The DXY Index fell late in the US session from 101.28 to 101, decoupling from the higher US Treasury 2Y yield, despite its strong correlation with crude oil prices after President Donald Trump declared that the interim ceasefire agreement with Iran was over. However, Trump clarified that the US blockade applied strictly to Iranian ports, and Treasury Secretary Scott Bessent added that safe and secure oil should trade at a premium. Volatile headline risks remain. Trump pivoted this morning, declaring that Iran wants to make a deal badly, which the market views as another calculated effort to gain leverage in future discussions. This followed his earlier comment at the NATO Summit that he did not expect the war to restart.
Although the futures market returned the odds of a September Fed hike above 50%, the FOMC Minutes did not convey the same urgency for one by the divided Fed participants. Markets remain mindful that Fed Chair Kevin Warsh will unlikely provide forward guidance at his congressional hearings amid an expected softer US CPI print next week.
EUR/USD regained its footing and traded above 1.14 again after markets lifted the probability of a September rate hike by the European Central Bank to 60-70%. Geopolitical anxieties expanded beyond the Middle East. President Trump’s fixation on Greenland re-emerged, and Denmark asserted its readiness to defend its sovereignty, evoking memories of January’s dumping of US Treasuries by Danish pension operators. With USD/JPY above 160, the market was alert to the possibility of stealth FX interventions by the Japanese Ministry of Finance.
NZD/USD is firm above 0.57 after the Reserve Bank of New Zealand countered doubts regarding its inflation-fighting resolve. The vote to lift the official 25 bps hike to 2.50% was unanimous, which marked a clear departure from May’s 3-3 split to hold rates. With the OCR level remaining accommodative, the committee signalled that "further reduction in monetary stimulus is likely." Two members view inflation risks as heavily skewed to the upside, while four view them as balanced following a drop in global oil prices. RBNZ projected that inflation will peak at 3.9% in 2Q26, slow to 3.3% in 3Q26, before declining toward 2% or the mid-point of the official inflation target of 1-3% by mid-2027.
Quote of the Day
“No foreign policy - no matter how ingenious - has any chance of success if it is born in the minds of a few and carried in the hearts of none.”
Henry Kissinger
July 9 in history
In 1875, the Native Share & Stock Brokers' Association was officially established in India. Today, it is known as the Bombay Stock Exchange, making it Asia’s oldest stock exchange.
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