French Economy Continues to Weaken in July Amid Marked Drop Inconfidence

Forex

Economic

Summary:

France’s private sector economy continued to deteriorate at the beginning of the third quarter, with business activity shrinkingfor an eleventh successive month. July’s contraction was, however, only marginal overall and the weakest seen over the currentsequence. That said, while the headline figure showed signs of stabilisation, other data from the ‘flash’ report pointed tounderlying fragility. For example, new orders decreased markedly and at an accelerated pace, while business confidencedeteriorated sharply to its weakest since last November. Additionally, employment fell to the greatest extent in three months.

Key findings:

● HCOB Flash France Composite PMI Output Index(1) at 49.6 (Jun: 49.2).11-month high.

● HCOB Flash France Services PMI Business Activity Index(2) at 49.7 (Jun: 49.6). 11-month high.

● HCOB Flash France Manufacturing PMI Output Index(4) at 48.6 (Jun: 47.3). 2-month high.

● HCOB Flash France Manufacturing PMI(3) at 48.4 (Jun: 48.1). 2-month high.

The headline HCOB Flash France Composite PMI Output Index rose to an 11-month high of 49.6 in July, fractionally belowthe 50.0 level which separates growth from contraction. By improving from 49.2 in June, the preliminary HCOB PMI data for thestart of the third quarter indicated that activity moved closer to stabilisation, following contractions in each of the prior tenmonths. By sector, slower declines in output were seen in both manufacturing and services.

However, despite the headline ‘flash’ index picking up, some of the survey’s sub-indices signalled deepening fragility across theeurozone’s second-largest economy. Demand for French goods and services declined at the sharpest pace in three months inJuly. Sales weakness intensified across both monitored sectors, but particularly in manufacturing, where new orders fell to thegreatest degree since February.

The steeper drop in overall private sector new orders partly reflected a quicker downturn in exports, which fell at the fastest ratein the year-to-date. Again, weakness was predominately centred on manufacturing.

Another key finding from July’s ‘flash’ report related to French companies’ year-ahead expectations, which slumped sharply totheir weakest since November last year. Marked declines in confidence were recorded at both manufacturers and serviceproviders, underlying sector data showed. Companies widely commented on lower budgets, concerns regarding the salesoutlook and domestic political uncertainty.

With expectations diminishing, French businesses made further cuts to their employment numbers during July. The overall rateof job shedding was the fastest seen for three months, albeit modest. Notably, lower workforce numbers were exclusive to theservice sector as factory hiring picked up. Although marginal, manufacturing employment growth was its most pronounced intwo-and-a-half years. In many cases, goods producers expanded staffing capacity through the recruitment of fixed-termemployees, anecdotal evidence showed.

As for pricing trends, July survey data revealed relatively soft inflationary pressures across France, with both input costs andoutput charges rising at rates which were below their respective long-term averages. Indeed, prices charged for French goodsand services rose only marginally at the start of the third quarter, albeit at a slightly quicker pace following a fresh uptick infactory gate prices. Total private sector input costs meanwhile rose at a broadly similar rate to June.

Source：S&P Global

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James Whitman

Economic

Forex

The EURUSD pair maintains its steady bullish momentum, with no signs of weakening so far. The current rate stands at 1.1775. Find more details in our analysis for 24 July 2025.

EURUSD forecast: key trading points

● The US dollar weakens amid progress in trade talks with key partners

● Market focus shifts to next week's Fed meeting; interest rates are expected to remain unchanged

● EURUSD forecast for 24 July 2025: 1.1855

Fundamental analysis

The EURUSD pair continues to climb for the fifth consecutive trading session. The US dollar weakens as progress in trade negotiations with key partners boosts demand for rival currencies. Recent reports indicate that the US and the EU are close to finalising an agreement.

Treasury Secretary Scott Bessent reassured investors that Federal Reserve Chairman Jerome Powell would not be forced to resign, despite ongoing criticism from Donald Trump regarding the Fed's monetary policy.

