European markets ended the week with cautious optimism as oil prices climbed on lingering US-Iran tensions. Traders eye upcoming US CPI data and central bank policies.
Market Overview: Oil Gains, Dollar Mixed as US-Iran Risks Persist
Global markets closed the week with modest gains in oil prices and mixed trading across major asset classes, as geopolitical tensions in the Middle East and upcoming inflation data dominated investor attention.
WTI crude futures rose 0.7% to $72.60 a barrel, buoyed by concerns over potential disruptions to oil flows through the Strait of Hormuz. The International Energy Agency (IEA) noted that global oil supply increased by 4.1 million barrels per day in June, though it remains 9.4 million barrels per day below pre-conflict levels.
Central Bank Policies and Inflation Dynamics
The Bank of Japan is expected to maintain its ultra-loose monetary policy at the July meeting, keeping interest rates unchanged amid persistent deflationary pressures. Meanwhile, German headline inflation held steady at 2.3% in June, with core prices showing minimal movement. French inflation data also pointed to a decline, reducing immediate pressure on the European Central Bank to adjust its stance.
Currency and Bond Market Movements
The US dollar traded mixed against major peers, with EUR/USD flat at 1.1430 and GBP/USD edging up 0.1% to 1.3425. The Japanese yen outperformed, with USD/JPY falling 0.3% to 161.80 following reports of Japan's significant pension fund rebalancing. US 10-year Treasury yields rose marginally to 4.547%, while gold slipped 0.3% to $4,107 and Bitcoin gained 1.7% to $64,368.
Implications for Traders
Geopolitical risks in the Gulf region continue to support oil prices and the yen, a traditional safe-haven asset. The dollar's performance remains tied to upcoming US CPI data on July 14, which could influence Federal Reserve policy expectations. European indices showed little directional bias, with S&P 500 futures down 0.1% and Nasdaq futures declining 0.3% amid tech sector weakness.
Risk sentiment appears cautiously optimistic, though traders remain wary of sudden escalations in the Middle East. Technical levels to watch include USD/JPY's support near 161.50 and resistance at 162.50, while EUR/USD faces key resistance around 1.1450.
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