KBC Sunset Market Commentary 28/07/2025 via Trader Talent

KBC Sunset

Monday, July 28, 2025

Daily Market Overview

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Markets

• Outside of stock markets, there’s little market euphoria to be spotted following the US-European trade deal over the weekend. And even the likes of the EuroStoxx50 are well below their intraday highs. Gains of as much as 1.3% were pared to around 0.4% currently. The euro slides against the USD. EUR/USD forfeits 0.9% to fill offers around 1.164 currently. From a technical and momentum point of view the pair is headed at minimum for a retest of the 1.1573 neckline of a double top formation. Is it buy the rumour (that lingered end last week), sell the fact or simply a good enough reason for some EUR-profit taking after the rebound last week? Or perhaps it is the realization that a 15% levy, which is not nothing, is bound to reduce European exports (and therefore also demand for the euro) and growth in a broader perspective? The differing views on the deal among European leaders obviously don’t help either with the French PM for example calling it an act of submission and a dark day for Europe. The weaker euro is also complemented by an across-the-board stronger USD (against G10 peers). This suggests there’s some relief on the dollar side of the equation, maybe related to the fact that Trump’s aggressive trade rhetoric so far does not translate into similar policies. Remember how his shocker tariff card on April 2 triggered a sell-off across all US assets, including the USD. Investors are probably also wary to add to dollar shorts going into an important economic update this week and a Fed policy meeting at which there’s little reason to leave the current wait-and-see attitude. The trade-weighted dollar index fights its way back north of the 98 barrier. Sterling is seizing the sluggish euro momentum to avoid a break below the EUR/GBP November 2023 high. After a brief test of that 0.8768 this morning, EUR/GBP quickly turned south to trade around 0.8682 currently, which coincides with the lower bound of a 2-month upward sloping trend channel.

• Core bonds part ways with German bunds outperforming US Treasuries. German net daily yield changes vary between -4 and -0.7 bps in a bull steepening move. Euro area money markets again add to ECB easing bets after having reduced them in the wake of last week’s policy meeting. Treasury yields are slightly up on the day, lead by the long end of the curve. A double $69bn 2-yr and $70bn 5-yr auction tonight may trigger some intraday moves though these tenors usually lack major market moving potential. UK gilts underperform both vs Bund Treasuries. Yields rise 1-2.2 bps, bear flattening the curve.

News & Views

• A survey by the Confederation of British Industry (CBI) showed a downturn in British retail sales ran into its 10th month in July. The index came in at -34 with the improvement from June’s -46 offering meagre comfort. CBI’s principal economist Sartorius said that “Firms reported that elevated price pressures – driven by rising labour costs – and economic uncertainty continue to weigh on household demand, which has contributed to sales volumes falling since October 2024.” The rising labour costs in turn are attributed to the UK government’s decision to increase social security contributions in the October budget. Weak demand was visible across the distribution sector, with sales in wholesale and motor trades also declining.

• Jürgen Schaaf, an adviser to the ECB, expressed worry in a blog on the central bank’s website over the US dollar’s early dominance of stablecoins following the landmark GENIUS act signed by president Trump last Friday in which a regulatory framework is created. Schaaf said such dominance would provide the US with strategic and economic advantages, allowing it to finance debt more cheaply while exerting global influence. Schaaf also said that if dollar-based stablecoins become widely used in the euro area, be it for payments, savings or settlement, the ECB’s control over monetary conditions would be weakened. Stablecoins are crypto assets that are pegged to a currency, most commonly the US dollar.