• US revokes Iran’s oil general license, following attacks in Strait
• Chip stocks sell off after Samsung earnings fall short of high AI bar
• SK Hynix US listing said to be multiple times oversubscribed
• RBNZ set for hawkish decision, as ‘one step towards policy normalisation’

Forex

USD was relatively quiet through most of the day, with a small bid towards the close as Washington adopted a more aggressive tone towards Iran. Prices continue to trade just above the late March top at 100.64. Volumes are low and with it, FX volatility is broadly capped at present. The FOMC minutes will be in focus after the Fed’s Waller tentatively criticised new Fed Chair Warsh’s forward guidance ban and said risks have flipped on the hawkish side for the Fed. That’s not new for markets so muted moves ensued.

EUR was modestly softer even though yield spreads are recovering quite sharply from the middle of last week. We’ve had some hawkishness from a range of ECB policymakers, including executive board member Schnabel, who specifically pushed back on the idea of softening the central bank’s guidance in response to the latest decline in oil prices. This goes against President Lagarde’s recent comments.

GBP lost a bit of ground as cable came up against resistance at the 50-day and 200-day SMAs at 1.3400 and 1.3396, and fell back. There’s been little fresh top tier data recently while political developments have also been limited with markets waiting for fresh news on the looming leadership transition from PM Starmer to the ‘leader-in-waiting’ Burnham.

JPY steadied and traded around 162 after the volatile few days of Thursday’s sell-off in the major and the subsequent bounce back on Monday. The recent top, its highest level since 1986 sits at 162.83. Failing to intervene below 163 could fuel speculation the new line in the sand is closer to 165.

Stocks

US stocks: The S&P 500 lost 0.48% to close at 7,501, the Nasdaq closed down 1.77% at 29,173 and the Dow Jones settled lower by 0.25% at 52,925. Energy was the clear winner with Healthcare, Real Estate, Consumer Staples and Utilities all strong. Industrials, Tech, Materials, Consumer Discretionary and Financials were in the red with mixed performance across indices. Samsung shares fell overnight, disappointing lofty investor expectations and hurting sentiment in US chipmakers. Intel fell 9.7%, Nebius declined 8.4% and Teradyne dropped 9.6% among other tech names. Meta rose 2.6% as it expanded generative AI tools with muse image rollout. Rivian plunged 18.1% after unveiling a $1.5 billion share sale, raising dilution concerns.

Asian Stocks: Futures are mixed. APAC stocks were lower as positive sentiment on Wall Street failed to boost the bulls. Samsung’s Q2 earnings disappointed even as operating profit beat, though revenue came in mid-range. Increased volatility was due to leveraged ETFs extending the selloff, with profit-taking also a key reason. The ASX 200 outperformed its peers but still ended lower as Tech offset weakness in metals and mining. The Nikkei 225 sold off as a tech-heavy index.  The Shanghai Comp and the Hang Seng were softer but held up better than most of its peers.

Gold

Gold dipped in a quiet trading range day until near the close, as it touched the 21-day SMA. Crude was firmer and supported amid numerous reported strikes in the Strait of Hormuz. 

Day Ahead – RBNZ Meeting, FOMC Minutes

It’s a close call around today’s RBNZ rate decision according to analysts, but not when looking at money markets. The latter price in around 72% chance of the overnight cash rate being hiked by 25bps to 2.50%. The last meeting saw a 3-3 vote split and the bank’s own forecasts pointed to a rate hike in July or September. But crude oil prices have fallen sharply since the prior meeting, while quarterly CPI and labour market figures are released later in July and August, perhaps giving policymakers more time to assess incoming data. There’s around 58bps predicted by traders by year-end.

The new Fed Chair Warsh stamped his mark immediately on his first FOMC meeting. The focus was squarely on price stability as he binned forward guidance and eschewed even presenting a dot plot, unlike the other Fed members. One rate hike this year was the median dot plot with nine officials wanting policy tightening, though we note only three of these are actual voters.  Questions around how hawkish some officials are and any divisions between policymakers will be in focus. 

Chart of the Day – Bearish consolidation in kiwi

A hold, even a moderately hawkish hold by the RBNZ, could cause dovish repricing and also a de-anchoring of inflation expectations. Is that too big a risk for rate setters? That would likely see the major sell-off after the kiwi’s current bearish conolsidation, so a look at the recent lows around 0.5626. Bears could then target the November 2025 bottom at 0.5577/81. Below here is the spike low from April at 0.5484. Negative risk sentiment could also drive the high beta kiwi lower too. On the flip side, a hawkish hike and more potential polciy tighening through 2026 will push the major higher, with initial resistance at 0.5727.