The Dollar loses its Oil shield — Now it's Powell vs the macro tape

The geopolitical premium has largely dissipated from the dollar. With the Israel-Iran ceasefire holding steady, oil’s risk bid collapsed and safe-haven demand for USD faded with it. Traders have shifted gears—from hedging headlines to parsing Powell, and suddenly the spotlight is back on U.S. macro.

Yesterday’s soft consumer confidence figure gave the bears something to chew on, but the main event was Chair Powell’s testimony. He didn’t exactly roll out the red carpet for a July cut, but he also didn’t shut the door entirely. His tone was cautious, but beneath the surface, there were signs: a greater willingness to “discuss” the preconditions for easing, which markets—already influenced by Waller and Bowman—interpreted as dovish enough. The Treasury market responded accordingly, with yields softening and the curve nudging steeper. The dollar initially wilted, but honestly, its trading has been very range-bound with the EURO struggling to break out.

Still, don’t mistake this for a full-blown Fed pivot. Powell didn’t cave to Trump’s pressure—if anything, he went out of his way to show independence. That’s key. A politicized Fed would spook bond markets and potentially alter the entire dollar narrative. Instead, Powell’s threading the needle: conditionally dovish but institutionally grounded. That keeps longer-end rates stable, which matters more for FX than the front-end right now.

EUR/USD, meanwhile, is running into familiar resistance around 1.165. A break higher likely requires more than just fading geopolitical noise—it needs a genuine macro driver from the U.S., whether that’s a weak Tier 1 economic data print or a dovish policy shift from Powell. Europe’s not helping itself either: Trump’s NATO posturing and Spain’s refusal to play ball on defence spending have added another layer of political uncertainty. But ultimately, this remains a dollar story. And right now, that story’s leaning bearish—more by process of elimination than conviction.

The focus today stays on Powell’s second round of testimony, with May housing data as the only U.S. print on deck. Unless he walks back yesterday’s nuance or the data surprises to the upside, the path of least resistance still points lower for the dollar.

The dollar has lost its geopolitical armour, and now it’s walking into macroeconomic crossfire.

Oil finds its feet — But the tape’s still heavy

Crude staged a modest bounce—up around 1% to just shy of $68—but let’s not confuse a dead-cat twitch with a trend reversal. After the worst two-day selloff since 2022, wiping 13% off the board, this move looks more like short-covering than fresh conviction. The trigger? A 4.3 million barrel draw in U.S. crude inventories gave bulls something to cling to, while traders took a second look at the Iran-Israel ceasefire and decided, for now, the shooting’s stopped. But the backdrop remains brittle.

Trump’s messaging hasn’t helped. One minute he’s praising peace in the Middle East, the next he’s greenlighting China to resume Iranian crude imports while talking tough on sanctions. That kind of policy whiplash isn’t oil-bullish—it’s noise. And the market knows it. Yet the slight rebound feels more like a mechanical profit taking breather than a shift in macro posture.

More telling? Brent’s curve has slipped back into contango. That’s the market whispering its true view: too many barrels, not enough urgency. Physical tightness just isn’t there, and with OPEC+ due on July 6,

Right now, oil is caught between geopolitical fog and macroeconomic headwinds, with a side order of tariff risk. This bounce may persist for a day or two, but structurally, sentiment remains bearish, and the path of least resistance remains lower unless a significant shift occurs.

WTI can slide on noise, but once we start approaching the $60 handle, you’re staring straight at the shale breakeven zone. Permian producers—especially the capital-disciplined, hedged-up majors—don’t flinch at $65, but push much lower and even the most efficient players start feeling the heat. Sub-$60 isn’t just a chart level—it’s where balance sheets start blinking and drilling slows down.

Most estimates peg Permian breakevens in the low $50s for Tier 1 acreage, but that’s only half the story. With service costs inching higher again, and financing still tighter than pre-COVID days, $60–65 is the effective pain threshold for sustained production growth. Below that, capex budgets get trimmed, rig counts start bleeding, and the U.S. becomes less of a “swing” and more of a slow bleed.

So yes—oil can probe lower, especially if the Trump-China-Iran triangle deflates sanctions risk further or if macro sentiment rolls over again. But the curve is already in contango, signaling supply comfort. Push WTI too far below $60 and you’ll start choking off marginal barrels. That, eventually, tightens the balance again.

In other words, there's more room to flush—but gravity loses pull fast below $60. The shale backstop might not be a trampoline, but it's definitely a tripwire.