EUROPEAN INFLATION: MNI Eurozone Inflation Preview – July 2025
Few Fireworks Expected In July
See the full report here: https://mni.marketnews.com/4lTh6gQ
- The Eurozone inflation round will be split across three days in July. Spain kicks off proceedings on Wednesday, with France, Germany and Italy to all follow Thursday. The Netherlands rounds off the main national-level releases on Friday morning ahead of the Eurozone-wide release later that day.
- Consensus is for the core rate to remain unchanged at 2.3% Y/Y, while headline is seen to slightly decelerate to 1.9% amid expectations for a softer energy Y/Y print.
- The hawkish aspects of last week’s post-decision press conference from President Lagarde centred on familiar themes like tariffs (“the sooner this trade uncertainty is resolved the less uncertainty we will have to deal with”) and growth (Q1 GDP print was "not just front loading", but also "increased consumption and increased investment, and not only attributable to Ireland").
- Comments around the inflation outlook were broadly unchanged compared to June. The ECB expects headline inflation to fall below target from Q3 2025 and into 2026, before returning back towards 2% by 2027. Meanwhile, easing compensation pressures should continue to contribute to services disinflation in the coming quarters.
- That should leave markets focusing more on this week’s Q2 flash GDP prints and ongoing EU-US tariff headline flow. However, with ECB-dated OIS pricing just 16bps of easing through the year, we think there is still scope for a decent reaction in either direction should the July round bring a notable (e.g. 0.2pp or more) surprise on the core metric.
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
