A bare-bones deal is Europe’s best hope in trade talks with the U.S., sources say

Economic

Summary:

EU and U.S. trade talks aim for a minimal political deal before July 9, amid tariff tensions. EU seeks concessions in key sectors but braces for all outcomes, including higher U.S. tariffs.

The clock is ticking in trade talks between Washington and the European Union, with European officials now saying their best hope is striking a “political” deal before a key July 9 deadline, three sources told CNBC.

Concrete details of such a trade arrangement would have to be worked out at a later time.

“The U.S. proposal from last week is aimed at an agreement in principle,” one EU official, who did not want to be named due to the sensitivity of the talks, told CNBC, adding that this agreement in principle would then “be negotiated out into a proper trade agreement at a later stage.”

Previously close allies, the U.S. and EU have had a fractious relationship amid disagreements over trade and support for embattled Ukraine in the months since the start of U.S. President Donald Trump’s second term. Tensions escalated in early April, when White House announced a spate of reciprocal tariffs against most global trade partners, including a 20% levy on the EU. All such duties have been temporarily reduced until July 9 to facilitate talks.

The U.S. sent a new proposal to the EU’s negotiating team last week. European negotiators are having face-to-face talks with their American counterparts later this week with the view to get a deal done in the coming days. Total bilateral trade in goods between the EU and the U.S. accounted for 851 billion euros ($1 trillion) in 2023, according to figures from the European Commission.

European officials expect a new update on the negotiations Friday, but the situation is fluid. On Monday, European ambassadors had conversations about the state of play in the trade negotiations. Lithuania’s Minister of Finance Rimantas Šadžius told CNBC on Wednesday that he is “slightly optimistic” there will be a trade compromise between both sided of the Atlantic.

Despite this, sources told CNBC that, despite efforts to reach a trade compromise, the EU is preparing for any possible outcomes, including the return of reciprocal tariffs.

“The general sense is that in the coming days and weeks, all outcomes, ranging from a successful deal on a framework agreement all the way to higher US tariffs with additional sectors, are still possible,” the same EU official told CNBC.

This sentiment was also shared by European Commission President Ursula von der Leyen last Friday.

“We are ready for a deal. At the same time, we are preparing for the possibility that no satisfactory agreement is reached,” she said at a press conference.

The European Commission was not immediately available for comment when contacted by CNBC Wednesday about an update to the talks.

Another EU official, also speaking to CNBC on the condition of anonymity, said there is an awareness in Brussels that it is almost impossible to return to the trade relationship that the EU and U.S. enjoyed before the April 2 announcement of reciprocal tariffs.

A third EU official, who also chose to speak anonymously, told CNBC that there is a risk that the outcome of the talks will be an “asymmetrical” deal, under which the EU will not escape some additional U.S. levies.

Nonetheless, the bloc is looking to get concessions in critical areas for its economy, including automotive, semiconductors and pharmaceuticals, all three sources confirmed.

The first EU official added that some member states will only agree to a deal in principle if there is a commitment from the Trump administration to “upfront tariff relief.”

The European Commission, the executive arm of the EU, negotiates trade with other parts of the world, but its proposals and position reflects the thinking of the 27 capitals.

source :cnbc

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Adam

Forex

The USD/JPY recovered its entire losses from the day before when it had dropped to test its lowest point since early June below 143.00. Though the pair is now back inside the chop zone around 144.00 handle, the path of least resistance remain to the downside, owing to a strengthening bearish trend for the US dollar.

The greenback has fallen to multi-year lows against several major European currencies including the pound, euro and more noticeably the franc, but it has managed to hold steady against the Japanese yen for the time being, with the 142.00-142.50 area offering strong support on multiple occasions in recent months. But the more a key level is tested, the more likely we will see an eventual breakdown. So, is the USD/JPY forecast going to change to being decisively bearish? Well, it will need to break this key support zone before potentially heading towards 140.00 and lower. For now, the dollar is making a bit of recovery, but that could easily change in the coming days – especially if incoming US data disappoints expectations. Today’s poor ADP reading was a prime example.

