The latest weekly data from the US labour market remained strong. Initial jobless claims fell by 22,000 to a seasonally adjusted 187,000 in the week ending 18 July, reaching their lowest level since September 1969. The result was substantially below the market forecast of approximately 212,000 and the previous revised reading of 209,000. The four-week moving average declined from 214,750 to 207,500, while continuing claims edged down from 1.798 million to 1.796 million.
The figures confirm that layoffs remain limited, although part of the sharp decline may have reflected seasonal distortions related to temporary summer shutdowns at US automotive plants. Nevertheless, the resilience of the labour market allows Federal Reserve officials to remain focused on inflation, which continues to exceed the regulator’s target.
The Federal Reserve will hold its next monetary policy meeting next week. Although keeping the target rate unchanged remains the main scenario, stronger labour data, rising oil prices and renewed inflation risks have increased market expectations of a possible tightening of monetary conditions. Investors will closely examine the regulator’s statement for signals regarding its policy outlook for the second half of the year.
US trade policy is also becoming more restrictive. The Trump administration has introduced new Section 301 tariffs of 10.0% and 12.5% on goods from 60 trading partners, citing insufficient enforcement of restrictions on products linked to forced labour. The measures replace the temporary global tariff of 10.0% and apply to trade representing approximately 99.4% of total US imports. However, numerous exemptions remain in place, including oil and gas, fertilisers, certain food products and goods already covered by separate trade measures. The new duties may increase costs for US companies and consumers, adding another source of uncertainty to the Federal Reserve’s inflation outlook.
Eurozone
The euro is strengthening against the US dollar and the British pound while showing mixed performance against the Japanese yen.
Preliminary July business activity data were stronger than expected. The Eurozone Manufacturing PMI increased from 51.4 to 52.0, exceeding the market forecast of 51.5. The Services PMI rose from 49.4 to 51.6 instead of the expected 49.8, while the Composite PMI advanced from 50.0 to 51.9, well above the forecast of 50.3.
The figures indicated that private-sector activity returned to growth for the first time in four months, supported by the first increase in new orders since February. Manufacturing and services both contributed to the improvement, although export orders continued to decline.
German data also showed a marked recovery. The Manufacturing PMI increased from 50.3 to 52.2, compared with the forecast of 50.5, while the Services PMI rose from 48.6 to 49.6. The Composite PMI advanced from 49.5 to 51.2, exceeding expectations of 49.8 and returning to expansion territory for the first time in four months. However, renewed increases in energy prices caused by escalating tensions in the Middle East could limit the sustainability of the recovery and revive inflationary pressure.
United Kingdom
The British pound is weakening against the euro while showing mixed dynamics against the Japanese yen and the US dollar.
Preliminary July business activity data were significantly stronger than expected. The Manufacturing PMI rose from 52.5 to 52.8, compared with the forecast of 52.0, while the Services PMI jumped from 48.8 to 51.8 instead of the expected 49.4. The Composite PMI increased from 49.3 to 52.1, substantially above the market forecast of 49.7.
The results showed that the UK private sector returned to growth after two months of contraction. Both services and manufacturing expanded, while business optimism improved. Nevertheless, the renewed escalation of the conflict in the Middle East could raise fuel, transport and raw-material costs, weakening activity and increasing inflationary pressure during the coming months.
June retail sales data were also positive. Sales volumes rose by 1.0% month-on-month, compared with expectations of a 0.3% decline, and increased by 4.2% year-on-year. According to the Office for National Statistics, warm weather and promotional campaigns supported clothing and non-store retailers.
Japan
The Japanese yen is showing mixed performance against its main competitors, including the euro, the British pound and the US dollar.
Investors are assessing Japan’s June inflation data. The headline Consumer Price Index slowed from 0.4% to 0.3% month-on-month but accelerated from 1.5% to 1.7% year-on-year. The core index, which excludes volatile fresh food prices, remained unchanged over the month and increased from 1.4% to 1.6% year-on-year.
Core inflation therefore remained below the Bank of Japan’s 2.0% target for a fifth consecutive month. This may encourage policymakers to maintain a gradual approach to further monetary tightening, although the weak yen and higher imported energy costs continue to create upside risks for consumer prices.
Preliminary July business activity data were generally positive but showed diverging sector trends. The Manufacturing PMI edged down from 54.8 to 54.7 but remained firmly in expansion territory, while factory output increased at its fastest pace since February 2014. The Services PMI declined from 52.2 to 51.9, while the Composite PMI rose from 52.8 to 53.1, reaching its highest level since February.
Manufacturing benefited from stronger production and new orders, whereas service-sector growth moderated. Companies also remained concerned about supply-chain disruptions, energy prices and the continuing conflict in the Middle East.
Australia
The Australian dollar is strengthening against its main competitors, including the Japanese yen, the euro, the British pound and the US dollar.
Preliminary July business activity data showed an improvement in private-sector momentum. The Manufacturing PMI rose from 51.5 to 51.7, while the Services PMI increased from 50.5 to 53.0. The Composite PMI advanced from 50.4 to 52.6, reaching its strongest level since the beginning of the year.
The improvement was mainly driven by services, while new business returned to growth after four consecutive months of decline. Employment also increased, although export demand and business confidence remained relatively weak.
Inflation continues to limit the Reserve Bank of Australia’s room for manoeuvre. According to the latest data from the Australian Bureau of Statistics, annual headline inflation stood at 4.0% in May, while trimmed mean inflation increased to 3.6%, remaining above the central bank’s target range of 2.0%–3.0%. These figures keep the possibility of another rate increase in play, although current market pricing does not indicate that additional tightening is virtually certain.
Oil
Oil prices are correcting lower today after Brent crude settled above 100 US dollars per barrel during the previous session. The decline appears largely technical, as fundamental conditions remain supportive due to escalating geopolitical tensions and continued risks to supplies from the Middle East.
US President Donald Trump said he was close to deciding whether to launch what he described as a “massive attack” against Iran on a larger scale than previous strikes. He did not provide details regarding potential targets or the timing of any operation. Any further escalation could trigger additional retaliation against US and allied interests in the region and increase the threat to energy and transport infrastructure.
The widening conflict continues to raise the risk of prolonged disruptions to global oil supplies. Shipping traffic through the region’s key maritime routes remains severely constrained. According to Kpler data, only three commodity vessels crossed the Strait of Hormuz on each of the past three days, while traffic through the Bab el-Mandeb Strait has also been heavily disrupted following attacks on Saudi oil tankers and threats of a wider blockade.
The continuing reduction in tanker traffic through the Strait of Hormuz and the Red Sea is forcing some operators to reroute vessels around the Cape of Good Hope. Longer delivery times, higher insurance costs and increased fuel expenses could maintain upward pressure on oil prices even if the market experiences short-term technical corrections.
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