The euro briefly dipped below $1.08 for the first time in over three weeks, driven by a mix of macroeconomic reports from the Eurozone. Despite this, European equity markets closed positively as investors processed fresh earnings reports, while the bond market saw continued interest. German front-end bond yields fell for the sixth straight session, reaching a near seven-month low at 2.54%.

Preliminary figures showed the Eurozone economy grew by 0.3% in Q2, exceeding expectations, with France, Italy, and Spain leading the growth. Conversely, Germany's economy unexpectedly shrank by 0.1% quarter-on-quarter, against predictions of a 0.1% increase, with significant declines in investments in equipment and buildings due to high interest rates straining the industrial sector.

Inflation in Spain decreased more than anticipated to 2.8% year-on-year, while Germany saw an unexpected rise in inflation to 2.3% year-on-year, compared to the expected 2.2%. Food prices rose and service inflation held steady at 3.9%, while energy costs declined more slowly. The CPI increased by 0.3% from the previous month, the largest rise in three months. Investors are still expecting a 25bps rate cut by the ECB in September.

Despite the influx of data, one-week EUR/USD realized volatility remains near 2024 lows due to prevailing caution as markets prepare for this week’s Fed and BoE meetings. The Euro Index fell by 0.16% for the second consecutive session, reaching a four-week low.