Market participants now shift their focus to the upcoming Federal Reserve meeting scheduled for next week. Interest rates are expected to remain unchanged amid continued uncertainty around global tariffs.

Meanwhile, US crude oil inventories dropped by 3.17 million barrels last week, reaching 419 million barrels. This figure, published by the Department of Energy, significantly outperformed expert expectations, which predicted a decline of only 1.6 million barrels.

EURUSD technical analysis

The EURUSD rate remains within an ascending channel, showing confident movement above the 1.1750 resistance level. The price is currently consolidating near the next local resistance level, suggesting a potential pause before a new upward impulse.

Today’s EURUSD forecast anticipates a possible short-term pullback towards the lower boundary of the channel near 1.1755, followed by a renewed rise towards 1.1855. The Stochastic Oscillator remains in the overbought area, but its signal lines continue to point upwards, confirming sustained bullish pressure.

Summary

EURUSD strength continues, supported by a weaker dollar amid progress in US-EU trade talks and the absence of hawkish Fed expectations. EURUSD technical analysis shows the pair maintains its bullish momentum within the upward channel. After a short-term correction towards 1.1755, a move towards the 1.1855 target remains the primary scenario.

Source: RoboForex

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Gerik

Economic

Targeted subsidies mark shift in China’s fiscal support strategy

In a significant departure from its typical policy approach, China has announced a direct fiscal intervention targeting its aging population by offering monthly electronic subsidy vouchers for elderly care. The initiative, spearheaded by the Ministry of Civil Affairs and the Ministry of Finance, will be tested in select cities before expanding nationwide later in 2025. Eligible recipients seniors classified as moderately, severely, or fully disabled will receive between 500 and 800 yuan per month to cover a portion of care-related services, such as rehabilitation, meal support, and assisted bathing.

Unlike previous stimulus efforts that avoided direct cash handouts, Beijing is now acknowledging the growing economic drag caused by demographic shifts. By focusing assistance on elderly households, policymakers aim to ease the cost burden on families and encourage greater use of care services, thereby activating latent consumption within a segment that is often overlooked in traditional consumer stimulus models.

Silver economy gains prominence amid aging demographics

The move comes as China faces mounting pressure from its demographic transition. As of the end of 2024, 22% of the population was aged 60 or above, up from 18.7% in 2020. The number of people aged 65 and older has already surpassed 216 million, accounting for 15% of the total population. This aging trend is reshaping the domestic economy, giving rise to a "silver economy" in which businesses are increasingly tailoring services and products to older consumers.

Beijing’s subsidy scheme reflects a causal response to both demand and supply-side constraints. On the demand side, many middle-income households are reluctant to spend due to job insecurity, leading to high precautionary savings. According to Alfredo Montufar-Helu, this hesitancy is particularly visible in families supporting elderly relatives, where the cost of long-term care remains a major financial burden. Subsidies, even if modest, are expected to reduce this burden and encourage more active participation in the service economy.

On the supply side, the program is designed to stimulate the senior-care sector by directly subsidizing demand, potentially attracting new investment and encouraging innovation in care delivery.

Fiscal burden shared between central and local governments

The program’s funding will be led by the central government, with supplementary support from local authorities. This model aligns with broader fiscal reforms aimed at balancing responsibility between levels of government while minimizing regional disparities in care provision. The initial 12-month pilot period will allow policymakers to evaluate take-up rates, regional effectiveness, and administrative efficiency before committing to a broader rollout.

While still limited in scope, the initiative is notable for its political significance. Economists from ING and the Economist Intelligence Unit agree that it marks a shift toward bolstering the social safety net, especially amid broader concerns about low consumption, a high youth unemployment rate, and uneven economic recovery. The vouchers are thus not only a social policy tool but also a demand-side stimulus mechanism.

