Forex News

Izidor Flajsman at TD Securities analyses past US equity ‘lost decades’ and finds that headline indices delivered flat to negative real returns, while Small Cap, Value, Energy and Non-Durables outperformed. The study is descriptive rather than a call on US equities, focusing on how sector and factor leadership historically rotated away from expensive, cyclical parts of the market.

Small, cheap and insulated factors win

"We do not take a view on US equities in this note; rather, this note asks a narrower and more useful question: which passive and dynamic strategies across fixed income, commodities and equities have historically tended to do well, or poorly, once a lost decade was already underway?"

"This is the whole point of a lost decade — flat to negative real returns for over a decade, after a regime that otherwise compounds at high-teens."

"Equities: -0.2% annualized real return in lost decades, vs. 16.9% outside them."

"Inside lost decades, the ranking flips completely, and four names have done the work: Small Cap, Value, Energy, Non-Durables."

"Outside lost decades, the S&P 500 puts up ~17% annualized real returns and every sector and style basket in our universe trails it."

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

United States (US) Secretary of State Marco Rubio reiterates after meeting with leaders from Gulf nations that Iran’s toll system near the Strait of Hormuz, a vital passage to almost 20% of global energy supply, is unacceptable. Rubio also stated earlier in the day, "Hormuz tolling would set an unacceptable precedent." He also expressed that Gulf countries are not in favor of the recognition of Iran’s authority near Hormuz.

Remarks

Had a really good meeting with the Gulf countries.

We won't do anything that undermines Gulf partners.

Zero support among Gulf countries for tolling in Hormuz.

Iran MOU addresses interference in other countries.

Iranians will continue making maximalist announcements.

We look at actions, not rhetoric, from Iran.

A tolling system in Hormuz isn't even workable.

Fees' and 'tolls' are the same thing.

I'm not aware of Iran funds held by Qatar being transferred.

Reconstruction fund for Iran was not discussed with Gulf countries.

The Iranian system continues to be led by radical clerics.

Trump has multiple options if it doesn't work out with Iran.

Relationship with Oman is fine.

Omanis said they are not in favor of a tolling system for the Strait of Hormuz.

Market Reaction

No immediate response seen in oil prices. At press time, the WTI Oil price trades 0.3% lower to near $69.50.

• The New Zealand Dollar posts a seventh consecutive daily loss against the US Dollar, weighed down by a hawkish Fed signal.
• The Reserve Bank of New Zealand maintains a restrictive bias, limiting near-term losses for the pair.
• Markets turn cautious ahead of the release of the US Personal Consumption Expenditures price index.

NZD/USD trades around 0.5640, declining for a seventh consecutive day and hovering near its lowest levels since November 2025. The pair remains under pressure in an environment dominated by a resilient US Dollar (USD) and persistent risk aversion across financial markets.

The US Dollar Index (DXY), which tracks the performance of the Greenback against a basket of currencies, recently hit its highest level since May 2025 following the hawkish pivot delivered by the Federal Reserve (Fed) last week. Nine of the nineteen members of the Fed's committee indicated that a rate hike could prove necessary to contain sticky inflation. Futures markets now price in roughly a 65% chance of a rate increase in September, up from 40% a month ago, according to the CME FedWatch tool.

On the geopolitical front, lingering uncertainty surrounding Iran's nuclear programme and the management of the Strait of Hormuz continues to unsettle investors, to the detriment of risk-sensitive currencies such as the New Zealand Dollar (NZD).

That said, the easing of Crude Oil prices introduces a layer of ambiguity into monetary policy expectations. The resumption of maritime traffic through the Strait of Hormuz, combined with a temporary sixty-day waiver granted by Washington authorizing the production and sale of Iranian Oil, has pushed prices back near pre-conflict levels. This normalization alleviates upstream inflationary pressure, which could prompt traders to scale back their Fed rate hike expectations and, in turn, cap the US Dollar's near-term upside potential.

Against this backdrop, market attention is now squarely focused on the release of the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, due later in the day. Consensus expectations point to an acceleration in headline PCE inflation to 4.1% YoY in May, from 3.8% in April, with the core reading edging up to 3.4% from 3.3% the previous month. A stronger-than-expected print would reinforce the case for a rate hike later this year and provide additional support for the US Dollar, weighing further on NZD/USD.

On the New Zealand side, the Reserve Bank of New Zealand (RBNZ) has adopted a more restrictive stance, limiting the Kiwi's losses. The central bank signaled that the Official Cash Rate (OCR) could reach approximately 2.85% by year-end, implying up to three additional rate hikes. This hawkish bias from the RBNZ underpins the New Zealand Dollar and warrants caution before positioning for further downside in the pair.

• EUR/USD remains on its back foot after a 4-day sell-off, with 1.1330 lows in the bears' focus.
• US PCE Prices Index data is expected to back Fed tightening hopes.
• The Euro consolidates losses after reaching oversold levels, with the bearish trend intact.

