Key Highlights

• As BRICS summit convenes in Brazil, President Trump warns “any country aligning themselves with the anti-American policies of BRICS will be charged an additional 10% tariff.”

• Industrial metals: iron ore and copper both down as letters push for deals before new August 1 deadline for reciprocal tariffs.

• OPEC+ announces surprise August plan to add 548,000 barrels/day to oil output; crude oil prices fall 0.5%.

Chart of the Day

EXHIBIT #1: CASH FLOWS DOMINANT IN AUD AHEAD OF RBA DECISION

^{Source: BNY}

Tomorrow’s RBA decision is expected to yield another 25bp cut, and the central bank’s initial position as one of the more reluctant G10 easers has ceased to apply – a shift that has driven most AUD outflows throughout the last quarter. Although the economy’s exposure to U.S. tariffs is comparatively mild, the difficult environment for commodity-based terms of trade and China’s growth challenges have likely dampened interest. Meanwhile, flows driven by “real asset protection” or safe-haven status have been muted, despite AAA-rated bonds with a stable outlook. There was a period of severe outflows around the May RBA meeting, but over the past month interest has been mixed; we believe the market’s pricing-in of Fed easing has made a difference, although only RBA signals of higher terminal rates can build a buffer to curb hedging demand. The one area within Australian assets that has performed strongly has been cash and short-term instruments (CAST), which we highlighted as perhaps the only asset class globally to attract demand for very highly rated havens; Australia and Singapore have been two of the strongest beneficiaries of APAC cross-border cash flows. Given the lack of interest in equities and bonds, there was likely rotation into cash purely for liquidity management purposes while the dollar was under pressure. AUD has improved its overall valuation versus the dollar this year but remains soft by long-term standards, and cash may offer short-term support for additional AUD gains.

What's Changed?

Risk sentiment is mixed, as tariff concerns return to markets. The global growth worries linked to higher tariffs are showing up in industrial metals, oil and gas prices, and equities. Extensions of potential tariffs are not a sufficient surprise to generate new highs for equities; rather they are a reminder to investors of the risks to Q3 and beyond. What is more, bonds globally are breaking away from the idea that demand is weak enough to offset the cost of higher tariffs. Cash is returning into focus as an asset class, as the money that was put to work in Q2 searches for some immunity against stagflation risks. The safe havens of CHF, JPY and gold are all lower today, and that is adding to the mixed signals about risk. The light newsflow from the weekend and overnight sets the U.S. open up for a slower Monday grind, with prices looking for leadership ahead of FOMC minutes, CPI and the start of Q2 earnings next week. USD is higher, most notably against ZAR, INR, PLN, KRW, all of which were favored emerging markets last week that failed to extend their trends. Higher June inflation in Sweden is supporting SEK today, while lower real wages in Japan are hitting JPY. EUR is wandering lower, with German output better but EU retail sales weaker. The mixed signals make bond prices today the anomaly. The move in rates is again reaching beyond bonds, with fears that central bankers are losing their battle to balance growth and inflation. The facts around policy performance rest in the data ahead, and that leaves investors back in a wait-and-see holding pattern, rather than rushing to extend current trends. The lack of bigger U.S. economic headlines leaves the focus on Elon Musk starting a new political party, along with Trump’s Gaza meetings and the tragedy of the Texas floods. Removing trade frictions and growth worries will require an extension of disbelief over the current muddling through on global growth. 

What You Need to Know

Germany’s production data for May 2025 show real output in industry up 1.2% m/m (seasonally and calendar-adjusted) and up 1.0% y/y (calendar-adjusted). Revised April figures show a 1.6% monthly fall and a 2.1% annual drop. In the three-month on three-month comparison, output rose 1.4% from March-May versus the preceding period. May’s gains were driven by automotive production (+4.9%), energy generation (+10.8%) and pharmaceuticals (+10.0%), while construction fell 3.9%. Excluding energy and construction, industrial production rose 1.4% m/m, with capital goods +4.1%, consumer goods +0.5% and intermediate goods -2.1%. Energy-intensive industries fell by 1.8% m/m, climbed by 0.7% over three months and shrank by 4.8% y/y. DAX +0.277% to 23853.45, EURUSD -0.332% to 1.1739, 10y Bund -0.1bp to 2.606%.

The euro area’s and EU’s retail trade volumes for May 2025 fell by 0.7% and 0.8% m/m, respectively, to index levels of 101.8 and 102.4. Year-on-year, volumes rose 1.8% in the euro area and 1.9% in the EU. In May, food, drink and tobacco sales declined by 0.7% (EA) and 0.8% (EU); non-food (excl. fuel) slipped 0.6% and 0.7%; and automotive fuel fell 1.3% and 1.2%. Sweden recorded the steepest monthly decline at -4.6%, while Portugal saw the largest gain at +2.1%. Annually, automotive fuel was the strongest performer (+2.8% EA, +3.3% EU). Euro Stoxx 50 +0.053% to 5291.6, EURUSD -0.332% to 1.1739, BBG AGG Euro Government High Grade EUR -283.5bp to 0%.

