Stay up to date with the latest market trends, economic shifts and key financial developments across the UK, US and Asia.
Key market events
🎯Fed Chair in the hot seat – Reports that US Fed Chair Jerome Powell would be fired rocked markets, but calm resumed after US President Trump said it was “highly unlikely” to happen.
⬆️ Rising US inflation – Monthly CPI rose by 0.3%, the largest increase in 5 months, with tariff impacts on electronics and furniture pushing prices higher. Core CPI came in below estimates for the fifth straight month, aided by cooling inflation in services.
📈 Jump in UK inflation – A 3.6% rise in inflation exceeded expectations, with sharp increases in food, fuel and airfares.
📉 Weak UK labour market – Payrolls fell for the fifth consecutive month and unemployment rose to 4.7%. Wage growth also slowed to 5%, the lowest rate since 2022.
✅US sales bounce back – US retail sales grew by 0.6% in June, beating expectations. Analysts caution that the headline gain is mostly driven by higher prices due to tariffs, and underlying volume growth is more modest.
What this means for financial advisers and clients
The US central bank’s dual mandate has been established since the 1970s, but this week the spotlight was firmly on another burden – resisting political pressure. President Trump’s intervention to push back against the speculation gave markets confidence that he won’t take the nuclear option to fire Jerome Powell, but will continue to use him as a punching bag. With members of Congress pushing for a criminal investigation into Powell’s testimony, and other members of the Federal Reserve publicly calling for a rate cut, it’s hard to recall a time when a Fed Chair has been under so much scrutiny. Fed independence is crucial for market confidence, and whilst President Trump will be able to appoint his own Fed Chair next year, the members of the Board of Governors are long term appointments that can serve up to 14 years.
Higher US inflation this month wasn’t a surprise, the question from here is whether price pressures from tariffs are a one-off hit or will lead to more persistent price increases.
The rise in UK inflation is somewhat complicated by the weaker labour market. The Bank of England may prioritise the latter when considering rate cuts at upcoming Monetary Policy Committee meetings.
Strong macro data in the US pushed back expectations of Fed rate cuts and led to an appreciation in the dollar, reversing a little of the losses seen this year. However, the longer term outlook remains challenged by concerns over US debt and fiscal largesse.
Chart of the week - US dollar still pricey
Source: J.P. Morgan Asset Management.
Why this matters
The chart above shows the long-term fair value of G10 currencies versus the US dollar, based on real effective exchange rates and productivity. It shows that whilst the dollar has moved closer to fair value this year, it remains expensive compared to other currencies.
Currencies are notoriously volatile, and after falling 10% this year, some recovery in the dollar was to be expected. But there remains risk for unhedged investors exposed to the dollar, with the valuation still elevated and an administration with goals at odds with a stronger currency.
Market recap
UK success broadens
Midcaps outperformed this week as investors, buoyed by renewed hopes for an August rate cut, rotated into companies with stronger UK domestic orientation. The banking and financial services sectors also bounced on optimism and around mortgage lending reforms.
Earnings drive S&P
Upbeat macro data and strong Q2 earnings drove the S&P 500 higher, with PepsiCo surging after exceeding profit and revenue expectations and several banks posting healthy earnings reports. UK investors also benefitted from a rise in the dollar over the week.
New Nasdaq highs
The US tech index reached record highs following global optimism for chipmakers after TSMC's record breaking Q2 profits. Renewed access to the Chinese AI market also drove Nvidia and AMD higher.
Higher yields
Scaled back expectations of rate cuts, and political concerns about Fed independence drove bond yields higher this week.
Crude curtailed
Oil prices remain depressed amid a supply glut and tepid global demand. US and Chinese inventories remain elevated and OPEC+ plans to increase August production by a further 550,000 barrels per day.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.35% | 12.16% |
| FTSE 250 | 0.74% | 7.72% |
| S&P 500 | 1.33% | 0.50% |
| NASDAQ | 2.04% | 2.88% |
| MSCI Europe ex UK | -0.41% | 15.52% |
| Hang Seng | 0.70% | 14.05% |
| Nikkei 225 | 0.33% | -0.82% |
| Brent Crude | -1.06% | -13.36% |
| Gold Spot | -0.09% | 19.37% |
| UK 10yr Gilt yield | +4bps | +11bps |
| US 10yr Treasury yield | +4bps | -11bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 17th July 2025.
Stay tuned for next week’s market insights
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