Global markets opened the week on a cautiously optimistic note as easing geopolitical tensions in the Middle East, following US President Donald Trump's cancellation of planned military strikes on Iran, helped boost investor sentiment and alleviate immediate concerns over oil supply disruptions and inflation risks [1][5][7]. President Trump described his offer for renewed talks as a 'last chance,' but Iranian officials, including General Mohsen Rezaei, rejected the conditions and denied any negotiations were taking place [1][5][6][7].
In currency markets, the Euro (EUR) held firm, with EUR/CAD trading around 1.6170 for an eighth consecutive day of gains, supported by stronger-than-expected Eurozone economic data. The Eurozone economy expanded by 0.4% in Q2, doubling forecasts and marking its strongest growth since early 2025. July's annual inflation accelerated to 2.9%, with core and services inflation also picking up, reinforcing expectations for a European Central Bank (ECB) rate hike at the September meeting. Deutsche Bank analysts noted that ECB September hike pricing is around 90% [1][2]. However, gains for the Euro were capped by a resilient Canadian Dollar (CAD), buoyed by crude oil prices rising over 2% to $80.50 per barrel amid ongoing Middle East tensions [1][3].
US Dollar (USD) performance was mixed. The USD/CAD pair stalled near 1.4050, with price action forming a triangle pattern above the 1.4000 support area. The Greenback had weakened after the Federal Reserve left rates on hold and failed to convince markets of its inflation-fighting resolve, but bearish momentum faded as hopes for US-Iran peace talks pressured the CAD via oil prices [3]. Meanwhile, the EUR/USD traded cautiously around 1.1500, with technical resistance at 1.1555 and 1.1600, and support at 1.1451. The US Dollar Index (DXY) held near 100.00, and the USD was the strongest against the New Zealand Dollar this week [2][6].
On Wall Street, stock futures rose as easing tensions supported risk appetite. Dow Jones futures gained 0.17%, S&P 500 futures 0.23%, and Nasdaq 100 futures 0.68%. The previous session saw the Nasdaq Composite surge 2.13%, S&P 500 up 1.48%, and Dow Jones up 1.32%, led by megacap tech stocks such as Amazon, which crossed the $3 trillion market cap for the first time with a 4.6% gain [5]. Treasury yields remained broadly flat, with the 10-year at 4.686%, the 2-year at 4.250%, and the 30-year at 5.232%, as investors awaited further clarity on US-Iran negotiations and upcoming US economic data, including JOLTs job openings and trade figures [7][4].
Federal Reserve officials, including Williams, reiterated confidence in the current policy stance, describing it as 'well positioned' to achieve 2% inflation, but emphasized readiness to hike rates if inflation does not slow as expected. The FXS Fed Sentiment Index fell by 1.47 points to 146.76, indicating a modest pullback in perceived hawkishness, though the tone remains restrictive [4][5].
CONCLUSION
Easing Middle East tensions and robust Eurozone growth data have buoyed market sentiment, supporting equities and the Euro, while the US Dollar remains range-bound amid mixed Fed signals. Investors are closely watching upcoming US economic releases and developments in US-Iran relations for further direction. The overall market tone is cautiously optimistic but remains sensitive to geopolitical and monetary policy headlines.