IC Markets – Asia Fundamental Forecast | 22 January 2026
What happened in the U.S. session?
Markets plunged on President Trump’s Greenland acquisition threats and tariff rhetoric, reviving trade war fears and the “Sell America” narrative, while the NAR Pending Home Sales dropped 9.3% MoM though overshadowed by geopolitics; U.S. equities tumbled over 2%, the dollar weakened sharply, gold hit records above $4,865/oz as a safe-haven, and Treasury yields spiked before stabilizing, reflecting broad risk aversion.
What does it mean for the Asia Session?
Markets crushed on President Trump’s Greenland acquisition threats and tariff rhetoric, reviving trade war fears and the “Sell America” narrative, while the NAR Pending Home Sales dropped 9.3% MoM though overshadowed by geopolitics; U.S. equities tumbled over 2%, the dollar weakened sharply, gold hit records above $4,865/oz as a safe-haven, and Treasury yields spiked before stabilizing, reflecting broad risk aversion.
The Dollar Index (DXY)
Key news events today
Final GDP q/q (1:30 pm GMT)
Final GDP Price Index q/q (1:30 pm GMT)
Unemployment Claims (1:30 pm GMT)
Core PCE Price Index m/m (3:00 pm GMT)
Core PCE Price Index m/m (Oct Data)
What can we expect from DXY today?
The U.S. dollar faced selling pressure, extending losses from White House threats against Europe over Greenland, which fueled a flight from dollar assets and pushed the DXY index toward weekly lows near 99 amid heightened geopolitical risks and U.S. debt worries discussed at Davos.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) is widely expected to lower the federal funds rate target range by 25 basis points to 3.50%–3.75% at its December 9–10, 2025, meeting, marking the third consecutive cut after the October reduction to 3.75%–4.00%
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market showing further softening as the unemployment rate rose to 4.4% in September 2025 amid modest job gains.
- Officials note persistent downside risks to growth alongside resilient activity, with inflation easing to 3.0% year-over-year CPI in September but remaining elevated due to tariff effects; core PCE stands at around 2.8% as of October.
- Economic activity grew at a 3.8% annualized pace in Q2 2025 per revised estimates, though Q3 and Q4 face headwinds from trade tensions, fiscal restraint, and data disruptions like the government shutdown.
- September’s Summary of Economic Projections forecasts 2025 unemployment at a median of 4.5%, with PCE inflation near 3.0% and core PCE at 3.1%, signaling a gradual disinflation path. Updates expected on December 10 may adjust for higher unemployment and lower growth.
- The Committee maintained its data-dependent approach, noting a softening labor market and inflation above the 2% target, while deciding to lower the federal funds rate target range by 25 basis points to 3.50%-3.75%. Dissent persisted, with multiple members opposing the cut or advocating for a hold, reflecting divisions similar to recent meetings.
- The FOMC confirmed the conclusion of its quantitative tightening program effective December 1, 2025, with Treasury rolloff caps at $5 billion per month and agency MBS caps at $35 billion per month to ensure ample reserves and market stability.
- The next meeting is scheduled for 27 to 28 January 2026.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
Final GDP q/q (1:30 pm GMT)
Final GDP Price Index q/q (1:30 pm GMT)
Unemployment Claims (1:30 pm GMT)
Core PCE Price Index m/m (3:00 pm GMT)
Core PCE Price Index m/m (Oct Data)
What can we expect from Gold today?
Gold maintains an upward trend into late January 2026, with projections reaching $6,100+ by year-end amid easing policies and tensions, though traders watch $4,900 resistance closely. Volatility persists as markets recalibrate rate cut timelines.
Next 24 Hours Bias
Strong Bullish
The Australian Dollar (AUD)
Key news events today
Employment Change (12:30 am GMT)
Unemployment Rate (12:30 am GMT)
What can we expect from AUD today?