Dollar Rebounds on US Data but Path Forward Not Clear

The US dollar index has managed to find some support after falling to its lowest level since February 2022 yesterday. The greenback has found some support on the back of Tuesday’s US data releases when JOLTS job openings and ISM manufacturing both came in stronger than expected, offering a lift to a dollar still labouring under an asymmetric bearish tilt. On the docket today, we have ADP payrolls (which has just been released, showing a print of -33K vs. +99K), final House approval for Trump’s “Big Beautiful Bill”, as well as potential tariff posturing ahead of the 9 July deadline. On Thursday, we will have plenty more US data, including the monthly non-farm payrolls report. These upcoming events means there’s potential for increased volatility in the next few days across the FX space. Though this may imply that there are equal risks to both the upside and downside dollar directions, I will still lean towards the bearish side of things for the greenback owing to the underlying trend and negative sentiment.

Dollar Bears Need Soft Data to Justify Bearish Bets

Yesterday’s saw Fed Chair Jerome Powell stick to script in Sintra, reiterating a data-dependent stance that leaves the dollar finely attuned to labour and inflation releases. It is worth pointing out that he declined to rule out a July cut – meaning a very soft jobs print tomorrow could quickly revive market bets on near-term easing. That would be enough, in my view, to cause the USD/JPY direction to turn sharply lower and move near 140.00 zone.

That said, yesterday’s numbers went the other way. May’s JOLTS data exceeded forecasts, while ISM manufacturing ticked higher, with a rebound in prices paid sub-index pointing to increased inflationary pressures. These data releases aren’t game-changers, but they hint at sticky inflation and a still-resilient labour market, giving the Fed less cause to act soon, despite pressure from the White House. It can therefore be argued that markets may have leaned too far dovish, and that the dollar could regain its footing if inflation picks up. Put another, the dollar bears need to see the release of negative data to justify their bearish bets against the dollar.

In as far as today’s data is concerned, consensus for the ADP was to rebound to 99K from 37K the month before. Instead, we got a negative 33K print. While it’s no oracle for official payrolls, market have moved a little sharply on the back of this sharp miss. Tariff threats also loom, with Trump sticking to a 9 July deadline. While markets suspect another last-minute climbdown, any renewed trade tension still poses a headwind for the dollar.

USD/JPY Technical Analysis

From a technical point of view, the USD/JPY is in an overall bearish trend given the fact that price remains below its key moving averages like the 50 or 200 day. Even the 21-day exponential average is now back above current prices to suggest the near-term trend is also starting to turn. With a short-term bullish trend line also broken yesterday, this has added another layer of bearish flavour to the mix.

USD/JPY Rebounds but Risks for US Dollar Remain Titled to Downside_1

That said, support at 142.80-142.00 area needs to give way now for the trend to gather momentum. So far, this area has held on multiple occasions in recent weeks, and this was again the case yesterday as rates bounced right off this important support area. Therefore, a clean break below this area is now needed to provide fresh bearish momentum and pave the way for a potential drop to the next key support area around 140.00.

Otherwise, expect continued choppy price action in the near-term outlook. Resistance is now seen around 144.00, marking the underside of the short-term trend line that has just been taken out. Above it, 145.00 and then 146.00 are the next key short-term hurdles to watch.

Source: investing

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Adam

Economic

The Australian dollar is lower on Thursday. In the Europen session, AUD/USD is trading at 0.6556, down 0.41% on the day.

Australia's retail sales lower than expected at 0.2%

Australia's retail sales posted a small gain of 0.2% in May, up from a flat reading in April but shy of the consensus of 0.4%. The gain was driven by a strong rebound in sales in clothing and footwear, while food sales declined. On an annual basis, retail sales rose 3.3%, down sharply from 3.8% in April and the weakest pace of growth in six months.

