This volatility is driven more by shifting expectations than by changes in actual economic conditions. In May, small firms expressed renewed optimism about future business conditions and sales prospects; however, they reported weaker actual sales, earnings, and capital spending. Looking ahead, small business optimism will likely remain sensitive to policy developments. A continued lull in tariff escalations and progress on tax legislation could support sentiment in June, but uncertainty is expected to remain elevated.

Wednesday, July 9

FOMC Minutes from the June Federal Reserve meeting will be released, offering investors critical insights into policymakers’ views on trade tensions, tariff impacts, inflation trends, and labor market dynamics. These minutes could recalibrate expectations for monetary policy, particularly regarding the likelihood of a September interest rate cut.

The final reading of Wholesale Inventories for May will also be published. Softer inventory figures could support the case for future easing by signaling weaker underlying demand in the broader economy.

Thursday, July 10

Jobless claims continue to serve as a timely indicator of shifts in labor market conditions. Recent data shows initial unemployment claims have averaged 242,000 over the past four weeks, historically low, yet 2% higher than levels recorded a year ago. More concerningly, continuing claims have increased more noticeably, suggesting that laid-off workers are having greater difficulty finding new employment. This trend aligns with a rise in the median duration of unemployment, which has climbed to 10 weeks on a three-month average basis.

Overall, labor demand appears to be easing, but low levels of both hiring and firing are helping to stave off a significant rise in layoffs for now. Historical research indicates that a 25% year-over-year jump in initial claims—equating to claims rising to roughly 290,000–300,000—would signal a heightened risk of recession. Current figures remain below that threshold; however, the recent upward trend in claims is worth monitoring, as it could foreshadow slower payroll growth in the months ahead, particularly as tariffs continue to pressure employer margins and weaken underlying demand.

Friday, July 11

The Treasury Statement for June will provide insights into government borrowing and fiscal flows, just as policymakers approach critical budget decisions. This report will reflect the initial impacts of recent tax and spending legislation included in the “One Big Beautiful Bill,” helping markets gauge how fiscal policy is influencing overall economic conditions and future government financing needs.

USD and Wall Street: Outlook for the Week Ahead

The week ahead will be pivotal, as tariff decisions, insights from the Federal Reserve, and consumer finance data collectively shape near-term market expectations. While markets appear cautiously optimistic, elevated uncertainty persists. Clear communication from central banks and a resolution of trade tensions could reinforce risk appetite, but renewed policy risks may quickly reverse recent gains. This week’s trajectory hinges on the outcome of the July 9 tariff deadline. A clear path toward calmness or a delay could boost equities and weaken the dollar further, whereas an escalation may inject volatility and drive safe-haven demand for the dollar. Given stretched valuations across asset classes, strategic positioning and tactical monitoring—rather than full exposure—are advised.

Stock markets remain fundamentally supported by earnings growth and the potential for Fed rate cuts. However, near-term volatility could emerge around tariff developments and technical levels. Meanwhile, the dollar appears poised for further softness unless selective tariffs are enacted. Traders should closely monitor movements around the 97–98 DXY range and assess potential impacts on global capital flows and U.S. dollar demand.

Wall Street Outlook

Equities have rallied into July, supported by seasonal trends and expectations for strong Q2 earnings. However, optimism remains fragile and highly dependent on policy clarity. Avoiding a tariff shock would allow markets to stay focused on economic fundamentals and corporate performance, while renewed protectionist measures could undermine confidence and trigger sharp market corrections.

July has historically been a favorable month for equities, with average returns of approximately +2.5% over the past two decades. Despite significant volatility in the first half of the year, equity markets have rebounded sharply, with both the S&P 500 and Nasdaq reaching record highs. This surge has been fueled by optimism surrounding the pause in tariff announcements, solid corporate earnings, and a resilient labor market.

Strategists remain broadly constructive heading into the second half of 2025. Morgan Stanley projects additional upside, citing improved earnings estimates, expectations of Fed rate cuts, and historical resilience following geopolitical shocks. Bank of America and Goldman Sachs forecast sustained growth, albeit with potential volatility stemming from tariff-related developments. JPMorgan and Wells Fargo anticipate continued expansion, supported by strong consumer spending and deregulation, with S&P 500 targets ranging between 6,000 and 6,500.

Key themes to watch this week include Q2 earnings releases, the upcoming July 9 tariff deadline, and commentary from the Fed. Corporate earnings and retail activity will also be important market drivers. As the Q2 earnings season progresses, trends in consumer lending and spending will be central to the economic outlook. Amazon’s Prime Day (July 11–12), along with retail promotions from Walmart and Target, will serve as informal tests of consumer health. Strong credit metrics and robust sales could support equities, while signs of credit stress or disappointing retail performance might raise concerns about a slowdown.