The Euro (EUR) trades lower against the US Dollar (USD) for the fourth consecutive day on Thursday, as investors’ hopes of Federal Reserve (Fed) rate hikes drive markets ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index. The EUR/USD pair trades at 1.1345 at the time of writing, with the 13-month low of 1.1330 dangerously close.

The market consensus anticipates a further acceleration of price pressures in May, which would endorse hopes of Fed monetary tightening later this year. Headline PCE inflation is seen growing to a three-year high of 4.1%, from 3.8% in April, with the core reading seen up to 3.4% in the 12 months to May, from 3.3% in the previous month. 

In the Eurozone, the German GfK Consumer Confidence Survey for July posted a weaker-than-expected recovery and reported less willingness to buy, with a majority of respondents expecting the economic outlook to deteriorate further this year. The data failed to provide any significant support to the Euro.

Technical Analysis: Consolidating losses amid a strong bearish trend

EUR/USD trades at 1.1337, extending a bearish near-term bias after dropping about 2.3% in just over a week. The pair has been consolidating gains as the 4-hour Relative Strength Index (14) picks up from extremely oversold levels, while the Moving Average Convergence Divergence (MACD), hovering near zero, reveals that upside attempts remain shallow.

The Euro has found support at the 261.8% Fibonacci retracement of the June 11-17 rally, at 1.1330. Below here, the 1.1300 psychological level might provide support ahead of the 1.1220 area, where the late May 2025 lows meet the 316.8% retracement of the mentioned cycle.

Upside attempts, on the contrary, have been contained above the 1.1370 area, which, so far, is closing the way towards a previous resistance-turned-support, around 1.1520, and the June 19 high, at 1.1480.

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

MUFG’s Lee Hardman and Abdul-Ahad Lockhart note the US Dollar (USD) is trading close to year-to-date highs as markets debate whether the Federal Reserve (Fed) will follow its hawkish rhetoric with actual rate hikes. They highlight falling Oil prices, uncertainty over Chair Warsh’s reaction function, and today’s US Personal Consumption Expenditures (PCE) Price Index deflator as key to the Dollar’s near-term direction.

Dollar strength tied to Fed signals

"The major foreign exchange rates have remained relatively stable overnight with the US dollar continuing to trade close to year-to-day highs."

"It is one of the reasons why we still don’t expect the Fed to back up tough talk on inflation by hiking rates hikes this year."

"In contrast, the US rate market has taken the opposite view that the Fed will back up tough talk on inflation by hiking rates this year."

"If the Fed is serious about restoring price stability, a significant tightening of monetary policy will be required so it makes sense that more hikes have been priced in recently encouraging a stronger US dollar."

"We expect the US dollar to continue to trade at stronger levels until it is either challenged by incoming economic data showing slowing inflation and/or any indications from the Fed that they will not follow through with rate hikes."

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

Royal Bank of Canada (RBC) strategists argue that while the United States (US) consumer has remained resilient in 2026, persistent inflation and the earlier energy price shock have eroded households’ ability to absorb further price increases. They maintain a cautiously optimistic view on the US economy, highlighting strong high-income demand and a tight labor market, but warn that corporate pricing power may now be weakening.

Inflation pressures strain household resilience

"We’ve been consistent: One shouldn’t bet against the US economy."

"The consumer has held up well since the start of the year even as energy costs surged, buffered by a long list of shock absorbers: Tax refunds, plentiful savings, and manageable debt loads."

"Now, as energy costs decline, it’s tempting to think consumer spending can accelerate."

"Despite headline resilience, the energy shock, coupled with persistent non-energy inflation, have weakened the US consumer and their capacity to absorb further price pressures."

"But, businesses may increasingly find their ability to pass prices through to end consumers is eroding for the first time after the pandemic, and that’s a shift worth monitoring."

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

Commerzbank’s Henry Hao and Moses Lim note that progress on reopening the Strait of Hormuz has driven Brent and WTI sharply lower, easing inflation risk premia in global bond markets. They emphasize that improved shipping safety and political negotiations have reduced near-term geopolitical risk premia in Oil.

Hormuz normalization weighs on Brent

"The main theme overnight was the acceleration in the reopening of the Strait of Hormuz, which drove a sharp drop in oil prices and a broad rally in global sovereign bonds."

"Progress toward normalizing shipping through the Strait of Hormuz dominated market narratives. More tankers crossed the waterway with their satellite signals switched on, pointing to growing confidence among shipowners and traders. Iran and Oman announced they would begin work on an agreement covering the future administration of the strait, including transit costs."

"The International Maritime Organization confirmed it had secured safety guarantees to evacuate more than 11,000 stranded seafarers, with the operation to be carried out in cooperation with Iran, Oman, and the US. Separately, President Trump declared that any tolling arrangement on Hormuz shipping would be “unacceptable” to the US, drawing a red line in ongoing negotiations."

"The cumulative effect of these developments accelerated the oil price decline and reduced near-term inflation risk premia in the bond markets."

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

• The Indian Rupee trades higher against the US Dollar as oil prices fall further.
• RBI Governor Malhotra pushes back fears of interest rate hikes.
• The US Dollar ticks lower ahead of the US PCE Inflation data for May.

