ECB expected to cut rates once again

German stocks are leading the way higher once again this morning, with the DAX reaching a fresh record high off the back of the EUR46bn stimulus plans announced by the Merz government. The latest factory orders data showed a notable resilience in the face of tariff concerns, with a 0.6% monthly rise confounding calls for a 1% contraction. Looking elsewhere, the Australians have been feeling the effects of Trump’s policies, with exports dropping by 2.4% compared with March. Nonetheless, with that March figure having jumped as US importers sought to front-load purchases ahead of the April tariffs, we can see that absolute exports from Australia remain elevated.

Today sees the ECB step forward, with markets widely anticipating a 25-basis point rate cut that would mark the eight cut to the refi rate in the past year. While we have seen improved PMI and German factory orders data this week, the bank will understand the task ahead of them as the eurozone seeks to regain momentum in the face of a potential reimposition of reciprocal tariffs on 9 July. Yesterday did see some positive tones from EU Trade Commissioner Sefcovic, who said that constructive talks with US trade rep Jamieson Greer meant negotiations were advancing in the right direction at "pace". However, with the S&P 500 having regained 24% of the 28% needed to get back to record highs, we will soon need to see signs that these talks are going to result in a tangible deal that eases concerns about a fresh deterioration in global trade.

Looking ahead, US markets remain on a positive footing despite growing concerns over the ability for Trump to strike a deal with China. Optimism around a planned phone call between Trump and Xi Jinping have been tempered somewhat after a series of posts claiming China have reneged on its Geneva pledges and stating that Xi Jinping is “extremely hard to make a deal with.” The weakness seen in yesterday’s ADP payrolls figure (37k) highlights the risk of a similarly poor figure in tomorrow’s US jobs report. Nonetheless, the economic weakness seen across ISM PMI surveys and the ADP payrolls metric have helped bolster expectations of Fed easing in H2. Calls for a further 3+ cuts this year have grown over the past week, highlighting why we are seeing increased support for gold and silver (which has hit a 12-year high today).