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FX and Commodities Monthly Insights - May 2026
Highlights: The US dollar weakened in April, with the Bloomberg US Dollar Index down around 2 per cent. The early-April ceasefire reduced safe-haven demand and US diversification flows restarted, which weighed on USD. In G10, AUD led the move higher at around 4.5 per cent versus USD, followed by NZD at around 3 per cent and GBP at around 2.9 per cent. CAD and CHF rose around 2 per cent and EUR gained around 1.5 per cent, while JPY was broadly steady with monthly gains of around 1.3 per cent. In EM, KRW, BRL, and MXN outperformed, while IDR and TRY lagged. Monetary policy meetings did not bring fresh news as it seems too early to assess impact of oil prices onto real economy. Though, the broader tone across central banks was sensed as more hawkish than previously.
- We expect USD to remain broadly stable. In the near term, geopolitics and unsettled oil prices may keep volatility elevated, and safe-haven demand could provide a floor. Looking beyond the conflict, we do not expect US cyclical drivers to materially underperform peers. Offsetting this, we still favour diversification given USD-specific risks linked to monetary policy, the mid-term elections and trade policy. A more structural shift in reserve allocation away from USD could also be a gradual headwind
- We are bullish AUD. It benefited from improved risk appetite and a supportive domestic backdrop, and the RBA has remained relatively hawkish versus peers. We still expect a final hike in May to 4.35 per cent, although weaker sentiment indicators are a key risk
- We are neutral on EUR, GBP, CHF, JPY, CAD and NZD. EUR remains supported by diversification demand, but cyclical signals are soft. GBP is supported by higher yields but remains exposed to energy and political risks. CHF and JPY retain hedge appeal but can lag when risk appetite improves. CAD may benefit from higher oil prices but faces a weaker cyclical backdrop and tariff risks ahead of USMCA talks. NZD has valuation and normalisation support but softer activity and oil import dependence remain constraints
- In EM, we prefer selective exposure where carry and fundamentals are stronger, such as CNY and MXN, while oil import sensitivity and policy constraints remain headwinds for currencies such as INR, IDR and TRY
Commodity Space:
- Bullish on Gold: Gold fell around 1 per cent in April as markets rotated into risk assets after the ceasefire and investors stayed cautious around major central bank meetings. We remain bullish over the medium to long term because gold remains a key diversifier and should benefit if growth expectations are revised lower as oil-driven inflation feeds through. Silver too fell by around 2 per cent in April and should benefit if risk sentiment improves and gold rebounds, although it is likely to remain more volatile
- Neutral on Oil: Oil prices stayed volatile in April, although the overall trend was lower as the ceasefire eased some uncertainty. Renewed blockages and low traffic through the Strait of Hormuz kept volatility elevated. Upside risk persists if disruption escalates, while downside risk rises arise if prolonged disruption weighs on global growth and demand