China’s elderly-care subsidy voucher plan represents a strategic pivot toward addressing structural consumption challenges rooted in demographics and inequality. By easing household financial stress linked to elder care, the initiative may reduce precautionary savings and unlock new streams of domestic demand. While modest in financial scope, the program could pave the way for wider reforms in pensions, healthcare, and welfare support under the upcoming 15th Five-Year Plan. For a society increasingly shaped by its aging population, targeted fiscal tools such as these may become central to both social stability and long-term economic sustainability.

Source: CNBC

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Gerik

Economic

Labour market slowdown seen as part of expected adjustment

Reserve Bank of Australia (RBA) Governor Michele Bullock downplayed concerns over a recent rise in the national unemployment rate, framing the uptick from 4.1% to 4.3% in June as aligned with prior forecasts. Rather than interpreting the change as a signal of economic stress, Bullock emphasized that labour market rebalancing is unfolding through reductions in job vacancies, total hours worked, and voluntary job switching, rather than through widespread job losses.

This interpretation suggests that the RBA views the labour market's softening as structurally manageable, rather than as a trigger for urgent monetary easing. Bullock noted that forward indicators, such as vacancy rates, have been stable, and there is no immediate evidence pointing to a sustained spike in unemployment. In this context, the RBA appears to be prioritizing labour market stability over pre-emptive stimulus.

Monetary policy to ease gradually as inflation trends lower

Despite the unemployment data, Bullock reiterated that a "measured and gradual" path to monetary easing remains appropriate. The central bank surprised markets earlier in July by holding rates at 3.85%, even as a quarter-point cut had been widely priced in. That decision, which split the RBA board, reflected a desire to await additional data on both inflation and employment before acting.

Since that meeting, the case for easing has strengthened. Inflation slowed to 2.9% in Q1, down sharply from its peak of 6.8%, and well within the RBA’s target range of 2–3%. Market forecasts suggest that Q2 data, due next week, will show further moderation to around 2.7%. While Bullock acknowledged the possibility of a slight upside surprise, she stressed that the RBA’s strategy remains centered on balancing inflation control with labour market resilience.

This cautious easing stance reflects the RBA’s underlying philosophy: unlike some major central banks that pursued aggressive rate hikes during the inflationary peak, Australia’s central bank took a milder path. As Bullock noted, this approach may allow the RBA to reduce interest rates more conservatively in the coming months, since the baseline level of tightening was already relatively modest.

Markets anticipate August rate cut, but no rush from RBA

Following the unemployment data release, markets have nearly fully priced in a 25-basis-point rate cut in August. However, Bullock’s remarks indicate the RBA is not committing to a fixed timeline and prefers to remain guided by real-time economic signals rather than market expectations. The central bank is clearly prepared to ease policy if disinflation continues and labour conditions deteriorate further, but it will not do so mechanically.

Importantly, Bullock clarified that the RBA does not target a specific job loss figure or unemployment rate. Instead, it evaluates the broader dynamics of labour market adjustments, which can take multiple forms without necessarily triggering significant social or economic disruption.

The RBA’s steady-handed response to rising unemployment suggests a high degree of confidence in the economy’s ability to absorb external and internal shocks. With inflation returning to target and the labour market showing early signs of a soft landing, the central bank is opting for a slow and deliberate path toward lower rates. While markets are positioning for an August cut, Bullock’s message reinforces that future policy decisions will hinge on incoming data not pressure from short-term volatility. This reinforces the RBA’s overarching objective: to manage inflation without sacrificing the hard-won gains in employment.

Source: Reuters

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Gerik

Economic

Commodity

Political tensions trigger economic shock for coffee sector

The Trump administration’s imposition of a 50% tariff on Brazilian goods has dealt a sudden blow to Brazil’s coffee industry, particularly its smallholder producers. The tariff, widely viewed as politically motivated in response to the trial of former President Jair Bolsonaro, threatens to erode Brazil’s dominant position in the global coffee market by significantly undermining its price competitiveness in the United States its largest single coffee buyer, accounting for roughly 16% of total exports.

