Monthly Market Outlook July 2025

The Middle East war, rising trade tensions, the FOMC, and the big, beautiful bill kept markets busy in June, just like in the earlier months of the year. July is expected to be just as active, with particular attention on the tariff deadline set for July 9. 

Macro View 

Geopolitical risks took the spotlight in June with the Israel–Iran conflict. While the U.S. mostly stayed out of it, the potential for an oil price spike, especially if the Strait of Hormuz were to close was a real concern. In the end, a ceasefire was reached, and the immediate risks mostly faded, except for ongoing tensions that markets had already priced in months ago. The oil price flare-up was temporary and is unlikely to affect the inflation outlook beyond a single month. As a result, it’s not expected to influence central bank policies. 

The June FOMC meeting was notable for its updated forecasts. As expected, inflation and unemployment were revised higher for both 2025 and 2026, while GDP growth was revised lower. However, several consecutive months of softer-than-expected inflation appear to have eased concerns among some members regarding the timing of rate cuts. Despite the upward revisions, the 2025 rate projection remained unchanged, still pointing to two cuts, while the 2026 projection increased to 3.6% from 3.4%. 

What stood out in the dot plot was the shift in member expectations. The number of members who believe rates will remain unchanged this year rose by three, while those projecting two cuts declined by one. Overall, this was not a dovish shift from the Fed. 

The “Big, Beautiful Bill” passed in the House, but Republican senators are struggling to reach a consensus on several key issues. Markets expect the bill to increase the budget deficit rather than reduce it, which led to upward pressure on yields in May. However, softer inflation data, rising expectations for Fed rate cuts, and the Fed’s decision to lower capital requirements have supported the bond market and helped reverse the upward trend in yields. 

In July, the bond market will be focused on two key developments. First is the Senate’s final decision on the bill. Trump wants it passed before the Fourth of July, and the outcome could introduce additional volatility. Second is the trade negotiation deadline, set for July 9 unless extended. If these talks fail to produce meaningful results, it could lead to inflationary pressure. 

Given the bond market’s strong correlations with FX, stocks, crypto, and metals, all major markets will be paying close attention. 

The weak dollar continues to shape global markets. One of the main reasons is lower U.S. yields, but perhaps the most significant factor is shifting economic expectations. In the chart below, the 2025 GDP and CPI forecast spreads between the Eurozone and the United States clearly show a trend reversal. While the spread remains slightly below zero, growth expectations for the Eurozone and the U.S. are now nearly aligned. At the same time, the Eurozone holds an advantage with lower inflation, which could support stronger GDP growth under lower interest rates. 

The inflationary impact of tariffs is also playing out differently across regions. In the U.S., tariffs are expected to be inflationary, while for the rest of the world, they are likely to have a disinflationary effect. This divergence, along with the shift in GDP expectations and the decline in yields, is keeping the dollar index under pressure. 

In terms of economic activity, the U.S. continues to show a positive divergence compared to economies like the EU and China. However, U.S. growth is expected to slow, with the composite PMI forecast to move toward the 50 mark in the coming months. Overall, global economies are expanding at a slow pace. 

The Eurozone composite PMI has remained steady above 50 since the beginning of the year. Defense and technology spending plans, along with discussions around a possible new debt structure, have helped maintain confidence among both businesses and consumers. 

The UK is benefiting from an improved trade deal with the U.S., which contributed to a jump in its PMI to 50.7. Meanwhile, despite tariff-related challenges, China has maintained steady growth since early 2023. 

As for central bank expectations, markets are pricing in 2.5 rate cuts from the Fed (two cuts fully priced in, plus a 50% chance of a third), 0.96 cuts from the ECB, 2.15 from the BOE, and 0.57 from the BOJ. 

Central Bank Meeting Calendar 

Technical View 

The U.S. 10-year government bond yield is declining following the Fed’s decision to lower capital requirements for large banks. Markets are speculating that the resulting excess funds could flow into the bond market, especially with current yields still elevated and rate cuts expected later this year. 

Investors will also be closely watching the tax cut bill, which is expected to be finalized before the Fourth of July. 

So far, the 4.10–4.70% range for the 10-year yield remains intact and could continue to hold through July. 

