Monthly Market Commentary

As at 31 July 2025

Economic Overview

Australia

RBA holds rates at 3.85% in July, surprising markets

The RBA surprised markets by holding rates steady at 3.85% in July. With inflation back within the RBA’s target band, the market was expecting a 0.25% cut. However, the RBA judged that it could wait for a little more information to confirm that inflation remains on track.

Q2’25 inflation showed that inflation in Australian continues to decline. 2nd quarter headline CPI was 2.1%, falling from the prior months 2.4%, and below consensus of 2.2%. Core CPI was in line with consensus. This lends weight to inflation stabilising and that the RBA resuming interest rate cuts is more likely.

Australian labour market data showed a gain of only 2,000 jobs in June, which was below consensus of a 20,000-job gain. The unemployment rate, which has remained steady at 4.1% for the past five months, rose to 4.3% in June.

Retails sales data for June increased to 1.2% month on month (MoM) from the prior 0.2% MoM. However, retail sales for the overall quarter remained weak.

International

US announces new reciprocal tariff rates

With the end of the 90-day delay of the US reciprocal tariffs, US President Trump sent letters to 21 countries announcing tariffs ranging from 20% to 40%. A 50% tariff on copper was also announced, as well as a threat of high tariffs on semiconductors and pharmaceuticals. Additionally, US President Trump warned that BRICS*, and countries aligned with them, could also face an additional 10% levy. In July, US trade deals have been announced with the European Union, Vietnam, Japan and Indonesia.

The US Administration’s “One Big Beautiful Bill” (OBBB) was signed into law. OBBB contains both permanent extension of the expiring tax cuts under the 2017 Tax Cuts and Jobs Act and spending cuts. This tax cut extension is expected to cost $4.6 trillion in US Dollars (USD) over the next 10 years. In addition, campaign promises of no taxes on overtime and no tax on tips have been delivered.

The Fed left rates unchanged in July, keeping the target range at 4.25-4.5%. The Fed downgraded its description of economic growth noting that “economic activity moderated in the first half of the year”. The ECB also kept rates on hold.

^{*BRICS – Brazil, Russia, India, China and South Africa}

Market Review

International shares continue to see gains in July

International shares (hedged) rose by 2.1% in July, even as tariff tensions escalated once again. Emerging market shares (unhedged) continued to outperform international shares, posting solid gains, up 3.8% in July.

Australian shares rose over the month, up 2.4%, despite the RBA surprising the market by not cutting rates as expected.

Bonds yields rise on inflation uncertainty

International government bonds fell slightly, down -0.3%, as most global government bond yields rose over the month.

International credit was marginally higher, up 0.3% in July, hindered by rising bond yields.

USD reversed some of its recent losses

The USD (trade-weighted) strengthened over the month, up 3.2%.

Copper prices fall on tariff reversal

Copper fell -14.3% after US President Trump exempted copper ore from the copper tariffs.

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