IC – Asia Fundamental Forecast | 04 August 2026

IC – Asia Fundamental Forecast | 04 August 2026

What happened in the U.S. session?

A shift toward diplomacy between the U.S. and Iran caused crude oil prices to tumble, easing inflation fears and lowering Treasury yields. The resulting improvement in risk sentiment lifted U.S. equity markets, with technology stocks leading gains. Manufacturing data continued to indicate steady economic expansion, but investors remained focused on the upcoming labor market releases, particularly Tuesday’s JOLTS Job Openings report and Friday’s Non-Farm Payrolls, which are expected to play a key role in shaping expectations for the Federal Reserve’s next policy decision.

What does it mean for the Asia Session?

Asian traders will focus on key labour market data from the United States and New Zealand, with the main scheduled events being the US JOLTS Job Openings report and New Zealand employment figures. The US JOLTS data will provide further insight into labour market strength and could influence expectations around the Federal Reserve’s future interest-rate path. A stronger-than-expected reading would likely support the US dollar and Treasury yields, while weaker job openings could increase expectations for a more dovish Fed stance, potentially pressuring the USD and supporting risk assets such as equities, gold, and higher-yielding currencies.
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The Dollar Index (DXY)

Key news events today

JOLTS Job Openings (2:00 pm GMT)

What can we expect from DXY today?

The dollar is trading with a cautious tone today as falling oil prices and softer Treasury yields reduce immediate USD strength, while uncertainty around future Federal Reserve policy keeps traders defensive. A stronger labor-market reading from upcoming employment indicators could revive dollar buying, but continued declines in yields and reduced geopolitical risk may limit safe-haven demand. Overall, the USD outlook remains neutral to slightly bearish in the short term, with traders watching U.S. employment data and Fed expectations for the next major move.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) kept the federal funds rate unchanged at 3.50%–3.75% at its July 28–29, 2026, meeting, marking the fifth consecutive meeting without a policy change. The Committee voted 9–3 to maintain rates, with three members dissenting in favor of a 25-basis-point rate hike, highlighting growing concern among some policymakers that inflation remains too high.
• The Committee reaffirmed its dual mandate of maximum employment and price stability. Officials noted that the labor market remains resilient, with job gains broadly keeping pace with labor force growth and the unemployment rate remaining relatively stable. The FOMC continues to view employment conditions as consistent with a healthy economy while remaining vigilant for signs of labor market weakening.
• Inflation remains the Committee’s primary concern. While some recent inflation data have shown moderation, overall price pressures remain above the Fed’s 2% target. Policymakers emphasized that elevated inflation continues to be driven in part by higher energy prices and persistent supply-side pressures, leading the Committee to maintain a restrictive monetary policy stance.
• Economic activity continues to expand at a solid pace despite elevated uncertainty. Strong productivity growth, business investment, and continued spending related to artificial intelligence remain supportive of economic growth. However, the FOMC acknowledged that geopolitical tensions, particularly developments affecting global energy markets, continue to pose risks to both inflation and the broader economic outlook.
• The July meeting highlighted increasing divisions within the Committee. Three policymakers—Beth Hammack, Neel Kashkari, and Lorie Logan—voted against the majority, preferring an immediate rate increase. This unusually large number of dissents reflects growing concern among some officials that inflation could remain persistent and may require additional policy tightening if progress stalls.
• Chair Kevin Warsh reiterated that future policy decisions will remain strictly data-dependent. He avoided providing explicit forward guidance, emphasizing that upcoming decisions will depend on incoming inflation, employment, and growth data. Warsh also stressed that the Committee remains fully committed to returning inflation to its 2% objective and is prepared to act if inflationary pressures intensify.
• The FOMC continues its balance sheet normalization program without changes. The Federal Reserve will maintain Treasury runoff caps at $5 billion per month and agency mortgage-backed securities (MBS) runoff caps at $35 billion per month, while continuing to ensure ample reserves remain available within the banking system.
• The next meeting is scheduled for 15 to 16 September 2026.

Next 24 Hours Bias

Medium Bullish

Gold (XAU)

Key news events today

JOLTS Job Openings (2:00 pm GMT)

What can we expect from Gold today?

Gold is trading with a modest bullish bias today after rebounding from recent losses, supported primarily by a weaker U.S. dollar and persistent geopolitical uncertainty. Investors continue to seek safe-haven assets amid ongoing tensions involving the U.S. and Iran, although expectations that the Federal Reserve may keep interest rates elevated have limited stronger gains. Markets are also positioning ahead of this week’s key U.S. labor market data, particularly today’s JOLTS Job Openings report and Friday’s Non-Farm Payrolls, which could significantly influence Fed policy expectations and Treasury yields.

