The euro declined in European markets on Tuesday against a basket of global currencies, extending its losses for the second consecutive day against the US dollar and moving away from a two-week high, due to active correction and profit-taking, alongside a rebound in US dollar levels ahead of key economic data from the United States.

Amid the entrenched inflationary pressures currently facing policymakers at the European Central Bank, the likelihood of a European interest rate cut in September has declined. To reprice these expectations, investors are awaiting further economic data from the Eurozone.

The Price

• EUR/USD exchange rate today: The euro fell against the dollar by 0.15% to $1.1554, down from today’s opening price of $1.1568. The highest level recorded was $1.1588.

• The euro ended Monday’s session down 0.15% against the dollar, marking its first loss in the past three days, after earlier hitting a two-week high at $1.1597.

The US Dollar

The US Dollar Index rose by 0.15% on Tuesday, extending its gains for the second straight session, as the currency continued to recover from a two-week low of 98.59 points, reflecting sustained strength in the US dollar against a basket of global currencies.

This rebound comes ahead of key US economic data set to be released later today, concerning the performance of the services sector in July, which provides a strong indicator of the pace of US economic activity during the third quarter of this year.

European Interest Rates

• The Consumer Price Index in Europe recorded a 2.0% rise in July, higher than market expectations of a 1.9% increase, and matching the previous reading of a 2.0% rise.

• These figures indicate persistent inflationary pressures on policymakers at the European Central Bank.

• According to Reuters sources, a clear majority at the latest ECB meeting expressed a preference to keep interest rates unchanged in September — for the second consecutive meeting.

• Market pricing of a 25-basis-point rate cut by the European Central Bank in September is currently holding below 30%.

• To reprice these expectations, investors will closely monitor upcoming economic data from Europe, in addition to statements from ECB officials.

The Japanese yen rose in Asian markets on Tuesday against a basket of major and minor currencies, extending its gains for the third consecutive day against the US dollar and recording its highest level in two weeks, after the minutes of the Bank of Japan's meeting indicated a resumption of monetary policy normalization before the end of this year.

In order to reprice expectations regarding the Bank of Japan's potential interest rate hike of 25 basis points at the upcoming September meeting, investors are awaiting the release of further key data on developments in the world’s fourth-largest economy.

The Price

• USD/JPY exchange rate today: The dollar declined against the yen by 0.3% to ¥146.62, the lowest since July 24, down from the opening price of ¥147.08. The highest level recorded was ¥147.15.

• The yen posted a 0.2% gain against the dollar at Monday’s settlement, marking its second consecutive daily gain, amid a decline in the yield on 10-year US Treasury bonds.

Japanese Interest Rates

• The minutes of the June monetary policy meeting showed that some members of the Bank of Japan’s board stated that the central bank would consider resuming rate hikes if trade tensions ease.

• Following last week’s meeting, the Bank of Japan confirmed that it would raise interest rates if economic and price conditions align with expectations.

• Bank of Japan Governor Kazuo Ueda stated that the recent trade agreement between the United States and Japan represents a significant positive step toward enhancing economic stability by reducing uncertainty that has long weighed on future outlooks.

• Market pricing of the Bank of Japan raising interest rates by 25 basis points at the September meeting is currently holding above 50%.

• To reprice these expectations, investors are awaiting more data on inflation, unemployment, and wage levels in Japan.

US Bond Yields

The yield on 10-year US Treasury bonds fell by 0.2% on Tuesday, deepening its losses for the third straight session and reaching a three-month low at 4.186%, which is putting downward pressure on the US dollar exchange rate.

This development in the US bond market follows the US jobs report released on Friday, which revealed clear weaknesses in the labor market, prompting traders to expect the Federal Reserve to implement at least two interest rate cuts before the end of this year.

Goldman Sachs expects the Federal Reserve to carry out three consecutive 25-basis-point cuts starting in September, with the possibility of a 50-basis-point cut if the unemployment rate rises further in the next report.

Additionally, President Donald Trump's dismissal of a senior US statistics official and the resignation of Federal Reserve member Adriana Kugler have heightened market concerns about the stability of the world’s largest economy.

Gold prices climbed on Monday amid a broad decline in the US dollar against most major currencies and growing expectations of a Federal Reserve interest rate cut.

Government data showed the US economy added 73,000 jobs in July, falling short of forecasts for 100,000 new jobs.

Figures for May and June were also sharply revised downward, with a total downward adjustment of 258,000 jobs compared to initial estimates. June’s numbers were revised to 14,000 from 147,000, while May was revised to 19,000 from 144,000.

The same report showed the US unemployment rate edged up to 4.2% last month from 4.1%, in line with market expectations.

In response to the data, former President Donald Trump questioned the reported decline in job growth and dismissed the head of the Bureau of Labor Statistics, accusing her of manipulating the numbers to undermine Republicans ahead of the elections.

Following these developments, the probability of a 25-basis-point rate cut at the Fed’s September meeting surged to 88%, up from 80% a day earlier and 63% a week ago, according to the CME FedWatch tool.

Separately, US Trade Representative officials said Sunday that the Trump administration is likely to keep in place the tariffs imposed last week on a number of countries, rather than rolling them back.

