KBC Sunset Market Commentary 29/07/2025 via Trader Talent

KBC Sunset

Tuesday, July 29, 2025

Daily Market Overview

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Markets

• EUR/USD weakness continues to prevail in the wake of the trade agreement with the US, be it in choppy trading. The common currency wiped out early losses in the European session only to stack them up again in early US dealings. A buy-the-rumour, sell-the-fact correction was nevertheless inbound after failing to move beyond the July high end last week amid rumours of an imminent deal. All of the EUR/USD dips since March of this year were seen as good entry points and we think this time is no different. For the time being though, we wouldn’t row against the tide and let the downleg run its course. That’s particularly so given the high risk of a technical break lower below the 1.1578 neckline of a double top formation. The level is cracking right now and could, in case of a confirmed break, pave the way for a return to 1.1431 initially with 1.1214/1.1184 then popping up as the next reference. Aside from euro weakness, we’re spotting dollar strength as well going into the first releases (JOLTS, Conference Board consumer confidence, cfr infra) of a busy economic calendar this week. The IMF supported the upleg with an upward revision to US growth for this year to 1.9% from 1.8% estimated in April and to 2% (from 1.7%) in 2026. The fund cited lower than expected tariff rates for the move, though warned they still pose a risk for the US (as well as global) economy. DXY takes out the mid-July high to trade north of 99 for the first time since end June. The 99.63/100 barrier serves as the next resistance. The IMF’s updated forecasts for the euro area entail a 1% growth this year (+0.2 ppts) but partially due to a jump in frontloaded Irish pharmaceutical exports to the US. It kept the 2026 estimate unchanged at 1.2%. Global growth expectations were lifted to 3% from 2.8% and 3.1% from 3% for 2025 and 2026 respectively. Rates markets trade pretty quiet with some minor Bund underperformance vs Treasuries. German yields eke out 1.5 bp at the front and middle section of the curve. It’s worth noting that the ultralong end (30-yr) remains near the 14-year highs. US rates are down between 2.8-4.4 bps in a bull flattening move.

• US JOLTS job openings in June came in at 7.43 mln, pretty close to the 7.5 mln expected but lower than May’s 7.77 mln. The quits rate – a gauge of confidence in finding a new job after voluntarily quitting one – stabilized at 2%. July consumer confidence measured by the Conference Board meanwhile improved from an upwardly revised 95.2 to 97.2. The present situation was considered slightly worse than the upwardly revised print for June. The expectations component rose from 69.9 to 74.4, the highest since February this year. The US dollar and yields react stoic.

News & Views

• The Belgian economy grew by 0.2% q/q in the second quarter of 2025, the National Bank of Belgium’s initial estimate showed today. That’s halve the pace of the first quarter. The year-on-year growth rate stood at 1%, easing from 1.1% in Q1 and maintaining the +/- 1% growth pace in place since 2024. This flash estimate has no expenditure details yet. Instead, the value added approach reveals a 0.1% q/q contraction in the industrial sector while both the construction and services sectors saw positive activity growth of 0.2%.

• Hungary’s economy ministry slashed its growth estimates for this year and the next. GDP may now grow a meagre 1% this year vs an already earlier reduced 2.5% from the initial 3.4% estimate. Economy minister Nagy said the economy may have stagnated in Q2 following a contraction in the first quarter and added that it may grow significantly less than forecast in the second half of the year. Expectations for 2026 were lowered to 3.1% from 4.1%. The struggling economy going into election year 2026 prompted several ad hoc government interventions, including price caps to tame inflation and a series of stimulus measures. The former fail to keep price pressures really in check with inflation remaining above the central bank’s target in June (4.6%), so offering little relief for consumers, but instead weighing on business confidence. The latter put additional strain on already weak public finances. Nagy nevertheless still believes it can reach its earlier upwardly revised 4.1% deficit target for this year. The Hungarian forint weakened abruptly and sharply after the new government estimates. EUR/HUF is testing the 400 barrier again.