Silver Linings Playbook

June 09, 2026

Elias Haddad

Iran deal optimism fuels risk-on sentiment. We still expect USD to edge higher.

AI data center building boom keeps gathering momentum.

Bank Indonesia delivers off cycle 25bps hike to cushion the decline in IDR.

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Improving sentiment tied to the Iran war is driving markets. President Donald Trump signaled a “very good deal” could take shape within days while Iran and Israel agreed to halt strikes on each other. Brent crude oil prices are down near recent lows, the MSCI All Country World Index rebounded, bond yields are generally lower, and USD is down against most major currencies.

We are sticking to our view that USD can edge higher in the near-term. Resilient US economic activity in both absolute and relative terms outweigh the drag to USD from easing geopolitical fears.

US data in the pipeline today include: May NFIB small business optimism index, ADP employment change for the week ending May 23, and April trade balance. We also get a fresh update of the Atlanta Fed GDPNow model. As of June 1, the model estimated annualized real GDP growth of 3% in Q2.

The AI capital expenditures boom got another shot in the arm today as China is preparing to spend around 2 trillion yuan ($295 billion) over the next five years on building data centers. The announcement adds to an already powerful AI capex cycle, with Amazon, Google, Microsoft, and Meta set to spend around $725 billion this year.

The ongoing AI spending boom is a structural tailwind to precious and industrial metals. Every new server and power system requires large amounts of silver, gold, platinum, palladium, and copper, for high performance chips, wiring, and energy infrastructure. AUD, CLP, ZAR, BRL, MXN, and PEN all stand to benefit over the longer term. Check out our Worlds Collide report that discusses the currency winners and losers from the intersection of AI & geoeconomics

AUSTRALIA

AUD/USD is consolidating recent losses around 0.7050. Australia-US 2-year bond yield spreads suggests AUD/USD risk undershooting 0.7000 in the near-term.

Australia’s business and consumer sentiment indexes paint a soft growth picture. NAB business confidence improved in May but remains deeply negative, while business conditions held at +3 index points, below its long-run average. In parallel, the Westpac–MI consumer sentiment index worsened to near record lows in June due to cost-of-living issues.

RBA cash rate futures trimmed slightly odds of a 25bps hike by year end to 4.60%. In our view, the risk is skewed towards a more extended pause in the RBA tightening cycle. First, the RBA projects real GDP growth to be below potential over the next two years. Second, the RBA cash rate at 4.35% currently sits near the top of the range of model-based central estimates of the nominal neutral rate.

CHINA

USD/CNH is down on broad USD weakness, and nearing support at its June multi-year low of 6.7581. China’s May trade surplus widened more than expected powered by the AI supply chain. The trade surplus increased to a four-month high at $105.4bn as exports surged 19.4% y/y and imports soared 27.4% y/y, both well above consensus.

Strong global demand for AI-related goods boosted shipments while import growth was driven by a surge in semiconductor imports. On an annual basis, China’s trade surplus remains massive at $1.17 trillion.

In our view, a continued appreciation in China’s currency could help the country shift its growth model towards consumer spending by boosting disposable income through cheaper imports. Bottom line: USD/CNH downtrend is intact.

INDONESIA

USD/IDR pulled back sharply after reaching a fresh record high of 18190 today. Bank Indonesia (BI) lifted the policy rate 25bps to 5.50% today, more than a week ahead of its next scheduled meeting. BI said “this increase is a follow-up measure to strengthen the stabilization of the rupiah exchange rate…[and] a preemptive step to keep inflation in 2026 and 2027 within the government’s target range. Today’s unscheduled rate decision follows the bank’s surprised jumbo 50bps hike on May 20.

Bottom line: BI rate hikes and ongoing FX intervention will help curtail IDR weakness. But until the energy shock fades, IDR is unlikely to correct its significant undervaluation. The rupiah is -10% undervalued relative to its real effective exchange rate trend, the most since 2009.

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