ECB Expected to Hold Rates as Middle East Tensions Keep September Hike in Focus 
US Dollar Falls as Weak July Jobs Report Dents Fed Rate Hike Bets 
Canada, US Hold Constructive Trade Talks as Tariff Negotiations Continue 
China Exports Beat July Forecasts as AI Demand Fuels High-Tech Trade 
DeepSeek to Raise AI API Prices as Demand for New Models Surges 
Fed Holds Interest Rates Steady as Kevin Warsh Says Rising Treasury Yields Tighten Financial Conditions 
Asian Currencies Steady as Markets Await U.S. Jobs Data 
China Inflation Cools in July as CPI Misses Forecast, PPI Deflation Eases 
Daimler Truck Q2 Profit Falls 18%, 2026 Outlook Raised 
BOJ Minutes Signal More Rate Hikes as Inflation Risks Grow 
Meta Ordered to Pay $567M Over Child Safety Violations in New Mexico 
Alibaba Plans Revenue-Sharing Model for Qwen3.8-Max AI Commercial Users 
South Korea Raises Interest Rates to 2.75% as Inflation and Weak Won Drive Tightening 
Gold Prices Surge 7% as Dollar Falls, Fed Rate Hike Bets Ease 
US Yen Intervention Unlikely to Deliver Lasting Recovery, Yardeni Says 
RBA Signals More Rate Hikes Possible as Australia Battles Stubborn Inflation 
BOJ Expected to Hold Rates Steady While Signaling More Hikes Ahead 
Goldman Sachs has revised its euro area economic outlook, now anticipating two interest rate increases from the European Central Bank as stubbornly high energy-driven inflation continues to overshadow slowing regional growth. The revision reflects mounting pressure from disruptions in the Middle East, which have significantly constrained oil flows through the Strait of Hormuz to roughly 5% of normal levels for an expected six-week period.
In response to these supply-side shocks, Goldman's commodities team lifted its Brent crude forecast to $80 per barrel for the fourth quarter of 2026, up from a prior estimate of $71. The sustained energy price environment has forced a broader reassessment of both growth and inflation trajectories across the eurozone. The bank trimmed its year-end GDP growth projection by an additional 0.3 percentage points, now targeting 0.7% growth, while estimating the peak drag on output relative to pre-conflict levels could reach 0.7%.
On the inflation front, Goldman now sees headline inflation cresting at 3.2% in the second quarter, with core inflation peaking at 2.5% in the third quarter. Economists led by Sven Jari Stehn noted that greater persistence in core price pressures reflects the scale of the energy shock. The team acknowledged that risks remain skewed toward weaker growth and higher inflation simultaneously.
In light of these developments, Goldman expects the ECB to raise its deposit rate by 25 basis points at both the April and June meetings, bringing it to a peak of 2.5%. Policymaker communication has turned increasingly hawkish, suggesting a relatively low barrier for further tightening. That said, Goldman anticipates the cycle will be brief, with rate cuts likely beginning in 2027 as conditions normalize toward a 2% neutral rate.
For the United Kingdom, Goldman similarly revised growth down to 0.6% year-over-year while lifting inflation forecasts, though it maintains a baseline view of no change to the Bank Rate for now, with risks tilted toward hikes if energy prices persist.
