Separately, San Francisco Fed President Mary Daly indicated that signs of labor market weakness are making monetary policy easing increasingly likely, with two rate cuts this year now seen as the base case. The first reduction could occur as soon as September.

Eurozone

The euro is losing ground to the pound and dollar, but strengthening against the yen. Newly released PPI data showed a month-on-month rise from -0.6% to 0.8% (short of the 0.9% forecast) and a year-on-year increase from 0.3% to 0.6% (beating 0.5%). This outcome supports the case for holding ECB rates steady in the near term.

July’s services PMI for the bloc improved to 51.9 from 50.5 (preliminary estimate: 51.2), while the composite slipped to 50.9 from 52.0—still in expansion territory. Germany’s services PMI rose to 50.6 from 49.7 (versus expectations of 50.1), and the composite improved to 50.6. While overall eurozone business activity is accelerating, export contraction and weak new order flows remain significant headwinds.

United Kingdom

The pound is climbing against both the euro and yen, but remains mixed against the US dollar. July PMI data revealed the services index fell to 51.8 from 52.8 (beating forecasts of 51.2), and the composite dipped to 51.5 from 52.0. Recovery is ongoing, but at a slower pace, with UK firms reporting the sharpest decline in new orders since November 2022. Uncertainty and increased social contribution requirements continue to weigh on employment and business sentiment.

Japan

The yen is down across the board against major peers. July’s services PMI increased to 53.6 from 51.7 (beating the 53.5 consensus), while the composite rose to 51.6 from 51.5. The Japanese services sector is now expanding at its fastest pace in five months, offsetting pressure on industry from US tariffs and supporting broader economic growth.

Minutes from the latest Bank of Japan meeting revealed that while some officials see a case for resuming rate hikes if trade tensions ease, most prefer to keep borrowing costs unchanged due to persistent recession risks.

Australia

The Australian dollar is advancing versus the euro and yen, but trades mixed against the US dollar and pound. July services PMI ticked up to 54.1 from 53.8, while the composite improved to 53.8 from 53.6—highlighting continued resilience in the domestic economy, despite global trade headwinds. This may prompt the Reserve Bank of Australia to keep rates steady, though most analysts expect two cuts by year-end.

Oil

Oil prices continue to trend lower, as OPEC+ approved a new production hike of 547,000 barrels per day for September—fully unwinding previous 2.5 million bpd supply cuts. Fears over lost Russian crude supplies have faded, further easing price pressure. President Trump’s renewed threats of tariffs on Indian imports (in response to continued purchases of Russian oil) have been rebuffed by the Indian government as “unjustified.” Analysts caution that Trump’s proposals could backfire, driving gasoline and oil prices higher—an outcome the White House would likely prefer to avoid.