The euro is stabilizing amid mixed economic signals, with recent retail sales in the Eurozone dropping sharply by 0.5% in July 2025, driven by declines in food and fuel sales, while the construction sector continues to contract despite slight improvements. European stocks have shown resilience, with gains in technology shares, though concerns linger over fiscal challenges, political risks in France, and persistent pessimism in the construction sector. The European Central Bank is likely to maintain steady interest rates, contrasting with expected Federal Reserve rate cuts, putting pressure on the euro, especially as markets await the critical US Nonfarm Payrolls report, which could influence direction.

The Nikkei 225 Index surged, and the Topix Index rose, driven by a tech-led rally mirroring Wall Street, with strong performances from companies like SoftBank and Advantest. Japan’s 10-year bond yield dipped to 1.58% after hitting a 17-year high, while robust wage growth of 4.1% in July and rising household spending supported expectations of a potential Bank of Japan rate hike. Japan’s foreign reserves hit $1.32 trillion, bolstered by valuation effects, and lower US tariffs on Japanese autos, alongside $550 billion in investment, eased pressure on the auto sector. Political uncertainty grew with the resignation of a key ally of Prime Minister Ishiba, potentially impacting BOJ policy, while the yen remained stable against the dollar.

The Australian dollar is under pressure despite strong domestic economic data, largely due to a resilient U.S. dollar as markets await the U.S. Nonfarm Payrolls report. Australia’s trade surplus surged to A$7.31 billion in July, driven by robust exports and weaker imports, while household spending rose 5.1% year-on-year, supported by solid GDP growth of 0.6% in the June quarter. Despite these positives, the Reserve Bank of Australia is likely to maintain current interest rates, though analysts predict potential rate cuts in 2025 and 2026. The S&P/ASX 200 rallied, led by strong performances in financials and mining stocks.