Fundamentally, the backdrop appears “slightly bearish” in the near term due to trade uncertainty and elevated valuations. However, the medium-term outlook remains neutral-to-bullish, supported by expected earnings strength, potential Fed easing, and buy-the-dip dynamics if tariff concerns ease.

From a technical perspective, despite new highs on the charts, the On-Balance Volume (OBV) indicator has failed to reach new records, while the RSI is retreating from overbought territory, signaling a potential correction. The critical level to watch is 6,100; a break below this level could open the path to 6,000 and 5,900 as the next downside targets. Conversely, holding above the key pivot at 6,100 could keep the bulls in control.

USD Outlook

The U.S. dollar has come under sustained pressure, declining sharply since April and recording its worst start to a year since 1973, down roughly 11% against major currencies. This depreciation has been driven by concerns over rising U.S. fiscal deficits, unpredictable tariff policies, and growing expectations of Federal Reserve rate cuts.

Bond markets will be particularly sensitive to both tariff developments and Fed commentary this week. Signs of geopolitical stress or tariff-induced inflation could push yields higher, fueled by flight-to-safety flows and inflation hedging, while dovish Fed signals and weaker economic data could exert downward pressure on yields.

Leading analysts expect continued softness in the dollar over the near term. A Reuters poll highlights tariffs, increasing debt levels, and the Fed’s dovish stance as key headwinds, with the euro likely to continue strengthening. Currency strategists also note traders’ reluctance to hold long-dollar positions ahead of the July 9 tariff deadline, with the USD expected to trade in the 97–98 range on the DXY index.

Forecasts from MUFG suggest a gradual downtrend through the third and fourth quarters, with the DXY potentially easing toward the mid-90s later this year as interest rate differentials narrow and trade sentiment improves.

A key catalyst this week will be the outcome of the tariff decision. The imposition of selective tariffs could offer brief support to the dollar, while a broader delay or pause would likely boost risk-sensitive currencies such as the Australian dollar, New Zealand dollar, and emerging market currencies.

From a technical perspective, the DXY remains bearish in the broader trend, and if it fails to recover above the 97-mark, levels below 95 could soon come into play. Technical indicators offer mixed signals: while the downtrend was previously confirmed by oversold conditions, the RSI has started to rebound from oversold territory, signaling reduced momentum for USD selling. This shift could lead to a short-term recovery toward the 96.50–98.50 range.

RBA Rate Decision Review & Outlook for July 8, 2025

The Reserve Bank of Australia is widely expected to cut its cash rate at this week’s meeting. A recent Reuters poll shows that 31 of 37 economists anticipate a 25-basis point reduction, which would lower the rate from 3.85% to 3.60%. This would mark the RBA’s third consecutive rate cut this year.

This anticipated move follows a series of softer-than-expected economic data, reinforcing the case for near-term easing. May inflation surprised to the downside, with headline CPI slowing to 2.1% year-over-year—just above the RBA’s 2% target floor—and trimmed mean inflation, a key core measure, easing to 2.4% from 2.8%. These figures suggest underlying price pressures are moderating faster than previously expected. Meanwhile, Q1 GDP growth came in at just 0.2% quarter-over-quarter, or 1.3% annually, with per-capita output declining, signaling weakening consumer demand and headwinds from external factors.

Additionally, retail sales data have disappointed. May retail spending rose only 0.2%, missing forecasts of 0.5%, which has further heightened expectations for a July rate cut as consumer momentum continues to fade.

Outlook & Market Positioning

All four major Australian banks—ANZ, CBA, NAB, and Westpac—have forecast a 25-basis point cut in July, with most expecting follow-up reductions in August and beyond, potentially bringing the cash rate into the mid-3% range. Market pricing now reflects nearly a 100% probability of a July cut, with around 65% anticipating another move in August. MUFG forecasts additional cuts that could take the cash rate toward 3.10% by year-end, driven by slowing growth and contained inflation.

Overall, a 25-basis point cut in July appears highly likely, followed by a possible second cut in August, bringing the policy rate down to 3.35%. However, risks remain two-sided. There is a notable possibility that the RBA could either pause after a single cut or hold rates steady if upcoming data fail to show further economic softening. The central bank is expected to maintain a data-dependent stance, balancing the need to support growth while ensuring inflation expectations remain anchored.