RBA expected to trim next week

Today's weak data has bolstered expectations that the Reserve Bank of Australia will lower rates at next week's meeting. The money markets have priced in a cut at 97%, which would lower the cash rate to 3.6%.

Consumers have been holding back on spending and the Reserve Bank will be counting on a rate cut to boost Australia's weak economy. That strategy hasn't worked as well as hoped; the RBA has lowered rates twice since February but first-quarter growth was weak and consumers haven't been spending.

Inflation is under control and CPI dropped to 2.1% in May, down from 2.4% and the lowest level since Oct. 2024. With inflation largely contained, the Reserve Bank can deliver a rate cut without too much concern about the upside risk to inflation.

US nonfarm payrolls expected to drop to 110 thousand

It's an abbreviated week in the US due to the Fourth of July holiday on Friday. The US will release the June employment report on Thursday, with all eyes on nonfarm payrolls.

Nonfarm payrolls eased slightly in May to 137 thousand from 147 thousand and the downward trend is expected to continue, with a consensus of 110 thousand for June. This would mark the weakest pace of job growth since 2020, with the exception of a meltdown in job growth in Oct. 2024.

AUDUSD Technical

AUD/USD has pushed below support at 0.6567 and is testing support at 0.6555. Below, there is support at 0.6540

There is resistance at 0.6582 and 0.6594

Australia's retail sales miss forecast, Aussie slips_1

AUDUSD 4-Hour Chart, July 2, 2025

Source: marketpulse

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Devin

Economic

Treasuries fell as weaker-than-anticipated US employment data was overpowered by a selloff in the UK government bond market that focused investor attention on deficits in both nations.

Yields rose the most for longer-dated bonds with 30-year Treasuries climbing about six basis points to 4.83%. The market was, in part, following moves in the UK, where yields on 30-year gilts jumped on concerns about Chancellor of the Exchequer Rachel Reeves’ future reignited questions over the nation’s fiscal position.

Investors have raised similar concerns about the outlook in the US, where on Tuesday the Senate passed President Donald Trump’s sweeping tax and spending bill that would add an estimated US$3.4 trillion (RM14.26 trillion) to the nation’s debt over a decade. The legislation is now in the hands of the House as Republicans rush to complete work on the legislation by a July 4 deadline set by the president.

“The UK long end is getting crushed and that market is thin so it’s taking all long duration higher in yield,” said Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities.

“With both UK and US fiscal trajectories in the spotlight and long-end yields rising accordingly, markets are recalibrating their view of the term premium — even as short-end expectations remain anchored by the potential for rate cuts,” says Brendan Fagan of Bloomberg FX Strategist.

The market briefly pared losses earlier in the session after a report on private-sector payrolls showed an unexpected slump in June, a sign of weakness in the US labour market.

Yields for two-year notes, which are more sensitive to monetary policy, erased an increase of nearly three basis points, to trade little changed following the release of ADP figures showing a drop of 33,000 in payrolls last month.

Investors are turning to Thursday’s jobs report, the third and most comprehensive to be released this week on US labour market conditions. If that data shows further weakness, traders reckon that the Fed could move up cuts. Following the ADP report, traders added to wagers on at least two cuts this year, with the first coming in September.

A “general softening trend among many labor market indicators is really the story,” said Angelo Manolatos, a rates strategist at Wells Fargo. “That softening likely puts the Fed in a position to cut rates later this year, likely starting in September.”

The prospect of Fed cuts propelled the Treasury market in June to its best monthly performance since February. Yields dropped last week to their lowest level in more than a month. And open interest data shows traders added new long positions into the recent bond market rally.

“If there’s a material increase in the unemployment rate it will change the calculus in the market’s mind about the timing and pace of rate cuts,” said Dominic Konstam, head of macro strategy at Mizuho Securities USA.

