While direct US-Russia trade volumes remain modest, analysts warn of ripple effects across global supply chains. If China and India retaliate, a broader trade conflict could erupt, worsening global recession risks and fueling currency market volatility.

United States: USD Weakens Against EUR and GBP

The US dollar trades lower against the euro and pound, showing mixed behavior versus the yen. Investors are cautious ahead of 14:30 (GMT+2), when US inflation data is set for release. Monthly CPI is forecast to rise from 0.1% to 0.3%, with annual inflation increasing from 2.4% to 2.6%. Core inflation is also expected to tick higher.

If confirmed, these figures will support the Federal Reserve’s case for keeping interest rates within the 4.25–4.50% range, despite mounting political pressure for cuts. A short-term dollar rebound is possible following the CPI release.

Eurozone: EUR Gains on Strong German Sentiment, Industrial Data

The euro strengthens against the dollar and yen but trades flat versus the pound. The ZEW Economic Sentiment Index for July rose modestly to 36.1, missing forecasts of 37.8. However, the German component outperformed, rising to 52.7 from 47.5, above expectations.

Meanwhile, industrial production in the eurozone grew by 1.7% month-over-month (vs. 1.1% forecast) and 3.7% year-over-year (vs. 2.95% expected), further supporting EUR gains. ZEW President Achim Wambach noted that business optimism is growing steadily, especially with hopes of de-escalation in the EU-US trade dispute and upcoming German stimulus.

United Kingdom: GBP Boosted by Retail Surprise

The British pound is gaining against the dollar and yen, while fluctuating against the euro. The British Retail Consortium reported a strong 2.7% rise in retail sales for June, far exceeding forecasts of 1.2%.

Experts credit good weather and cooling inflation for lifting consumer spending—particularly on summer apparel, cooling equipment, and home goods. Grocery store sales rose 4.1% year-over-year, while non-food retail increased 2.2%.

Japan: Political Risks Pressure the Yen

The yen weakens against the euro and pound, while trading mixed versus the USD. With no major economic releases, sentiment is being driven by domestic politics. Investors are eyeing the upcoming July 20 parliamentary elections with caution, as the ruling Liberal Democratic Party under Prime Minister Shigeru Ishiba faces growing opposition.

A loss of parliamentary majority could jeopardize Ishiba’s hawkish monetary policy stance and potentially lead to his resignation, introducing fresh uncertainty into Japan’s policy outlook.

Australia: AUD Strengthens on Consumer Confidence and China Talks

The Australian dollar is outperforming across the board—rising against the USD, EUR, GBP, and JPY. July data from Westpac showed consumer sentiment improving slightly, with the index edging up from 0.5% to 0.6%. Hopes for a rate cut by the Reserve Bank of Australia later this year continue to support the AUD.

Additionally, Prime Minister Anthony Albanese is in China today to meet President Xi Jinping. Talks are expected to cover economic cooperation and Indo-Pacific security. Albanese reaffirmed that while Australia values its partnership with China, it will prioritize national interests.

Crude Oil: Prices Rise on Geopolitical Risk

Oil prices are attempting to recover as markets price in potential supply disruptions tied to the new 100% US tariffs targeting Russia-linked trade. While these sanctions will take effect in 50 days, traders are already factoring in potential dislocations in Chinese and Indian energy imports.

However, gains are being capped by soft economic data from China. Q2 GDP growth slowed from 1.2% to 1.1%, raising concerns about future energy demand from the world’s largest oil importer.

Later today, at 22:30 (GMT+2), the API inventory report will be released. Analysts expect a draw of 2.0 million barrels, which could further support oil prices if confirmed.