Oil

Risks to Russian oil supply has been in focus recently given sanctions as an economic penalty against Russia for its war with Ukraine. The European Union for one has announced a sanctions package against Russia, including a lower price cap on the country’s crude oil (effective 3 September) and on imported refined products made from Russian oil by other countries (effective around March 2026).

On the flipside, production hikes by OPEC+ could limit the risk of higher oil prices. On 3 August, the oil cartel announced a further boost in its oil production to 547,000 per barrel from 411,000 per barrel previously. This is the latest in a series of accelerated output hikes to regain market share, as concerns mount over potential supply disruptions linked to Russia.

We expect oil prices to consolidate and maintain our 12-month Brent forecast of US$65/barrel.

Precious metals

Gold struggled to make new highs despite peak geopolitical risks in June. Gold made another dash up in July but failed to sustain above US$3,400/ounce, as concerns over US Federal Reserve independence eased after President Donald Trump reiterated that he has no plans to fire Fed Chair Jerome Powell. Gold could continue to consolidate over the next few months, caught between two competing economic narratives of US soft landing and stagflation.

US soft landing refers to a situation of benign inflation and steady growth. This drives gold lower as growth resilience keeps the Fed patient about resuming rate cuts. Such a situation, which tends to benefit precious metals with a stronger industrial component, has also encouraged rotation from gold to silver. On the other hand, US stagflation refers to a situation of rising inflation and slower growth. Stagflation risk should help to limit gold’s downside. For now, we think risks on either side of this equation remains balanced. However, our view remains that stagflation risk will dominate over time as the drag to growth from US tariffs build up. This should eventually drive Exchange Traded Fund (ETF) flows higher alongside an upside break in gold prices.

Currency

The US Dollar (USD) index (DXY) closed higher in July – its first monthly gain since December 2024. Upside surprise to US economic data has led to chatter of a return of US exceptionalism while markets partially pared back Fed rate cut expectations following the July Fed policy meeting. From a currency point of view, markets had anticipated that Powell would make a soft pivot or hint of a rate cut soon. However, there was no such signalling from Powell. Further unwinding of stretched USD shorts may see USD strength persists for a little longer. Over the forecast horizon, we still expect the USD to trade on the back foot amidst the USD diversification/re-allocation trend and as a potential Fed rate-cut cycle comes into focus. However, the USD is not likely to see a repeat of another 10% decline for 2H 2025. The magnitude of decline should moderate and hence the view that the USD’s decline will not be one way and is likely to be bumpy going forward.

In July, the Euro (EUR) posted its first monthly decline in six months against the USD, after a more than 13% gain in 1H 2025. The slippage was due to a few factors including (1) a broad USD rebound from multi-month lows; (2) comments from some ECB officials on the pace of EUR appreciation (although these officials remain comfortable with regards to the level of the EUR); (3) a trade deal with US that has come with plenty of confusion. While the US and EU broadly agree on a 15% tariff on most EU imports to US, there were contradictory statements from both side – whether the 15% tariff excludes pharmaceuticals and metals. This ongoing ambiguity over pharmaceutical tariffs raises broader questions about sector-specific tariffs, particularly with regards to pharmaceuticals and semiconductors — areas that Trump previously highlighted but has yet to clarify in detail. A slight slippage in the EUR after an outsized run-up is assessed to be a healthy correction. Overall, we remain constructive on the EUR’s outlook for the following reasons: (1) ECB nearing the end of its rate-cut cycle; (2) German and European spending boosting growth, in turn lending support to the EUR; (3) China’s economic growth showing tentative signs of stabilisation. A stable to stronger Renminbi (RMB) can result in a positive spillover to the EUR); (4) signs of portfolio flows and reserve diversification that may favour alternative reserve currencies such as the EUR.

The exchange rate between the US Dollar and the Japanese yen (USDJPY) closed higher for the month of July. Tokyo CPI data surprised to the upside while the Japanese cabinet’s approval rating fell to 29% in an Asahi poll. Political uncertainty (referring to Prime Minister Shigeru Ishiba’s political career and LDP leadership), credit rating concerns (which is dependent on Japan’s fiscal health) and the carry allure remains supportive of USDJPY while the “sell USD” trade momentum takes a back seat for now. With tariff uncertainty out of the way for Japan, we keep our eyes peeled on two risks going forward for USDJPY: (1) political risks – If Ishiba resigns and the LDP sees a leadership transition; (2) if there is any change to Japan’s credit rating (which is dependent on its fiscal health). More broadly, we look for the USDJPY to trend lower at some point, after political/rating uncertainty clears. Fed-BOJ policy divergence and the USD diversification theme should still support the USDJPY's broader direction of movement to the downside.

The exchange rate between the US Dollar and the Singapore Dollar (USDSGD) posted a monthly gain in July for the first time in six months, after a decline of more than 6% in 1H 2025. The Monetary Authority of Singapore (MAS) left its monetary policy settings unchanged in July. Its latest Monetary Policy Statement (MPS) on 30 July indicated that its policy is in an appropriate position to respond to medium-term risks to price stability. Our read is that the door to easing monetary policy remains open should the growth-inflation dynamics worsen more than expected, but there is no hurry to ease or jump the gun. A wait-and-hold strategy is the preferred stance for now as new data comes in, even as tariff development continue to evolve. The Singapore Dollar Nominal Effective Exchange Rate Index (S$NEER) remains largely steady at about 1.90% above our model-implied midpoint. We expect the S$NEER to stay near the upper bound of the band, but that also implies limited room for the SGD to appreciate on a basket basis. USDSGD will revert to tracking the USD, given the significant correlation between the USDSGD and DXY.