Farmers like José Natal da Silva in Porciuncula, a coffee-rich municipality in the northwestern part of Rio de Janeiro state, are already struggling under the weight of labor-intensive farming practices, high input costs, and the lingering impacts of climate volatility. With over 40,000 coffee trees under his care, da Silva expressed despair over the economic uncertainty brought on by the tariff, fearing that years of hard work could unravel quickly under the pressure of falling prices and stagnant international demand.

Small-scale producers face limited market flexibility

The structural vulnerability of Brazil’s coffee industry lies in its fragmentation: over two-thirds of its production comes from small family farms. These producers often lack the financial cushion to pivot to new markets or absorb price shocks. As Leandro Gilio of Insper Business School pointed out, the tariff undermines Brazil’s competitiveness in the US without offering any viable short-term alternative export destination.

Brazil’s coffee exporters council, Cecafe, remains cautiously optimistic that US buyers will continue to rely on Brazilian supply, even with the added cost. However, such assertions may underestimate the sensitivity of global commodity trade to pricing shifts, especially when alternatives from Colombia, Vietnam, or Ethiopia may fill the gap at more attractive rates.

The situation has been exacerbated by falling arabica prices. After peaking in February, prices fell 33% by July, according to the University of São Paulo’s Center for Advanced Studies in Applied Economics. This decline, when paired with rising export costs, drastically compresses margins for producers like Paulo Vitor Menezes Freitas, a farmer from Varre-Sai. Freitas warns that many farmers may abandon coffee cultivation altogether if conditions worsen, leading to broader socio-economic consequences in rural regions.

Tariffs compound challenges of climate change and inflation

Beyond the direct impact on bean prices, the US tariff also indirectly raises production costs by affecting essential imported inputs. For coffee farmers, machinery, spare parts, and aluminum materials critical to processing and storage are becoming more expensive, adding another layer of strain.

Climate-related volatility has already weakened producers' resilience. Last year’s drought reduced output significantly, pushing prices higher but only after most smallholders had already sold their crops at lower rates. Such timing mismatches reveal how price surges often come too late to benefit those most in need.

Menezes Freitas, who is soon to become a father, voiced fears that the industry’s uncertain future could drive many out of farming. The combination of environmental unpredictability and trade disruption has created a fragile ecosystem, where even a single policy decision abroad reverberates with disproportionate force in local communities.

The US tariff on Brazilian coffee comes at a time when many smallholders are already on edge due to climate pressure and market volatility. While Brazil remains a dominant coffee exporter, its internal structure rooted in family-scale farming makes it highly susceptible to global disruptions. Without rapid diplomatic or policy resolution, the tariff could accelerate a wave of rural economic distress, forcing farmers to abandon their trade and threatening the sustainability of one of Brazil’s most iconic export industries. For now, farmers like da Silva and Freitas can only hope for a reversal before their fears become irreversible losses.

Source: Reuters

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Eva Chen

Political

Economic

A Thai F-16 fighter jet bombed targets in Cambodia on Thursday, both sides said, as weeks of tension over a border dispute escalated into clashes that have killed at least two civilians.

Of the six F-16 fighter jets that Thailand readied to deploy along the disputed border, one of the aircraft fired into Cambodia and destroyed a military target, the Thai army said. Both countries accused each other of starting the clash early on Thursday."We have used air power against military targets as planned," Thai army deputy spokesperson Richa Suksuwanon told reporters. Thailand also closed its border with Cambodia.

Cambodia's defence ministry said the jets dropped two bombs on a road, and that it "strongly condemns the reckless and brutal military aggression of the Kingdom of Thailand against the sovereignty and territorial integrity of Cambodia".

The skirmishes came after Thailand recalled its ambassador to Cambodia late on Wednesday and said it would expel Cambodia's envoy in Bangkok, after a second Thai soldier in the space of a week lost a limb to a landmine that Bangkok alleged had been laid recently in the disputed area.