Source: Theedgemarkets

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Adam

Economic

At 8:15am ET, the Bloomberg terminal coughed up an unpleasant surprise. The ADP payroll number—Wall Street's appetizer before Thursday's official jobs feast—showed a loss of 33,000 positions. Forecasters had penciled in a gain of 98,000. The screen flushed scarlet; the sell buttons twitched. And then, almost nothing. The Nasdaq 100 futures sagged a perfunctory 0.2%, the digital equivalent of a raised eyebrow. Complacency has become the market's default setting. Weak data? That merely whets the appetite for rate cuts, now priced at roughly sixty-four basis points by year-end.

In seven days, on the 9th, President Trump's new tariff barrage goes live, unless Tokyo, Brussels, or New Delhi produces the diplomatic equivalent of alchemy. The President, sounding like a man with one eye on campaign rallies and the other on customs receipts, vows there will be "no extension" to the July 9 deadline. The world's supply chains have heard such vows before, and each time the costs seep, unseen, into consumer prices.

Today marks three months to the day since the famous “Liberation Day.” On Wednesday, April 2, Donald Trump sent shockwaves through the markets by announcing reciprocal tariffs. The image of the US president proudly brandishing his list of punitive measures will remain etched in our memories. So too will the panic that ensued, until the announcement of a pause a week later. Before this spectacular about-turn, almost no one would have bet that the S&P 500 would recover its losses in 30 days. Or that it would break records in three months.

Between April 2 and today, there was a 28% rise in the S&P 500. The index is now up 5.4%, after losing as much as 18% at its worst on April 7, which was the low point of the year.

And yet, nothing has really been resolved since then. We have no certainty about the level of tariffs, as trade negotiations are ongoing. Worse still, we already know that with the tariffs currently in place, the average entry ticket to the US is around 15%, compared with 2.5-3% previously. The impact on growth, inflation and corporate earnings is therefore still ahead of us.

Late Tuesday another wild card clattered onto the table: the Senate's passage of the "One Big Beautiful Bill", a sprawling tax-and-spend opus that trims social programs, fattens defense, and promises to add $3.3 trillion to the deficit. Once upon a time markets fretted about such arithmetic. Now they greet it as stimulus. The Dow, barely a percent off its record, is living proof that deficits are somebody else's problem—until bond vigilantes return from exile.

Meanwhile the Federal Reserve, chastened by stickier inflation and stronger-than-expected May job openings, insists that cuts will be "data dependent." What happens when the job data suddenly include a minus sign, like today's? If employment is stumbling before tariffs bite, can monetary policy really paper over both supply shocks and fiscal profligacy?

For years the American economy has floated on a Goldilocks narrative—growth neither too hot nor too cold, inflation docile, jobs plentiful. But Goldilocks now faces a trifecta: tariffs that could goose prices, deficits that could drive yields higher, and a labor market that may be losing altitude. Markets are responding with an almost literary form of denial.

In corporate news, Centene saw a 26 percent pre-market plunge after withdrawing its 2025 forecast offered a microcosm of the tension. All eyes will be on the non-farm payroll number that lands on Thursday— ahead of the July 4th holiday.

In the U.K., British Finance Minister Rachel Reeves is in trouble after the government had to compromise on its welfare reform bill to pass it through Parliament. Meanwhile, Bank of England policymaker Alan Taylor warned that the UK's economic "soft landing" is now at risk, citing recent data that supports five interest rate cuts in 2025 instead of four. U.K. bond yields spiked sharply during the weekly parliamentary debate after Prime Minister Keir Starmer stopped short of offering full support for Reeves.

In Asia, the Nikkei 225 ended with a poor performance, down 0.5% this morning. South Korea, weighed down by the Nasdaq's decline, lost even more ground (-0.6%). Mainland China and India are stable. The best performers of the day are Hong Kong (+0.5%) and Sydney (+0.7%). European markets are mixed, with the Stoxx Europe 600 near zero.

source :marketscreener

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Daniel Carter

Economic

Central Bank

Poland's central bank unexpectedly cut its main interest rate by 25 basis points to 5% on Wednesday, citing its expectation for a clear decline in inflation in the coming months.

