Economy and Financial Markets in week 29, 2025

Central banks are now walking a narrow path, balancing the need to support fragile recoveries without prematurely loosening policy in the face of fiscal and geopolitical uncertainty. With several key data points ahead—including U.S. CPI and retail sales, China’s Q2 GDP, and more central bank decisions—the next few weeks will be pivotal in shaping the second-half global outlook.

Global Economic Review – Week 28, 2025 (July 7–13)

Rising trade tensions marked the global economic landscape during the past week, with diverging central bank strategies and increasingly fragile consumer demand across advanced economies. While hard economic data was relatively light, a surge of policy developments and tariff-related news kept investors and analysts busy assessing the implications for growth and inflation in the months ahead.

In the United States, attention shifted back to trade policy as the 90-day pause on the Trump administration’s reciprocal tariff program expired on July 9. Although the deadline was extended to August 1, over 20 countries received formal notification of new country-specific tariff rates. The administration also announced a renewed focus on sectoral tariffs targeting products like copper and pharmaceuticals. These developments are expected to heighten economic policy uncertainty, which is already weighing on sentiment and activity. Revised GDP data showed that real personal consumption expenditures expanded at just a 0.5% annualized pace in the first quarter, a significant slowdown from the 2.8% average in 2024. This weaker demand trend persisted into the second quarter, with real consumer spending declining 0.3% in May and consumer credit growth slowing to a 1.2% annualized rate. As a result, several forecasters have downgraded their Q2 GDP growth estimates to around 1.8%, down from earlier expectations near 3.4%.

Business confidence in the U.S. has also taken a hit, with small business optimism declining and more firms signaling plans to raise prices in response to tariff-related cost pressures. However, inflation expectations remain relatively well-anchored, with the New York Fed’s one-year outlook falling to 3.02% and the University of Michigan’s measure easing to 5.0%. These lower inflation expectations may give the Federal Reserve more comfort in pursuing rate cuts, even though core inflation remains above its 2% target. Labor market data continues to suggest resilience, with jobless claims holding near historically low levels, but signs of softening demand and slowing job creation suggest the unemployment rate may drift higher in the coming months. Most analysts now expect the Fed to lower the federal funds rate by 50 basis points before year-end, bringing it to a range of 3.75%–3.50%.

Internationally, central banks took a cautious tone. The Reserve Bank of Australia surprised markets by holding its policy rate steady at 3.85%, citing slightly stronger-than-expected inflation data and ongoing strength in private domestic demand. While many had expected a cut, the RBA emphasized the need for further data before confirming the inflation trajectory. Nonetheless, markets still anticipate gradual rate cuts in the months ahead, with the policy rate projected to fall to around 3.10% by early 2026. Similarly, the Reserve Bank of New Zealand also held its rate at 3.25%, with the central bank noting that high export prices and easing financial conditions were supporting growth, even as global uncertainty remained elevated. Easing is still expected later this year.

In the United Kingdom, economic activity disappointed again, with GDP contracting by 0.1% in May following a 0.3% drop in April. Weaknesses were especially pronounced in the manufacturing sector, which saw output fall 0.9%, while the services sector registered only marginal growth. These back-to-back declines put the UK economy on track for near-zero growth in the second quarter and further increase the likelihood of a Bank of England rate cut in August. Across the Atlantic, Canada's June labor market report surprised to the upside, with a net gain of 83,100 jobs and the unemployment rate falling unexpectedly to 6.9%. The strength was broad-based, led by both private and public sector hiring, though wage growth moderated slightly. The data supports expectations that the Bank of Canada may pause rate cuts at its July meeting unless inflation data surprises significantly to the downside.

Latin America delivered a mixed inflation picture. In Mexico, June inflation slowed slightly but not as much as anticipated, with core prices accelerating, casting some doubt on the pace of rate cuts from the central bank. In Brazil, headline CPI ticked up to 5.35% year-over-year, fueled by price increases in housing, transport, and clothing. Although this is unlikely to prompt rate hikes, it may delay the start of a new easing cycle if inflation pressures persist. Meanwhile, Colombia and Chile offered more encouraging news, with inflation easing faster than expected, reinforcing expectations for further monetary easing in those economies.