Sweden’s inflation data for June 2025 show the y/y headline Consumer Price Index (CPI) inflation rate at 0.8%, up from 0.2% in May. This corresponds to a monthly increase of 0.5 percentage points. The year-on-year CPIF (CPI with a fixed interest-rate component) rate rose to 2.9%, from 2.3% in May, in another a 0.5-percentage point monthly uptick. Excluding energy (CPIF-XE), the year-on-year rate accelerated to 3.3%, compared with 2.5% in May – a 0.7-percentage point monthly increase. Compared with the previous month, all three measures reflected accelerating inflationary pressures. Monthly changes were identical for CPI and CPIF, while the core inflation gauge excluding energy saw a larger increase. These preliminary flash estimates cover only aggregate-level CPI, CPIF and CPIF-XE measures. OMX -0.331% to 2504.203, EURSEK -0.816% to 11.1705, 10y Swedish GB +4.7bp to 2.378%.

Norway’s production index for May 2025 shows overall industrial output fell by 0.5% m/m, rose 1.3% over three months and shrank 0.4% y/y. Extraction and related services were flat m/m, up 1.6% q/q and down 1.9% y/y. Mining and quarrying surged 6.2% m/m, against a 0.8% q/q drop and a 2.8% y/y gain. Manufacturing output dropped 1.7% m/m but rose 1.7% q/q and 5.7% y/y. Within manufacturing, refined petrochemicals and pharmaceuticals fell 1.5% m/m but jumped 6.5% q/q and 27.4% y/y. Ships, boats and oil platforms declined 4.5% m/m but gained 5.0% q/q and 10.6% y/y, while electricity, gas and steam tumbled 3.2% m/m and 3.9% q/q, with a 1.0% y/y fall. OSE +0.085% to 1633.26, EURNOK +0.078% to 11.8903, 10y NGB +3bp to 3.838%.

Japan’s labor statistics for May 2025 show total monthly cash earnings rose 1.0% to ¥300,141; regular salaries increased by 2.0% to ¥287,546, while bonuses and special pay fell 18.7% to ¥12,595. For general workers, cash earnings increased by 1.1% to ¥384,696 and basic pay rose 2.5% to ¥340,249. Part-time workers saw cash earnings up 3.5% at ¥112,440, with hourly wages increasing 4.0% to ¥1,382. The real cash earnings index fell 2.9% to 82.8 (consumer prices excluding imputed rent), and the CPI-based index declined 2.4% to 84.3. Total actual working hours decreased by 2.0% to 134.2 hours, and overtime hours fell 2.1% to 9.6 hours. Nikkei -0.561% to 39587.68, USDJPY +0.464% to 145.14, 10y JGB +2.6bp to 1.462%.

What We're Watching

Central Bank Speakers: ECB Governing Council member Robert Holzmann speaks at Austrian central bank conference on climate, inflation and monetary policy. 

What iFlow is Showing

Mood: iFlow Mood drifted back into risk-neutral zone, driven by easing of equity selling pressure along with flattening demand for core sovereign bonds.

FX: Notable outflows in USD, SEK, TWD, CNY and KRW, against inflows in the rest of the iFlow universe. EUR and DKK posted the best demand.

FI: Broad demand in sovereign bonds, against selling pressure in the corporate bonds complex. Notable flows into sovereign bonds included selling in Israel, against buying in Hungarian, Mexican and Indian government bonds. Eurozone, Colombian and Danish corporate bonds were significantly sold.

Equities: Broad buying interest in equities except for DM Americas, which saw light selling. Brazil, Poland, South Africa, New Zealand and Singapore equities saw the best demand. 

Quotes of the Day

“No power and no treasure can outweigh the extension of our knowledge.” – Democritus

“Creativity is a natural extension of our enthusiasm.” – Earl Nightingale

Economic Details

The Eurozone’s Sentix Economic Index data for July 2025 rose 4.4 points to +4.5, its highest level since February 2022. This marks a third consecutive uptick. The current assessment climbed by 5.8 points, while expectations gained 2.8 points. Germany’s index reached -0.4, the highest level since February 2022, after a fifth straight rise in the assessment of the current situation to -18.8 (+8.0 point) and a third straight jump in expectations to +19.8 (+2.3 points). In the U.S., all sub-components surged: the overall index rose to +5.3 and the current situation to +14.8 (+10.3), while expectations improved by 11.0 points. Global sentiment broadened, with the global index rising to +8.3, the current situation to +6.1 and expectations to +10.5. Euro Stoxx 50 +0.053% to 5291.6, EURUSD -0.332% to 1.1739, BBG AGG Euro Government High Grade EUR -283.5bp to 0%.

