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Societe Generale analysts Kunal Kundu and Galvin Chia say Indonesia’s early‑2026 fiscal deterioration is driven by front‑loaded expenditure, with the primary balance already in deficit and raising financing needs. They argue this mainly reinforces existing concerns rather than creating a new shock for FX, and they keep a bearish stance on the Indonesian currency while expecting some upward pressure on longer‑dated rates.

Fiscal risks reinforce bearish FX stance

"While the deficit data adds to long‑standing market concerns around the fiscal position, it is likely a less significant marginal driver for FX, which should primarily reflect risks around larger net oil & gas imports and a widening current account."

"The data should, however, marginally add to longer-end premia in rates, given the fiscal’s role in absorbing the inflationary shock."

"Fiscal execution will continue to be monitored closely, and we expect Indonesian authorities to remain cognisant of international investor perceptions."

"This data does not change our convictions: we maintain a bearish bias on FX and a bear‑flattening bias on rates."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Here is what you need to know for Thursday, May 7:

The US Dollar Index (DXY) slides near the 98.00 area, with limited losses supported by resilient United States (US) data but capped by improving risk sentiment after Axios reported that the US and Iran are moving closer to a deal aimed at ending the conflict.

Geopolitical relief has eased fears of prolonged disruption to global energy flows, weighing on safe-haven demand for the US Dollar while supporting risk-sensitive currencies. Still, the Greenback remains underpinned after ADP Employment Change showed US private employers added 109K jobs in April, above expectations of 99K and improving from March’s revised 61K gain.

EUR/USD is elevated near the 1.1750 price zone, though upside remains limited as traders balance softer safe-haven flows against the resilient US labor market.

GBP/USD holds near recent levels at 1.3600, struggling to extend gains as the US Dollar remains somewhat supported by firm employment data and cautious positioning.

USD/JPY trims part of its intraday losses near the 156.40 level, with the pair caught between lower safe-haven demand for the USD and firm US data, while markets continue to watch the Bank of Japan’s (BoJ) policy outlook.

AUD/USD surged toward the 0.7240 region, benefiting from stronger risk appetite as hopes for a US-Iran deal lifted demand for the Australian Dollar.

West Texas Intermediate (WTI) Oil falls sharply near $94.90 per barrel as fears of a prolonged Middle East supply disruption fade following reports of progress toward a US-Iran agreement.

Gold surges near the $4,700 price zone as safe-haven demand softens, with investors rotating back into risk-sensitive assets amid hopes of reduced geopolitical tensions.

What’s next in the docket:

Thursday, May 7:

• Australian Trade Balance
• Germany Factory Orders March MoM YoY
• Eurozone Retail Sales March MoM YoY
• US Challenger Job Cuts April
• US Initial Jobless Claims
• US Nonfarm Productivity Q1 Prel
• US Unit Labor Costs Q1 Prel

Friday, May 8:

• Germany Industrial Production March MoM YoY
• Eurozone Trade Balance March
• Canadian Employment data

• USD/CHF breaks below 0.7800, confirming continuation of the bearish trend.
• RSI accelerates lower, signaling growing downside momentum pressure.
• A break below 0.7775 exposes 0.7748 and 0.7700 support levels.

USD/CHF edges lower on Wednesday, breaching a key support trendline at around 0.7800 as the pair extends its downtrend, falling over 0.50% at the time of writing. The pair trades at 0.7789, as traders target the March 10 swing low at 0.7748.

USD/CHF Price Forecast: Technical outlook

From a technical perspective, the downtrend is resuming after sellers cleared the 0.7800 figure. Worth noting that USD/CHF tested the April 17 cycle low of 0.7775, but the pair recovered some ground. However, a daily close below that level opens the door to testing lower areas, such as the March 10 daily low at 0.7748, ahead of 0.7700.

Momentum is bearishly biased, as indicated by the Relative Strength Index (RSI), and is accelerating towards oversold territory. This indicates that sellers are gathering momentum.

On the flip side, for a bullish continuation, buyers must reclaim 0.7800, followed by the confluence of the 20-, 100-, and 50-day Simple Moving Averages (SMAs) at around 0.7836/58. Once surpassed, the next area of interest will be the 0.7900 figure.

