According to ING’s Deepali Bhargava, India has temporarily contained consumer inflation from higher Oil prices by capping retail fuel pass-through, leaving CPI impacts modest so far.

The US Dollar (USD) regains some composure on Tuesday, rapidly reversing Monday’s downtick against the backdrop of persistent uncertainty around the US-Iran peace deal and the reopening of the Strait of Hormuz.

United States 2-Year Note Auction increased to 4.071% from previous 3.812%

Societe Generale analysts examine a low‑probability but severe scenario where the Strait of Hormuz stays shut through 2026, forcing Brent toward and potentially above $200/bbl to trigger sufficient demand destruction.

TD Securities’ US Economic Outlook suggests a higher-for-longer Federal Reserve stance that is typically supportive for the US Dollar. The bank sees stagflationary risks from the Iran conflict, elevated Oil prices, and stressed supply chains keeping inflation high and preventing rate cuts in 2026.

MUFG's strategists flag the Reserve Bank of New Zealand (RBNZ) as a key event risk, with markets expecting no move this week but assigning a meaningful probability to a July rate hike.

United States Dallas Fed Manufacturing Business Index increased to 0.4 in May from previous -2.3

Societe Generale’s Kit Juckes notes that the Euro (EUR) has shown limited reaction to comments from Isabel Schnabel about a June European Central Bank (ECB) rate hike, even as markets price in more tightening.

TD Securities economists Oscar Munoz and Eli Nir expect the Fed to drop its easing bias in June and keep rates on hold through 2026, citing hawkish FOMC momentum, firm inflation and a stabilized labor market. Cuts are not expected to resume until 2027.

US consumer sentiment loses some momentum in May, as the Conference Board’s Consumer Confidence Index recedes to 93.1 from April’s 93.8 (revised from 92.8).

United States S&P/Case-Shiller Home Price Indices (YoY) came in at 0.8%, below expectations (1%) in March

United States Housing Price Index (MoM) meets forecasts (0.1%) in March

Deutsche Bank economists flag Thursday’s US personal income and spending report, including core PCE, as the key data for the Federal Reserve. They expect core PCE to rise 0.3% month-on-month, with consumption momentum cooling.

Bank of Canada (BOC) Deputy Governor Nicolas Vincent said on Tuesday the more the economy faces shocks accompanied by structural changes, the less clear-cut the monetary policy decisions will be, per Reuters.

United States Chicago Fed National Activity Index increased to 0.14 in April from previous -0.2

According to Iran's Fars news agency, the unfreezing of Iran's funds is the last serious sticking point with the United States (US), being resolved through Qatar mediation. However, there has been no official confirmation.

European Central Bank (ECB) Chief Economist Philip Lane said in an interview with Nikkei, "I don't think the market needs some kind of extra guidance from us,” when asked about speculation of an interest rate hike by the central bank.

Citing a source close to Tehran's negotiation team, Iran's Tasnim news agency reported on Tuesday that Iran insists $24 billion of frozen Iranian funds must be released in a potential Memorandum of Understanding (MOU) with the United States (US).

EUR/CAD depreciates after four days of losses, trading around 1.6060 during the European hours on Tuesday. The currency cross loses ground as the commodity-linked Canadian Dollar (CAD) remains firm amid higher crude oil prices.

Iran’s Islamic Revolutionary Guard Corps (IRGC) reported during the European trading session on Tuesday that it identified hostile aircrafts entering its airspace and intercepted an MQ-9 drone.

Iranian Supreme Leader Mojtaba Khamenei said during the European trading session on Tuesday that the United States (US) will no longer have safe haven for Middle East bases. Khamenei added that he invites all Islamic countries to cooperate.

Danske Research Team notes that equities rose 1.1% in Europe in thin holiday trading, with cyclicals, small caps and growth outperforming. They attribute the risk-on tone partly to peace talks and Oil prices, but also to a reversal in long-end yields that began last week.

BNY’s John Velis and David Tam note that recent FOMC minutes and comments from Fed Governor Waller point to higher two‑way risk for US interest rates.

Here is what you need to know on Tuesday, May 26:

Danske Research Team reports that US strikes on Iranian missile launch sites and mine-laying boats have pushed Brent crude to 98.1 USD/bbl, still below Friday’s 103.5 close.

Sweden Producer Price Index (MoM) rose from previous 0.6% to 1.1% in April

Sweden Producer Price Index (YoY) climbed from previous 2% to 4.7% in April

The AUD/JPY cross loses momentum to near 113.85 during the early European session on Tuesday. The Australian Dollar (AUD) weakens against the Japanese Yen (JPY) as Australia’s labor market surprised to the downside, and markets remain concerned over the Middle East uncertainty. 

European Central Bank (ECB) Executive Board Member Isabel Schnabel said on Tuesday, Even if Iran war ended today, policy action is needed given the damage to the energy infrastructure.

The Bank of Japan (BoJ) said on Tuesday that Japan's core consumer inflation rate excluding one-off factors, as measured by the Japanese central bank's new gauge, reached 2.8% in April. This figure exceeded the BoJ’s 2% target and accelerated from 2.5% in March.