It has been a week of little economic data for markets to process. Euro area inflation currently stands at 2% – matching the ECB’s target. A Tuesday report showed short-term consumer expectations edging up to 2.6%, the lowest in four months, hinting at growing confidence in ECB policy. The findings follow last week’s decision to hold interest rates steady amid cited signs of easing price growth, even while ECB President Christine Lagarde acknowledged that uncertainty persists particularly around the inflationary impact of recent U.S. trade tariffs on the region.
Meanwhile, U.S. labour market data released this week pointed to a gradual cooling of economic activity. The June Job Openings and Labour Turnover Survey (JOLTS) reported that job vacancies dipped to just under 7.5 million, which fell short of forecasts and prompted some economists to reconsider the Federal Reserve’s next policy move. However, hiring remained steady at 5.2 million, and the quits rate held firm at 3.1 million, consistent with the previous month. Taken together, the data suggests a labour market that is no longer excessively tight, with the decline in vacancies also potentially helping to temper wage growth and reduce inflationary pressures. With unemployment still near 4%, the Fed possibly now has the flexibility to ease interest rates without reigniting inflation. Markets are currently expecting no rate change at today’s Fed interest rate meeting but are pricing in the possibility of a 25-basis point cut in September.
A combination of stronger-than-expected economic performance in the first half of the year and improved sentiment around trade tariffs led the IMF to upgrade its outlook for China on Tuesday. The 2025 growth forecast was raised from 4.0% to 4.8%, reflecting both the resilience of recent activity and the assumption that previously high tariffs have eased significantly. The IMF also factored in the likelihood that paused tariffs will remain suspended beyond the current deadline of 1 August, and that no new tariffs will be introduced.
Also, this week senior U.S. and Chinese representatives concluded two days of productive trade talks in Stockholm, with both parties reportedly agreeing to keep working toward a possible extension of the current 90-day tariff pause set to expire on August 12th. Although the tone was largely positive, U.S. Treasury Secretary Scott Bessent noted that any decision to prolong the truce ultimately depends on consensus from President Trump.
Ireland’s economy contracted by 1% in the second quarter of 2025 compared to the previous quarter, according to early estimates, marking a sharp reversal from the strong 7.4% expansion seen in Q1. This decline broke a five-month run of growth and was largely attributed to a slowdown in the industrial sector, which is heavily influenced by multinational corporations. On an annual basis, GDP growth decelerated to 12.5%, down from the impressive 20% recorded in the previous quarter.
Still to come this week we have Eurozone and U.S. GDP, the Fed’s interest rate decision and also an interest rate decision from the Bank of Japan.
Nicola Tune, Portfolio Specialist
