Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.The pound has dropped to a three-week low this morning, after the governor of the Bank of England said it could make larger cuts to interest rates if the jobs market slows quickly.Andrew Bailey told The Times that “slack” was opening up in the UK economy, following the increase to employers’ national insurance contributions.That slack should create downward pressure on inflation.Bailey insisted: “I really do believe the path is downward” for interest rates.

Bank rate is currently 4.25%, following four quarter-point cuts in the last year, with the Bank next scheduled to set rates on 7 August,Bailey added:“If we saw the slack opening up much more quickly, that would lead us to a different conclusion.”“I think the path [for interest rates] is down.I really do believe the path is downward but we continue to use the words ‘gradual and careful’ because … some people say to me, ‘Why are you cutting when inflation’s above target?’”Governor Bailey also pointed to Rachel Reeves’s decision to hike taxes on employers, saying companies were:“adjusting employment and hours and also having pay rises that are possibly less than they would have been if the NICs change hadn’t happened”.Last week, the Guardian revealed that the National Trust is to cut at least 550 jobs in efforts to save £26m after changes made in Reeves’s debut budget pushed up labour costs.

Hospitality firms have repeatedly warned that higher NICS will force them to cut jobs.And indeed, new data this morning shows that the number of people hunting for jobs has surged at the fastest rate since the height of the Covid pandemic.Following Bailey’s rate cut hint, the pound has dropped by 0.2% this morning to $1.3467.

That’s its lowest level since 23 June, three weeks ago, extending its recent losses,Time to recap…The pound dropped to a three-week low after the governor of the Bank of England said it could make bigger cuts to interest rates if the job market slows too quickly,Andrew Bailey said “slack” was opening up in the UK economy, as higher taxes have squeezed employers,He told the Times: “I really do believe the path is downward” for interest rates,The bank rate stands at 4.

25%, after four quarter-point cuts in the last year, and the Bank is next scheduled to make another decision on 7 August.Bailey said:“If we saw the slack opening up much more quickly, that would lead us to a different conclusion.“I think the path [for interest rates] is down.I really do believe the path is downward but we continue to use the words ‘gradual and careful’ because … some people say to me: ‘Why are you cutting when inflation’s above target?’”The market-implied probability of a UK interest rate cut in August jumped to over 88% following Bailey’s comments.European markets have weakened after Donald Trump announced a 30% tariff on EU imports – a threat described as “absolutely unacceptable and unjustified” by Denmark’s foreign minister today.

Germany’s DAX is down 0.8% today, with France’s CAC 40 index losing 0.5%.The EU’s lead negotiator with the US, Maroš Šefčovič, warned that a tariff of 30% or more would have a huge impact, making it “almost impossible to continue” current transatlantic trade, which is worth €4.4bn (£3.

8bn) a day,Ministers are to consider handing over ownership of the Post Office to its operators after the Horizon IT scandal,A water company serving 3,9 million customers in London and south-east England has doubled the pay of its chief executive, despite the regulator saying it had “elevated concern” over its financial situation,There’s a mixed start to trading in the US market today, as investors ponder President Donald Trump’s latest tariff threats against the EU and Mexico.

The Dow Jones industrial average is slightly in the red, down 17 points or 0,04% at 44,354 points,The broader S&P 500 index has slipped by almost 0,2%,Over in Wall Street, shares in aerospace manufacturer Boeing rose 2% at the start of trading, after an early report into the Air India disaster did not recommend action against the company.

On Friday, the preliminary report found that fuel to both engines of the plane that crashed and killed 260 people last month appears to have been cut off seconds after the flight took off.The U.S.Federal Aviation Administration and Boeing have privately issued notifications that the fuel switch locks on Boeing planes are safe, according to a document seen by Reuters.EU’s trade chief Maroš Šefčovič is also speaking the briefing in Brussels, and says he echoes Rasmussen’s comments.

Šefčovič tells reporters in Brussels that the EU has approached the talks with United States constructively, and in good faith.Šefčovič says the EU needs to focus on four areas, both in the run-up to the new deadline of August 1 and also beyond.On negotiations.Šefčovič says the EU remain convinced that the transatlantic relationship deserves a negotiated resolution, one that leads to renewed stability and cooperation.Šefčovič says he will continue talks with his US counterparts later today, insisting the EU “never walks away without genuine effort”.

Šefčovič says “it takes two hands to clap”, so the EU must also prepare “well-considered, proportionate measures” to restore balance to the transatlantic relationship.He explains that the European Commission has drawn up a proposal for a second list of US imports, totalling €72bn, which could be subject to counter-tariffs.Member states now have a chance to discuss this list, he explains.[Reminder: the EU has decided to postpone its first set of retaliatory countertariffs on €21bn of US goods, in the hope of agreeing a trade deal]EU PREPARES €72 BILLION IN COUNTER-TARIFFS ON U.S.

IMPORTS AFTER TRUMP’S LATEST TRADE MOVES — ŠEFČOVIČ#BREAKINGNEWSOver in Brussels now, the EU are holding a press conference following a Foreign Affairs Council meeting on trade.Lars Løkke Rasmussen, Minister of Foreign Affairs of Denmark, opens by explaining that ministers discussed the state of play and prospects for EU US trade relations, including possible EU countermeasures.Rasmussen adds that ministers also discussed President Trump’s announcement over the weekend of 30% general tariffs on the EU from 1 August, adding that “member states find [Trump’s announcement'] absolutely unacceptable and unjustified.”Rasmussen declares:We are committed to continuing working with the US on a negotiated outcome.It has to be a mutually beneficial agreement on terms that are acceptable to both sides.

