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The Week Ahead - 30 June - 4 July 2025
These are the Key Macro Events for the upcoming week.
Japan: The Land of the Rising Yields
We expect drags from US tariffs to keep a lid on Japanese growth. Trade talks with the US are taking quite some time. The Bank of Japan (BoJ) recently lowered its inflation forecasts, but upside risks remain. We expect the BoJ to stay on a cautious, gradual hiking path. In its June meeting, the BoJ announced to slow its pace of tapering, as expected. High public debt and rising rates pose challenges, but there are risk-mitigating factors. Meanwhile, the Japanese government bond curve has steepened due to a higher term premium. We do not have indications for structural US debt outflows by Japanese investors, yet. We expect the yen to appreciate versus the US dollar in 2025-2026.
NATO Summit - Defence spending to still rise significantly, even if 3.5% is unrealistic
NATO leaders today voted to officially raise the alliance’s defence spending target to 5% of GDP from 2% previously, comprised of 3.5% in core defence spending (the figure directly comparable to the previous 2% target) and 1.5% in infrastructure related to defence. With many countries likely to have already met the latter target, the really important number is the 3.5%, and it is here where there are major doubts over both the willingness but also the capability of meeting this target. Spain has a vague exemption from the target, while other countries openly doubted the target in the run up to the Summit.
The Week Ahead - 23 - 27 June 2025
These are the Key Macro Events for the upcoming week.
Impact of Israel-Iran on inflation and interest rates
Muted reaction so far of energy prices to Israel-Iran escalation - The escalating conflict between Israel and Iran has raised concerns over the last few days about potential disruption to global energy supply. As a result, a risk premium has been priced into oil prices, which has oscillated between 5 and 10 dollars p/b depending on the prospects for escalation versus de-escalation. The relatively muted reaction of prices reflects that the impact on energy supply has been limited so far. At the same time, outside of potential impacts of the conflict, supply is growing more quickly than demand and that is expected to remain the case this year and next.
Sovereignty increases EU regulatory burden
Trade between European member states is less intensive than trade between the 50 American states. Consequently, the benefits of scale and specialization remain underutilized, resulting in lower productivity growth compared to the US. One reason for the disparity in trade intensity is the complex regulations that hinder the internal market. The complexity of European regulations is not primarily due to the inferiority of individual member states' regulations compared to those in the US, but rather the lack of harmonization among the member states. Simplifying rules, as the European Commission currently aims to do, does not necessarily resolve this issue. A truly unified, common market with low transaction costs becomes feasible when member states can no longer easily negotiate exemptions or establish additional rules. Therefore, member states will need to relinquish some sovereignty. Furthermore, new regulations should be consistently evaluated for effectiveness (do the rules achieve the intended outcomes?), efficiency (are these outcomes achieved at the lowest possible cost?), consistency (do the rules align with policies in other areas?), and enforceability (can compliance be effectively monitored?). This evaluation task was previously assigned to the European Commission. However, as the Commission's role has become more political, and compromises are often required to strike deals, it is less able to perform this task effectively. Consequently, this responsibility should be assigned to an independent body.
Dutch Macro Perspectives - Wilders blows up coalition amid elevated uncertainty
Dutch government falls as the far-right PVV quits the coalition. The current government assumes caretaker status, meaning they only govern on selected topics. While uncertain at this stage, new elections are likely to be held, possibly in October.
Dutch industry struggles with declining orders and cuts staff
The Nevi Dutch Manufacturing PMI fell further in May, from 49.2 to 49.0. Despite the uncertainty surrounding trade policy and a further decline in the number of new orders, the Dutch manufacturing industry increased production for the third month in a row, albeit slightly.
The Week Ahead - 2 - 6 June 2025
These are the Key Macro Events for the upcoming week.
The Netherlands - Uncertainty seeping into growth figures
Q1 GDP growth slowed to 0.1% q/q – a poor start to the year before the tariffs hit. We have lowered our growth forecasts to 1.2% for 2025 (was 1.4%) and 1.0% for 2026 (was 1.3%). In addition to the direct and indirect impact of tariffs, uncertainty is also weighing on our forecasts.