FED MINUTES, RECIPROCAL TARIFFS SCRIPT WEEKLY STORY
Last week saw India inflation at a 77-month low of 2.10%, with food inflation in the negative. With WPI inflation also contracting, it raises the prospects of another rate cut. US inflation, however, spiked 30 bps to 2.7%. For India, core inflation is the sole concern.
In terms of sentiments, the coming week will be about the Indo-US trade deal and the secondary sanctions on India for buying oil from Russia. The latter cold result in punitive 100% tariffs and could make the trade deal almost entirely redundant for now.
The table captures US 10-year benchmark bond yields over the last 5 trading sessions.
| Date | Price (%) | Open (%) | High (%) | Low (%) |
| Jul 18, 2025 | 4.431 | 4.443 | 4.451 | 4.416 |
| Jul 17, 2025 | 4.463 | 4.467 | 4.495 | 4.429 |
| Jul 16, 2025 | 4.455 | 4.493 | 4.495 | 4.437 |
| Jul 15, 2025 | 4.489 | 4.429 | 4.493 | 4.396 |
| Jul 14, 2025 | 4.427 | 4.417 | 4.447 | 4.403 |
| Jul 11, 2025 | 4.423 | 4.358 | 4.427 | 4.340 |
Data Source: Bloomberg
The bond yields at 4.4631% saw another spike during the week, reacting to the Fed minutes ruling out any rate cuts till September. FOMC is unlikely to cut rates till there is clarity on the colour of tariffs and some visibility on the impact of OBBBA on the budget deficit. Last week, US 10-year bond yields touched a high of 4.495% and a low of 4.396%.
Here is the US dollar index (DXY), an index of dollar strength, over last 5 trading sessions.
| Date | Price (%) | Open (%) | High (%) | Low (%) |
| Jul 18, 2025 | 98.46 | 98.49 | 98.57 | 98.10 |
| Jul 17, 2025 | 98.73 | 98.35 | 98.95 | 98.33 |
| Jul 16, 2025 | 98.39 | 98.58 | 98.91 | 97.71 |
| Jul 15, 2025 | 98.62 | 98.14 | 98.70 | 97.93 |
| Jul 14, 2025 | 98.08 | 97.96 | 98.14 | 97.76 |
| Jul 11, 2025 | 97.85 | 97.57 | 97.96 | 97.56 |
Data Source: Bloomberg
The US dollar index (DXY) closed higher for the week at 98.46; albeit well below the January peak levels of 110. With the Fed minutes ruling out rate cuts, the dollar built heft this week also. Last week, the US dollar index (DXY) touched a high of 98.95 and a low of 97.71. However, it remains to be seen if this is a dead-cat bounce or whether it is sustainable.
The table below captures 10-year India bond yields for the last 5 trading sessions.
| Date | Price (%) | Open (%) | High (%) | Low (%) |
| Jul 18, 2025 | 6.305 | 6.300 | 6.309 | 6.296 |
| Jul 17, 2025 | 6.302 | 6.313 | 6.313 | 6.298 |
| Jul 16, 2025 | 6.313 | 6.312 | 6.317 | 6.312 |
| Jul 15, 2025 | 6.313 | 6.319 | 6.323 | 6.310 |
| Jul 14, 2025 | 6.311 | 6.302 | 6.319 | 6.302 |
| Jul 11, 2025 | 6.304 | 6.318 | 6.334 | 6.301 |
Data Source: RBI
India bond yields continue to be in a tight range of 6.304%-6.313%; although yields did edge up during the week. The sharply lower CPI inflation and WPI inflation for June has raised the prospects of one more rate cut; either in August or in October. Last week, India 10-year bond yields touched a high of 6.323% and low of 6.296%.
The table captures the official USDINR exchange rate for last 5 trading sessions.
| Date | Price (₹/$) | Open (₹/$) | High (₹/$) | Low (₹/$) |
| Jul 18, 2025 | 86.150 | 86.010 | 86.244 | 85.972 |
| Jul 17, 2025 | 86.035 | 85.922 | 86.136 | 85.796 |
| Jul 16, 2025 | 85.885 | 85.959 | 86.081 | 85.733 |
| Jul 15, 2025 | 85.991 | 86.009 | 86.032 | 85.742 |
| Jul 14, 2025 | 86.017 | 85.824 | 86.062 | 85.810 |
| Jul 11, 2025 | 85.825 | 85.735 | 85.921 | 85.690 |
Data Source: RBI
This week, the USDINR weakened from ₹85.825/$ to ₹86.150/$; and spent most of the week above the 86 mark, before closing at ₹86.15/$. The dollar index strength and the imminent threat of second sanctions on India kept the rupee under pressure. Last week, USDINR touched a high of ₹85.733/$ and a low of ͅ₹86.244/$, as dollar demand was robust.
The table captures the Brent Crude prices over last 5 trading sessions.
| Date | Price ($/bbl) | Open ($/bbl) | High ($/bbl) | Low ($/bbl) |
| Jul 18, 2025 | 69.28 | 69.55 | 70.77 | 69.14 |
| Jul 17, 2025 | 69.52 | 68.79 | 69.67 | 68.27 |
| Jul 16, 2025 | 68.52 | 68.98 | 69.09 | 67.71 |
| Jul 15, 2025 | 68.71 | 69.15 | 69.41 | 68.60 |
| Jul 14, 2025 | 69.21 | 70.50 | 71.53 | 69.02 |
| Jul 11, 2025 | 70.36 | 68.84 | 70.71 | 68.55 |
Data Source: Bloomberg
The higher supplies from OPEC Plus put pressure on crude prices during the week. Brent crude closed below $70/bbl as it struggled in a narrow range. Last week, Brent Crude prices touched a high of $71.53/bbl and a low of $68.27/bbl. However, excess supply may be an overhang, if OPEC Plus continues to pump extra oil.
The table captures the international spot prices of gold in dollars per troy ounce (oz).
| Date | Price ($/oz) | Open ($/oz) | High ($/oz) | Low ($/oz) |
| Jul 18, 2025 | 3,350.40 | 3,338.76 | 3,361.41 | 3,331.75 |
| Jul 17, 2025 | 3,338.95 | 3,346.59 | 3,352.50 | 3,309.90 |
| Jul 16, 2025 | 3,346.58 | 3,322.63 | 3,377.50 | 3,319.69 |
| Jul 15, 2025 | 3,322.63 | 3,343.80 | 3,366.58 | 3,320.27 |
| Jul 14, 2025 | 3,343.80 | 3,355.91 | 3,374.94 | 3,341.10 |
| Jul 13, 2025 | 3,367.76 | 3,361.47 | 3,374.07 | 3,359.54 |
| Jul 11, 2025 | 3,355.91 | 3,325.63 | 3,368.89 | 3,321.37 |
Data Source: Bloomberg
Spot gold prices were above $3,300/oz during the latest week. The BOFA target of $4,000/oz for gold in 2026 on higher US fiscal deficit, looks a fairly likely option. During the week, gold touched a high of $3,377.50/oz and a low of $3,309.90/oz.
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