U.S. GDP contracts, factory orders soar, PMI strong despite tariff risks

Here’s your latest economic snapshot:

• S&P Global Manufacturing PMI jumped to 52.9 
• S&P Global Services PMI edged down to 53.1
• U.S. factory orders soared 16.4%
• U.S. economy contracted 0.5%

Market Recap:

U.S. Manufacturing Purchasing Managers Index (PMI: The S&P Global Manufacturing PMI jumped to 52.9 in June (vs 52 prior, 51 expected) — the strongest factory growth in over 3 years. Output rose for the first time in four months, boosted by strong new orders and export demand, even with tariffs. Hiring hit its fastest pace since Sept 2022. However, input and output prices surged, signaling rising inflation pressure. Business confidence also climbed to a four-month high.

U.S. Services Purchasing Managers Index (PMI): The S&P Global Services PMI edged down to 53.1 in June (from 53.7), slightly beating forecasts (52.9). Growth remained solid, driven by strong domestic demand despite falling export orders due to tariff worries. Firms hired more staff and saw backlogs build. However, rising costs for wages, fuel, and financing pushed prices higher. Business confidence dipped amid ongoing tariff uncertainty.

U.S. Durable Goods Orders MoM: U.S. factory orders soared 16.4% in May to $343.6B — the biggest monthly jump since July 2014 and well above forecasts (+8.5%). The surge was led by transportation orders (+48.3%), especially nondefense aircraft (+230.8%). Capital goods orders rose 48%, while core business investment (nondefense ex-aircraft) climbed a solid 1.7%, beating expectations. Ex-transportation, orders rose a modest 0.5%, signaling broad-based but uneven strength.

U.S. Gross Domestic Product (GDP) QoQ: The U.S. economy contracted 0.5% annualized in Q1 2025 — deeper than the earlier –0.2% estimate and marking the first decline in 3 years. The downgrade came from weaker consumer spending (+0.5% vs 1.2%) and exports (+0.4% vs 2.4%). A sharp jump in imports (+37.9%) ahead of expected tariffs weighed further, while federal spending dropped –4.6%. Business investment was a bright spot, rising 7.6%, though slightly below the previous estimate.

Oil and Commodities:

Brent Crude: Oil prices fell to $66.20

Gold: Gold prices fell to $3256

Currency Watch:

EUR/USD: The euro rose 0.05% to $1.1705, hitting a peak of $1.1754 — its highest level since September 2021. It’s set for a 1.57% weekly gain, the strongest since May 19.

GBP/USD: Sterling slipped 0.19% to $1.3701 but is still heading for a 1.85% weekly gain — its strongest performance since May 19.

USD/JPY:  The dollar rose 0.19% to 144.65 yen but remains on track for a 0.94% weekly drop — its biggest loss against the yen since May 19.

Bitcoin $107535. Ethereum $2454

Preview of the Upcoming Week:

July 01, 2025

Eurozone Consumer Price Index (CPI) YoY: Inflation in the Euro Area rose to 2.0% in June, up from 1.9% in May, marking a slight acceleration. Analysts expect it to reach 2.1% by the end of Q3, with longer-term projections pointing to 1.8% in 2026 and 2.1% in 2027.

📌 What to Watch:

• EUR/USD may gain support if inflation continues to rise, especially if the ECB signals a shift toward tighter policy.
• EUR/GBP could also move higher, depending on the UK’s inflation trajectory.
• European indices like the DAX and EURO STOXX 50 may come under pressure if inflation triggers rate hike bets.
• Keep an eye on gold (XAU/USD) — it often reacts to inflation expectations across major economies.

U.S. Manufacturing Purchasing Managers Index (PMI): The U.S. Manufacturing PMI rose to 52.9 in June from 52.0 in May — the strongest reading in over three years. However, analysts expect it to ease to 51.5 by the end of Q3, with longer-term forecasts at 50.0 in 2026 and 51.0 in 2027.

📌 What to Watch:

• USD/JPY could remain supported if strong PMI fuels rate hike speculation.
• S&P 500 and Dow Jones may react to growth signals from the manufacturing sector.
• Copper and industrial metals could see upward momentum on improved factory demand.
• Keep an eye on EUR/USD — if U.S. growth diverges from the Eurozone, volatility may rise.

July 02, 2025

U.S. ADP Nonfarm Employment Change: U.S. private sector employment rose by just 37K in May, down from 60K in April — signaling a notable slowdown in job creation. Analysts expect a rebound to 90K by the end of Q3, with longer-term projections of 150K in 2026 and 140K in 2027.

📌 What to Watch:

• Weak jobs data could pressure the USD, especially against safe havens like JPY and CHF.
• Gold (XAU/USD) may benefit from rising expectations of Fed rate cuts.
• U.S. indices such as the Nasdaq and S&P 500 might react positively if soft labor data fuels dovish policy bets.
• USD/CAD and USD/AUD could also come under pressure as risk sentiment shifts.

July 03, 2025

U.S. Nonfarm Payrolls: Nonfarm Payrolls rose by 139K in May, showing moderate hiring momentum. Forecasts suggest a slowdown to 100K by the end of Q3, with longer-term projections at 170K in 2026 and 150K in 2027.

📌 What to Watch:

• A weaker NFP trend could weigh on the USD, especially vs EUR and JPY.
• Gold and Treasuries may rise if job data fuels rate cut bets.
• U.S. stock indices could bounce if markets interpret slowing jobs growth as easing inflation pressure.
• USD/MXN and USD/ZAR may also weaken as investors rotate into higher-yielding EM assets.

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