Global Outlooks - 18th July 2025

📈 Asia FX Wrap | July 18, 2025

Asian Currencies Mixed; Set for Weekly Losses Amid Dollar Strength, Fed Uncertainty

Most Asian currencies traded in tight ranges on Friday but remained on course for weekly losses, as a stronger U.S. dollar and uncertainty surrounding the Federal Reserve’s interest rate outlook continued to weigh on sentiment.

The U.S. Dollar Index dipped 0.2% during Asian hours but was still on track for its second consecutive weekly gain, buoyed by cautious Fed signals and persistent global risk aversion.

🌏 Regional FX Highlights

• Indian Rupee (USD/INR): Held steady on the day, yet headed for a weekly decline as capital outflows and dollar strength limited upside. Trading at 86.18/19 levels.

• South Korean Won (USD/KRW): Traded flat Friday, but the won remained one of the stronger performers, set to gain nearly 1% for the week.

• Singapore Dollar (USD/SGD): Edged 0.1% lower on Friday; however, the pair remained on course for a weekly loss, reflecting ongoing dollar strength.

• Chinese Yuan (USD/CNY, USD/CNH): Both onshore and offshore yuan pairs slipped 0.1%, but remained broadly pressured by concerns over China’s economic outlook and trade friction with the U.S.

• Australian Dollar (AUD/USD): Gained 0.4% on Friday, bucking the regional trend. The pair was set for a weekly rise, supported by increased market bets on Reserve Bank of Australia rate cuts following soft labor market data.

• Japanese Yen (USD/JPY): Remained muted but was on track for a 0.7% weekly loss. Attention turned to Japan’s sticky consumer inflation data and the upcoming upper house elections, both seen as key to the Bank of Japan’s policy path.

India Markets

Nifty50 opened at ~24959, down ~0.60%, and Sensex at ~81759, down ~0.61%—reflecting a cautious tone.

Factor	Impact
Banking woes (Axis Bank etc.)	Heavy direct drag
Mixed global/domestic signals	Capped broader market gains
Valuation & profit-booking	Fed prudence and FII caution

The most impacted sector on Friday morning was the financials, with private banks taking the biggest hit:

• The financials index fell around 0.5%, while the private banks subindex dropped 1.2%—making them the only laggards among the 13 major sectors.

• Heavyweight names like Axis Bank plunged ~6% following a surprise profit drop and fresh bad loan provisions, and Kotak Bank also slumped, pulling the sector down.

• Telecom stocks, led by Bharti Airtel, also contributed to the downside, but to a much lesser extent compared to the bank-heavy financials

🧭 Outlook

Asian currencies remained under pressure amid U.S. trade tariff threats, persistent global inflation concerns, and a Federal Reserve that has yet to signal a clear rate trajectory. With risk sentiment fragile and the dollar firm, regional FX may continue to face headwinds in the near term.

USA - Markets Tread Carefully Amid Fed Uncertainty and Tariff Escalation

This week, markets were shaped by a wave of caution as investors weighed sticky U.S. inflation, the Federal Reserve’s cautious policy tone, and renewed trade tensions from the White House.

📊 Inflation Data Raises Red Flags

The U.S. Consumer Price Index (CPI) came in slightly above expectations, underscoring persistent inflationary pressures. Analysts noted this could be the early impact of President Donald Trump’s recent tariffs, which are beginning to feed through to consumer prices.

Fed officials responded with restraint, reiterating the need to maintain a cautious approach to interest rates. Several policymakers highlighted that inflation remains uncomfortably sticky, making it unlikely the central bank will shift policy in the near term.

🏛 Central Bank Independence Under Scrutiny

Market anxiety was compounded by political tensions between the White House and the Federal Reserve. President Trump on Wednesday dismissed rumors of plans to remove Fed Chair Jerome Powell, but notably did not rule out the possibility, fueling fears over the central bank’s independence—an issue closely watched by global markets.

🌍 Trade Risks Resurface

Trump also ramped up his tariff rhetoric this week, with new measures announced and a key August 1 deadline fast approaching. With limited clarity on trade policy and mounting geopolitical noise, investors remained risk-averse and positioned defensively.

Bottom Line

• Equities: Mixed but generally upbeat—global indices at records, Asia ex‑Japan strong, though Japan and India trade slightly lower.

• Bonds: Yields rising globally, especially in U.S. and Japan, reflecting inflation and tariff pressures.

• Commodities & FX: Oil remains firm; gold pressured; INR gains, yen weak due to Japan-specific risks.

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