IC Markets – Asia Fundamental Forecast | 20 March 2026
What happened in the U.S. session?
Resilient labor data (jobless claims at 205K) and manufacturing data (Philly Fed at 18.1) somewhat eased recession fears, but were overshadowed by weak housing figures (new home sales down 17.6%) and inventory draws (-0.5%). Meanwhile, the Fed’s decision to hold rates steady, coupled with hawkish inflation commentary and a spike in oil prices to $113/bbl amid escalating Iran conflict tensions, had a broader market impact, driving crude oil sharply higher, pushing stocks lower on risk-off sentiment, weighing on gold, and strengthening select forex pairs like USD/JPY as the yen gained.
What does it mean for the Asia Session?
Escalating Middle East tensions, particularly between Israel and Iran, have driven oil prices higher and fueled inflation fears, alongside the US Federal Reserve’s recent decision to hold rates steady at 3.5%-3.75% amid solid growth but elevated inflation risks. potential follow-through on central bank signals like the SNB decision’s aftermath and RBA policy updates, with focus on USD strength pushing USDJPY near 160 and commodity volatility in gold (down 4% recently) and oil.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
The US dollar experienced modest downward pressure amid ongoing geopolitical tensions from the US-Israel actions against Iran and a hawkish Federal Reserve stance that has delayed rate cuts. The DXY index, which tracks the dollar against major currencies, hovered around 99.6-100 after dipping 0.44-0.48% on March 19, supported by safe-haven demand and elevated oil prices up ~30% year-to-date, though analysts anticipate a potential retreat if the conflict eases.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate target range steady at 3.50%–3.75% at its March 17–18, 2026, meeting, amid rising oil prices from the US-Israel war against Iran and persistent inflation pressures, delaying any 2026 cuts potentially to September.
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market weakening further as nonfarm payrolls declined by 92,000 in February 2026 and the unemployment rate rose to 4.4% from 4.3% in January.
- Officials face tilted risks from geopolitical tensions, elevated oil prices, and sticky inflation, with CPI steady at 2.4% year-over-year in February 2026, headline PCE at 2.8% in January, and core PCE rising to 3.1%.
- Economic activity has cooled after robust Q4 2025 growth near 5%, with the Atlanta Fed GDPNow now estimating Q1 2026 growth at around 2.1%–2.7% amid softer consumer spending and labor data.
- December 2025’s Summary of Economic Projections forecasts 2025 unemployment at a median of 4.5%, 2026 GDP growth at 2.3%, and core PCE at 2.5%, with the dot plot signaling one more cut in 2026 to a median 3.4% funds rate; March updates may reflect softer labor and inflation upticks.
- The Committee maintains its data-dependent stance amid a softening labor market, inflation above target, and new oil shocks, likely holding rates at 3.50%-3.75% with ongoing divisions and possible hawkish dissents on rate cuts.
- The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to ensure ample reserves post-2025 program adjustments.
- The next meeting is scheduled for 28 to 29 April 2026.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
No major news event
What can we expect from Gold today?
Gold prices experienced a sharp decline on March 19, 2026, dropping 4.37% to $4,608.97 USD/t.oz amid ongoing negative pressure and trading below key moving averages like the EMA50. As of late March 19 data, spot gold hovered around $4,633, with forecasts suggesting potential further softening on March 20 but possible recovery toward $4,996 if momentum shifts.
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 maintained upward momentum, trading near 0.71 against the USD after hitting multi-year peaks driven by the RBA’s hawkish pivot, including recent rate hikes and inflation warnings despite headwinds from escalating Middle East conflicts, oil surges, and USD resilience ahead of Fed decisions; this positions AUD as a relative outperformer in a risk-averse environment.
Central Bank Notes:
- The Reserve Bank of Australia (RBA) is expected to hold its cash rate at 3.85% at the March 16-17, 2026 policy meeting, following the widely anticipated 25 basis point hike to 3.85% in early February after persistent inflation pressures from late 2025. While some banks like CBA, NAB, and Westpac now forecast a further 25 basis point rise to 4.10% as soon as May if inflation data remains sticky, consensus tilts toward a pause in March to assess incoming monthly CPI and labor market signals. The February hike reversed prior cuts, entering mildly restrictive territory amid capacity pressures, with the board emphasizing data dependence.
- Inflation remains elevated, with December 2025 CPI at 3.8% year-on-year and trimmed mean at 3.3%, above the 2–3% target midpoint. RBA’s February Statement revised forecasts higher, projecting trimmed-mean inflation to peak in mid-2026 above 3% and remain elevated through early 2027, driven by services, housing, and demand resilience despite some monthly cooling, such as January’s 0.2% MoM gauge. Monthly CPI data continues to highlight core stickiness beyond energy rebates, delaying the target return to late 2027 or beyond.
- January 2026 monthly indicators showed modest easing, but headline CPI risks upward surprises from housing (up recently) and services amid firm domestic demand. Trimmed mean pressures persist from wage growth and capacity constraints, with consumer expectations ticking to 5% YoY in February surveys. Enhanced monthly reporting sharpens vigilance on potential broad-based pick-up.
- The labor market shows softening, with unemployment around 4.1-4.4%, down slightly to 4.1% in December, but unit labor costs are elevated due to subdued productivity. Household spending faces higher borrowing costs post-hike, yet private demand recovery sustains capacity strains. Vulnerabilities persist amid resilient employment dynamics.
- Global growth modestly revised up but tempered by geopolitics and commodity volatility; policy now restrictive post-February, with the RBA balancing inflation against employment risks. Data from the monthly CPI and Q1 GDP will guide, amid household debt sensitivities.
