The European session was pretty much uneventful. We got some ECB speakers reaffirming the need to wait for more data before deciding on a rate cut in September. The main highlight was the Eurozone inflation report which showed the headline reading ticking lower to 2.5% Y/Y and the Core measure remaining unchanged at 2.9% Y/Y.

Zooming out, inflation in the Eurozone stabilised around 2.5% Y/Y for the headline reading and 2.9% Y/Y for the Core measure. The bad news for the ECB is the stickiness in services inflation which has been stuck at 4.0% Y/Y since November 2023.

The central banks are now switching their focus from inflation to the labour market as that’s what could keep inflation higher for longer. We saw ECB’s Vasle this morning emphasising that the labour market will be important for the next steps. This is also something that has been transpiring from the Fed’s statements and speeches.

In the markets, the US Dollar is basically flat on the day. Equities are down. Bonds are mostly flat. Gold is lower and Crude oil is higher.

The focus will now switch to the US Session as we get the US Job Openings which are expected to ease further, and Fed Chair Powell speaking the European Central Bank Forum on Central Banking 2024 in Sintra, Portugal.