Seven Fundamentals for the week: Trade deadline, Fed and Nonfarm Payrolls promise explosive week

"No rest for the wicked" – not even in the middle of summer. This week is packed with top-tier macroeconomic events that are set to rock markets.

1) Trade deadline may result in some jitters

The US and the EU agreed to a trade agreement, following in the footsteps of the US-Japan deal, with a 15% tariff on most goods. After these accords with major countries and as Sino-American trade will likely remain in a state of truce. 

As with other accords, many details, such as sector-specific duties and also purchases of US goods by other countries, remain unclear. That means there will be bumps in the road for existing deals, but these further twists are more likely to occur beyond this week.

What is highly probable this week is news of further accords with other countries or that US President Donald Trump slaps heavy duties on them. The countries to watch are India and South Korea – both are big trading partners with which the US has yet to make progress with.

Investors will cheer deals or delays, but will suffer if Trump slams them with prohibitive duties. What is prohibitive? The EU and Japan agreed to 15%, while Vietnam, Indonesia and the Philippines settled for 19% or 20%. Anything above 20% on a significant trading partner would be worrisome.

2) ADP jobs data could be disregarded as pessimistic

Wednesday, 12:15 GMT. America's largest payroll provider publishes a leading indicator toward the official Nonfarm Payrolls (NFP) report. But does Automatic Data Processing’s (ADP) private-sector jobs report really indicate something?

The past few publications have proven extremely pessimistic, especially the most recent one, which pointed to job losses.

I expect investors to be skeptical of any downbeat figure, seeing it as "the boy who cried wolf." Conversely, a robust outcome would be treated as a bullish sign. The thinking might go: ADP is optimistic, the NFP will be even better.

In any case, expect a short-lived effect on markets ahead of the Federal Reserve (Fed).

3) US GDP will likely show steady growth is back

Wednesday, 12:30 GMT. Did US economic data return to normal? Gross Domestic Product (GDP) figures for the first quarter of 2025 showed negative growth – a result of massive imports of goods ahead of tariffs. There was an outsized role for shipments of Gold to American shores.

Economists expect a return to normalcy in figures for the second quarter. The initial release, which is the most impactful on markets, is projected to show an annualized expansion rate of 2.5%, a bounce from -0.5% in Q1.

An outcome above 3% would be bullish for Stocks and the US Dollar (USD), while bearish for Gold. Another reading below 2% would have the opposite effect. Also here, it is essential to note that prices may return to pre-release ranges quickly, given the upcoming Fed decision.

4) Fed decision could include cold water on many cuts, but also some dissent

Wednesday, decision at 18:00 GMT, press conference at 18:30 GMT. Will the Fed cut interest rates in September? That is one question investors have on their minds for this July decision, in which the world's most powerful central bank is set to leave borrowing costs unchanged.

Fed Chair Jerome Powell will likely leave his options open for September, as there are two more inflation reports and also a couple of jobs figures due before then. Moreover, the Chair and his colleagues want to see the impact of tariffs on price rises. So far, the impact has been minimal, but they could begin showing soon.

Powell will have to be cautious when talking about inflation, especially after fact-checking Trump in the Fed's building on Thursday. The relationship is extremely tense.

What about Fed members who were nominated by Trump in his first term? Christopher Waller and Michelle Bowman turned dovish a few months ago, supporting earlier rate cuts. If both vote to cut rates, markets could see it as a sign the bank will cut next time, perhaps even by 50 basis points (bps).

My baseline scenario is for both Bowman and Waller to opt for a cut – a rare double dissent – thus triggering a rally in markets. However, Powell may then pour some cold water with some caution – and a refusal to commit. That would reverse the trend, at least temporarily.

5) BoJ set to intensify talk of a rate hike

Thursday, early in the Asian session. The Bank of Japan (BoJ) is set to leave borrowing costs unchanged once again. The Tokyo-based institution has pledged to raise interest rates to curb inflation, but after lifting it from negative territory to 0.50%, it is taking a long pause.

Another rate hike seemed elusive until the US and Japan struck a trade deal last week, providing some certainty to policymakers. That may embolden BoJ Governor Kazuo Ueda to signal a hike is coming sooner than markets think.

I expect the Japanese Yen (JPY) to emerge stronger from the meeting, assuming Ueda sounds somewhat more hawkish.

6) Core PCE could vindicate Fed hawks

Thursday, 12:30 GMT. The day between the Fed and Nonfarm Payrolls is not very quiet. Apart from weekly Initial Jobless Claims, which do not include the time when NFP surveys are conducted, there is a more interesting publication.

The core Personal Consumption Expenditures (PCE) Price Index is the Fed's preferred gauge of inflation. After a few months of subdued outcomes, the economic calendar points to an increase of 0.3% MoM in June, accelerating from 0.2% in the previous month.

A faster increase may push the annual figure away from its long-term descent toward 2%, the central bank's target, and vindicate Fed hawks who fear tariffs may have an adverse impact on inflation.

7) Nonfarm Payrolls could defy AI and tariffs once again

Friday, 12:30 GMT. Has Artificial Intelligence (AI) hurt the labor market? So far, certain jobs, such as entry-level programmers, have suffered, but overall employment holds up. Has a tough stance against illegal immigrants resulted in more positions for the native-born population or weakened the entire labor market? What about tariffs?

These remain open questions – but the Nonfarm Payrolls report for July could provide some answers. The economic calendar points to an increase of 102K positions, somewhat lower than in previous months, but still growing.

An upbeat outcome would boost the US Dollar and weigh on Gold, while signs of weakness would do the opposite. What about Stocks? Companies need employed people to sell their products to, but also fear high interest rates. I think investors will prefer strong data over weak data.

Final thoughts

This is one of the busiest weeks of the year, featuring not only Trump's headline-grabbing comments but also a dense concentration of top-tier economic figures. Trade with care.