The Indian Rupee (INR) trades firmly against the US Dollar (USD) on Thursday. The USD/INR pair declines to near 94.30 as the Indian currency strengthens due to a further decline in oil prices.

The WTI Oil price has returned close to the pre-Middle East war levels as traffic through the Strait of Hormuz, a critical chokepoint to almost 20% of global energy supply, has started normalizing, following the Memorandum of Understanding (MoU) signing and an improvement in technical talks towards the nuclear deal between the United States (US) and Iran.

At press time, the WTI Oil price trades 0.75% lower to near $69.25. The MCX Crude Oil contract expiring on July 20 is down 1.6% to near 6,563.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, appreciate when oil prices fall significantly.

One Reserve Bank of India (RBI) rate-setting member has stated that the Indian economy could outpace the central bank's growth rate forecast of 6.6% and rise by 7% if oil prices continue to remain lower near $70.00, Bloomberg reported.

Slightly lower US Dollar also acts as drag on USD/INR

In the Asian session, the US Dollar demonstrates a subdued performance while investors await the US Personal Consumption Expenditure Price Index (PCE) data for May, which will be published at 12:30 GMT.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally lower around 101.52, but is still close to its over-a-year high at 101.80 posted on Wednesday.

Investors will pay close attention to the US PCE inflation data as it is expected to influence market expectations toward the Federal Reserve’s (Fed) monetary policy outlook. The US core PCE inflation, which is the Fed’s preferred inflation gauge, is expected to arrive higher at 3.4% Year-on-Year (YoY) from 3.3% in April.

Signs of price pressures accelerating would further boost hawkish Fed prospects. Currently, the CME FedWatch tool shows that the odds of the Fed hiking interest rates this year are almost 82%. While the possibility of at least two interest rate hikes is 42.2%.

FIIs continue to pare stake in Indian stock market

The lack of interest by overseas investors towards the Indian stock market remains intact despite oil prices having returned close to pre-war levels and the Reserve Bank of India pushing back fears of interest rate hikes in the near term.

On Wednesday, Foreign Institutional Investors (FIIs) offloaded their stake worth Rs. 1,843.40 crore in the Indian stock market. The same day, RBI Governor Sanjay Malhotra said, while speaking to ET Now, that it is “premature” to consider interest rate hikes, citing that the central bank doesn’t see signs of energy crisis-led inflation generalizing. "If we wanted to prepare the market for rate hikes, we would have changed stance from neutral to restrictive,” Malhotra added.

Technical Analysis: USD/INR stays under pressure below 20-day EMA

USD/INR trades lower at around 94.25, keeping a bearish near-term tone as spot holds decisively under the 20-day Exponential Moving Average (EMA) at 94.86.

The Relative Strength Index (14) around 41 suggests lingering downside pressure but without reaching oversold extremes, hinting that sellers still have the upper hand while leaving room for further extension before exhaustion signals emerge.

On the topside, initial resistance is provided by the 20-day EMA at 94.86, with the downward border of the Descending Triangle formation near 95.23 acting as the next cap, ahead of a more distant barrier around 97.0541 from the trend-line’s origin. Looking down, the pair would be exposed to the April 15 high at 93.67 if it extends its decline below the May 7 low at 94.03.

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

• Gold price trades lower below $4,000 ahead of the US PCE Inflation data for May.
• The US core PCE inflation is expected to arrive higher on a monthly as well as an annual basis.
• Traders are confident that the Fed will deliver at least one interest rate hike this year.

Gold price (XAU/USD) clings to Wednesday’s losses near $3,985 during the European trading session on Thursday. The yellow metal remains under severe pressure as traders seem confident that the next monetary policy move by the Federal Reserve (Fed) will be on the upside.

According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 82%. While the possibility of at least two interest rate hikes is 42.2%.

The scenario of higher interest rates by the Fed bodes poorly for non-yielding assets, such as Gold.

Hawkish Fed bets have escalated due to accelerating both headline and the core inflation in the past few months due to higher energy prices.

For fresh cues on the current status of inflation, investors await the United States (US) Personal Consumption Expenditure Price Index (PCE) data for May, which will be published at 12:30 GMT. The US core PCE inflation, which is the Fed’s preferred inflation gauge, is expected to arrive higher at 3.4% from 3.3% in April. On a monthly basis, the underlying inflation is estimated to have risen 0.3%, faster than the previous reading of 0.2%.

Gold technical analysis

XAU/USD trades lower at around $3,985.26, extending its slide below the short-term trend as the 20-day Exponential Moving Average (EMA) at roughly $4,247 now caps the upside.

The near-term tone remains bearish, with price entrenched well under this dynamic barrier, while the Relative Strength Index (RSI) around 30 sits in oversold territory, hinting that downside momentum is stretched but not yet reversed.

On the topside, initial resistance is at the March 23 low near $4,100, followed by the 20-day EMA near $4,247, and a daily close above this level would be needed to ease immediate selling pressure and suggest a more meaningful recovery attempt. On the downside, the Gold price could extend its decline towards the October 28 low at $3,886.62, followed by the September 23 high at $3,791.12.

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