USD/CHF Price Chart – Daily

MUFG’s Michael Wan highlights that the Philippines faces heightened vulnerability to Middle East supply disruptions, with April Consumer Price Index (CPI) surging to 7.2% year-on-year, far above expectations. He expects Bangko Sentral ng Pilipinas (BSP) to hike rates further but sees limits given weak growth. MUFG projects USD/PHP could move towards 62.00–63.00 if the Strait of Hormuz stays closed, and 60.50–61.50 on de-escalation.

Philippines inflation spike pressures Peso

"The Philippines as we have been highlighting falls into that vulnerable camp. The data released on the Philippines’ April CPI inflation is indicative and an example of that impact, with headline inflation rising dramatically to 7.2%yoy, well above consensus expectation of 5.5%yoy, and from 4.1%yoy previously."

"Overall, we think BSP will likely have to hike rates further possibly by another 75-100bps this year given the inflation print, and we will not be surprised if there is an off-cycle meeting to do so coupled with perhaps some chance of a jumbo 50bps rate hike moving forward."

"Nonetheless, given the relatively weak starting point of growth in the Philippines in part driven by the fiscal tightening with the flood control projects scandals, we think that BSP’s focus is more on containing inflation expectations, rather than to target demand destruction given the current negative output gap."

"As such, we think there will be a limit to the overall magnitude of BSP rate hikes moving forward, with the central bank certainly caught between a rock and a hard place."

"We continue to think that PHP remains vulnerable and should underperform across a range of scenarios, and see USD/PHP possibly rising closer to 62.00 to 63.00 if the Strait of Hormuz remains closed. In our base case of de-escalation, we think USD/PHP could recover gradually towards the 60.50 to 61.50 range."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• Gold jumps nearly 3% as US-Iran peace hopes grow.
• Oil selloff pressures the US Dollar, lifting bullion despite strong jobs.
• Fed officials warn inflation risks may keep rates elevated.

Gold (XAU/USD) price rallies nearly 3% on Wednesday amid growing speculation of an end to the Iran war, weighing on the Greenback and pushing US Treasury yields lower. At the time of writing, XAU/USD trades at $4,681 after bouncing off daily highs of $4,723.

XAU/USD surges as falling Oil and yields boost demand

Optimism of a possible end of the US-Iran war keeps the yellow metal underpinned. Axios reported that both parties are close to an agreement on a one-page memo with 14 points, while also beginning 30-day negotiations on opening the Strait of Hormuz and limiting Tehran’s nuclear program.

On the news, Oil prices are tumbling, with West Texas Intermediate (WTI) losing more than 7%, a headwind for the Greenback given its close correlation with the US crude Oil benchmark. At the same time, the US Dollar Index (DXY), which tracks the performance of the buck’s value against a basket of currencies, is down 0.46%, at 98.03.

ADP data showed the US labor market remained strong in April, with employment rising by 109,000—the highest gain in 15 months and above forecasts and March's revised figure of 61,000.

Fed hawks ready for Warsh's first meeting

After the news, St. Louis Fed President Alberto Musalem was hawkish, stating that the risks to monetary policy had shifted towards getting inflation under control. He said that “there are plausible scenarios that would require rates to remain stable for some time,” adding that “current policy is either neutral or slightly accommodative in real terms.”

Recently, Chicago Fed President Austan Goolsbee hit the wires, saying that higher productivity could spur spending and boost inflation. Goolsbee added, “It can lead to increased spending and potentially overheat the economy before the productivity boom has actually arrived. In that case, the fundamentals suggest rates would need to rise.”

Given the backdrop, Gold’s advance could be capped if additional policymakers turn dovish ahead of the June meeting, the first for Trump’s nominee to become the new Fed Chair, Kevin Warsh.

Money markets had priced in a nearly 93% chance that the Fed will hold rates steady in the June 17 meeting, Warsh’s first. For the rest of the year, the Fed funds rate is expected to stay unchanged, according to Prime Terminal data.

Ahead in the US docket, traders' eyes will be on Initial Jobless Claims and speeches by Federal Reserve officials.

XAU/USD technical analysis: Gold buyers challenge $4,700 as sentiment shifts bullish

Gold price stages a recovery, rising past the $4,650 psychological level, opening the door for further upside, with buyers targeting the $4,700 milestone. The Relative Strength Index (RSI) suggests momentum is about to shift bullish, indicating further short-term upside.