U.S. Economic Outlook – (July 14–18)

As the U.S. heads into a crucial week, markets are bracing for a series of economic releases and corporate earnings that could shape expectations for the Federal Reserve’s next policy moves. At the center of attention is the June Consumer Price Index (CPI), set to be released on Tuesday. After several months of cooling inflation, recent trends suggest a potential rebound. Core CPI had slowed to a 1.7% annualized pace over the past three months, matching the slowest since early 2021, but June may have marked a turning point. Analysts estimate headline CPI rose 0.25% in June, lifting the year-over-year rate to 2.6%, driven in part by a sharp increase in gasoline prices. Core inflation is also expected to pick up, with a 0.24% monthly gain that would push the 12-month core rate to 2.9%. While still modest in a historical context, the upside risk is notable given the emerging impact of tariffs on core goods and services.

Adding to the week's significance, Q2 earnings season for major banks begins, with JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, Goldman Sachs, and Morgan Stanley set to report. These results will shed light on how financial institutions are navigating an uncertain economic landscape shaped by elevated interest rates, shifting consumer behavior, and volatility sparked by U.S. trade policy. Analysts expect a strong showing in trading revenue—potentially exceeding $26 billion across the top banks—as tariff-related volatility boosts market activity. However, investors will also focus on forward guidance, credit quality, and how banks assess loan growth and margin compression amid slower economic momentum.

The week will also feature updates on consumer activity, with June retail sales due on Thursday. May retail sales disappointed with a 0.9% monthly drop, and while the control group showed resilience (+0.4%), broader signs suggest a slowdown in discretionary spending. Auto dealerships, a major retail category, have struggled in four of the past five months, though early signs point to a possible bounce in June. E-commerce continues to perform well, helping offset weaknesses elsewhere. Overall, retail sales are expected to be flat for June, with control group sales edging up just 0.3%, reinforcing the narrative that household spending is moderating after a strong run.

To close out the week, Friday's housing starts report will provide insight into the real estate sector, where activity has softened under the weight of high mortgage rates and increased resale supply. Single-family permits—a forward-looking indicator—have declined for three straight months, signaling more pressure ahead for builders, especially in the southern U.S. Though multifamily construction remains supported by rental demand, the overall pace of residential construction is expected to fall, with total starts projected to decline to a 1.23-million-unit pace in June.

Together, these data releases and earnings reports will offer critical evidence of how inflation, policy, and consumer behavior are evolving in the second half of 2025. With the next phase of U.S. trade tariffs scheduled for August 1 and monetary policy at a potential turning point, Week 29 is shaping up to be one of the most consequential of the summer.

Wall Street – The Week Ahead

Wall Street enters a pivotal week as Q2 earnings and key inflation data are set to test the market's underlying optimism. Strong bank results could reinforce the narrative of a resilient corporate sector, while hotter-than-expected inflation may dampen hopes for early Federal Reserve rate cuts and tighten overall financial conditions. Investors will be watching closely for any signs of trade policy spillover—whether through earnings guidance, price pressures, or shifts in consumer sentiment—that could reshape expectations heading into the second half of 2025.

The Q2 earnings season begins Tuesday with results from JPMorgan, Citigroup, and Wells Fargo, followed by Goldman Sachs, Bank of America, and Morgan Stanley on Wednesday. Analysts anticipate trading revenues will rise by approximately 11% year-over-year—fueled by increased market volatility linked to recent tariff escalations—bringing the total to around $26 billion. Beyond the top-line numbers, investors will focus heavily on forward guidance related to margin pressure, loan loss provisions, and capital return strategies such as dividends and share buybacks. With share prices already elevated, companies will face little tolerance for underperformance.

