Global markets spent the day in wait-and-see mode, with traders showing little appetite for bold moves ahead of Fed Chair Jerome Powell’s much-anticipated speech at Jackson Hole on Friday.

Bond Markets Stay Quiet

A lackluster Japanese government bond auction gave a mild nudge to local yields, but the signal barely rippled beyond Japan. In Europe and the U.S., bond yields shifted by less than 2 basis points across the curve. Still, long-term yields in Germany (3.34%) and the UK (5.60%) continue to hover near multi-year highs, keeping fiscal sustainability concerns on the radar as governments prepare their 2026 budgets.

For the UK, the challenge is even more complex. Finance Minister Rachel Reeves faces a stagflation-like backdrop while tomorrow’s UK inflation data looms large. Rising costs of inflation-linked debt are a key variable in budget planning. Sterling has been edging lower, with EUR/GBP moving further away from the 0.86 support level, now around 0.8645.

Currencies in Check

On the broader FX stage, the U.S. dollar softened slightly, though without breaking any key technical levels (DXY at 98.1, EUR/USD at 1.168, USD/JPY at 147.75). Powell’s upcoming remarks appear to be freezing meaningful action across currency markets.

One bright spot: Central and Eastern European currencies, lifted by optimism about potential progress in the Ukraine conflict. The Hungarian forint led the pack, strengthening to its best level against the euro since September 2023 (EUR/HUF at 393.9). The zloty (EUR/PLN 4.245) and Czech koruna (EUR/CZK 24.45) also gained modestly.

Equities Near Highs

European stocks posted solid gains, with the Eurostoxx 50 climbing 0.9%, leaving the index less than 2% shy of its early March peak. In the U.S., the S&P 500 opened flat but remains just below record highs, keeping the rally narrative intact for now.

Spotlight on EU Bonds

Meanwhile, ICE (Intercontinental Exchange) once again rejected the idea of including joint EU debt in sovereign bond indices, maintaining the bloc’s classification as a “supranational” borrower. This decision continues to weigh on the EU’s effort to position its bonds as a true “safe haven” alternative to U.S. Treasuries. While other index providers like MSCI and Bloomberg have made similar calls, the EU is still working to improve liquidity and develop tools such as a repo facility and futures market to boost appeal.

Canada’s Inflation Picture

In Canada, July inflation data showed headline CPI slowing to 1.7% year-on-year, the lowest pace since early 2021, thanks largely to cheaper gasoline. Core inflation measures held steady, with the Bank of Canada’s preferred “trimmed mean” at 3%. The Canadian dollar dipped slightly to 1.3840 against the U.S. dollar, though the move carries little technical weight.