IC – Asia Fundamental Forecast | 04 September 2026

IC – Asia Fundamental Forecast | 04 September 2026

What happened in the U.S. session?

The overnight U.S. session was dominated by a softer labor-market signal from ADP, shifting Fed expectations, and persistent U.S.–Iran tensions. The weak 38K private payroll gain pressured the USD and Treasury yields while supporting gold, whereas elevated oil prices continued to create an inflationary risk that could prevent the Fed from becoming too dovish. U.S. equities nevertheless recovered as yields eased.

What does it mean for the Asia Session?

Friday’s Asian session could be dominated by yen strength, BoJ rate-hike expectations, oil/geopolitical risk, and positioning ahead of U.S. NFP. The yen is currently the standout currency after its sharp rally, while the stronger Australian economy is providing some support for AUD. At the same time, elevated oil prices remain an inflationary risk for the region.
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The Dollar Index (DXY)

Key news events today

Average Hourly Earnings m/m (12:30 pm GMT)

Non-Farm Employment Change (12:30 pm GMT)

Unemployment Rate (12:30 pm GMT)

What can we expect from DXY today?

The dollar’s biggest driver today is the U.S. jobs report. With NFP expected at only +55K after July’s -23K, the market is looking for evidence that the weak U.S. labor market is stabilizing. At the same time, recent dovish comments from Waller and Williams have reduced expectations for an immediate Fed hike, keeping the dollar vulnerable. A strong jobs/wages report could trigger a sharp USD rebound, while another weak employment reading could reinforce the bearish dollar trend and push traders toward gold and other major currencies. The yen is also an important factor, having recently strengthened sharply against the dollar amid rising expectations for a BOJ hike.

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

Weak Bearish 

Gold (XAU)

Key news events today

Average Hourly Earnings m/m (12:30 pm GMT)

Non-Farm Employment Change (12:30 pm GMT)

Unemployment Rate (12:30 pm GMT)

What can we expect from Gold today?

Gold is starting Friday on the back foot from a fundamental perspective but with positive short-term momentum, having recovered above $4,400 as the dollar and Treasury yields eased. The forecast of only 55K new jobs points to a relatively soft labor market, so a significant downside surprise could send gold higher by reducing expectations for further Fed rate hikes.

Conversely, a strong NFP and/or stronger wage growth could push yields and the dollar higher, putting renewed pressure on gold. Meanwhile, ongoing U.S.-Iran tensions provide an additional safe-haven bid, although elevated oil prices are complicating the Fed outlook.

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?

Strong Australian GDP, elevated inflation and rising expectations for another RBA rate hike are supporting the currency, while the recent decline in the U.S. dollar is another positive factor. However, U.S. Non-Farm Payrolls is the major event risk: a significantly weaker-than-expected jobs figure could trigger a strong AUD/USD move higher through a weaker USD, whereas a stronger payrolls number could reverse some of the Aussie’s recent gains.

Central Bank Notes:

• The Reserve Bank of Australia (RBA) is expected to maintain a cautious, data-dependent policy stance heading into its September 2026 Monetary Policy Meeting. The Cash Rate Target remains at 4.35%, following three increases earlier in 2026. The RBA has indicated that monetary policy needs to remain sufficiently restrictive to bring inflation back toward the 2–3% target while allowing the Board to assess the effects of previous tightening on household demand, employment and economic activity.
• Inflation remains the central issue for the September meeting, although headline price pressures have continued to moderate. Australia’s CPI rose 3.8% year-on-year in June 2026, down from 4.0% in May, while trimmed-mean inflation remained at 3.6%. This suggests that underlying inflation is proving more persistent than headline inflation and remains above the RBA’s 2–3% target band. Housing costs continue to be an important source of inflationary pressure, while the end of some electricity rebates has also contributed significantly to household costs.
• The August and September inflation data will be particularly important for determining the RBA’s next move. The ABS is scheduled to release July 2026 CPI on 26 August, giving policymakers a fresh inflation reading before the September meeting. The data will help determine whether the recent moderation in headline inflation is becoming more broad-based or whether services and domestic cost pressures remain stubborn.
• The labour market remains relatively resilient, but there are early signs of moderation. Australia’s unemployment rate was 4.4% in June, while employment increased by approximately 76,300 people and the participation rate rose to 67.0%. The increase in employment provides the RBA with room to keep policy restrictive, although rising unemployment or a significant decline in employment growth could strengthen the case for eventually easing monetary policy.
• Wage growth will remain an important indicator for the September decision. The latest available Wage Price Index showed wages increasing 0.8% quarter-on-quarter and 3.3% year-on-year in the March quarter. The June-quarter wage data is scheduled for release on 19 August 2026, meaning the RBA will have this information available before its September meeting. A stronger-than-expected wage result could reinforce concerns about persistent domestic inflation, while softer wage growth would support the argument that inflation is gradually returning toward target.
• Household demand and economic growth will remain closely monitored. Higher borrowing costs continue to place pressure on mortgage holders and discretionary household spending. At the same time, improving real incomes and easing headline inflation could gradually support consumption later in the year. The RBA will therefore need to balance the risk of keeping rates restrictive for too long against the risk of easing policy before underlying inflation has been sufficiently contained.
• Global economic and commodity-market conditions remain an important risk for Australia. Developments in energy prices, geopolitical tensions and China’s economic performance could have significant implications for Australia’s inflation and export outlook. A renewed increase in energy prices could raise Australia’s inflation outlook, while weaker Chinese demand could weigh on commodity exports, business activity and overall economic growth.
• Financial markets are likely to remain highly sensitive to incoming inflation and employment data. With the cash rate already at 4.35%, markets will closely assess whether the RBA is approaching the end of its tightening cycle or whether another increase could become necessary. A sustained decline in underlying inflation and weaker domestic demand would strengthen expectations for eventual rate cuts, while persistent services inflation, strong wages or renewed energy-price pressures could keep the possibility of another hike alive.
  