How an RBA Rate Cut Impacts the AUD

The Australian dollar typically weakens following an RBA rate cut, as lower rates narrow the yield differential between Australia and other major economies, reducing demand for the AUD among carry traders and global investors. The Aussie dollar has maintained its uptrend since May 2025, buoyed by broad U.S. dollar weakness. However, experts caution that the RBA could act more decisively if a strong AUD starts to undermine growth, potentially putting the recent trend at risk.

Generally, an RBA rate cut—especially if accompanied by dovish guidance- is likely to weigh on the AUD by signaling lower yields and expectations of further easing. Still, factors like ongoing USD softness and resilient global risk sentiment could limit losses or even support the currency.

📊 Technical Picture

• Recovery Potential: Technical indicators show the AUD rebounding from oversold levels, suggesting room for a move toward US 0.675–0.680, unless the RBA’s tone proves more dovish than expected.
• Resistance: US 0.665–0.670—key area to watch for signs of reduced selling pressure.
• Support: US 0.650—critical level aligned with easing expectations and momentum signals.

Gold Weekly Outlook: Key Themes & Trends

Gold remains a pivotal asset amid ongoing geopolitical volatility, strong central bank demand, and persistent macroeconomic uncertainty. Prices continue to trade firmly above $3,300 per ounce, having surged more than 25% since early 2025, driven by rising geopolitical tensions and a weakening U.S. dollar. However, after reaching a record high above $3,500 in April, gold has eased about 5% from its peak. Stronger-than-expected U.S. payroll data contributed to recent softness, pulling prices back toward $3,328 as the dollar strengthened and expectations for imminent Federal Reserve rate cuts were deferred. While resilient U.S. economic data and equity market gains may cap near-term upside for gold, geopolitical risks and uncertainty around trade policy, particularly ahead of the looming July 9 tariff deadline, continue to support gold’s safe-haven appeal and keep it firmly in many investment portfolios.

Cooling U.S. inflation, with CPI currently near 2.4%, alongside the potential for future Fed rate cuts, provides underlying support for gold’s bullish medium-term case. Yet, lingering caution among policymakers and robust labor market data have limited immediate upside momentum. On the fundamental side, central bank demand remains exceptionally strong, with annual sovereign purchases exceeding 1,000 tons, underpinning gold’s long-term appeal as a store of value and inflation hedge. Major investment banks share a constructive outlook: HSBC projects average prices of $3,215 per ounce in 2025 and $3,125 in 2026, with upside potential reaching $3,600. J.P. Morgan, Morgan Stanley, and Goldman Sachs forecast that gold could test $4,000, citing risks from rising fiscal deficits and continued dollar weakness, while State Street Global Advisors (SSGA) expects a “higher-for-longer” regime above $3,000, targeting $4,000 to $5,000 per ounce within the next 12 to 24 months. However, some analysts caution on technical signals pointing to a possible short-term correction and recommend watching the $3,301–3,286 support zone for potential buying opportunities.

From a technical perspective, gold remains in a bullish structure but shows signs of potential near-term consolidation or pullback. The key pivot level lies at $3,300, with immediate resistance seen around $3,350–3,400. A decisive break above this resistance could pave the way for a retest of the $3,500 mark. Conversely, a drop below the critical $3,300 support could shift focus to $3,270, and if that level fails to hold, further downside could extend toward $3,245. Overall, gold’s fundamental and technical backdrop continues to favor constructive bias, but investors should be prepared for potential short-term volatility driven by upcoming economic data and geopolitical headlines.

Oil Market Snapshot & Outlook

Global oil markets are navigating a delicate balance of rising supply, moderate demand, and persistent geopolitical uncertainty. This week’s price action and sentiment will hinge on data releases from OPEC, the IEA, and the EIA.

Market Snapshot:

Oil remains in a fragile equilibrium, with geopolitical risks and OPEC+ supply management offering price support, while structural oversupply and subdued demand continue to cap gains. Monitoring OPEC+ policy decisions, inventory trends, and developments in the Middle East will be critical in the weeks ahead. Prices have rebounded modestly, with WTI trading around $66.50/barrel and Brent near $69/barrel, following mid-year volatility. OPEC+ has shifted toward output hikes, implementing monthly increases of around 411,000 barrels per day (bpd), with a potential surge of up to 550,000 bpd in August as the group aims to regain market share despite rising global supply. June production rose by approximately 270,000 bpd, led by Saudi Arabia and the UAE.

In its previous report, the IEA noted global oil supply outpacing demand by about 1 million bpd, with non-OPEC+ producers ramping up output. The EIA has confirmed unexpected inventory builds, though stock levels remain lower than a year ago. Meanwhile, a recent Dallas Fed survey highlighted reduced U.S. drilling activity, citing trade uncertainty and weak investment sentiment as key factors weighing on production growth.