Thai residents in the Surin border province fled to shelters built of concrete and fortified with sandbags and car tires as the two countries exchanged fire."How many rounds have been fired? It's countless," an unidentified woman told the Thai Public Broadcasting Service (TPBS) while hiding in the shelter with gunfire and explosions heard intermittently in the background.

For more than a century, Thailand and Cambodia have contested sovereignty at various undemarcated points along their 817 km (508 miles) land border, which has led to skirmishes over several years and at least a dozen deaths, including during a weeklong exchange of artillery in 2011.Tensions were reignited in May following the killing of a Cambodian soldier during a brief exchange of gunfire, which escalated into a full-blown diplomatic crisis and now has triggered armed clashes.

LANDMINES

The clashes began early on Thursday near the disputed Ta Moan Thom temple along the eastern border between Cambodia and Thailand, around 360 km from the Thai capital Bangkok."Artillery shell fell on people's homes," Sutthirot Charoenthanasak, district chief of Kabcheing in Surin province, told Reuters, describing the firing by the Cambodian side.

"Two people have died," he said, adding that district authorities had evacuated 40,000 civilians from 86 villages near the border to safer locations.Thailand's military said Cambodia deployed a surveillance drone before sending troops with heavy weapons to an area near the temple.

Cambodian troops opened fire and two Thai soldiers were wounded, a Thai army spokesperson said, adding Cambodia had used multiple weapons, including rocket launchers.

A spokesperson for Cambodia's defence ministry, however, said there had been an unprovoked incursion by Thai troops and Cambodian forces had responded in self-defence.Thailand's acting Prime Minister Phumtham Wechayachai said the situation was delicate."We have to be careful," he told reporters. "We will follow international law."

An attempt by Thai premier Paetongtarn Shinawatra to resolve the recent tensions via a call with Cambodia's influential former Prime Minister Hun Sen, the contents of which were leaked, kicked off a political storm in Thailand, leading to her suspension by a court.Hun Sen said in a Facebook post that two Cambodian provinces had come under shelling from the Thai military.

Thailand this week accused Cambodia of placing landmines in a disputed area that injured three soldiers. Phnom Penh denied the claim and said the soldiers had veered off agreed routes and triggered a mine left behind from decades of war.

Cambodia has many landmines left over from its civil war decades ago, numbering in the millions according to de-mining groups.But Thailand maintains landmines have been placed at the border area recently, which Cambodia has described as baseless allegations.

Source: Reuters

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Winkelmann

Economic

The Chinese “cannot be allowed to export their way back to prosperity”, argues US Secretary of the Treasury Scott Bessent, who claims that China’s economy is the “most unbalanced in history”. Such remarks reflect the growing fear in Washington that China’s overcapacity, subsidies and dumping are distorting global trade.

The more pressing concern, however, is not what China exports, but how. Global cost structures are indeed being reshaped but by a quieter and more complex force: relentless productivity improvements. China is not merely moving more goods; it is exporting a new production model powered by automation, artificial intelligence (AI) and state-guided industrial optimisation. This shift is disruptive, deflationary and still largely misunderstood.

China’s rise as the world’s factory in the late 20th century was driven by labour and scale. But now, China aims to achieve a new form of dominance through intelligent infrastructure. No longer confined to apps or chatbots, AI has been embedded across the physical economy — guiding everything from robotic arms and warehouse fleets to autonomous production lines. For example, Xiaomi’s “lights-out” factory in Beijing can assemble 10 million smartphones annually with minimal human intervention. AI conducts a symphony of sensors, machines and analytics that form a tightly woven industrial loop, driving efficiencies that traditional manufacturers can approach only incrementally.

Nor is this technology-driven ecosystem confined to a single factory. DeepSeek’s 671-billion-parameter open-source large language model is already being deployed not just for coding but also to optimise logistics and manufacturing. JD.com is revamping its supply networks through automation. Unitree is exporting bipedal warehouse robots. And Foxconn (Apple’s primary manufacturing partner) is developing modular, AI-led microfactories to reduce its dependence on static production lines.

