IC Trading Asia Fundamental Forecast | 8 August 2025

IC Trading Asia Fundamental Forecast |  8 August 2025

What happened in the U.S session?

The overnight U.S. session was defined by new tariff implementations, tech sector optimism led by Apple, increased confidence in Fed rate cuts due to weak data, and heightened volatility in currencies and commodities. Tech and semiconductor equities, the USD, U.S. Treasuries, and global indices were most responsive to these headlines and data releases.: A string of weak U.S. macro data (stagnant ISM services, slow payrolls) increased market expectations for a Fed rate cut by September to 90%. The White House signaled it would announce new Fed leadership prospects soon. These developments drove down Treasury yields and weakened the U.S. dollar.

What does it mean for the Asia sessions?

Asian traders should focus on China’s liquidity and loan growth data, Japan’s service sector sentiment, Indonesia’s consumer outlook, and ongoing trade/tariff headlines. Markets will likely remain headline-driven and sensitive to any fresh news on global monetary policy, with a defensive tilt amid macro uncertainty. Ongoing U.S. tariff measures on Asian exports, especially semiconductors, continue to drive volatility in regional tech, chip, and export-focused stocks. Traders remain cautious as headline risk persists around the next-phase U.S.-China trade negotiations and tariff exemptions.

The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

The dollar has been under pressure due to weak macro data and increased rate cut expectations, but stabilized amid speculation over new Fed leadership and ongoing trade policy developments. Expect further volatility tied to upcoming economic releases, Fed announcements, and geopolitical headlines. After consecutive losses, the dollar stabilized around the 98.00–98.40 area, finding some support from technical levels and fresh rate speculation. The daily chart suggests a neutral outlook, and the market awaits further macro data or policy signals, so rangebound trading is possible near-term.

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 Bearish

Gold (XAU)

Key news events today

No major news event

What can we expect from Gold today?

Gold has reached new historic highs amid surging safe-haven demand, trade and policy uncertainty, and expectations for looser Fed policy. While some consolidation is possible after such strong gains, long-term momentum and underlying macroeconomic drivers remain in gold’s favor. By late Thursday, spot gold prices hovered around $3,374.90–$3,389.45/oz, up around 0.4–0.6% on the day and 2.5–2.7% for the month. Domestic prices (such as Indian and Vietnamese benchmarks) also hit all-time highs, reflecting heightened demand as a safe haven asset and, in some regions, additional local currency depreciation.

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 RBA is highly likely to announce a cash rate cut in its August meeting, with further easing moves expected later in the year as domestic inflation moderates and the labor market softens. June economic data was robust for retail sales and building approvals, though the latter may be volatile month-to-month. Australian shares are consolidating after setting record highs, with volatility expected amid global uncertainty and tariff risks. House prices are trending up, driven by rate cut expectations and supply shortages. Watch for the RBA announcement, ongoing U.S. tariff developments, and responses in the AUD, local equity markets, and fixed income instruments.

Central Bank Notes:

• The RBA held its cash rate steady at 3.85% at the July meeting on 8 July 2025, following a 25bps reduction in May and in line with widespread market expectations after recent data showed inflation tracking within the target band.
• Inflation continues to ease from its peak, with higher interest rates helping to rebalance demand and supply across the Australian economy. Data for the June quarter signaled ongoing progress, though underlying pressures persist in certain sectors.
• Trimmed mean inflation for the June quarter likely remained near 2.9% and headline CPI around 2.4%, both within the RBA’s 2–3% target range. The Board noted further evidence of inflation convergence, but flagged that not all price categories are moving in tandem.
• Financial markets have shown increased volatility in the wake of global tariff and trade policy developments—especially as a result of recent U.S. and EU announcements. This has pushed asset prices higher but contributed to an uncertain outlook for domestic growth and employment.
• Private domestic demand showed a tentative recovery. Real household incomes improved and signs of easing household financial stress emerged, but some business sectors continued to face subdued demand, limiting their ability to pass on cost increases.
• Labour market conditions remained tight overall. Employment continued to expand, with low rates of underutilization. Business surveys suggest labour availability remains a constraint, though there are signs of a gradual easing compared to earlier in 2025.
• Underlying wage growth softened modestly, though unit labour cost growth remains elevated due to below-trend productivity gains. The Board remains attentive to developments in wage and productivity dynamics as cost pressures continue to evolve.
• Uncertainties persist for both domestic activity and inflation. Consumption growth has risen, but more slowly than anticipated three months ago, with global and domestic factors both contributing to the cautious outlook.
• There remains a risk that household spending picks up more slowly than forecast, which could result in ongoing subdued aggregate demand and a sharper deterioration in employment conditions.
• Given that inflation is expected to remain around the target band, the Board judged that it was appropriate to keep policy settings unchanged in July, maintaining a position that is still mildly restrictive.
• The Board continues to monitor all incoming data and assesses risks carefully, with a focus on global trends, domestic demand indicators, inflation outcomes, and the labour market outlook.
• The RBA remains committed to its mandate of price stability and full employment and stands ready to adjust policy as needed to achieve these objectives.
• The next meeting is on 11 to 12 August 2025.
  
  Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news event

What can we expect from NZD today?

The NZD has strengthened in the short term on global risk appetite and supportive Chinese data, but the outlook remains cautious due to softening domestic employment, easing inflation, rising expectations for RBNZ rate cuts, and ongoing external trade risks. The currency has appreciated over the last two sessions and is trading around 0.594–0.595, its highest in a week. This lift is attributed to a combination of risk-on sentiment in global markets, strong export data from China (a key New Zealand trading partner), and a softer U.S. dollar as markets anticipate a Federal Reserve rate cut.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to hold the Official Cash Rate (OCR) at 3.25% on 9 July, marking the first pause following six consecutive rate cuts.
• The MPC cited heightened uncertainty and near-term inflation risks as reasons to wait until August for further action.
• Although the annual consumer price index inflation increased to 2.5% in the first quarter of 2025,  it remained within the MPC’s target range of 1 to 3%, noting that the outlook for medium-term inflation pressures has evolved broadly in line with the May MPS projections.
• While it is expected to be near the upper end of the band in the second and third quarters of this year, easing core inflation and spare capacity in the economy should help return it toward the 2% midpoint over time.
• The MPC noted that, despite global factors, domestic financial conditions are evolving broadly as expected, as mortgage and deposit interest rates have continued to decline, reflecting a lower OCR, strong bank liquidity, and soft credit growth.
• In aggregate, GDP growth over the December and March quarters was stronger than expected, reflecting a pickup in household consumption and business investment. However, higher-frequency indicators suggest weaker-than-expected growth in April and May.
• Large economic policy shifts overseas and concerns about sovereign risk could result in additional financial market volatility and increased bond yields, while prolonged economic uncertainty might induce further precautionary behaviour by households and firms, slowing the domestic economic recovery.
• Subject to medium-term inflation pressures continuing to ease in line with the Committee’s central projections, the Committee expects to lower the OCR further, broadly consistent with the projection outlined in May.
• The next meeting is on 20 August 2025.

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

Key news events today

No major news event

What can we expect from JPY today?

The Japanese yen remains sensitive to both domestic economic headwinds (including a downgraded growth forecast and sticky inflation) and global factors (Fed rate cut expectations, U.S. tariffs). Expect the JPY to stay headline-driven, with risk sentiment, U.S. policy updates, and BoJ communications shaping moves going into the weekend. As of August 7, 2025, the USD/JPY exchange rate was at 147.27, up slightly from the previous session. Over the past month, the yen has weakened moderately (about -0.28% vs the USD), reflecting ongoing concerns about weak growth and trade uncertainty. The yen has, however, traded well above its multi-decade lows seen earlier in the summer.

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

Strong Bullish

Oil

Key news events today

No major news event


What can we expect from Oil today?

The oil market on August 8 is balancing between OPEC+ output increases, fragile demand, and major geopolitical risks centered on Russian sanctions and global trade. Prices are off six-week lows but remain highly sensitive to headlines about sanctions, trade, and any disruptions to Russian or Middle Eastern supply. Oil prices entered today stabilized just above multi-week lows, with Brent crude futures near $68 and WTI around $65–66 per barrel after a volatile week. This rebound followed a series of declines caused by oversupply concerns, even as summer demand remains strong and U.S. crude inventories posted a larger-than-expected drawdown of 3 million barrels last week.

Next 24 Hours Bias

Weak Bearish