IC Markets Asia Fundamental Forecast | 15 August 2025
What happened in the U.S session?
The hot U.S. producer inflation print dominated market sentiment in the overnight (U.S.) session, sparking a risk-off move in equities and a rally in the dollar and yields. Gold and crypto held their ground on medium-term rate cut optimism, while rate- and tariff-sensitive sectors were hit hardest. U.S. PPI surged 0.9% month-over-month in July (forecast: 0.2%), and 3.3% year-over-year (forecast: 2.5%), marking the largest gain in three years. This came in significantly above expectations, fueling concerns about persistent inflationary pressures.
What does it mean for the Asia sessions?
Focus on China’s industrial and retail data early Friday, followed by any shifts in the U.S. rate cut narrative and associated market reactions. Currency moves, especially for JPY and CNY, and capital flows into/out of regional equities, are likely to be especially volatile. Any significant deviation in the major data releases from consensus expectations could trigger sharp moves across Asian equities, FX, and commodity markets.
Sentiment is dominated by expectations for Fed interest rate cuts as early as September. The probability of a 50 basis point cut has risen following dovish remarks from Treasury Secretary Scott Bessent and softer labor market and inflation data in the U.S.
The Dollar Index (DXY)
Key news events today
Core retail sales m/m (12:30 pm GMT)
Retail sales m/m (12:30 pm GMT)
Empire State Manufacturing Index (12:30 pm GMT)
Prelim UoM consumer sentiment (2:30 pm GMT)
Prelim UoM inflation expectation (2:30 pm GMT)
What can we expect from DXY today?
The US Dollar enters Friday, August 15, 2025, in a firm position bolstered by unexpectedly strong inflation prints and front-loaded retail sales/consumer data that are set to determine whether the USD rally persists or moderates. Watch for sharp, event-driven moves around the 8:30–10:00 AM ET data releases, which are likely to set the tone for FX markets through the session. Retail sales and consumer sentiment data on August 15 are in sharp focus and expected to drive the dollar’s moves. Consensus is that a robust retail sales number would reinforce the dollar’s strength, further delaying Fed easing.
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
Medium Bearish
Gold (XAU)
Key news events today
Core retail sales m/m (12:30 pm GMT)
Retail sales m/m (12:30 pm GMT)
Empire State Manufacturing Index (12:30 pm GMT)
Prelim UoM consumer sentiment (2:30 pm GMT)
Prelim UoM inflation expectation (2:30 pm GMT)
What can we expect from Gold today?
Gold today is consolidating just above key support levels, as market participants weigh strong U.S. data and currency dynamics against persistent geopolitical tensions and evolving Federal Reserve policy expectations.Gold fell about 0.7% on Thursday (August 14), settling near $3,331 per ounce as hot U.S. inflation data (strong PPI) and a drop in weekly jobless claims reinforced the dollar’s strength and trimmed hopes for a large September Federal Reserve rate cut. U.S. gold futures for December delivery dipped to $3,376.50
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 immediate outlook is stable but cautious, supported by solid domestic jobs data and tempered inflation, but capped by global economic headwinds, dovish RBA policy, and shifting US monetary expectations. The Reserve Bank of Australia (RBA) recently reduced its cash rate from 3.85% to 3.60%, citing easing inflation and previous labor softness. Markets are now betting that the RBA will pause and reconsider the next move in November, awaiting further inflation data. The AUD/USD exchange rate has been volatile, recently trading in the 0.65–0.66 USD range, with the latest quotes showing the pair near 0.6530–0.6545
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
Medium Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
The NZD is expected to remain under pressure in the near term, with further weakness likely if the RBNZ delivers on expected rate cuts and unless there are positive surprises from global growth or domestic data. Some moderate recovery could occur later in the year, contingent on global sentiment and improved commodity/export prices. A rise in New Zealand’s unemployment rate (now at 5.2%) and continued weakness in consumer and export sectors have prompted expectations that the Reserve Bank of New Zealand (RBNZ) will cut its Official Cash Rate (OCR) by 25 basis points at its August 20 meeting.
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?
Into Friday, the yen’s bias is firmer on shifting BOJ rhetoric and increased Fed‑cut pricing; data and official commentary remain the swing factors for whether USD/JPY extends below 146 or recoils toward 148–149. The yen strengthened into multi‑week highs as markets bet on a more hawkish Bank of Japan, while the US Dollar softened on growing Fed‑cut expectations.
USD/JPY traded in the mid‑146s to high‑147s on Thursday, marking a 3‑week high for the yen; recent 7‑day range roughly ¥146.4–148.2 per $1.A high‑profile US interview further pressured the Fed narrative and even argued the BOJ is “behind the curve,” boosting yen bids as traders priced a higher chance of BOJ tightening and lower US rates.
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?
Oil markets are caught between geopolitical risk and oversupply concerns. The Trump-Putin summit on August 15 could be a turning point for both prices and global oil flows, with traders closely watching for outcomes that might sharply move the market in either direction. Oil prices rose about 2% on Thursday, August 14, following two days of losses, with Brent closing at $66.71/barrel and U.S. West Texas Intermediate (WTI) at $64.05/barrel.
This upward move brought prices to a weekly high, but both benchmarks remain down over the past month and year, reflecting longer-term bearish trends. Brent and WTI are still near their lowest levels since early June, with Brent down more than 17% year-on-year.
Next 24 Hours Bias
Medium Bearish