"According to the available forecasts, the CPI inflation in the coming months will fall below the upper bound for deviations of the NBP (National Bank of Poland) inflation target," the Monetary Policy Council (MPC) said in a statement.

"Taking this into account, in the Council's assessment, it became justified to adjust the level of the NBP interest rates."

Poland's statistical office said this week that annual inflation in June was 4.1%, slightly higher than the 4.0% forecast in a Reuters poll and up from a revised 4.0% in May. The central bank's inflation target is 1.5%-3.5%.

On Wednesday, Poland's central bank also published new forecasts for inflation and economic growth, which indicated the pace of price growth would be lower than expected in its projection from March.

The central bank sees inflation of 3.5%-4.4% in 2025, 1.7%-4.5% in 2026 and 0.9%-3.8% in 2027. In its previous set of forecasts in March, it expected inflation of 4.1%-5.7% in 2025, 2.0%-4.8% in 2026 and 1.1%-3.9% in 2027.

According to analysts, the MPC may decide to further ease monetary policy.

"What next? The MPC does not specify in the statement, but such a projection is consistent with further cuts (of rates), consistent with the cycle," mBank economists said in a post on X.

NBP President Adam Glapinski is scheduled to hold a press conference on Thursday in which he is expected to discuss the reasons for the latest rates decision in more detail and perhaps provide guidance on future monetary policy.

In May, Poland's central bank cut the cost of credit by 50 basis points, bringing its main interest rate to 5.25% and marking its first easing since October 2023.

But it left interest rates unchanged last month, with Glapinski saying at the time that the central bank would not commit to a future rates path because of economic uncertainty, and that incoming data would guide its future decisions.

Source: Reuters

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Adam

Commodity

Gold and silver prices are a bit higher in quieter early U.S. trading Wednesday. The two precious metals are pausing ahead of a major U.S. economic report on Thursday. August gold was last up $2.40 at $3,352.20. September silver prices were last up $0.058 at $36.455.

Traders are starting to look ahead to what is arguably the most important U.S. data point of the month—the June employment situation report from the Labor Department on Thursday (out one day early due to the Fourth of July holiday Friday). The key non-farm payrolls number is seen coming in at up 110,000 versus a rise of 139,000 in the May report.

Asian and European stocks were mixed overnight. U.S. stock indexes are pointed to mixed openings today in New York. Focus of the marketplace is moving back to global trade and specifically U.S. trade deals as a U.S.-imposed deadline of July 9 approaches for some countries to make a deal. Reads a Wall Street Journal headline today: “Trade deals prove hard to strike.”

The key outside markets today see the U.S. dollar index slightly up. Nymex crude oil futures prices are firmer and trading around $66.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.287%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the Challenger job-cuts report and the weekly DOE liquid energy stocks report.

Mild price gains for gold, silver as they pause ahead of U.S. jobs data_1

Technically, August gold futures bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $3,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $3,200.00. First resistance is seen at this week’s high of $3,370.50 and then at $3,400.00. First support is seen at the overnight low of $3,337.20 and then at Tuesday’s low of $3,313.70. Wyckoff's Market Rating: 6.5

Mild price gains for gold, silver as they pause ahead of U.S. jobs data_2

September silver futures bulls have the overall near-term technical advantage but trading has turned choppy and sideways at higher levels recently. Silver bulls' next upside price objective is closing prices above solid technical resistance at the June high of $37.73. The next downside price objective for the bears is closing prices below solid support at $35.00. First resistance is seen at $37.00 and then at $37.50. Next support is seen at $36.00 and then at last week’s low of $35.535. Wyckoff's Market Rating: 7.0