Inflation remains a key concern. Tuesday’s CPI report for June is expected to show a 0.25% monthly increase in headline inflation and a 0.24% gain in core CPI, largely driven by higher gasoline prices and the early effects of tariff-related cost pressures. A stronger-than-expected print could undermine expectations for a Fed rate cut in September and extend the current phase of policy tightening.

Although markets are hoping for lower inflation data to confirm that price growth is finally under control, the renewed rise in trade and tariff tensions may shift sentiment. If inflation pressures resurface or remain sticky, Fed policymakers may once again adopt a "wait and see" stance. As a result, the probability of a September rate cut could drop to around 60%, which may limit further gains in equities. In this context, corporate earnings are likely to remain the primary market driver this week.

From a technical standpoint, major Wall Street indices continue to exhibit a bullish structure. In the daily chart, the Dow Jones Industrial Average remains in an upward trend with signs of consolidation. The 200-day moving average (DMA) near 42,000 acts as a critical support level. As long as the index holds above this level, the bullish tone remains intact. A key resistance lies at 45,000, which could serve as the gateway to new highs around 46,000. On the downside, initial support sits at the 50-day moving average near 43,000. A break below this level could push prices toward the 42,000-pivot area. If that pivot is breached, further downside could open the door toward 40,000, and potentially 36,000 in more extended corrections.

U.S. Dollar Outlook and Estimates – Week 29, 2025

The U.S. dollar remains under sustained pressure as it grapples with a convergence of macroeconomic challenges. A recent Reuters survey underscores rising concerns over the United States' growing fiscal deficits, unpredictable trade policies, and heightened expectations for Federal Reserve rate cuts—factors that have collectively undermined the greenback throughout 2025. Despite a modest rebound in recent sessions, supported by renewed tariff threats and broader risk-off sentiment, strategists at Goldman Sachs warn that the dollar may continue to behave like a “risky” asset, rather than a traditional safe haven. Persistent uncertainty surrounding trade dynamics and the Fed’s policy direction continues to erode confidence in the dollar’s longer-term outlook.

The greenback's weakness has been pronounced: the U.S. Dollar Index (DXY) has fallen nearly 11% year-to-date, marking its worst annual performance since the 1970s. Much of this decline is attributed to shifting global capital flows, as investors diversify into other major currencies in anticipation of a looser U.S. monetary stance and increased geopolitical friction.

This week could prove pivotal. With June CPI data, Q2 bank earnings, and further trade policy updates on the calendar, markets will be watching closely to determine whether the U.S. economic picture stabilizes or signals deeper deterioration. A stronger inflation rate could temporarily support the dollar by pushing back the timeline for rate cuts. Conversely, soft inflation and cautious earnings commentary could reinforce bearish sentiment.

From a technical perspective, the Dollar Index (DXY) is currently hovering in a key decision zone, trading between support at 97.00 and resistance near 97.80, with further upside potential capped at 98.50. Traders are closely monitoring the 96.50–98.50 range. A breakout above the upper boundary could spark a technical rebound and challenge the broader downtrend, particularly if upcoming economic data surprises to the upside. On the other hand, a decisive move below the 97.00 level would likely open the door to further declines toward the 96.50–96.00 range, reinforcing the bearish bias.

Market volatility has remained subdued in the lead-up to the week’s high-impact events, but this could change rapidly. The June CPI report on Tuesday and housing starts data on Friday are expected to be key catalysts that may trigger sharper moves in the currency markets.

 UK Economic Review and Outlook

The UK economy is currently navigating a fragile phase. Two consecutive months of GDP contraction, softening business sentiment, and mounting fiscal pressures have significantly increased market expectations for a Bank of England (BoE) rate cut in August. Upcoming high-frequency data, including June GDP, industrial output, and trade figures, will be critical in determining whether the modest growth seen in Q1 has now given way to a more entrenched economic slowdown. With the Office for Budget Responsibility (OBR) warning of “daunting” fiscal risks and global trade tensions escalating, next week’s economic releases and policy signals will be pivotal in shaping the outlook for the second half of 2025.