These examples may not represent “prestige innovation” but they do attest to a broad culture of industrial optimisation. Under the banner of “new quality productive forces”, the Chinese government is rolling out AI pilot zones and subsidising factory retrofits, and cities like Hefei and Chengdu are offering local grants that rival the scale of national initiatives elsewhere.

The strategy echoes the one pursued by Japanese industry in the 1980s, when automation, lean production and industrial consolidation helped firms outcompete global rivals. But the Chinese approach goes further, blending AI with economies of scale, feedback loops and a unique cultural dynamic known as involution (neijuan): a self-perpetuating race to optimise and outcompete, often at the expense of profit margins. BYD, among the most vertically integrated automakers globally, recently cut prices across dozens of models, triggering a US$20 billion stock sell-off.

In sectors from e-commerce to electric vehicles, this practice has driven such relentless cost compression that the state has occasionally seen fit to intervene. In April 2025, the People’s Daily newspaper warned that extreme involution was distorting market stability, citing a destructive price war in food delivery between JD.com, Meituan and Ele.me. And the problem is even more acute in the electric vehicle (EV) industry. While more than 100 Chinese EV brands currently compete, more than 400 have gone out of business since 2018.

The arena of global competitiveness is unforgiving. Those who survive emerge leaner, more adaptive and better positioned than their legacy counterparts. That is how successful Chinese EV makers have managed to edge into Europe, offering models at price points that local firms struggle to match. Viewed from afar, the process looks chaotic. In practice, though, it resembles natural selection. China is deliberately promoting industrial evolution: The state fosters a wide field of contenders and then lets the market winnow the field.

This approach is rippling across industries. In solar panels, Chinese manufacturers now account for over 80% of global production capacity, driving prices down more than 70% over the past decade. And a similar trend is emerging in EV batteries, where Chinese firms dominate the cost-per-kilowatt curve. But make no mistake; this deflation does not stem from oversupply or dumping. It reflects redesigned cost structures, which are the result of AI, intense competition and relentless iteration.

Thus, Chinese industry has made efficiency a tradable asset — one that is reshaping global pricing dynamics. Once this shift really takes hold, businesses around the world will find themselves adjusting their own pricing strategies, labour deployment and supply chain configurations.

But this development presents new challenges for many economies. Consider the role of central banks, whose mission is to ensure price stability. What can they do if inflation is subdued not by weak demand but by superior supply-side efficiency coming from abroad? Most likely, monetary policy will lose traction in such a scenario. The march of software advances will not slow just because interest rates rise or fall. Instead, industrial policy will have to come to the fore — not as protectionism but as an adaptive necessity. The core divide will no longer be between capitalism and state planning but between static and dynamic systems.

The US Inflation Reduction Act and CHIPS and Science Act, as well as the EU Green Deal Industrial Plan, did represent early Western efforts to challenge China’s lead, but these packages were largely reactive, siloed or focused on upstream nodes like chips. While the US and its allies deploy tariffs, subsidies and export controls, the real competition is over the integration of AI into the real economy — not who builds the smartest chatbot but who builds the smartest factory and whose model can be sustainably replicated at scale.

Of course, the Chinese model has trade-offs. Labour conditions may worsen under relentless cost-cutting; oversupply remains a systemic risk; regulatory overreach can derail progress; and not all efficiency gains translate into shared prosperity. Consumers may benefit but workers and smaller firms will bear the brunt of the adjustment.But even if the Chinese model is not universally replicable, it raises important questions for policymakers everywhere. How will others compete with systems that produce more, faster and cheaper — not through wage suppression but ingenuity?

To dismiss China’s approach as merely distortive misses the point. The Chinese government is not just playing the old trade game harder: It is changing the rules and it is doing so not through tariffs but through an industrial transformation. If the last wave of globalisation chased cheaper labour, the next one will chase smarter systems. Intelligence will no longer live only in the cloud — but in machines, warehouses and 24/7 assembly lines.

China’s most important export today is not a product but a process. And it will redefine the nature of global competition.