He adds that the EU is “prepared for all possible scenarios”.If no satisfactory solutions can be found, the EU remains ready to react, and that includes robust and proportionate countermeasures if required.Rasmussen says there was a “strong feeling of unity” in the room today.You can watch the briefing here:The big picture today is that markets remain calm despite the growing risks of tariffs, says Gabriele Foa, portfolio manager at Algebris Investments:“A broad set of new tariffs and threats were announced last week, targeting a wide range of countries and sectors, with rates reaching up to 200% on pharmaceuticals.However, markets are not fully reflecting the scale of these tariff threats, particularly given how aggressive some of the proposed rates are.

European markets opened a bit soft on Monday, with no major moves.The copper market shows some divergence, with the London–US prices’ spread implying roughly a 50% probability of the copper tariff being implemented.In Brazil, where a 50% tariff is set to be imposed on exports, USDBRL and local rates initially sold off on the announcement but quickly reversed.More broadly, rates markets are not pricing in any growth disruption these measures could cause.Equity markets remain resilient and appear to be underestimating the potential inflation spike and demand hit that could follow.

We see risks skewed to the downside,”Germany’s DAX index is still leading the losses across Europe today, down almost 0,9%,Carmakers are among the fallers, such as BMW (-2%) and Mercedes-Benz (-1,7%).

Online retailer Zalando (-5%) is the top fallers, after Morgan Stanley lowered its price target and warned of growing disruption from TikTok Shop’s expansion into Europe.White House National Economic Council director Kevin Hassett has told reporters at the White House this morning that trade talks are still under way between the US and the European Union, Canada and Mexico.Asked about his expectations of talks with the EU, Hassett said:“We’ll see...

we’ve got a few weeks left.”The owner of McVitie’s has announced plans to inject £68m into its British operations in a bid to “supercharge” the growth of its brands.Turkish-owned snacking giant Pladis said investment funds will be used to boost manufacturing capacity and productivity across its factories.The London-based company, which also owns the Jacob’s and Godiva brands, added that it has “earmarked the bulk of the cash” to pump into sites across the north-west of England.The plans will include a £33 million overhaul of its Liverpool Aintree site, where it bakes Jacob’s cream crackers.

It will have a comprehensive refurbishment which will include the installation of new ovens and infrastructure,Back in the markets, France’s long-term borrowing costs have hit their highest level since the eurozone debt crisis almost 14 years ago,French 30-year bond yields have risen by 3 basis points (0,03 percentage points) to 4,23% this morning.

That’s the highest level since November 2011, when the eurozone was gripped by political instability and political turmoil, reflecting some anxiety about the US-EU trade situation,Bond yields rise when bond prices fall, and are a gauge of the cost of issuing new debt,French 10-year bond yields are flat on the day, right now, and still below levels hit in March this year…Water news: Households in several English counties have just been hit by a hosepipe ban,Thames Water has announced that a hosepipe ban across Swindon, Gloucestershire, Oxfordshire, Berkshire and Wiltshire will kick in at one minute past midnight on Tuesday 22 July,The ban will apply to all OX, GL, SN, RG4,RG8 and RG9 postcodes.

Thames explains that the current heatwave has hit water supplies to these areas, saying:Water for much of this area is supplied by Farmoor Reservoir.Farmoor is fed by pumping water from the River Thames.The amount of water we can pump is dependent on the amount of flow in the river.We must leave enough flow remaining to protect the environment and maintain navigation.The very dry and warm weather we’ve had means that the flow in the river is low.

This therefore impacts the amount of water we can pump into Farmoor Reservoir.BREAKING: Thames Water announces temporary hosepipe ban https://t.co/TC2ROCL7wW📺 Sky 501, Virgin 602, Freeview 233 and YouTube pic.twitter.com/TJ4AbzsW8vSome homes in Oxford had an, umm, dry run of water disruption last week – some homes and businesses in the city were left with no water or low pressure due to a burst pipe (including my excellent local pub!).

MP’s will hear from Thames Water chairman Sir Adrian Montague, CEO Chris Weston, and non-executive director Ian Pearson tomorrow morning, to discuss the company’s financial problems.The spot price of silver has hit its highest level since 2011 this morning.Silver traded as high as $39.09 per ounce, a 14-year high.Rostro’s chief market analyst, Joshua Mahony, says the jump in silver is an example of “resurgent demand for non-fiat assets” (see also bitcoin), adding:Notably, the rise in US debt coupled with higher stimulative spending does provide the basis for a more optimistic outlook for silver given its industrial use cases.

Another factor could be Donald Trump’s surprise 50% tariff on copper, which could spur higher demand for silver imports, just in case….Bloomberg reports that increased demand is leading to tighter physical supply of silver.Germany’s exporters have grown less competitive in recent years, leading to a fall in thir market share, the country’s central bank is warning today.The Bundesbank has calculated that more than three-quarters of the losses in export market shares between 2021 and 2023 were due to a deterioration in the competitiveness of German exporters.In a new report into “the sustained decline in German export market shares”, the Bundesbank says:The weak performance of German exports in recent years has been accompanied by significant market share losses for the German export industry.

German export market shares have been contracting since 2017 and have increasingly fallen behind those of other advanced economies since 2021.As a result, the losses in market share have contributed significantly to the sluggish growth of the German economy.The Bundesbank has concluded that this decline is due to supply-side problems within Germany’s economy, which have affected some of its largest sector.It says:The machinery industry, electrical industry and energy-intensive sectors such as the chemical industry were the biggest contributors to the drop in competitiveness.The sectoral profile and timing of the losses in competitiveness suggest that supply chain problems and energy price increases weighed particularly heavily