Chipping away at BRICS, one BRIC at a time

The dollar may be consolidating after Friday’s selloff, but behind the surface calm, a more strategic pattern is emerging. India, Brazil, and South Africa have all landed in Washington’s crosshairs, and the BRICS bloc—once seen as a rising alternative to the Western-led order—is suddenly looking exposed, fragmented, and vulnerable to U.S. pressure.

India is now the immediate focal point. What began as a shrug over its 1.7 million barrels per day of Russian crude imports has evolved into something more serious. The threat of secondary sanctions on India’s Russian oil financing has stepped out of the shadows, though the motive may be less about punishment and more about leverage.

Trump’s playbook here may be to pressure India into opening its domestic markets to U.S. agricultural goods—or to reroute its energy demand toward American LNG. Either way, the rupee is now trading defensively, and the Reserve Bank of India faces a delicate choice: defend the 88.00 USD/INR level or not. For now, the RBI has signalled comfort with a more hands-off stance—but geopolitics has a way of forcing the issue.

Brazil, meanwhile, is dealing with its own squeeze. U.S. tariffs are already at 50% as Washington points fingers over human rights concerns tied to ex-president Jair Bolsonaro. The drama escalated yesterday as Bolsonaro was placed under house arrest. With President Lula scheduled to address the nation tomorrow, the next move may dictate whether this becomes a full-blown standoff. Yet markets haven’t flinched. The real remains resilient, underpinned by near-15% implied yields that continue to attract global carry traders. Yield hunger trumps headline risk—for now.

Even South Africa is finding itself caught in the downdraft. Facing 30% U.S. tariffs, the rand is still holding up. Why? The South African Reserve Bank’s bold decision to shift its inflation target down to 3% has impressed the bond market and pulled in inflows. It’s a rare case of a developing market central bank going against the grain—and being rewarded for it.

But all eyes are quietly shifting to the biggest domino: China. The U.S.-China détente, still intact for now, faces its next critical test on August 12, when tariff terms come back under review. Markets are treating this as a non-event, assuming stability will prevail. But if the White House chooses to tighten the screws on Beijing, this will start to look less like a scattershot of bilateral grievances and more like a coordinated campaign to break the BRICS backbone.

As for the dollar itself, the setup remains tactical. The market has priced in roughly 60bps of Fed cuts by year-end. Mary Daly, while not a voting member, leaned into that view yesterday, suggesting the bias may tilt toward more—not fewer—cuts. But it’s tomorrow’s commentary from Fed Governors Lisa Cook and Susan Collins that traders care about. In the meantime, today’s ISM services print will be closely watched. Consensus calls for a modest rebound, but if the prices-paid or employment components surprise on the soft side, that could reenergize the dollar bears.

EUR/USD, for its part, has been stuck in neutral this week. Price action has been mainly about consolidation amid a lack of market-moving data. Today’s Eurozone PPI likely won’t matter much, but it might start to highlight an undervalued deflationary risk that export tariffs surely will bring to the continent.

August may be known for quiet tapes, but this one carries an undertow. With geopolitics, central banks, and trade deadlines all colliding beneath the surface, it won’t take much to trigger a volatility pulse. The market’s betting on calm. But when pressure builds across multiple axes—monetary, political, and structural—peace rarely holds for long.