Market Overview
On 31 July 2026 the U.S. dollar recovered slightly, rising 0.3% to a Dollar Index of 101.50, yet it remains on track for a 1% decline over the month. The Federal Reserve left its policy rate unchanged and Fed Chair Kevin Warsh offered limited guidance, reinforcing doubts about further rate hikes. June’s Personal Consumption Expenditures (PCE) price index came in softer than expected, although core PCE stayed above the 2% target.
Eurozone Currency
The euro slipped 0.2% on the day to $1.1380 but posted a 0.8% gain for July. Eurostat data showed headline inflation in the euro area rose to 2.9% in July from 2.8% in June, driven by an energy price spike linked to escalating U.S.–Iran military friction. Underlying inflation, excluding food and energy, accelerated to 2.5% and services inflation rose to 3.3%. Coupled with a second‑quarter Eurozone GDP growth of 0.4%—double market expectations—the inflation pickup strengthened the case for an ECB rate hike at its September 10 meeting. Financial markets are pricing in more than two rate increases by early next year, though analysts caution that easing labor‑market pressures and slowing food inflation may limit the scope for aggressive tightening.
Japanese Yen
The Japanese yen appreciated 0.2% against the dollar, trading back above the 160 per dollar level after the Bank of Japan kept its policy rate unchanged as expected and trimmed its inflation outlook. The yen had fallen to as low as 158 per dollar overnight amid suspected coordinated intervention by Japanese and U.S. authorities. Over July the yen gained 1.6%, its strongest monthly performance since October, helped by government support and expectations that the BOJ will continue policy normalization later in the year.
British Pound
The British pound fell 0.2% on the day, reflecting ongoing anxiety over the five‑month‑old Middle East conflict and volatile energy prices, which kept investors cautious ahead of key central‑bank meetings scheduled for August.