XAU/USD's first resistance is a downtrend line at around $4,700-$4,715. If breached, the next resistance would be the 100-day Simple Moving Average (SMA) at $4,760. On further strength, the next area of interest would be the $4,800 mark, above the 50-day SMA at $4,799.

Downwards, the first support for XAU/USD is $4,600. If hurdled, the next support would become the May 4 swing low of $4,500, followed by the March 26 daily low of $4,351, before testing the 200-day SMA at $4,276.

BNY’s Geoff Yu notes that the iFlow Carry index briefly turned negatively significant as investors sold nine of fifteen high-yield currencies, suggesting growing profit-taking after a resilient run. He stresses that central banks are now signaling weaker demand and future rate cuts, warning that if markets pre-empt this H2 shift, emerging-market carry longs could be unwound more rapidly.

Carry resilience challenged by policy shift

"For one session last week, our iFlow Carry index touched negative statistical significance. This means that there was strong inverse alignment between currency sales and their corresponding 10y bond yields (where available). At first glance, the carry trade remains resilient as central banks are almost uniformly hawkish."

"However, over the past week, nine of the 15 were net sold, encompassing all regions and policy/fiscal views. Most of the flows appear to represent some “trimming” or light profit-taking, and only COP [Colombian Pesos] was strongly sold (flow magnitude above 1.0) through the week. However, after a period of resilience through sharp volatility and difficult balance-of-payments conditions, the market appears to have decided that the carry trade’s return profile has run its course."

"Central banks meeting now are signaling that demand is weakening, and rate cuts will follow as soon as conditions allow. Hence, if markets are now looking past resilience to the conflict as a positive driver, the balance of risks will shift to how to stimulate growth thereafter, and lower nominal rates will be a part of that story."

"If the carry theme fully preempts such an outcome for H2 – especially in emerging markets, which account for the bulk of positions – profit-taking on longs could speed up quickly. This dynamic could materialize even before Fed easing pushback moves to the fore."

"Our iFlow Carry indicator has yet to register an extended period of negative statistical significance this year. In addition, the two episodes from last year, encompassing reaction to “liberation day” tariffs in Q2 and AI-related valuations in Q4 – were the only such phases since 2022–2023, when central banks were also moving toward an aggressive tightening cycle, albeit in response to demand expansion."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• USD/JPY rebounds modestly after another suspected intervention by Japanese authorities triggered a sharp intraday drop.
• Hopes for a US-Iran deal pressure the US Dollar, though lingering uncertainty limits deeper losses.
• Technically, USD/JPY trades below key SMAs on the daily chart as downside momentum builds.

USD/JPY stages a modest rebound on Wednesday after coming under pressure earlier in the day amid another suspected intervention by Japanese authorities. At the time of writing, the pair is trading around 156.42 after recovering from an intraday low near 155.00.

Despite the modest recovery, USD/JPY remains down nearly 0.90% on the day as the US Dollar (USD) softens broadly on hopes of a potential US-Iran deal following an Axios report suggesting Washington and Tehran are moving closer to an agreement aimed at ending the war and establishing a framework for detailed nuclear negotiations.

However, uncertainty over whether both sides can reach a final agreement is helping limit deeper losses in the Greenback. The US Dollar Index (DXY), which tracks the US Dollar’s value against a basket of six major currencies, trades around 98.04 after touching an intraday low of 97.62, though it remains down roughly 0.45% on the day.

Meanwhile, USD/JPY remains vulnerable to further intervention risks. While Tokyo has not officially confirmed any intervention, repeated warnings from Japanese authorities keep traders cautious.

Still, the Japanese Yen (JPY) has struggled to gain meaningful traction as ongoing Oil supply disruptions in the Middle East continue to weigh on sentiment, given Japan’s heavy dependence on imported energy, with a significant portion of shipments passing through the Strait of Hormuz.

Looking ahead, traders will continue to track developments surrounding the US-Iran negotiations, particularly any progress toward reopening the Strait of Hormuz.

Attention also turns to upcoming Japanese economic data, including Labor Cash Earnings and the Bank of Japan’s Monetary Policy Meeting Minutes due on Thursday. In the US, traders await weekly Initial Jobless Claims on Thursday, followed by the Nonfarm Payrolls (NFP) report on Friday.