British Economy in Week 28 (July 7–13) Snapshot

The latest data show the UK economy contracted by 0.1% in May, following a ‑0.3% decline in April, marking the second straight monthly drop in output. The weakness was broad-based, with notable decreases in manufacturing, construction, and industrial production, though services saw a marginal gain. Chancellor Rachel Reeves described the figures as “disappointing”. They used her Mansion House speech to reassure markets, emphasizing the government’s commitment to public investment and recent trade agreements, while addressing growing concerns about fiscal discipline and U.S. tariff threats.

In response to the deteriorating growth picture, financial markets have now priced in a 78% probability of a BoE rate cut at their August meeting. The Bank’s Financial Stability Report also flagged rising risks stemming from global trade friction and sovereign debt pressures. However, it emphasized that the UK banking sector remains resilient. Meanwhile, the OBR reiterated that the country’s elevated debt levels and limited fiscal headroom leave it exposed to future shocks.

Business confidence has weakened, partly due to the uncertain trade environment, while labor market data suggest slowing momentum, likely exacerbated by the upcoming rise in national insurance contributions. Despite the contraction, some economists point to the relatively healthy state of consumer finances and the 0.7% GDP growth recorded in Q1 as cushioning factors. That said, the BoE now forecasts just 0.25% GDP growth for Q2, and this slowdown, combined with easing inflation, makes a rate cut in August increasingly likely.

UK and Week 29 Outlook

Looking ahead, inflation will be in focus. June CPI data is expected to show continued disinflationary momentum, which should reinforce the BoE’s case for monetary easing. Headline inflation is projected to remain steady at 3.4% year-over-year, while core inflation is also expected to hold at 3.5%. Food prices remain elevated, and oil prices saw a brief spike in late June, potentially keeping headline inflation sticky. However, a more favorable development is expected in services inflation, which could decline further to 4.6%, supported by easing wage growth.

Wage data, due next week, is forecast to show that average weekly earnings (excluding bonuses) in the private sector slowed to 4.8% year-over-year in the three months to May. This moderation in pay growth strengthens the case for a 25-basis point rate cut to 4.00% at the BoE’s early August meeting. Nonetheless, the Bank has previously signaled that it does not expect inflation to return to its target until late 2025. Therefore, while the current path suggests a quarterly pace of easing, back-to-back rate cuts will likely require a sharper deceleration in wages and prices, coupled with continued economic weakness.

Key developments to monitor in Week 29 include:

• June GDP & Industrial Output: The ONS will release updated GDP, industrial output, and trade data. While some forecasters anticipate a slight uptick (e.g., +0.1%), the consensus remains subdued, reflecting persistent economic headwinds.
• Bank of England’s Communications: Speeches from BoE Governor Andrew Bailey and the Monetary Policy Report will be closely followed, particularly for insight into how the Bank is interpreting recent inflation and labor market trends. With an August rate cut already priced in, any dovish signals could shift expectations around the pace of further easing.
• Fiscal Policy Signals: Chancellor Reeves continues to face structural budget pressures. Announcements related to potential tax reforms or future spending commitments, especially in the lead-up to the autumn budget, could significantly impact market sentiment and investor confidence.
• Trade and Geopolitical Risks: The ongoing U.S. tariff campaign, which has already targeted Canada, Brazil, and others, poses a meaningful external risk. Any escalation could further undermine UK export performance and dent already fragile business sentiment.

The UK economy continues to struggle under the weight of weak growth, cautious business sentiment, and elevated fiscal concerns. With inflation gradually easing and wage pressures softening, a BoE rate cut in August looks increasingly likely. However, the path forward remains uncertain. Key data in the coming week will either reinforce or challenge the central bank’s current strategy, making Week 29 a crucial juncture in the UK’s macroeconomic trajectory.