Brent crude spiked during the Iran–Israel conflict, driven by fears that the Strait of Hormuz could be closed or that oil infrastructure might come under attack. Neither scenario materialized, and the conflict has subsided for now. 

Beyond the geopolitical risk, the underlying dynamics for Brent remain bearish. Growth expectations are being revised lower while supply continues to increase. As long as the $70–72 resistance level holds and barring any temporary risk-driven spikes, the overall trend is likely to remain downward. 

Precious metals, except gold, delivered strong returns in June. Platinum and palladium rose by 26.83% and 16.61% respectively, while silver gained 9%. The surge was driven by ongoing supply-side issues, mainly from South Africa, and a significant divergence from gold. Jewelry demand has also shifted toward other metals, as gold has become increasingly expensive. 

Silver has started to recover some of the ground it lost against gold, but it still has further room to climb. 

Gold, despite its weak performance in June, is still holding above the trendline that began at the end of 2024. As long as this trend remains intact, the primary direction is likely to stay upward. However, the recent weakness, especially during a high-risk environment, was significant. 

If the trendline breaks, gold could fall into the 3150 to 3200 zone then may enter a sideways trading pattern. 

Silver broke above the 34.85 resistance level, marking a significant move. This level was not only the previous high, but also the key resistance of the long-term cup and handle formation dating back to 2013. With this breakout, silver also narrowed part of its gap with gold. 

Both technically and fundamentally, silver shows strong momentum to the upside over the medium to long term. However, markets always have the final say. As long as 34.85 holds, the primary direction is likely to remain upward. 

The Dollar Index failed to recover the 99.60 to 100.80 zone and continues to move lower. However, a key long-term support level is now very close. The uptrend that began in 2011 sits at 96.40, just one point below the current level. This trendline could play a decisive role in shaping the dollar’s future. 

In July, trade negotiations, along with inflation and jobs data, are likely to be the main drivers for the dollar. 

The MSCI World Index rose by 3.77% in June, driven largely by the strength of the U.S. stock market. The Nasdaq led the recovery with a strong 6.38% monthly gain, followed by the S&P 500 and the Dow, which rose by 5.15% and 4.60% respectively. 

The DAX, on the other hand, showed negative divergence beginning in early June but managed to return to positive territory by the end of the month. One of the key reasons for this divergence was the stalled trade negotiations between the EU and the U.S. 

The VIX dropped to 16.32 alongside the stock market rally, though it remains above the 2024 average. However, this decline also pulled the 2025 average down to 21.07 from 21.55. The S&P 500 is approaching a key turning point, and while the VIX is still higher than its 2024 average, the market is now pricing in less potential risk compared to a few months ago. 

That said, bulls should remain cautious when the VIX stays above its yearly average, as it often signals lingering uncertainty. 

The S&P 500 rebounded strongly from the trendline that began with the 2020 dip, easily breaking through several key resistance levels before reaching a new all-time high. The U.S. stock market has shown time and again that, despite risks and high valuations, it can continue to rally. Even when economic conditions appear challenging, S&P bulls should not be underestimated. 

The key resistance now lies at the lower boundary of the previously broken trend channel, just below the 6300 level. If this area acts as resistance, the index may retreat below 6000 once again. Keep an eye on any spikes in the VIX as potential signals for downside moves. 

In June, currencies benefited from a weaker dollar, with the Swiss franc and the euro leading the way. The yen and the pound posted smaller gains, rising 1.36% and 1.29% against the dollar respectively, while AUDUSD increased by only 0.54%. 

EURUSD held firm above the 50-day moving average before pushing higher. The narrowing gap between EU and U.S. growth forecasts, along with increasing political pressure on the Fed, are currently the main drivers behind the latest leg of the rally. The 150% extension of the September to February pullback sits at 1.1743 and is acting as immediate resistance. If this level is broken, a move above 1.18 could be seen in July. 

Trade negotiations may also return to the spotlight and influence further price action. 

USDJPY has been range-bound between the 38.2% and 61.8% Fibonacci retracement levels since April, and this remained the case throughout June. However, the pair appears to be forming higher lows, creating a structure that is beginning to resemble an ascending triangle, although it may still be too early to define it as such. 

The 200-day moving average can also be watched as a potential area of strong resistance.