  
• The next meeting is on 28 to 29 September 2026.

Next 24 Hours Bias

Strong Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news event

What can we expect from NZD today?

The RBNZ’s 2.75% rate hike is theoretically supportive for the Kiwi, but the NZ dollar’s decline following the decision shows that traders are concerned about the outlook for further tightening. Stable dairy prices and improved Chinese economic data offer some support, while the US dollar remains the major downside risk. Disappointing US jobs data could trigger a NZD/USD rebound, whereas strong NFP/wage numbers could strengthen the USD and push NZD/USD lower.

Central Bank Notes:

• The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 25 basis points to 2.75% at its 2 September 2026 Monetary Policy Statement meeting. The decision was reached by consensus, marking another step in the Bank’s tightening cycle as policymakers seek to bring inflation sustainably back toward the 2% midpoint.
• Inflation remains the key reason behind the RBNZ’s tightening stance. Annual consumer inflation increased to 4.1% in the June 2026 quarter, driven largely by higher fuel prices associated with the Middle East conflict. The RBNZ expects inflation to remain above 3% for the remainder of 2026 before returning to the 1–3% target range next year and moving toward the 2% midpoint.
• Energy prices and geopolitical developments remain an important upside risk to inflation. Higher petrol and diesel prices have increased transportation and production costs, feeding into prices for goods and services such as food and air travel. The RBNZ remains concerned that renewed increases in energy prices could make inflation more persistent than currently expected.
• The RBNZ indicated that further OCR increases may still be required this year, but policy is not on a predetermined path. Future decisions will depend on the balance of risks to medium-term inflation, including inflation expectations, domestic price pressures, economic activity and the response of households and businesses to tighter financial conditions.
• New Zealand’s economic recovery appears to have resumed, although growth remains uneven. Economic activity was lacklustre during the June quarter as higher fuel costs reduced household purchasing power. However, stronger export prices and resilient demand from trading partners are supporting income growth and investment, particularly in export-oriented sectors.
• Household demand and the housing market remain areas of weakness. Weak income growth, job insecurity and relatively flat house prices continue to weigh on household spending and residential investment, particularly in Auckland and Wellington. The RBNZ nevertheless expects the recovery to strengthen gradually as inflation declines and purchasing power improves.
• The labour market remains relatively soft, but the Bank expects conditions to improve as economic activity strengthens. High unemployment and subdued household demand remain concerns, but stronger economic growth should gradually encourage businesses to increase hiring. This creates a delicate balance for the RBNZ between containing inflation and avoiding unnecessary weakness in employment and output.
• The RBNZ continues to see strong export performance as an important support for the economy. New Zealand’s agricultural and other export sectors are benefiting from resilient global demand and strong commodity prices, helping offset weakness in domestic consumption and residential investment.
• The next meeting is on 28 October 2026.

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 yen is one of the strongest major currencies heading into Friday. Markets are increasingly convinced that the BOJ could hike rates later this month, while Japanese officials remain vigilant about excessive currency volatility. At the same time, weaker U.S. labor-market signals are weighing on the dollar. Friday’s U.S. NFP report is therefore the key near-term event for USD/JPY: a weaker-than-expected jobs report could accelerate yen strength, whereas a strong employment number could provide the dollar with some relief.

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

Strong Bullish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Oil is entering Friday with a strong bullish bias, mainly because geopolitical risk is currently outweighing concerns about additional OPEC+ supply. Brent crude pushed to around $97.29/bbl on Thursday, while WTI reached roughly $93.04/bbl, both at six-week highs. The move has been driven by renewed U.S.-Iran military escalation and growing concerns about disruptions around the Strait of Hormuz, where vessel traffic has fallen sharply.

Next 24 Hours Bias
Strong Bullish

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