Pound Response

The British pound is shifting from a bullish to a bearish trajectory, driven largely by growing market expectations of lower interest rates from the Bank of England. From a technical perspective, the RSI hovering around 43 and a declining On-Balance Volume (OBV) line both point toward potential further downside for GBP/USD. Key support levels to watch are 1.3350 and 1.3300; a break below these could pave the way for a move toward 1.3200.

On the flip side, any weakness in the U.S. dollar could reverse this bearish trend. Should GBP/USD break above the key resistance at 1.3600, the pair may gain momentum and target the 1.3800 level in the sessions ahead.

Gold Market Review and Outlook!

Despite ongoing volatility and pressure across global markets, gold has remained resilient in recent weeks, consistently trading above $3,300 per ounce. This strength is underpinned by a combination of geopolitical uncertainty, robust central bank demand, and broad U.S. dollar weakness. Persistent tensions in the Middle East and the re-escalation of U.S. trade tariffs have further bolstered gold’s appeal as a safe-haven asset. Meanwhile, central banks continue to play a key role in supporting the market, with more than 1,000 tons of gold purchased annually, including a record 244 tons in Q1 2025 alone.

Despite gold’s impressive year-to-date gains of around 25–27%, analysts are becoming more cautious. HSBC has flagged that momentum is slowing, suggesting a correction may be on the horizon, with revised forecasts now ranging between $3,215 and $3,125 over the next 12–18 months. Similarly, Citi expects a retreat below $3,300, targeting a move toward $2,800 by late 2025, citing weakening investment demand as a key concern.

From a macro perspective, Federal Reserve policy signals remain a critical driver. Delayed rate cuts have weighed on gold in recent sessions; however, persistent economic risks could still prompt easing later this year, offering renewed support. In addition, geopolitical and trade-related tensions—particularly any escalation in global conflicts, sanctions, or tariff actions—continue to reinforce gold’s defensive characteristics.

Another powerful force remains central bank buying, which is expected to provide a buffer against short-term corrections. Should this trend continue, it could offer structural support for gold prices through the second half of 2025.

Looking at the technical picture, gold is currently consolidating near key support levels, but the broader outlook remains cautiously bullish. The 50-day moving average, now aligned near $3,300, has held as a meaningful support zone. The Relative Strength Index (RSI) at 54 reflects a neutral to slightly bullish tone. As long as gold maintains its footing above this key level, the uptrend remains intact.

• Key Support Levels: ~$3,300 (short-term), followed by ~$3,240–$3,272 (38.2% Fibonacci retracement).
• Key Resistance Levels: ~$3,360 in the near term, with a breakout above $3,400 potentially resuming the broader bullish trend.

In summary, while short-term technical weakness and profit-taking could introduce volatility, the medium-term trend remains constructive. Strong central bank accumulation, ongoing geopolitical risk, and a softer dollar continue to provide a favorable backdrop for gold heading into the second half of the year.

WTI Market Review and Estimates

WTI crude has recently traded in the $66–69 per barrel range, supported by seasonal summer demand, tight physical inventories, and heightened geopolitical risk sentiment. According to the International Energy Agency (IEA), July refinery runs and strong diesel crack spreads are tightening physical supply, even as headline output forecasts have been revised upward due to higher OPEC+ production. However, the IEA also trimmed its 2025 global oil demand forecast by 20,000 barrels per day, projecting growth of just 700,000 b/d—the slowest annual pace since 2009 (excluding the pandemic years). The agency cited weakening consumption in tariff-sensitive economies such as China, South Korea, Japan, and Mexico.

On the supply side, global output is expected to increase by 2.1 million b/d in 2025, led by both OPEC+ and non-OPEC producers. Despite this, the tightness in the summer physical market has helped keep prices firm. Last week, Brent rose by approximately 3%, while WTI gained around 2.2%.