Next 24 Hours Bias
Strong Bearish

The Australian Dollar (AUD)

Key news events today

No major news event

What can we expect from AUD today?

The Australian dollar (AUD) is starting Tuesday, with traders primarily focused on the Reserve Bank of Australia’s policy outlook, global risk sentiment, and the upcoming New Zealand labour market data later in the Asia session, which could influence AUD/NZD cross flows. Softer-than-expected Australian Q2 inflation released last week significantly reduced expectations of another near-term RBA rate hike, prompting markets to price in a prolonged pause in monetary policy. While Australia’s cash rate remains at 4.35%, investors are now looking for fresh domestic data and external developments to determine the AUD’s next direction.

Central Bank Notes:

• The Reserve Bank of New Zealand’s Monetary Policy Committee (MPC) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at its 8 July 2026 Monetary Policy Review, marking the first rate increase of the current tightening cycle. Unlike the split decision in May, the Committee reached a consensus that reducing monetary stimulus was appropriate to return inflation to target.
• Although global oil prices have fallen following the partial reopening of the Strait of Hormuz, the RBNZ warned that inflation remains above its 1–3% target range and that lingering energy-related cost pressures continue to pose upside risks. The Bank reiterated that further OCR increases are likely, although the timing will remain dependent on incoming economic data.
• The RBNZ now expects headline inflation to have peaked at 3.9% in Q2 2026, lower than the 4.3% peak projected in May, reflecting weaker oil prices. Inflation is forecast to ease to around 3.3% in Q3 2026 before gradually returning to the 2% midpoint by mid-2027, while underlying domestic inflation remains persistent.
• The Committee judged that the current OCR remains accommodative, even after the July increase, and stated that additional tightening will probably be required over coming meetings. Policymakers emphasized that future decisions will depend on inflation expectations, firms’ pricing behaviour, labour market conditions, and the pace of economic recovery rather than following a predetermined path.
• Economic activity slowed during the June quarter as higher energy costs temporarily weighed on demand, but the RBNZ expects the recovery to resume in the September quarter. The Bank’s Kiwi-GDP nowcasting model projects 0.6% quarterly GDP growth in Q3 2026, supported by improving business confidence, lower fuel prices, and stronger household purchasing power as inflation moderates.
• External conditions remained mixed, with elevated global energy price volatility and geopolitical risks supporting upside inflation risks, while softer demand from key trading partners, especially China, continued to weigh on Australian export momentum.
• Financial markets now broadly expect the RBA to hold rates at 4.35% through the third quarter, with the probability of further tightening slightly reduced but still present if services inflation or wage data re-accelerate.
• The July statement emphasized a continued “data-dependent and patient” approach, signaling that policy will remain restrictive for longer if inflation proves persistent, while avoiding any commitment to near-term easing despite slower growth signals.
• The next meeting is on 4 to 5 August 2026.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

Employment Change q/q (10:45 pm GMT)

Unemployment Rate (10:45 pm GMT)

What can we expect from NZD today?

The New Zealand dollar is trading cautiously ahead of today’s key labour market data, with investors focused on the Employment Change q/q and Unemployment Rate releases. The market expects employment growth to slow to around 0.1% q/q from the previous 0.2%, while the unemployment rate is forecast to rise slightly to 5.4% from 5.3%, signalling continued weakness in the labour market. A softer jobs report could increase expectations that the Reserve Bank of New Zealand (RBNZ) may maintain a cautious policy approach, as policymakers balance slowing employment conditions against elevated inflation pressures. 

Central Bank Notes:

• The Reserve Bank of New Zealand’s Monetary Policy Committee (MPC) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at its 8 July 2026 Monetary Policy Review, marking the first rate increase of the current tightening cycle. Unlike the split decision in May, the Committee reached a consensus that reducing monetary stimulus was appropriate to return inflation to target.
• Although global oil prices have fallen following the partial reopening of the Strait of Hormuz, the RBNZ warned that inflation remains above its 1–3% target range and that lingering energy-related cost pressures continue to pose upside risks. The Bank reiterated that further OCR increases are likely, although the timing will remain dependent on incoming economic data.
• The RBNZ now expects headline inflation to have peaked at 3.9% in Q2 2026, lower than the 4.3% peak projected in May, reflecting weaker oil prices. Inflation is forecast to ease to around 3.3% in Q3 2026 before gradually returning to the 2% midpoint by mid-2027, while underlying domestic inflation remains persistent.
• The Committee judged that the current OCR remains accommodative, even after the July increase, and stated that additional tightening will probably be required over coming meetings. Policymakers emphasized that future decisions will depend on inflation expectations, firms’ pricing behaviour, labour market conditions, and the pace of economic recovery rather than following a predetermined path.
• Economic activity slowed during the June quarter as higher energy costs temporarily weighed on demand, but the RBNZ expects the recovery to resume in the September quarter. The Bank’s Kiwi-GDP nowcasting model projects 0.6% quarterly GDP growth in Q3 2026, supported by improving business confidence, lower fuel prices, and stronger household purchasing power as inflation moderates.
• Domestic demand remains uneven, with tourism, agriculture, and export industries continuing to outperform, while discretionary retail spending, construction, and housing activity remain subdued. The RBNZ believes spare capacity in the economy should limit widespread pass-through of higher business costs into consumer prices, although this remains an important upside inflation risk.
• Financial conditions have eased since the May meeting as wholesale interest rates declined, and the New Zealand dollar depreciated, helping exporters but potentially adding to imported inflation. The Committee noted that shorter-term mortgage rates had increased earlier in the year, while longer-term borrowing costs have begun to stabilize alongside lower market interest-rate expectations.
• The MPC concluded that maintaining price stability remains its primary objective, stressing that while further rate increases are expected, policy will remain data-dependent. The Committee believes returning inflation to the 2% midpoint is essential to achieving a sustainable recovery in employment, household incomes, and long-term economic growth.
• The next meeting is on 2 September 2026.