The Australian Dollar maintains upward momentum, trading around 0.6747 against the USD after a solid early-year rally to 0.6767 highs, driven by commodity strength and USD weakness from Fed-related controversies. Despite softer consumer confidence at 92.9 and global risks like Middle East unrest, upcoming Australian labor data, and Q4 CPI on January 28, position the RBA for potential tightening, with forecasts eyeing 0.69 in 12 months.
Central Bank Notes:
- The Reserve Bank of Australia held its cash rate steady at 3.60% at the November 2025 policy meeting, adopting a cautious tone amid a surprise uptick in inflation data for the September quarter. This marks the fourth consecutive pause since the 25 basis point cut in August. The Board attributed some of the inflation rise to temporary factors like higher petrol prices and council rates, but noted signs of more persistent pressures from consumer demand.
- Policymakers emphasized vigilance on inflation, with trimmed mean inflation expected to remain elevated in the near term before nearing the 2–3% target midpoint by mid-2027. Recent data showed underlying inflation staying above target until at least the second half of 2026, prompting upward revisions to forecasts. Capacity pressures are seen as slightly more pronounced than previously assessed, delaying any easing.
- Headline CPI for the September quarter exceeded expectations, driven partly by temporary items, while underlying measures signal ongoing stickiness. The shift to monthly CPI reporting, with the first full edition in November 2025, will enhance real-time inflation monitoring. Housing and services remain resilient contributors to price pressures.
- Domestic demand shows firmness in services alongside below-trend growth elsewhere, with capacity pressures not expected to ease significantly. The labor market is gradually softening, with unemployment projected to stabilize around 4.4%, though wage growth and productivity dynamics keep unit labor costs a concern. Household spending faces headwinds from high borrowing costs.
- Global risks include geopolitical tensions and commodity volatility, set against modestly revised-up world growth outlooks. The Board describes its policy as mildly restrictive and data-dependent, balancing inflation control with employment goals. No rate hike was considered despite the inflation surprise.
- Monetary policy remains mildly restrictive to address lingering price stability risks amid household and global vulnerabilities. Communications reaffirm the dual mandate of 2–3% inflation and full employment, with readiness to adjust based on incoming data.
- Market expectations point to the cash rate holding through early 2026, with a possible modest cut to 3.3% mid-year if inflation eases as forecast. The new monthly CPI data will be key for timely insights.
- Monetary policy remains mildly restrictive, balancing progress on price stability against vulnerabilities in household demand and global outlook. Board communications reaffirm a dual mandate: price stability and full employment, while underscoring readiness to respond should risks materialize sharply.
- Analysts generally expect the cash rate to remain at current levels through early 2026, with only modest cuts possible later in the year if inflation moderates. The new monthly CPI release (first full edition Nov 2025) will be watched closely for timely signals on price trends.
- The next meeting is on 2 to 3 February 2026.
Next 24 Hours Bias
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
CPI q/q (9:45 pm GMT)
What can we expect from NZD today?
The New Zealand Dollar (NZD) showed resilience in recent trading sessions leading up to January 22, 2026, buoyed by expectations of potential Reserve Bank of New Zealand rate hikes, contrasting with rate cuts elsewhere, such as in the UK, driving gains against the GBP and contributing to GBP/NZD declines toward key support levels like 2.2859.
Central Bank Notes:
- The Monetary Policy Committee (MPC) left the Official Cash Rate (OCR) unchanged at 2.25% at its 26 November 2025 meeting, following the widely anticipated 25-basis-point reduction from 2.50%, and signaled that policy is now firmly in stimulatory territory while keeping the option of further easing on the table if needed.
- The decision was again reached by consensus, with members judging that the cumulative 325 basis points of easing over the past year warranted a period of assessment, even as several emphasized a willingness to cut further should incoming data point to a more protracted downturn or renewed disinflationary pressures.
- Headline consumer price inflation is projected to hover near 3% in late 2025 before gradually easing toward the 2% midpoint of the 1–3% target band through 2026, supported by contained inflation expectations around 2.3% over the two-year horizon and an expected pickup in spare capacity.
- The MPC noted that domestic demand remains subdued but shows tentative signs of stabilisation, with softer household spending and construction only partially offset by improving services activity; nevertheless, policymakers still expect services inflation to ease as wage growth moderates and the labour market loosens further over the coming year.
