Crude Awakening

July 22, 2026

Elias Haddad

Crude oil prices push higher, NOK outperforms, USD mixed. Data calendar empty today.

UK June inflation softer in parts, sticky in others. JPY whipsawed by BOJ tightening talk.

BI unexpectedly leaves rates steady at 5.75%.

Brent crude oil prices extended gains above $95 a barrel, the highest since June 11, reflecting mounting supply fears and rapidly shrinking global oil inventories. Markets are confronting a two-front threat to energy flow - Hormuz and the Red Sea – while OECD commercial oil inventories are at their lowest since 2022.

The rebound in energy prices are rekindling inflation pressures and weighing on global bonds. USD is consolidating yesterday’s upswing, and the oil-sensitive NOK is outperforming all major currencies.

Market friendly jawboning from President Donald Trump may not be far off, which could strip USD of some of its recent tailwind. 10-year Treasury yields are nearing recent highs and US gasoline prices are rising again.

Still, we expect USD to edge a bit higher in the next couple of months underpinned by: (i) US economic outperformance, (ii) the Fed's resolve to get inflation back to 2% anchoring hawkish rate pricing, and (iii) strong foreign demand for US long term securities.

JAPAN

Hawkish comments by unnamed Bank of Japan (BOJ) officials, signaling scope for a faster pace of rate hikes, triggered a kneejerk JPY rally. USD/JPY dropped as low as 162.69 after rallying to a fresh multi-decade high around 163.24 overnight due to higher energy prices.

The swaps curve price in a 25bps Bank of Japan (BOJ) rate hike by year-end and a total of 50bps of hikes to 1.50% over the next twelve months. That would still leave the policy rate closer to the lower-end of the BOJ’s estimated neutral range (1.10%-2.50%). Loose monetary policy when Japan’s economy is operating above potential raises the likelihood of an upward adjustment to BOJ rate expectations in favor of JPY.

GBP continues to trade heavy versus USD and EUR. UK June CPI report was mixed. Headline inflation cooled more than expected to 2.6% y/y (consensus: 2.7%, BOE projection: 3.1%) vs. 2.8% in May on lower motor fuels. Core CPI printed at 2.6% y/y for a second straight month, a tick higher than anticipated (consensus: 2.5%). Services CPI matched the BOE’s projection at 3.6% y/y vs. 3.7% in May but tracked higher than consensus of 3.5%. Cooling wage growth signal softer services inflation ahead.

The swaps curve price in a full 25bps BOE rate hike to 4.00% in November and a total of 75bps of tightening in the next twelve months. That would leave the policy rate above the BOE’s estimated neutral range (2.00%-4.00%).

Bottom line: restrictive monetary policy when the UK economy is operating well below potential raises the likelihood of a downward adjustment to BOE rate expectations against GBP. Moreover, the prospect of higher spending and borrowing under incoming Prime Minister Andy Burnham risks worsening UK fiscal credibility and is a drag on GBP.

INDONESIA

Bank Indonesia (BI) unexpectedly left the policy rate on hold at 5.75% after delivering three straight 25bps hikes. A majority of analysts expected a 25bps rate increase. Instead, BI expanded incentives to attract more foreign portfolio investments and stressed it was confident the rupiah will stabilize and strengthen.

USD/IDR has retreated from its June 8 record high of 18’190 but remains elevated near 17’900. In our view, positive real rates and ongoing BI FX intervention curtail IDR downside.

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