IC Trading Asia Fundamental Forecast | 26 August 2025

IC Trading Asia Fundamental Forecast |  26 August 2025

What happened in the U.S session?

Fed rate cut prospects, the U.S. housing rebound, and evolving inflation/trade policy data were the central macro themes in the U.S. session, with broad effects across equities, rates, FX, and some digital and commodity markets. During the latest U.S. session, financial headlines were dominated by strong anticipation of a Federal Reserve rate cut in September after comments from Chair Jerome Powell, as well as notable movements in the housing market and continued inflation and labor market concerns. The most impacted financial instruments were U.S. equities (especially the Dow and S&P 500), U.S. Treasury yields, the U.S. dollar, and digital assets like Ethereum.

What does it mean for the Asia sessions?

Asian traders on August 26 should monitor U.S. policy pivots, China stimulus, regional inflation, and retail prints, and sustained moves in tech, consumer, and commodity assets. Cross-asset volatility linked to macro/earnings surprises remains a key risk factor for trading strategies. Federal Reserve Chair Powell’s dovish Jackson Hole comments have increased the likelihood of a U.S. rate cut in September, fueling cross-asset rallies and sector rotation in global equities—this will impact Asian open and FX flows. U.S. inflation and GDP reports are impending, which will influence global rates, trade sentiment, and risk assets. Volatility could spike on any surprises.

The Dollar Index (DXY)

Key news events today

Core durable goods orders m/m (12:30 pm GMT)

Durable goods orders m/m (12:30 pm GMT)

CB consumer confidence (2:00 pm GMT)

Richmond manufacturing index (2:00 pm GMT)

What can we expect from DXY today?

The U.S. Dollar is steadying after last week’s heavy declines, as traders await more U.S. economic data and clarity on both Fed policy and U.S. political risks. Most USD pairs remain in tight ranges for now, but with a dovish lean in the broader outlook. The dollar index, while still down year-to-date by over 9.5% and underperforming the euro, has stabilized, reflecting traders waiting for further U.S. economic news before adjusting positions. The dollar maintained modest gains against major currencies on Monday, rebounding from last week’s sharp pullback. Against the euro, the dollar recovered slightly, with EUR/USD trading just below four-week highs hit on Friday.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at its meeting on July 29–30, 2025, keeping policy unchanged for the fifth consecutive meeting.
• The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.
• Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.
• The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.
• In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.
• The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.
• As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.
• The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

Core durable goods orders m/m (12:30 pm GMT)

Durable goods orders m/m (12:30 pm GMT)

CB consumer confidence (2:00 pm GMT)

Richmond manufacturing index (2:00 pm GMT)

What can we expect from Gold today?

Gold prices are trading near record highs on Tuesday, August 26, 2025, driven by strong expectations for a September U.S. Federal Reserve rate cut and intensified geopolitical risks in the Middle East. Spot gold holds steady above key support levels, with futures contracts seeing gains supported by safe-haven demand and central bank buying. Federal Reserve Chair Jerome Powell’s dovish Jackson Hole remarks last Friday have led market participants to price in a nearly 70% chance of a 25-basis-point rate cut in September, weakening the U.S. dollar and boosting gold.

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

Key news events today

No major news event

What can we expect from AUD today?

The Australian Dollar’s stability this session is supported by cautious RBA signals and a firm domestic labor market, but further directional momentum will depend on fresh central bank guidance and upcoming inflation data. The Australian Dollar is holding firm near 0.6485 against the U.S. Dollar today Tuesday, August 26, 2025 as markets await the release of the Reserve Bank of Australia (RBA) Meeting Minutes and monitor upcoming inflation data; overall, sentiment remains cautious, with the AUD likely to remain rangebound unless there is a significant shift from either the Fed or RBA. RBA Minutes today and CPI data tomorrow are pivotal for market direction a dovish RBA could mean further rate cuts and potential AUD weakness, while a stronger inflation number may support the currency.Australia’s economy is showing some resilience, but risks remain from China’s slowdown and global uncertainty impacting the AUD.

Central Bank Notes:

• The RBA held its cash rate steady at 3.85% at the August meeting on 11–12 August 2025, maintaining its stance after keeping rates unchanged in July. The decision was widely expected, reflecting confidence that inflation is settling sustainably within the target.
• Inflation continues to moderate, though headline outcomes for the September quarter are not yet available. Timely indicators suggest price pressures in housing-related services and insurance remain elevated, even as tradables inflation stays subdued.
• The RBA’s preferred measure, trimmed mean inflation, is estimated to track close to 2.8 — 2.9%, signaling continued progress toward the midpoint of the 2–3% target range. Headline CPI is likely near 2.3%, subject to volatility in energy and food prices.
• Global conditions remain a source of uncertainty. The market reaction to ongoing U.S.–EU trade frictions has tempered slightly, but volatility persists across equity and commodity markets. These developments continue to feed into Australia’s trade outlook and business sentiment.
• Domestic demand showed further signs of recovery. Household consumption strengthened modestly over the winter months, helped by improving real incomes and a stabilizing housing market. However, business investment intentions remain mixed, with service industries stronger than manufacturing and construction.
• Labour market conditions remain relatively tight, but indicators point to reduced momentum compared with the first half of 2025. Job vacancies have eased, and while employment growth continues, underutilization edged slightly higher for the first time this year.
• Wage growth has moderated further, consistent with easing labour demand, though unit labour costs remain above average due to weak productivity performance. The RBA continues to flag productivity as a medium-term risk to cost dynamics.
• Forward-looking indicators suggest consumption growth may be softer than previously assumed, with households cautious despite modest income gains. Elevated rents and high borrowing costs continue to weigh on discretionary spending.
• The Board reasserted the risk that household spending may underperform forecasts, potentially dampening business conditions and leading to weaker labour demand if confidence fails to strengthen.
• The overall stance of monetary policy remains mildly restrictive, consistent with inflation outcomes near target and ongoing progress toward balance in the economy. The Board judged it prudent to leave rates unchanged, while emphasizing that adjustments remain contingent on incoming data.
• The Reserve Bank reaffirmed its commitment to price stability and full employment, noting its readiness to adjust settings if conditions diverge materially from baseline projections..
• The next meeting is on 8 to 9 September 2025.
  
  Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major new event

What can we expect from NZD today?

The New Zealand Dollar is broadly stable today, supported by solid retail sales data and ongoing global rate cut expectations, but the medium-term outlook remains data-dependent and vulnerable to changes in local economic indicators and U.S. monetary policy. New Zealand’s Q2 retail sales rose 0.5% quarter-on-quarter (above expectations of 0.2%), signaling that lower interest rates are spurring consumer spending.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to cut the Official Cash Rate (OCR) by 25 basis points to 3.00% on 20 August 2025, marking a three-year low and continuing the easing cycle after July’s pause. The vote was split 4-2, with two members advocating a 50-basis-point cut, highlighting diverging views within the Committee.
• Policymakers indicated that significant uncertainty and a stalling economic recovery prompted this move, leaving the door open for further rate cuts later in the year, with a possible trough around 2.5% by December.
• Annual consumer price index inflation rose to 2.7% in the June quarter and is expected to reach 3% for the September quarter—at the upper end of the MPC’s 1 to 3% target band—but medium-term expectations remain anchored near the 2% midpoint..
• Despite the near-term uptick, headline inflation is projected to return toward 2% by mid-2026, as tradables inflation pressures ease and significant spare capacity continues to dampen domestic price momentum.
• Domestic financial conditions are broadly aligning with MPC expectations, as lower wholesale rates have translated into reduced borrowing costs for households. However, declining consumption and investment demand, higher unemployment, and subdued wage growth reflect ongoing economic slack.
• GDP growth stalled in the second quarter of 2025, contrasting with earlier projections. High-frequency indicators point to continued weakness driven by rising prices for essentials, weakening household savings, and constrained business lending.
• The MPC cautioned that ongoing global tariff uncertainties and policy shifts, especially recent changes in US trade regulations, could amplify market volatility and present both upside and downside risks to New Zealand’s recovery.
• Subject to medium-term inflation pressures continuing to ease as projected, the MPC signaled scope for further OCR cuts, possibly down to 2.5% by year-end, consistent with the latest Monetary Policy Statement outlook.

       ● The next meeting is on 22 October 2025.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

No major news event

What can we expect from JPY today?

The Japanese yen is oscillating within important FX technical ranges, reflecting cautious sentiment amid policy divergence, with short bursts of strength linked to safe-haven flows and prevailing global macro risks. Bank of Japan Stance: The BOJ is maintaining ultra-accommodative policy (rate steady at 0.5%), but signals openness to a hike later this year if inflation and wage growth progress. The central bank raised its inflation projections, citing persistent food price increases and continued evaluation of U.S.-Japan trade developments.GBP/JPY dropped after Powell’s remarks, showing ongoing confusion at key resistance levels (notably 200 and support at 198.40), reflecting broader caution in risk assets.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 31 July, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:
• The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
• The BOJ will maintain its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases will, in principle, continue to decrease by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, targeting a purchase level near ¥2 trillion in January to March 2027.
• Japan’s economy is experiencing a moderate recovery overall, though some sectors remain sluggish. Overseas economies are generally growing moderately, but recent trade policies in major economies have introduced pockets of weakness. Exports and industrial production in Japan are essentially flat, with any uptick largely driven by front-loaded demand ahead of U.S. tariff increases.
• On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. This reflects continued wage pass-through, previous import cost surges, and further increases in food prices, particularly rice. Expectations for future inflation have begun to rise moderately.
• The effects of the earlier import price and food cost increases are expected to fade during the outlook period. There may be a temporary stagnation in core inflation as overall growth momentum softens.
• Looking forward, the economy is likely to see a slower growth pace in the near term as overseas economies feel the pinch of ongoing global trade policies, putting downward pressure on Japanese corporate profits. Accommodative financial conditions are expected to buffer these headwinds somewhat. In the medium term, as global growth recovers, Japan’s growth rate is also expected to improve.
• With renewed economic expansion, intensifying labor shortages, and a steady rise in medium- to long-term expected inflation rates, core inflation is projected to gradually pick up. By the latter half of the BOJ’s projection period, inflation is forecast to move in line with the 2% price stability target.
• There are multiple risks to the outlook, with especially elevated uncertainty regarding the future path of global trade policies and overseas price trends. The BOJ will continue to closely monitor their impact on financial and foreign exchange markets, as well as on Japan’s economy and inflation.
• The next meeting is scheduled for 17 to 18 September 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

API Crude Oil Stock (8:30 pm GMT)

What can we expect from Oil today?

Oil is higher today on short-term supply risks and Fed policy optimism, but market structure remains bearish, with large inventory builds and soft demand forecasts potentially capping further rallies. Market sentiment was also bolstered by signals of possible U.S. Federal Reserve rate cuts by September, potentially supporting demand, although broader headwinds remain, with traders wary that weaker economic growth could ultimately limit consumption. The International Energy Agency (IEA) says global oil supply is growing much faster than demand, with OPEC+ and non-OPEC+ producers rapidly ramping up output as they reverse earlier production cuts.

Next 24 Hours Bias

Weak Bullish