Hungary’s retail trade data for May 2025 show the volume of retail sales rose 2.1% y/y to HUF 1,691bn at current prices; the seasonally and calendar-adjusted volume was down 1.3% m/m. In annual calendar-adjusted comparisons, non-specialized food and beverage shop sales increased 2.1%, while specialized food, beverage and tobacco store sales fell 4.0%, yielding a net food sector gain of 0.5%. Non-food retail turnover rose 4.0%, driven by manufactured goods (+9.1%), furniture and electrical goods (+7.2%), pharmaceuticals and cosmetics (+3.6%), clothing (+1.0%) and other stores (+0.4%); second-hand shop sales were down 2.5%. Mail order and internet retail volumes climbed 4.8%, automotive fuel sales dropped 1.1%, and motor vehicle parts sales were unchanged. In January-May 2025, the retail volume grew 3.1% y/y. Budapest SI +0.001% to 99590.54, EURHUF +0.086% to 399.67, 10y HGB -1bp to 7%.

Czechia’s trade balance of goods for May 2025 shows the surplus up CZK 2.1bn y/y to CZK 13.3bn. Exports rose 2.0% to CZK 389.8bn, while imports increased 1.5% to CZK 376.5bn. The motor vehicles surplus expanded by CZK 6.0bn, and deficits in computer, electronic & optical products and refined petroleum each narrowed by CZK 2.8bn. Conversely, deficits for fabricated metal products and electrical equipment grew by CZK 3.4bn and CZK 2.5bn, respectively, and the crude petroleum & natural gas gap widened by CZK 2.1bn. The surplus with EU states rose by CZK 4.2bn, while the non-EU deficit narrowed by CZK 0.7bn. Prague SE -0.384% to 2143.61, EURCZK -0.106% to 24.605, 10y CZGB 0bp to 4.249%.

Sweden’s central government net borrowing requirement for June 2025 was SEK 81.7bn, which is SEK 32.6bn above the Debt Office’s SEK 49.2bn forecast. The primary balance was SEK 51.0bn, SEK 10.3bn below forecast. This deviation was driven by tax income shrinking by approximately SEK 16bn, combined with higher outgoing payments from tax accounts. The Debt Office’s net lending to government agencies was SEK 22.7bn above forecast, on reduced deposits from the Swedish Pensions Agency. Interest payments on central government debt were SEK 0.5bn below expectations. For the 12 months to June, the net borrowing requirement totaled SEK 129.4bn, and central government debt reached SEK 1,171bn at month-end. OMX -0.331% to 2504.203, EURSEK -0.816% to 11.1705, 10y Swedish GB +4.7bp to 2.378%.

Japan’s business cycle indicators for May 2025 show the leading index rose 1.1 points to 105.3, the coincident index fell 0.1 points to 115.9, and the lagging index increased 0.2 points to 112.7. In the three-month moving averages, the leading index dropped by 0.83 points, the coincident index was down 0.40 points, and the lagging index rose 0.57 points. Seven-month trends show the leading index down 0.49 points, the coincident index unchanged, and the lagging index up 0.55 points. The coincident index’s baseline assessment has been revised to “deterioration,” reflecting mixed momentum across the indicators. Nikkei -0.561% to 39587.68, USDJPY +0.464% to 145.14, 10y JGB +2.6bp to 1.462%.

The U.K.’s BDO Business Trends report for June 2025 shows employment conditions deteriorating. The Employment Index was down 0.10 points to 94.22 – close to a 13-year low – and payrolled jobs fell by 109,000 in May. Services output rose slightly, driven by stronger consumer spending and favorable weather, indicating an early summer recovery. However, the Optimism Index slipped 0.72 points to 91.58 as businesses face elevated labor cost pressures – particularly in the shape of higher NICs – and policy uncertainty, which is weighing on confidence. Manufacturing sentiment received a modest lift from recent trade agreements with the U.S., the EU and India, but cost headwinds persist. Overall, firms remain cautious, and optimism is expected to stay below the long-term average throughout H2 2025. FTSE 100 -0.158% to 8808.95, GBPUSD -0.44% to 1.359, 10y gilt -2.2bp to 4.532%.

U.K. house price growth was flat in June 2025 (0.0%), with the average price at £296,665. Annual growth edged down to +2.5%, while the quarterly change was -0.3%. Regionally, Northern Ireland led at +9.6% to £212,189, Scotland rose 4.9% to £214,891, Wales climbed 3.9% to £229,622, and the North West was up 4.4% to £241,938. The South West and London saw subdued gains of 0.5% and 0.6%, respectively, with London’s average at £540,048. Housing activity in May included a 25.1% jump in U.K. transactions to 81,470, mortgage approvals rising to 63,032 (+3.9%). Meanwhile, the RICS recorded new buyer inquiries at a net -26% and agreed sales at -28%, with new instructions up +7%.

ANZ-Indeed Australian Job Ads were up 1.8% m/m in June 2025 to an index level of 116.9. This was the strongest rise since September 2024, and up 0.5% on the trend. Year-on-year, ads were down 0.4%. Labor demand remained elevated: ABS vacancies climbed 2.9% to 339,400 in the three months to May, driven by a 3.2% increase in private-sector openings. Growth was concentrated in Queensland and New South Wales, offsetting falls in Victoria and South Australia. By sector, management, sales and software development ads rebounded, while education and nursing opportunities continued to ease. ASX -0.127% to 4793.86, AUDUSD -0.855% to 0.65, 10y ACGB -1bp to 4.183%.