European Markets Wrap: Dollar Holds Steady, Gold Eases From Highs After Benign US CPI Report
Key Takeaways
- •The July US inflation report matched expectations, providing no new impetus for changing the timeline of potential Federal Reserve interest rate decisions.
- •Currency markets exhibited low volatility, with the US dollar trading flat as investors await potential policy signals from the Jackson Hole symposium.
- •The United Kingdom's second-quarter gross domestic product grew by 0.4% quarter-over-quarter, supported by unexpected expansion in the services sector during June.
- •Energy and precious metals markets declined, with West Texas Intermediate crude oil dropping two percent and gold retreating from recent highs.
- •Spanish consumer prices increased in July, indicating that inflationary pressures remain persistent in certain areas of the eurozone despite broader disinflation trends.
Key Headlines:
- Markets look ahead to Jackson Hole
- Dollar remains muted amid lack of post-CPI momentum
- Gold struggles to extend gains following US inflation data
- UK Q2 preliminary GDP comes in at +0.4% q/q, matching expectations
- UK economy posts unexpected growth in June, driven by a stronger services sector
- Spain inflation edges higher in July as both headline and core prices rise
Market Snapshot:
- WTI crude oil: down 2% to $81.58
- CHF leads, NZD lags on the day
- European equities higher; S&P 500 futures up 0.2%
- Gold: down 0.4% to $4,388
- US 10-year yields: down 1.7 bps to 4.675%
- Bitcoin: down 0.2% to $63,387
The July US CPI report proved largely uneventful, leaving market participants with little fresh impetus as the second half of the week gets underway. With inflation data largely aligning with expectations, the report did little to shift the prevailing debate around the timing of potential Federal Reserve rate adjustments, reinforcing the sense that policymakers will need additional data before committing to a clearer path.
The dollar recovered from overnight lows late in the previous session before settling into a sideways pattern during European morning trade. EUR/USD is trading within a narrow range, up just 0.1% at 1.1535. USD/JPY remains largely unchanged, hovering around the 159.20–30 zone. The lack of directional momentum reflects broader market hesitancy as participants position cautiously ahead of next week's Jackson Hole symposium, where Fed Chair Jerome Powell's remarks have historically served as a key venue for signaling the policy outlook.
On the geopolitical front, the US–Iran conflict continues to show little meaningful progress. The broader market mood remains tentative, even as oil prices move lower. WTI crude is currently down 2% at $81.58. Bond yields have also eased off recent highs, with 10-year Treasury yields down 1.7 bps to 4.675%.
European economic data offered a mixed picture. UK Q2 preliminary GDP came in at +0.4% q/q, matching expectations, with the economy posting unexpected growth in June driven by a stronger services sector. Meanwhile, Spain saw both headline and core inflation edge higher in July, underscoring that price pressures in parts of the eurozone remain sticky even as broader disinflation trends persist.
Overall, the price action points to little more than a brief pause as markets await further headlines and catalysts.
Equities are holding steady, with modest gains across European stocks and US futures nudging slightly higher. Wall Street managed to retain light gains following Wednesday's inflation data and is positioned marginally higher again today.
Gold has pulled back from its Asian-session highs, slipping 0.4% to $4,388. Buyers continue to attempt a decisive push above the $4,400 level this week, though the absence of a strong directional trigger has so far prevented a breakout.
Attention now turns to upcoming US weekly jobless claims and PPI data, which will provide further input on the inflation and labor market picture before the Jackson Hole symposium takes center stage next week.
