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Daily Economic Update
28.07.2025US/EU: US and EU reach an initial trade agreement, applying 15% tariff on EU goods. US President Trump and EU Chief von der Leyen announced reaching an early trade deal that would see most EU goods hit with 15% tariffs at US borders, including autos and semiconductors, but without any counter measures by the EU. While von der Leyen said that pharma products would also be subject to a similar rate and wouldn’t stack on top of any sectoral levies by the US, Trump earlier mentioned the 15% deal didn’t include pharma and metals. She also stated that US import duties on EU metals goods (currently at 50%) could be cut under a quota system. Certain other goods such as aircraft and some chemicals would be subject to zero duties on either side. As part of the deal, the EU also agreed to invest around $600bn in the US along with purchasing $750bn worth of US energy products as well as a ‘vast amount’ of defense equipment. Trump had previously threatened to hit EU goods with 30% tariffs effective August 1. The EU remains the US’s largest merchandise trade partner, accounting for some 20% share in US total goods trade in 5M25. The market’s initial reaction to the development was positive, with both US and European equity futures in the green this morning. However, the US has so far managed to reach only a few trade deals before the August 1 deadline, with issues with top partners such as Canada and Mexico (combined 28% share in total goods trade in 5M25) unresolved. Meanwhile, according to the South China Morning Post, the US and China may extend the current trade pact by another 90 days before its expiry on August 12, with US Treasury Secretary Bessent meeting his Chinese counterparts in Stockholm today to resume trade talks following two similar rounds of discussions earlier.
Global: FOMC/BoJ meetings, US/EU Q2 GDP, and US jobs data among key releases this week, US’s Aug 1 tariff deadline also looms. This week sees crucial economic events across major international markets that, along with the upcoming Aug 1 US tariff deadline for countries which are yet to secure a trade deal, will be keenly watched. In terms of the country specific calendar, in the US, the FOMC will hold its meeting on 29-30 July and is widely expected to keep interest rates unchanged at the 4.25-4.5% range. However, Chair Powell may remain guarded about a possible rate cut at the bank’s September meeting. The Q2 GDP print is due on Wednesday, and the street expects economic growth to rebound to 2.5% (annualized) from a decline of 0.5% in Q1. Non-farm payroll data for July is due on Friday, and the consensus forecast points to slowing job gains of 102K from June’s 147K and a slight increase in the unemployment rate to 4.2% from 4.1%. June’s PCE inflation (Thursday) is seen accelerating to 0.3% m/m for both headline and core rates from 0.1% and 0.2% in May, respectively. In the Eurozone, the market expects Q2 GDP (Wednesday) to show no q/q growth (+1.2% y/y) from +0.6% q/q (1.5% y/y) in Q1. Inflation for July (Friday) is expected to moderate to 1.9% and 2.2% from June’s 2% and 2.3% for headline and core rates, respectively. In Japan, the central bank is expected to hold its short-term interest rate at 0.5% on Thursday but may revise its inflation forecast for this fiscal year (currently at 2.2%). In China, the official PMIs for July (Thursday) are projected to underline almost steady manufacturing (at 49.7) but slightly easing services (to 50.3 from June’s 50.5) activities. Finally, in the UK, the Nationwide house price index (Friday) is seen increasing 0.2% m/m in July versus a drop of 0.8% in June.
Oil: Prices decline for second straight week ahead of OPEC-8 meeting. Brent futures settled at $68.4/bbl on Friday, registering a 1.3% w/w drop and extending year-to-date losses to 8.3%, as prospects of increased supply following the US’ renewal of Chevron’s operating license in Venezuela weighed on sentiment. In May, the US opted not to renew Chevron’s operating license in the country, though the Trump administration has eased sanctions enforcement after the two countries agreed on a prisoner swap deal. The renewal of the operating license is set to add 200 kb/d of heavy, sour crude back to global supply, with the Trump administration unlikely to enforce the “secondary tariff” threat it imposed on buyers of Venezuelan oil. Limiting the losses, however, was increased optimism surrounding US trade deal announcements vis-à-vis Japan and the EU, with the former announced during the past week while the latter was disclosed yesterday. The EIA’s weekly energy report was also constructive, showing a 3.2 mb and 1.7 mb w/w drop in US commercial crude and gasoline inventories, respectively, in the w/e July 18. The market’s focus will shift towards OPEC+’s meetings this week. The OPEC+ Joint Ministerial Monitoring Committee will meet today, though the no major changes to policy are expected. On Sunday (3 August), the OPEC-8 group will decide upon output policy for September. Given the strength recently exhibited by prices despite a faster unwinding of output cuts, the eight OPEC+ producers will likely increase production ceiling by another outsized 550 kb/d, resulting in the full unwind of the 2.2 mb/d of voluntary production cuts while the UAE also raises its baseline output by 300 kb/d, both being completed by September and a year ahead of schedule.
UAE: Private sector credit growth remained solid in April. Domestic credit growth softened marginally in 2025 to 5.1% y/y from March’s 5.2% on a steeper decline in public sector credit (government plus GREs) of -2.6% y/y compared with -2.2% in the previous month. Private sector credit offset part of this fall, rising by 8.4% from March’s 8.2% growth due to a robust increase in personal credit, which hit another cycle high of 18.5% y/y. Meanwhile, credit to businesses and the industrial sector eased to 3.2% y/y during the same month. On the other hand, resident deposits slowed to 7.5% y/y (10.3% in March) on a steeper fall in public sector deposits (-10.5% versus -1.3% in March) and slower growth in private sector deposits (14.7% versus 15.0%). Similarly, the year-to-date growth in domestic credit softened in April to 1.8% compared with 3.0% in the corresponding period of 2024 mainly on the decline in the public sector (-1.4%) and the relative stability in private sector credit (2.9%). On the other side, resident deposit growth slowed to 3.3% ytd on declining public sector deposits (-4.7% ytd) despite an acceleration in the private sector deposits (6.8% ytd). Robust private credit growth is expected to continue supporting non-oil activities over the coming months, underpinning non-oil growth to reach a still impressive 3-4% in 2025-26.