Rates on Hold, Markets on Edge: Trade Deals, Inflation and Fed Pressure in Focus

Key Dates & Policy Updates

UK

• CPI inflation rose to 3.6% in June, up from 3.4% in May—still well above the 2% target.
• The Bank of England (BoE) left its Bank Rate at 4.25% at the 19^th June MPC meeting, with a 6–3 vote; no change is expected at the next decision on 7^th August.

EU

• On 24^th July, the European Central Bank held its key rates unchanged: main refinancing rate at 2%, deposit facility at 2.15%, and marginal lending rate at 2.40%.
• Inflation is now steady around the 2% medium‑term target, and wage growth continues to ease.
• Market-implied odds of an ECB rate cut in September have fallen to about 18%, reflecting heightened caution.

US

• At its June FOMC meeting, the Fed held policy rates at 4.5%.
• Core PCE inflation was around 2.7% in May, keeping pressure on the Fed to stay cautious.
• Treasury and analysts flag strong wages, job gains, and tariff‑driven import prices as reasons no immediate rate cuts are expected; market pricing gives ~60% chance of a cut in September if inflation cools further.
• White House pressure intensifies on the Fed to cut rates dramatically, even as doubt grows over central bank independence.

Major News Highlights

Trade & Politics

• The U.S.–EU tariff deal has pre‑empted higher levies, imposing 15% tariffs on EU exports instead of 50%. It has boosted sentiment across equity and currency markets.
• Donald Trump will meet UK Labour leader Keir Starmer, expected to focus on trade and Gaza; earlier reports also highlight Trump’s Scotland visit and pressure around steel and whisky access.
• Markets are watching financial markets for potential Fed Chair turnover – rumours swirl Trump may seek to replace Jerome Powell, raising fears over policy independence.

Equities & Commodities

• U.S. stock futures climbed: Dow +0.4%, S&P 500 +0.4%, Nasdaq‑100 +0.6%.
• Gold has dipped to around $3,330 per oz, pressured by a firmer U.S. Dollar and progress on trade talks.
• Silver (XAG/USD) is trading cautiously near $38.00, eyeing the upcoming Fed decision; higher rates weigh on this non‑yielding safe-haven asset.

FX Forecasts & Market Outlook

GBP/USD

• Sterling has struggled to re‑establish its 2025 uptrend, with gains reversed late last week. Analysts expect GBP/USD to remain under pressure, and likely to be sold on rallies.

GBP/EUR

• Oversold conditions now signal mean reversion toward ~1.15, although scepticism persists due to tone on technical charts and risk sentiment. The pair may rebound briefly before resuming a downward bias.

EUR/USD & USD

• The U.S.–EU trade agreement has supported EUR/USD, limiting downside. However, a stronger USD outlook persists amid Fed policy stability
• USD strength is bolstered by sticky U.S. inflation and trade‑driven input price pressures—forecasts call for modest appreciation unless Fed signals a pivot.

Summary Table

Region	Inflation	Rate Decision	Policy Outlook	FX/Near-Term Forecast
UK	CPI 3.6% (June)	4.25% held	No cut until at least Sept	GBP/USD weak; GBP/EUR mean reversion to ~1.15
EU	~2% (target)	2% held	Data-dependent pause	EUR/USD supported by trade deal
US	Core PCE ~2.7%	4.50% held	Rate cut possible Sept	USD firm; Fed patience maintains strength

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