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 is starting on a much stronger footing after a rare joint foreign exchange intervention by the Bank of Japan (through the Ministry of Finance) and the U.S. Treasury to halt the yen’s sharp depreciation. The intervention drove USD/JPY sharply lower from recent multi-decade highs, forcing many speculative long-dollar positions to unwind. While the move has provided immediate support for the yen, investors remain focused on whether the Bank of Japan will reinforce the intervention with tighter monetary policy, as the wide U.S.-Japan interest rate differential continues to be the main structural driver of yen weakness.

Central Bank Notes:

• The Bank of Japan (BOJ) maintained the short-term policy rate at 1.00% at its 30–31 July 2026 Monetary Policy Meeting. The decision reflected confidence that Japan’s economy continues to recover moderately, while policymakers judged that further tightening should proceed gradually as they assess incoming data and the sustainability of inflation.
• The BOJ continues to guide the uncollateralized overnight call rate at around 1.00%, emphasizing that future policy adjustments will remain data-dependent. The Bank reiterated that any additional rate increases will depend on sustained wage growth, inflation remaining durably around or above the 2% target, stable financial markets, and resilient domestic demand rather than following a predetermined path.
• The Bank will continue reducing its purchases of Japanese Government Bonds (JGBs) in line with its previously announced tapering plan while maintaining flexibility to conduct market operations if excessive volatility threatens financial stability. Policymakers also remain attentive to sharp movements in the yen and their potential impact on inflation and financial conditions.
• Japan’s economy continues to expand at a moderate pace, supported by firm domestic consumption, strong corporate investment, improving labor market conditions, and recovering global demand. However, uncertainty surrounding global trade, geopolitical developments, and external manufacturing activity continues to pose downside risks to the growth outlook.
• Underlying inflation continues to strengthen. While headline inflation has moderated somewhat due to easing energy prices, core inflation remains above the BOJ’s 2% objective, supported by broad-based services inflation, rising labor costs, and stronger pricing behavior among firms. The BOJ now sees upside risks to medium-term inflation from persistent wage growth and structural price-setting changes.
• Domestic inflationary pressures remain supported by robust wage settlements, persistent labor shortages, and continued pass-through of higher labor costs into services prices. At the same time, policymakers are closely monitoring the effects of yen depreciation, which could accelerate imported inflation if sustained, even as lower commodity and energy prices provide some offset.
• The BOJ expects real GDP growth to remain moderate over the near term as accommodative financial conditions, rising household incomes, and business investment continue to support activity. Nevertheless, policymakers acknowledge that tighter global financial conditions, weaker external demand, and geopolitical uncertainty could temporarily restrain growth.
• Looking ahead, the BOJ maintains that if inflation continues to stabilize around its 2% objective alongside sustained wage gains and economic expansion, further gradual policy normalization remains appropriate. Financial markets generally expect another 25-basis-point rate increase later in 2026, although the timing will depend on incoming economic and inflation data.
• The next meeting is on 17 to 18 September 2026.

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?

Crude oil markets remain focused on the balance between global supply expectations, demand concerns, and upcoming economic data. Oil prices are trading cautiously as investors assess whether recent weakness in economic activity could weigh on global fuel consumption. The market is watching the latest U.S. inventory data for confirmation of whether crude stockpiles are continuing to decline or rebuilding, while traders remain alert to OPEC+ production policy and any signals regarding future output adjustments. Geopolitical risks in key producing regions continue to provide some support for prices, limiting deeper declines.

Next 24 Hours Bias
Weak Bearish

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