- Financial conditions continue to ease as wholesale and retail borrowing rates reprice to the lower OCR, contributing to gradually rising mortgage approvals and improving housing-related sentiment, although broader business credit growth remains patchy and sensitive to uncertainty about the durability of the recovery.
- Recent data confirm that GDP momentum is weak but not deteriorating as sharply as earlier in 2025, with high-frequency indicators pointing to a shallow recovery from a low base and ongoing headwinds from elevated living costs and fragile confidence weighing on discretionary consumption and investment.
- The MPC reiterated that external risks remain skewed to the downside, particularly from softer Chinese demand and uncertainty around United States trade policy, but noted that a lower New Zealand dollar continues to provide some offset via improved export competitiveness and support for tradables inflation.
- Looking ahead to early 2026, the Committee maintained a mild easing bias, indicating that a further cut toward 2.00–2.10% cannot be ruled out if activity fails to gain traction or if inflation undershoots projections, but current forecasts envisage the OCR remaining near 2.25% for an extended period, provided inflation converges toward target and the recovery proceeds broadly as expected.
- The next meeting is on 18 February 2026.
Next 24 Hours Bias
Medium Bullish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from JPY today?
The Japanese Yen remains under pressure near one-year lows against the US Dollar, trading around 158 JPY per USD as of recent sessions, amid a mix of safe-haven support and domestic headwinds. Geopolitical tensions, including US threats toward Iran and the ongoing Russia-Ukraine conflict, have provided some uplift to the Yen.
Central Bank Notes:
- The Policy Board of the Bank of Japan meets on 22–23 January 2026, with markets fully expecting the short-term policy rate to remain at 0.75%, following the December 2025 hike, as the bank assesses the impact of prior tightening while emphasizing gradual, data-dependent adjustments.
- The BOJ will continue targeting the uncollateralized overnight call rate around 0.75% and signal that future rate hikes depend on the effects of recent increases on bank lending, corporate financing, and economic activity, with some policymakers eyeing a possible move as early as April.
- JGB purchase tapering proceeds on schedule, with outright purchases reduced by ¥400 billion per quarter through March 2026, then ¥200 billion per quarter from April to June 2026, aiming for around ¥2 trillion monthly in Q1 2027, with flexibility if market conditions worsen.
- Japan’s economy showed recovery signs after the Q3 2025 contraction, with Q4 2025 GDP growth estimated positively amid export strength, though business sentiment among manufacturers softened to a six-month low of +7 in January 2026 due to weaker overseas demand.
- Core consumer inflation (excluding fresh food) eased to 2.3% year-on-year in December 2025 Tokyo CPI, down from 2.8-3.0% peaks earlier, while core-core (excluding fresh food and energy) stood at 2.6%, both above the 2% target but with moderating cost pressures.
- Near-term input costs continue easing from faded import surges, but services inflation and steady wage gains with early 2026 negotiations targeting 5% hikes sustain price momentum; medium-term inflation expectations remain anchored above 2%, tilting upside risks.
- In the coming quarters, real growth may moderate below potential amid tighter conditions and yen weakness, but accommodative real rates, real wage gains, and fiscal support are poised to bolster private consumption and investment recovery.
- Medium-term, stabilizing overseas demand and tight labor markets should drive wage growth and keep core inflation gradually around or above 2%, allowing cautious rate normalization if financial conditions stay supportive.
- The next meeting is scheduled for April 2026.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil markets showed mixed signals with WTI crude dipping to around $59.57 per barrel amid easing geopolitical tensions and anticipated U.S. inventory builds, while Brent hovered near $64-65, influenced by Kazakhstan’s temporary field shutdowns. Recent supply disruptions at Kazakhstan’s Tengiz and other fields provided brief support, but broader pressures from abundant U.S. shale output, high Chinese inventories, and President Trump’s comments on Venezuelan oil releases capped gains.
Next 24 Hours Bias
Weak Bearish
