Market Commentary 11th August 2025 – from Naigil Johnson

The Bank of England cut interest rates by 25 basis points to 4%, the lowest level since March 2023, in a rare split vote that appeared to highlight divisions over how to address stubborn inflation and a weakening economy. Governor Andrew Bailey described the move as “finely balanced” and stressed that future reductions will be “gradual and careful”. Inflation is now expected to peak at 4% in September and the Bank of England are closely monitoring the labour market, which has appeared to weaken following rises in employer National Insurance contributions and the minimum wage.

The Halifax House Price Index rose 2.4% year on year in July 2025, down from 2.7% in June and marking the slowest annual growth since July 2024. On a monthly basis, prices increased by 0.4%, which was the strongest rise since the start of the year, beating expectations of a 0.3% gain. The data also showed that the average property value increased from £297,157 to £298,237 in June 2025

In July, Germany’s HCOB Composite Purchasing Managers’ Index (PMI) showed modest growth, reaching its highest level in four months as a result of a rebound in services activity, which returned to expansion after being in contractionary territory for three months. However, the manufacturing sector remained in decline. In contrast, France’s Composite PMI pointed to a moderate and accelerating contraction, marking the 11th consecutive month of downturn, driven by continued weakness in both manufacturing and services.

Germany’s trade surplus narrowed in June 2025, falling to its lowest level since October 2024. The decrease was driven by exports growing more slowly than imports, resulting in a smaller surplus than expected. It appeared that the medium-term outlook for the German industry remains poor, with investors assessing the rising competition from Chinese producers, which is likely to weigh heavily on demand for German industrial goods

President Trump’s broad new tariffs on imports from over 90 countries took effect on the 7^th of August, ranging from 10% on the UK to 35% on Canada, with India facing a 50% rate. These measures have pushed the US average effective tariff to its highest level in nearly a century. While these tariffs are paid by US companies importing goods, their effects are being felt across the American and global economies. According to Yale University’s Budget Lab, as of the 7^th of August 2025, the average effective US tariff rate on imports reached 18.6%, the highest since 1933. Official data also showed tariff revenues in June 2025 surged to $28 billion, triple the monthly figures from 2024.

The ISM Services PMI unexpectedly fell close to stagnation in July 2025, falling from a modest expansion in June to nearly flat, with seasonal and weather factors weighing on the sector. Meanwhile, both new imports and exports shifted from expansion into contraction, which appeared to suggest that ongoing tariff tensions are beginning to weigh on global trade.

The average interest rate for 30-year fixed-rate mortgages in the US fell by 6 basis points to 6.77% in August, marking the lowest level in four weeks, according to the Mortgage Bankers Association. The decline appeared to follow the decline in Treasury yields amid economic data indicating a weakening US economy.

The S&P Global Japan Composite PMI indicated continued private sector expansion in July 2025, marking the fourth consecutive month of growth at its strongest pace since February. This was driven mainly by solid growth in the services sector, while manufacturing output contracted after a modest rise the previous month.

China’s trade surplus narrowed in July 2025, falling short of market expectations but remaining higher than the previous year, as exports continued to outpace imports. Export growth accelerated to 7.2% year on year, beating forecasts of a 5.4% increase. This was boosted by a temporary easing of tariff pressures and appeared to signal a possible extension of the US–China trade truce.

GBP / EUR – Current 1.1552 Previous 1.1459

The Pound rose 1.30% against the Dollar last week, recovering its previous week’s losses. It appeared the gain against the dollar was following the weaker than expected US July labour data and a slowdown in the services sector, which fueled expectations that the Federal Reserve would cut interest rates in September. Against the Euro, the Pound gained 0.81%.