By 20:02 GMT, the US Dollar Index had fallen 0.4% to 98.7, with an intraday high of 98.9 and a low of 98.5.

As for gold trading, spot prices rose 0.9% to $3,430.8 an ounce by 20:03 GMT.

When Donald Trump landed in the United Arab Emirates earlier this year, he wasn’t just bringing headlines with him—he came with deals, ambitions, and soft power in the field of artificial intelligence.

The former US president was received with royal honors, but the highlight of the visit was the announcement of a massive AI-focused university campus—a joint UAE-US project.

This initiative, described as the largest AI infrastructure hub outside the US, marks the boldest step yet by Gulf countries to cement their position on the global AI map.

Trump’s visit coincided with a strategic shift as the White House relaxed export restrictions on Nvidia’s most advanced chips to both the UAE and Saudi Arabia.

This move signaled how seriously the US considers its Gulf allies as partners in a broader tech alliance.

Gulf states are leveraging their sovereign wealth, geographic location, and abundant oil reserves to position themselves as AI powerhouses. Technology has become central to their plans for reducing future dependence on fossil fuel revenues.

The UAE leads this charge with bold steps, placing data centers at the heart of its strategy. Abu Dhabi announced the development of a massive data center cluster dedicated to OpenAI and other American firms under the “Stargate” project.

This multi-billion-dollar deal is funded by G42, a state-linked Emirati tech firm spearheading the country’s AI ambitions. Nvidia will supply its latest advanced chips for the project.

Major tech firms such as Cisco, Oracle, and Japan’s SoftBank are collaborating with G42 in the first phase of development.

Hassan Alnaqbi, CEO of Khazna—the UAE’s largest data center operator—says: “Just like Emirates Airlines turned the UAE into a global air travel hub, the country can now become a global hub for AI and data.”

Khazna, majority-owned by G42, is building the infrastructure for the Stargate project and currently operates 29 data centers across the UAE.

Both the UAE and Saudi Arabia are racing to host the computing infrastructure needed to train powerful AI models. “Compute is the new oil,” says Mohamed Soliman, senior fellow at the Middle East Institute in Washington, D.C.

In AI terms, “compute” refers to the massive processing power provided by advanced chips and large-scale data centers—an area into which the Gulf is investing billions.

In today’s AI-driven world, infrastructure is the new fuel—just as oil powered the industrial revolution.

Soliman notes that Gulf AI firms today aspire to play a role similar to that of their oil counterparts in powering the global economy—but this time through compute.

In recent years, Gulf sovereign wealth funds have poured billions into foreign tech companies. But now, they are shifting from passive investors to active players.

In Saudi Arabia, the Public Investment Fund (PIF) has launched a national AI firm called “Humain,” which plans to build “AI factories” powered by hundreds of thousands of Nvidia chips over the next five years.

In the UAE, sovereign wealth fund Mubadala has backed G42 and the $100 billion joint venture “MGX,” which focuses on AI and includes Microsoft as a key technology partner—alongside other domestic initiatives.

However, attracting top-tier AI talent remains a major hurdle. To address this, the UAE is offering incentives like low taxes, long-term golden visas, and a flexible regulatory environment to lure companies and researchers.

“Building world-class AI and digital infrastructure will act as a magnet for talent,” says Baghdad Gras, an AI startup founder and venture capitalist based in the UAE.

Still, the region has yet to produce a globally recognized AI company like OpenAI, Mistral, or DeepSeek, nor does it have a deep bench of elite research talent.

Gras notes that the UAE’s small population—around 10 million—limits the scale of a domestic research ecosystem.

The Gulf’s rise as an ambitious AI player has also drawn the region into the spotlight of US-China tech rivalry.

Trump’s visit gave Washington an edge in the regional AI race—but at a cost. In shifting course, the UAE scaled back some Chinese-backed projects and reduced its reliance on Huawei hardware.

The AI-focused deals during Trump’s trip reflect the growing strategic importance of this technology in US diplomacy.

For decades, the US-Gulf relationship was built on the formula of “oil for security.” Today, that dynamic is evolving into a mix of energy, security, and technology.

Soliman of the Middle East Institute says the AI agreements signed during Trump’s visit “are more about China than the Gulf.”

“It’s essentially an attempt to pull a promising AI region—the Gulf—into the American AI ecosystem and make it part of Team America,” he adds.

The “AI stack” refers to the full chain of capabilities, including chips, infrastructure, models, and software—areas dominated by US firms.

Gras says the UAE’s choice to partner with the US over China was a rational one: “At this point, the Americans are ahead in AI. So it made sense for the UAE to bet on them.”

Still, Reuters reported that the Stargate deal is awaiting security approvals, with US officials still concerned about potential Chinese components or personnel in Emirati data centers.

Even so, the project is expected to proceed with growing US corporate support.

Despite America’s current AI dominance, Soliman cautions against underestimating China.

“The Chinese are moving fast. They already have an AI stack. It may not be as powerful as the American one, but it’s cheaper. And for many countries, ‘good enough’ is all they need.”

For now, both the US and Gulf states appear to be benefiting: Washington gains regional allies in its AI race against China, while the Gulf gains a powerful partner in its search for a post-oil economic future.