- Sustained restrictive stance post-February anchors inflation return to target, upholding dual mandate with flexibility to new risks like further inflation upticks.
- Markets price a March hold at 3.85%, with big four banks split: CBA, NAB, Westpac eye May hike to 4.10% if persistence continues, while others see limited upside unless acceleration. Upcoming monthly CPI pivotal for Q2 trajectory.
- Policy vigilance counters inflation stickiness against household fragilities and global uncertainties, reaffirming adaptability under dual mandate.
- Base case favors March hold with risks tilted hawkish for further hikes if data is hot; monthly indicators key to 2026 path.
- The next meeting is on 5 to 6 May 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 New Zealand Dollar is steadying near 0.5815–0.5840 against the US Dollar after a small bounce from recent lows, supported by improved risk sentiment and modest gains versus other majors such as the Australian dollar and euro, even as Middle‑East‑driven oil‑price and inflation risks cap a stronger rally.
Central Bank Notes:
- The Monetary Policy Committee (MPC) left the Official Cash Rate (OCR) unchanged at 2.25% at its 18 February 2026 meeting, as widely expected, maintaining a unanimous decision and emphasizing a balance between supporting the nascent economic recovery and ensuring inflation returns sustainably to the 2% midpoint of the 1–3% target band.
- The Committee judged that the prior cumulative easing of 325 basis points provides ongoing stimulus, warranting patience amid uneven recovery signals, while noting readiness to normalize policy gradually as inflation pressures subside and activity strengthens.
- Headline CPI inflation, recently at 3.1%, is projected to dip back within the target band in the coming quarter—supported by spare capacity, modest wage growth, and declining food/fuel prices—before reaching 2.0% by mid-2027, with two-year-ahead business expectations edging up to 2.37%.
- Domestic demand shows gradual stabilization with softer household spending and a muted housing market, partially offset by easing retail rates boosting budgets, though cautious consumption, low migration, and a weak labour market continue to cap services inflation as wage moderation takes hold.
- Financial conditions remain accommodative as lower OCR flows through to borrowing costs, aiding mortgage approvals and housing sentiment, but business credit growth stays subdued amid uneven confidence and sensitivity to the recovery’s pace.
- Recent indicators point to weak but steadying GDP momentum in an early-stage rebound from 2025 lows, with high-frequency data showing gradual broadening despite persistent headwinds from elevated costs, fragile sentiment, and subdued investment.
- External risks are now viewed as balanced rather than downside-skewed, with a supportive global backdrop offsetting prior concerns over China and US trade policy, while a lower NZ dollar aids exports and tradables inflation.
- Looking to mid-2026, the MPC adopted a data-dependent stance with forecasts signaling OCR hikes likely from late 2026 or early 2027—potentially as soon as December if activity or inflation exceeds projections—while keeping policy accommodative for now if the gradual recovery aligns with expectations.
- The next meeting is on 7 April 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 yen traded steadily around 148 against the USD, reflecting a BOJ pause at 0.75% rates after its March 18-19 meeting, tempered by warnings of inflation from geopolitical oil tensions and hints of impending hikes if weakness persists. Markets eyed intervention risks and prediction markets pegging USD/JPY near 157.5, though recent strength kept pairs contained.
Central Bank Notes:
- The Policy Board of the Bank of Japan meets on 18–19 April 2026, with markets anticipating the short-term policy rate to remain at 0.75%, as the bank continues evaluating the December 2025 and prior hikes’ effects amid data-dependent normalization.
- The BOJ will target the uncollateralized overnight call rate around 0.75% and indicate future hikes hinge on impacts to lending, financing, and activity, with Governor Ueda signaling scrutiny of data for potential moves in April or later meetings.
- JGB tapering advances per plan, cutting outright purchases by ¥400 billion quarterly through Q1 2026 and slowing to ¥200 billion from April onward, targeting roughly ¥2-3 trillion monthly by mid-2026, adjustable for market stability
- Japan’s economy maintains moderate growth into Q1 2026, building on Q4 2025 rebound via exports and fiscal measures, though manufacturing sentiment holds soft amid overseas demand weakness and yen pressures.
- Core CPI (ex-fresh food) likely stays near 2.3-2.5% y/y in early 2026 Tokyo prints, off prior highs but above 2%, while core-core hovers around 2.6%, reflecting sustained but easing inflationary forces.
- Input costs ease further from import peaks, yet services inflation, 5% wage targets in shunto talks, and anchored expectations above 2% support price persistence, with upside risks from yen and geopolitics.
- Near-term real GDP may ease below trend due to tightening and external shocks like Iran tensions, but negative real rates, wage gains, and stimulus should underpin consumption and capex rebound.
- Medium-term, overseas recovery, labor shortages, and productivity lifts are set to fuel wages and core inflation near/above 2%, enabling gradual hikes toward 1% if conditions align.
- The next meeting is on 27 to 28 April 2026.
Next 24 Hours Bias
Strong Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil prices have surged dramatically amid escalating conflict in the Middle East, particularly involving Iran, with Brent crude exceeding $100 per barrel and WTI nearing $100 as of March 19, 2026. Reports indicate a sharp spike to $113 on March 20 due to attacks on Gulf oil plants, exacerbating supply disruptions that have suspended nearly a fifth of global crude output. President Trump’s comments prioritizing nuclear concerns over oil stability, combined with Iran’s strikes on UAE hubs like Fujairah and threats to the Strait of Hormuz, have driven weekly gains of 9-28% despite IEA reserve releases and U.S. sanction tweaks.
Next 24 Hours Bias
Strong Bullish
