Financial Markets Daily Report30 July 2026
Thursday was dominated by a hawkish-hold FOMC, ongoing AI-capex concerns, and a sharp re-escalation of the US-Iran war.
The latter pushed energy prices higher, lifting eurozone inflation expectations, particularly at the short end. Expectations for ECB rates moved higher, with markets pricing a 90% probability of a September hike. Eurozone sovereign bond yields rose, with peripheral spreads widening, ahead of today's euro area GDP releases.
The Fed left rates unchanged, but three of the 12 FOMC members already voted for a hike. Warsh reinforced the tightening bias, albeit without identifying a clear trigger. The probability of a September hike fell to 60%, from around 100% on Wednesday. The Treasury curve steepened as short-end yields fell and long-end yields rose.
In this context, the USD weakened against its peers, especially the euro. Equities fell sharply across the globe, led by AI-related stocks. European equities also closed lower, though energy stocks outperformed.