highlights

Tariffs, GBP, and Fed

We have successfully climbed the Wall of Worry

July 11, 2025

The median age in Central African Republic is 14.5.

I checked it five times because it seems impossible but apparently, it’s true.

Current Views

Flat

The wai…ting is the hardest part

With tariffs delayed again until August 1, we now will need to wait until the September or October CPIs are released in October or November to have a real idea of the inflationary or non-inflationary nature of the combination of tariffs and dollar weakness. It’s obviously ridiculous for the market to wait around and so we will need to overreact to every data point starting with Tuesday’s release. I think there is more room than usual for a surprise as the front-loading could keep cheap goods in the pipeline for a while before the more expensive goods land. Either way, the Two Dots will scream for cuts if the number is weak and the Zero Dots will double down on the wait-and-see if it’s not.

In the meantime, the tariff story looks more draconian than anyone thought, but nobody cares because the delays keep coming and there is no credibility to any of these policy announcements. August 1 is a long way away and we have been doing this since February. Fool me thrice, etc.

The thing is, nobody believes the tariffs matter anymore, so that might create a situation where they finally do matter at some point because there’s no wall of worry left to climb. We got to the top of the Wall of Worry now. Nobody is worried about anything.

Meanwhile, in FX, GBPUSD is getting more interesting as the USD finds its feet overall and the data turns soft ahead of next week’s Mansion House Speech from the Governor of the Bank of England. That venue has been the place for some interesting pivots on monetary policy in the past, and the market is wondering whether 2025 might be another one. Plus, we get UK CPI and GDP next week. The full calendar follows today’s piece.

You can see in this chart that GBPUSD is nearing its 50-day moving averages (simple and EMA on the chart) and these have been perfectly defining the trend up (much as they perfectly defined the prior trend down). So a daily close below 1.3480 should open up some downside and trigger a spike in bearish interest.

It’s conceivable that GBPUSD could be sub-1.34 next week as there is so much new information to come. 1-week GBPUSD is not particularly expensive as you can see here:

Tough to buy 1-week on Friday with spot right on the moving averages, but this is something I plan to look at on Monday if we close below 1.3480/90 today.

Nice chart from Bloomberg

This chart is a tiny bit hard to read, but it shows “news headline frequency” on the y-axis and “dovish vs. hawkish” on the x-axis. Nice little reference for Fed followers. We get plenty of Fedspeak next week.

Final Thoughts

The Q1 COFER data came out. It shows the changes in central bank holdings of various currencies and this quarter’s report showed a strange and impossible-to-believe jump in CHF holdings by central banks. This will be discussed for a while, but my feeling is that the data is wrong. No way someone bought 60 yards of CHF in a quarter where USDCHF went from 0.9000 to 0.8840.