Story of 6 key macro signals for the week to July 05, 2025

MARKETS UNCERTAIN AHEAD OF TARIFFS AND OBBBA

While the Middle East and West Asia have been relatively quiet, the real source of uncertainty stemmed from the reciprocal tariffs and the implications of OBBBA. While the former could be inflationary, the latter could be deficit-inducing.

For the week, the IIP was lower than expected at 1.23%. However, fiscal deficit showed some promise at just 0.8% of full year target, albeit due to the RBI largesse. The US non-farm payroll additions stood at 1.47 Lakhs, while June unemployment tapered to 4.1%.

• US BOND YIELDS SEE LATE RALLY

The table captures US 10-year benchmark bond yields over the last 5 trading sessions.

Data Source: Bloomberg

The current bond yields at 4.33% has seen a sharp rally during the week, especially in the last couple of days. With the OBBBA being passed in the US Congress, it is clear that the budget deficit is likely to spike. Also,  with slow progress on trade deals, it looks like reciprocal tariffs could hit several countries. Both factors pushed up the bond yields. Last week, US 10-year bond yields touched a high of 4.364% and a low of 4.187%.

• US DOLLAR INDEX (DXY) HOVERS AROUND THE 97 MARK

Here is the US dollar index (DXY), an index of dollar strength, over last 5 trading sessions.

Data Source: Bloomberg

The US dollar index (DXY) closed lower at 97.18. Dollar is under pressure as the passage of the OBBBA clearly hints at a surge in the budget deficit. Also, the tariffs are likely to keep the dollar under pressure and that is evident in the DXY. Last week, the US dollar index (DXY) touched a high of 97.42 and a low of 96.38.

• INDIA BENCHMARK BOND YIELDS FLAT FOR SECOND WEEK

The table below captures 10-year India bond yields for the last 5 trading sessions.

Data Source: RBI

After falling to 6.29%-6.31% levels; bond yields have been in a tight range for last 2 weeks. This week, bond yields closed flat at 6.29%. With RBI shifting its stance from accommodative to neutral; more rate cuts look tough. However, markets are betting one more possible rate cut. Last week, India 10-year bond yields touched a high of 6.329% and low of 6.283%.

• RUPEE SUBDUED DESPITE WEAKER DOLLAR INDEX

The table captures the official USDINR exchange rate for last 5 trading sessions.

Data Source: RBI

After the USDINR strengthened last week to ₹85.45/$, it  was in a tight range this week. This week, the rupee closed at ₹85.497/$. The lower than expected CAD and weak oil prices helped the USDINR to emerge stronger. However, oil companies are buying dollars to hedge exposures. Last week, the USDINR touched a high of ₹85.183/$ and a low of ͅ₹85.845/$.

• BRENT CRUDE STAYS IN A NARROW RANGE

The table captures the Brent Crude prices over last 5 trading sessions.

Data Source: Bloomberg

Despite the uneasy calm in the Middle East and West Asia, oil remained in a range. For now, the oil market overall looks fairly oversupplied. Brent crude was in the range of $68/bbl to $69/bbl through the week, in the absence of triggers. Last week, Brent Crude prices touched a high of $69.21/bbl and a low of $66.34/bbl.

• SPOT GOLD SEES BUYING AMIDST DOLLAR WEAKNESS

The table captures the international spot prices of gold in dollars per troy ounce (oz).

Data Source: Bloomberg

The gold prices were higher in the week due to trade uncertainty and passage of OBBBA. BOFA has given a target of $4,000/oz for gold in 2026 on higher US fiscal deficit, which looks likely. During the week, gold touched a high of $3,365.91/oz and a low of $3,247.50/oz.