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Pound firms ahead of BoE test as Swiss Franc, Euro lag
Sterling stands out as the week’s second-best performer amid Euro and Franc softness, but traders eye the BoE decision for direction. Meanwhile, trade tensions persist globally, Japan hints at rate hikes, and China posts strong services data.
Sterling gains on Euro and Swiss Franc weakness, but BoE’s upcoming rate decision could shift momentum.
The EU and US delay tariff escalation, but unresolved disputes and India–US tensions over Russian oil keep trade risks alive.
BoJ minutes suggest hikes may resume once tariff uncertainty clears, pointing to a shift from ultra-loose policy.
China’s services PMI hits a 14-month high, signaling stronger demand and improving sentiment.
Sterling outperforms but BoE decision looms
Sterling is currently the second strongest major currency this week, largely due to broad weakness in the Euro and Swiss Franc. While this relative strength is notable, the British pound faces a crucial test later this week with the Bank of England’s policy decision.
Markets expect the BoE to cut interest rates by 25 basis points, maintaining its pattern of steady easing. However, traders will closely watch the vote split within the Monetary Policy Committee and any updates to inflation forecasts following last month’s upside CPI surprise. The combination of internal divisions and persistent inflation risks could influence expectations for further rate cuts in 2025.
Swiss Franc sinks, commodities mixed
The Swiss Franc remains one of the weakest performers, alongside the Euro and New Zealand Dollar. These currencies have suffered as risk sentiment stabilizes and market attention shifts back to monetary policy divergence.
Commodity currencies and the US Dollar are mixed, with no strong directional trend so far this week. Uncertainty over global trade dynamics and upcoming economic releases has kept volatility contained.
EU delays tariffs, India clashes with U.S. over oil
On the global trade front, tensions remain high despite some diplomatic progress. The EU has postponed a package of countermeasures for six months as it negotiates a joint statement with Washington. However, key disagreements persist, especially regarding U.S. tariffs on EU automotive and strategic sectors, which were excluded from the July 31 executive order.
Meanwhile, India is back in focus after U.S. President Donald Trump threatened fresh tariffs in response to its continued purchases of Russian oil. India responded strongly, defending its trade stance and accusing the U.S. and EU of hypocrisy, noting that their own trade with Russia has not been similarly restrained.
BoJ minutes hint at hikes post-tariff deal
The Bank of Japan’s June meeting minutes, released today, indicate that several policymakers were ready to resume rate hikes once trade uncertainty subsides. Though the minutes predate the recent US–Japan trade agreement, they show a growing shift toward normalization.
Some members argued that as wages stay firm and inflation exceeds forecasts, the BoJ should move away from a wait-and-see approach and be prepared to act. Others emphasized flexibility, suggesting that policy decisions should adapt based on the trajectory of U.S. trade policy and global economic conditions.
Traders are now focused on Friday’s BoJ Summary of Opinions from the July meeting, which is expected to provide a more current view reflecting the new trade truce.
China’s services sector hits 14-month high
The S&P Global China Services PMI climbed to 52.6 in July, up from 50.6 in June — the strongest level since May 2024 and well above consensus of 50.4. The improvement was driven by the fastest growth in new orders in over a year, a renewed uptick in foreign demand, and a bounce in employment figures.
Business sentiment also improved, reaching a four-month high, suggesting that China’s domestic and external demand conditions are rebounding as tariff uncertainty stabilizes.