In the U.S., drilling activity continues to decline. Baker Hughes reported the 11th consecutive weekly drop in active rigs, with U.S. oil rigs falling by one to 424, the lowest level since September 2021. Total rigs now stand at 537. This sustained contraction in drilling suggests U.S. crude production could slow further unless prices rise meaningfully.

WTI Outlook for the Week Ahead

Despite increased output from OPEC+, the U.S., and other producers, the IEA’s lower demand forecast points to a potential supply surplus by late 2025. However, seasonal physical constraints—driven by peak refinery runs and high summer fuel usage (jet fuel and diesel)—are expected to keep inventories tight and support prices in the near term.

U.S. domestic supply signals also remain price supportive. With rig counts at multi-year lows and capital discipline still in effect, exploration and production (E&P) activity is likely to stay subdued unless there’s a marked pickup in demand.

Geopolitical risks also remain in focus. Any escalation in Middle East tensions or the introduction of new U.S. sanctions or tariffs could further disrupt market sentiment and drive prices higher.

Overall, WTI is expected to remain range-bound with a bullish bias, likely holding above $65 per barrel. The market faces a tug-of-war: on one side, weakening demand prospects; on the other, tight physical supply and production constraints. A breakout above $70–72 could materialize if geopolitical risks intensify or U.S. inventory draws accelerate. Conversely, a move below $65 could signal that demand concerns are becoming dominant, potentially weighing on producer activity and price stability.

Technical Outlook

The strong uptrend seen earlier in the year has faded, but bullish momentum remains intact. The Relative Strength Index (RSI) stands at 56, indicating neutral-to-positive conditions. Meanwhile, On-Balance Volume (OBV) suggests continued accumulation, reflecting resilient buying interest on dips.

As long as WTI holds above key technical support near $65, short-term price action may remain constructive, with upside potential toward the $72 level if market catalysts align.

Bitcoin Market Review

Bitcoin has surged to new all-time highs, recently trading around $118,100, driven by a major technical breakout above the $111K–$112K range and a sharp short squeeze that liquidated over $1 billion in bearish positions. Momentum remains robust, underpinned by significant spot Bitcoin ETF inflows—now totaling approximately $51 billion year-to-date—and growing adoption among institutional investors and corporations.

Key drivers of this rally include the anticipated Federal Reserve rate cut in September, positive regulatory developments from U.S. crypto legislation, and intensified attention during “Crypto Week”. From a technical standpoint, Bitcoin has broken out of a descending channel, reclaiming key resistance around $110K, with RSI readings indicating strong but not yet overbought momentum.

Still, caution is warranted. Analysts at HSBC and Citi have warned that sentiment could reverse, particularly if ETF inflows slow. Citi, in particular, forecasts a possible retracement toward $100K should bullish momentum fade.

BTC Weekly Outlook (July 14–18)

Bitcoin enters Week 29 with a bullish tone, supported by favorable technical structure, institutional inflows, and optimistic regulatory signals. The $120K level stands as a critical resistance point; a decisive breakout could open the path toward $125K–$134K, or even $140K, if bullish momentum continues. However, a near-term pullback or consolidation toward the $108K–$100K range remains possible if sentiment cools or macroeconomic risks intensify.

Ongoing record-high ETF inflows and expectations for regulatory clarity from U.S. lawmakers during Crypto Week could continue to provide a positive backdrop. Conversely, any shift toward stricter regulations or delays in the Fed’s rate-cut timeline could act as a drag on price action.

Institutional activity also appears supportive. Whale wallet activity is increasing, and basis rates remain elevated—both signs of sustained institutional demand. Some analysts forecast an additional ~16% rise through mid-July, with upside targets around $132K.

Technical Setup

Bitcoin continues to trade within a bullish channel. Key technical levels include:

Support:

• $109,000 (20-day EMA)
• $107,000, with deeper support near $100,000

Resistance:

• $120,000 (immediate resistance)
• A breakout could target $125,000–$134,000, based on Fibonacci extensions and trend projection

Momentum:

• The RSI is near 72, reflecting strong momentum with some room before reaching overbought territory