On the demand side, geopolitical tensions—particularly flare-ups between Israel and Iran—have supported prices by adding safe-haven appeal and raising concerns over potential supply disruptions in the Middle East. However, global economic weakness, especially in the U.S. and China, remains a headwind for oil demand. Reflecting these concerns, OPEC recently downgraded its demand forecast, now expecting growth of just 1.3 million bpd in 2025, suggesting the possibility of oversupply extending into 2026.

Oil Market Outlook (Week of July 7–13, 2025):

Key drivers this week include the outcome of the July 6 OPEC+ meeting, developments in Iran-Israel tensions and potential threats to the Strait of Hormuz, U.S. inventory updates, and macroeconomic data from the U.S. and China. OPEC+ is expected to continue amplifying its production increases, with reports suggesting an August hike of up to 550,000 bpd as part of the phased rollback of previous cuts totaling approximately 2.2 million bpd. While leading producers such as Saudi Arabia, Russia, and the UAE aim to expand market share, overproduction by some members has created internal tensions.

In the short term, oil is likely to trade in a neutral to mildly bullish range, with geopolitical risks and OPEC+ supply discipline offset by rising production and sluggish demand. Over the medium term, the outlook turns neutral to bearish, with surplus conditions expected to persist into 2026 unless global demand surprises to the upside or OPEC+ adjusts its policy.

EIA Supply & Demand Projections:

The EIA’s Short-Term Energy Outlook shows U.S. crude production at record levels, averaging nearly 13.5 million bpd in Q2, with a slight decline expected into late 2026 as shale activity cools. Brent prices are forecast to average $61/bbl in 2025, dropping to $59/bbl in 2026 as inventories build. The EIA’s next report is scheduled for Tuesday, July 8.

IEA Demand & Balance:

The IEA’s July Oil Market Report anticipates global demand growth of around 740,000 bpd in 2025, slightly above last month’s estimate, and 760,000 bpd in 2026. While emerging markets show resilience, demand growth in OECD economies, especially the U.S. and China, is expected to moderate. Supply growth is forecast to outpace demand, leading to a projected global surplus of 730,000 bpd in 2025 and 930,000 bpd in 2026. The IEA’s next report will be released on Friday, July 11.

Technical & Tactical Outlook:

WTI and Brent remain in a consolidative range, with WTI trading between $64–67. The market is in backwardation, signaling near-term tightness despite longer-term oversupply concerns. Technical indicators show RSI below 50 on the H4 chart, and OBV appears flat with a downward tendency. A break below $64 could target $60, while a less likely break above $67 could open the door for a stronger rally.

Bitcoin Market Conditions and Outlook

Bitcoin is currently priced around $108,000, with intraday trading ranging between $107,341 and $109,121, reflecting a slight pullback of about –1% from recent highs. Overall, the leading cryptocurrency remains in a consolidation phase near the $100K–$110K zone.

Bitcoin remains fundamentally supported by strong institutional demand and favorable regulatory developments, while technically it sits near key resistance levels. The near-term market is likely to stay range-bound unless a significant catalyst emerges. A breakout above $110K–$114K could unlock a powerful rally, while a breach below support could risk a slide toward $100K.

Significant institutional involvement continues to underpin Bitcoin’s market strength. Approximately $2.7 billion in crypto inflows occurred last week alone, with over 80% directed into Bitcoin-related ETFs. Matrixport analysts suggest that favorable seasonality in July could push BTC toward $116K, while other experts project a potential breakout to $120K–$143K if key resistance is cleared.

Echoing these bullish projections, long-dormant wallets reactivated this week, moving over 20,000 BTC—a collective value exceeding $2 billion. Although these coins have not yet been liquidated, their activation signals potential large-volume activity that traders will monitor closely.

Short-term volatility remains subdued. Realized volatility is near multi-year lows, and implied volatility suggests calm market conditions, encouraging more cautious institutional participation. This stability may foster a gradual upward trend, barring sudden macroeconomic shocks or adverse regulatory changes. ETF inflows remain a primary driver of momentum; any slowdown could impact price strength. Additionally, movements from long-held BTC wallets (e.g., large addresses active since 2011) could signal potential supply shifts.

Technical Outlook:

Bitcoin is consolidating within a defined range of $ 104,000–$ 109,000. A decisive breakout above $109K could target $110K and then $114K; surpassing these levels could trigger a sharp rally toward $140K+. Conversely, a weekly candle closing below $ 104,000 would open the door for declines toward $ 102,000, and potentially down to $ 100,000.