In the United States, nonfarm payrolls increased by 147,000 in June, exceeding expectations, while the unemployment rate fell to 4.1%. Wage growth moderated, with average hourly earnings rising 0.2% month-on-month, easing concerns about wage-driven inflation. Headline inflation rose to 2.7% year-on-year, the highest since February, with tariff-sensitive categories such as apparel and household goods contributing to the increase. The Federal Reserve left interest rates unchanged at 4.25%-4.5% at its July meeting, with Chair Jerome Powell emphasizing that no decision had been made regarding a September rate cut. Markets continue to expect easing, but the Fed remains focused on longer-term inflation expectations. President Donald Trump renewed public pressure on the Fed to lower rates and announced a major trade deal with the European Union. The agreement includes a 15% tariff on most EU imports, and significant EU commitments to purchase US energy and invest in US defense and infrastructure. Meanwhile, trade negotiations with China resumed, though US officials warned that tariffs would return unless a truce is agreed by August 12.
In Europe, eurozone inflation rose to 2.0% in June, with services contributing the most. The ECB kept rates steady at 2.00% in July, noting moderating wage growth and continued economic resilience. President Christine Lagarde highlighted improved consumption and investment, but warned of persistent uncertainty due to trade disputes. The euro weakened following the meeting and is now trading at $1.141, down from its July peak of $1.181.
Geopolitical tensions intensified as President Trump reduced the deadline for Russia to reach a peace agreement with Ukraine from 50 days to 10–12 days. He warned of secondary tariffs on countries continuing to trade with Russia if no deal is reached. Though avoiding direct criticism of President Putin, Trump expressed disappointment at the lack of progress. The US also cautioned China over ongoing purchases of Russian oil, threatening additional tariffs.
Oil prices rose sharply, supported by reduced trade risks and US threats of new sanctions. Brent crude rose to $73 and US crude to $70, both up 8% over the past five weeks. Gold declined 0.3% to $3,327, following its record high in June, while Bitcoin surged 10.8% to around $116,900.
Equity markets continued to rally. The S&P 500 rose 4.4%, led by gains in Nvidia and other AI-related stocks. European indices posted moderate gains, while the Nikkei and Hang Seng also advanced. Bond yields moved higher across both the US and Europe amid firmer inflation data and cautious central bank messaging.
In currency markets, the US dollar strengthened broadly. The Dollar Index rose 2.3%, recovering from oversold levels. The euro declined 1.6%, while sterling fell 2.6% to $1.325. The US dollar gained 0.8% against the Canadian dollar and 2.6% versus the Japanese yen, supported by rising US yields and reduced expectations for imminent Fed rate cuts.