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Word on the Street
Word on the Street

Word on the Street

Goldman flips stocks into options, ING believe in the USD rally, ECB previews and more.

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AP Research
Jul 20, 2025
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Word on the Street
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In our Word on the Street, we summarise our favourite and most thoughtful commentary from banks, fund managers, and seasoned strategists.

This weekend, we look at:

GS Finds ‘Stock Replacement’ Opportunities

Goldman’s derivatives team sees a favourable setup for replacing outperforming stocks with long calls, as US equities trade near all-time highs and implied volatility remains below realised levels.

They screen for Buy-rated stocks that have outperformed the SPX and sector peers by >15%, with upcoming earnings likely to drive additional volatility, allowing investors to keep upside while limiting downside to the call premium.

Barclays Talk US Yield Curve Steepeners

Barclays’ FICC team notes that speculation over President Trump potentially firing Fed Chair Powell has injected a lasting risk premium into long-end rates, with 30y yields up 5bp on the week and the 5s30s curve modestly steeper.

They warn that Powell’s removal could trigger an immediate 50bp sell-off in 30y Treasuries, wider breakevens, and higher rate volatility, as markets question the Fed’s inflation-fighting credibility and price in more accommodative policy.

Rabobank Says No ECB Cut This Week

Bas van Geffen expects the ECB to keep policy rates unchanged, arguing they are “in a good position” and that further cuts would require a significant deterioration in the economic outlook, which he does not anticipate.

Trade uncertainty remains the key risk, but he views a near-term EU-US trade deal as unlikely, meaning the ECB will rely on incoming data rather than trade developments. With medium-term inflation expectations stable and the euro’s strength having limited impact, he does not expect President Lagarde to change her narrative at next week’s meeting.

ING Says USD Rally Has Further To Go

The dollar index has gained over 2% since early July, with ING strategists attributing its rebound to a renewed alignment with macro drivers, including its positive correlation with 10-year Treasury yields.

They see limited risk of renewed selloffs unless political shocks, such as Trump firing Fed Chair Powell or escalating trade tensions, materialise, and expect further dollar support as Fed rate-cut expectations ease. Strong US data, resilient capital inflows, and rising scepticism over Fed cuts are also fueling USD/JPY momentum, with ING targeting 150.00 in the near term.

Let’s break the reports down in more detail…

GS Finds ‘Stock Replacement’ Opportunities

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