Markets have largely brushed off the recent U.S. threat of 30% tariffs on the EU and Mexico, interpreting the move more as a negotiation strategy than an imminent economic shift. Both the euro and Mexican peso showed minor reactions but remained mostly stable. Investors also seem unconvinced by speculation that cost overruns in renovating the Federal Reserve’s headquarters could justify removing Chair Powell. The U.S. dollar shows mixed performance against G10 currencies, with the Dollar Index making slight gains and extending its upward streak since early July. In emerging markets, currency movements are also varied, with the offshore yuan strengthening modestly on better-than-expected trade and credit figures.

Asia Pacific Markets

In the Asia-Pacific region, the yen and Australian dollar reflect differing market sentiments. The dollar is showing strong momentum against the yen, nearing key resistance levels, though technical indicators suggest caution. Japan's economic indicators reveal sluggish industrial performance, with machinery orders and final industrial production figures slipping, while services show modest growth. Meanwhile, the Australian dollar has pulled back after touching a yearly high, settling into a narrow range. Despite the Reserve Bank of Australia’s decision to hold rates steady, markets remain highly confident that a rate cut is coming next month, with another expected by year-end.

European Markets

The euro has continued to weaken after reaching a peak earlier in July, currently hovering just above a key support level. Markets are closely watching U.S.–EU trade developments, viewing the threat of steep tariffs as a tactic rather than a finalized policy. Tomorrow’s industrial output figures and Germany’s investor sentiment index are anticipated to shed more light on regional economic momentum. The pound is also under pressure following disappointing May GDP data, breaking below a major technical support level. Sterling has declined for six straight sessions, and upcoming inflation and labor market data this week could be pivotal for future movement.

American Markets

The U.S. dollar gained for a fifth straight session last week, logging its strongest weekly rise in two months. The Dollar Index is testing resistance levels, and upcoming inflation data may determine whether this upward trend continues. With economists forecasting the highest annual CPI increase since February, markets are preparing for a possibly strong report. Recent Fed minutes suggest that a rate cut remains unlikely in the near term, a shift from earlier expectations that had priced in a September cut. Meanwhile, speculation about Chair Powell’s position remains largely ignored by investors, who appear more focused on key economic data releases this week.