Fed Chair Powell’s hint at a September rate cut and looming US tariffs on European goods (excluding autos, pharmaceuticals, and chips) highlight policy and trade divergences. In the Eurozone, consumer confidence dipped to a four-month low of -15.5, and economic sentiment fell to 95.2, driven by weaker services and construction sectors, while bank lending grew steadily. Political uncertainty in France, with Prime Minister Bayrou facing a likely defeat in a confidence vote, adds market tension, and ECB divisions on inflation risks signal caution despite stable rates and rising German and French bond yields. European stocks showed mixed results, with tech stocks volatile after Nvidia’s earnings and broader concerns about AI-driven market sustainability.

Japan’s yen strengthened amid mixed economic data. Tokyo’s core consumer prices rose 2.5% in August 2025, above the Bank of Japan’s 2% target, signaling potential for further rate hikes despite a pause due to U.S. tariff concerns. The unemployment rate fell to 2.3% in July, the lowest since December 2019, while industrial production dropped sharply by 1.6% and retail sales growth slowed to 0.3%, the weakest since February 2022. Japan’s 10-year bond yield neared a 17-year high at 1.62%.

The Australian dollar rose for the third consecutive day as higher-than-expected July inflation data reduced expectations for an imminent RBA rate cut, with markets now anticipating only 34 basis points of easing in 2025 and a possible cut in November. A weaker US dollar, driven by increased bets on a September Fed rate cut and political uncertainty surrounding Fed Governor Lisa Cook, further supported the Aussie dollar. Domestically, strong business investment and a 0.2% rise in the S&P/ASX 200, led by financial and defensive sectors, bolstered market sentiment, though energy and healthcare stocks lagged due to weaker oil prices and disappointing earnings.