Technical Analysis:

In the daily chart, USD/JPY keeps a bearish near-term tone as spot holds beneath the 100-day Simple Moving Average (SMA) at 157.36 and the 50-day SMA at 158.69, which now cap the upside. The pair is still supported by the 200-day SMA at 154.24, but the Relative Strength Index (RSI) near 38 and a negative Moving Average Convergence Divergence (MACD) suggests downside momentum is building while trend strength, reflected by the Average Directional Index (ADX) around 23, remains only moderate.

On the downside, initial demand is seen just below the market at the horizontal support around 155.50, ahead of the 200-day SMA at 154.24, which marks a more significant structural floor. On the topside, a recovery would first face resistance at the 100-day SMA at 157.36, with a sustained break needed to challenge the 50-day SMA at 158.69 and ease the current bearish pressure.

(The technical analysis of this story was written with the help of an AI tool.)

ING’s Senior Economist Min Joo Kang notes that South Korean inflation accelerated in April on higher energy prices, but government measures such as food vouchers, a gasoline price cap and frozen utility tariffs helped limit the increase. Core inflation remains near 2%, yet ING expects headline inflation to climb towards 3% by June, keeping the Bank of Korea (BoK) alert to upside risks.

Government support cushions energy-driven pressures

"South Korea’s consumer price inflation accelerated to 2.6% year-on-year in April from 2.2% in March, matching market consensus but below our estimate of 2.8%. The downside surprise was mainly due to a larger-than-expected drop in food prices."

"Though inflation reached a 21-month high in April, government measures such as food vouchers, a gasoline price cap, and freezing utility prices helped limit increases in food and energy. Inflation excluding food and energy stayed at 2.2% for the second month."

"As expected, energy prices rose the most. Oil and petroleum prices increased by 21.9% YoY, adding 0.84 ppt to overall inflation. Fuel price cap measures reduced energy price hikes, keeping them lower than in other major economies."

"Among services, housing rental prices edged up 1.0%, showing a gradual hike since Jan 2024 (-0.2%). Due to Korea's unique Jeonse rental system, it hasn’t moved quickly."

"Going forward, we expect inflation to rise further despite the government measures, reaching around 3% as early as June."

"Overall, the BoK will focus on curbing inflation expectations. Considering these factors, the BoK’s rate hikes should be gradual."

"We currently expect a total of 50 bps hikes in the second half of 2026. We believe a July hike is more probable than a May hike for now."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Austan Goolsbee, President of the Federal Reserve (Fed) Bank of Chicago, spoke at the 2026 Milken Institute Global Conference in California on Wednesday. He stated that the impact of rising productivity on inflation remains an active topic of debate among the Fed.

Key takeaway:

The impact of rising productivity on inflation remains an active topic of debate.

If households anticipate future income and wealth gains from higher productivity, they could boost spending and inflation.

Productivity's impact on inflation and interest rates could go in either direction.”

Standard Chartered economists Carol Liao and Shuang Ding argue that both the US and China are incentivised to keep their bilateral relationship stable as President Trump’s 14–15 May visit approaches. They see a focus on preserving the existing tariff truce, modest trade concessions in non-sensitive sectors, and pragmatic, transactional arrangements rather than a comprehensive reset or grand bargain.

Pragmatic truce with limited concessions

"President Trump will most likely visit China from 14-15 May as he announced earlier. The core objective will likely be to sustain the tariff truce agreed last October, explore additional bilateral concessions where incentives align, and strengthen cooperation on select geopolitical issues."

"Recent headlines that likely reflect posturing by both sides ahead of the visit will not derail stabilisation efforts, in our view. Rather, the visit could prevent renewed escalation at a time both sides face costs from higher trade barriers and supply-chain disruptions, with trade in non-sensitive sectors remaining the most actionable areas for near-term deliverables."

"The approach from both sides may continue to be pragmatic and transactional. The preparation meeting in Paris in March appeared focused on trade issues."

"Last year’s Busan truce could serve as a blueprint, with both prioritising items that can be implemented through administrative actions (e.g., tariff relief, market access, export approvals, targeted purchases) rather than sweeping commitments."

"Possible outcomes include tariff reduction on selected products and an extended suspension or calibrated easing of specific non-tariff restrictions by the US, and incremental Chinese purchases of certain US goods (agriculture, energy, aircraft), alongside continued Chinese supply of critical minerals."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)