IC Markets – Asia Fundamental Forecast | 27 July 2026

IC Markets – Asia Fundamental Forecast | 27 July 2026

What happened in the U.S. session?

The U.S. session overnight was driven almost entirely by geopolitics and interest-rate expectations rather than scheduled economic data. Concerns over Middle East tensions and the potential for disruptions to global oil supplies initially lifted crude prices, while persistently high Treasury yields reinforced expectations that the Federal Reserve may need to keep monetary policy restrictive for longer. The stronger yield environment supported the U.S. dollar but weighed on gold and technology stocks, leaving the Nasdaq as the weakest major U.S. index.

What does it mean for the Asia Session?

Asian markets begin the week facing a combination of central bank uncertainty, geopolitical risk, elevated oil prices, and inflation concerns. Traders will focus on Chinese data, BOJ expectations, and any Middle East developments while also positioning ahead of the Federal Reserve decision later in the week. The most sensitive instruments are likely to be USD/JPY, AUD/USD, Asian equity indices, crude oil, and gold, with volatility potentially increasing as investors reassess the outlook for global growth and interest rates.
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The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

The U.S. dollar begins Monday on a firm footing as traders position ahead of this week’s Federal Reserve policy meeting (July 28–29). Although markets still largely expect the Fed to leave interest rates unchanged, recent resilient U.S. economic data, persistent inflation pressures, elevated oil prices, and hawkish comments from several economists have reduced expectations for near-term rate cuts and even sparked discussion of a possible surprise rate hike. The Dollar Index (DXY) ended last week near 101.5, its strongest level in several weeks, supported by higher Treasury yields and continued safe-haven demand amid geopolitical tensions in the Middle East. Investors are now focused on upcoming U.S. releases including GDP, employment, and inflation-related data for further clues on the Fed’s next move.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) left the federal funds rate unchanged at 3.50%–3.75% at its June 16–17, 2026, meeting, marking another pause in the policy cycle. Under new Fed Chair Kevin Warsh, policymakers signaled a more cautious and hawkish stance as inflation remains above target despite moderating energy prices.
• The Committee remains committed to achieving maximum employment and returning inflation to its 2% objective. Labor market conditions have remained relatively stable, with job gains continuing at a moderate pace and the unemployment rate projected to remain near 4.4% through 2026.
• Inflation continues to be the primary concern for policymakers. Headline inflation remains elevated, supported by earlier energy-related price pressures and persistent services inflation. The June projections showed higher inflation forecasts than previously expected, leading several officials to favor keeping policy restrictive for longer.
• Economic activity continues to expand at a moderate pace. Productivity growth, capital investment, and AI-related spending remain supportive of growth, while consumer spending and housing activity show signs of slowing compared with late 2025 and early 2026.
• The June 2026 Summary of Economic Projections (SEP) revealed a more divided Committee. Nine officials projected at least one rate hike during 2026, while others expected rates to remain unchanged or eventually decline. The median outlook shifted toward a higher-for-longer policy path compared with earlier projections.
• The Committee emphasized a data-dependent approach and noted that future decisions will depend on incoming inflation, employment, and economic growth data. Officials acknowledged that geopolitical developments and energy markets remain important upside risks to inflation.
• The FOMC continues its balance sheet normalization program, maintaining Treasury runoff caps at $5 billion per month and agency mortgage-backed securities (MBS) runoff caps at $35 billion per month, while ensuring ample reserves remain in the banking system.
• The next meeting is scheduled for 28 to 29 July 2026.

Next 24 Hours Bias

Strong Bullish

Gold (XAU)

Key news events today

No major news event

What can we expect from Gold today?

Gold is cautiously bullish after recording its best weekly gain in nearly three months. Safe-haven demand remains supported by geopolitical tensions and ongoing central bank purchases, while traders position ahead of a crucial week of U.S. economic data and earnings. Nevertheless, expectations that the Federal Reserve may maintain higher interest rates due to persistent inflation pressures from elevated energy prices are limiting further upside. As a result, gold is likely to remain highly sensitive to movements in the U.S. dollar, Treasury yields, and incoming macroeconomic data throughout the week.

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 enters Monday’s Asia session with a moderately bullish bias, underpinned by Australia’s surprisingly strong June employment report, growing expectations of further RBA policy tightening, and elevated commodity prices. However, gains may be limited as traders await a series of major central bank meetings, including the Fed, BoJ, and BoE, and key U.S. economic releases later this week, which are expected to drive global currency markets.

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

Medium Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news event

What can we expect from NZD today?

The New Zealand dollar (NZD) begins on a relatively firm footing after a series of hawkish domestic developments, although its upside remains sensitive to global risk sentiment and U.S. dollar performance. The biggest recent driver continues to be New Zealand’s stronger-than-expected Q2 CPI, which accelerated to 4.1% year-over-year, the highest level in more than two years and above both market expectations and the Reserve Bank of New Zealand’s (RBNZ) forecast. 

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 Bullish

The Japanese Yen (JPY)

Key news events today

No major news event

What can we expect from JPY today?

The Japanese yen starts the week on a cautious footing as investors await Friday’s Bank of Japan policy meeting and updated economic outlook. Although the BoJ is expected to keep interest rates unchanged at 1.00%, policymakers have become increasingly alert to inflation risks stemming from the yen’s prolonged weakness, reinforcing expectations that additional rate hikes remain possible later this year. At the same time, the U.S. Treasury has urged Japan to continue normalizing monetary policy to address excessive currency volatility, while stronger demand for the U.S. dollar amid geopolitical tensions, higher oil prices, and global trade uncertainty continues to weigh on the yen.

Central Bank Notes:

• The Policy Board of the Bank of Japan maintained the short-term policy rate at 0.75% at the 15–16 June 2026 meeting, in line with market expectations, while reiterating a cautious and data-dependent approach to further policy normalization amid mixed domestic and external conditions.
• The BOJ continues to target the uncollateralized overnight call rate around 0.75%, with policymakers signaling that any move toward 1.0% will depend on sustained wage growth, inflation durability above target, stable financial conditions, and limited downside risks to growth rather than a fixed tightening schedule.
• JGB purchase tapering remains on track, with monthly bond buying continuing to moderate under the previously announced framework. The BOJ maintains flexibility to intervene or temporarily adjust purchase operations if sharp volatility emerges in the Japanese government bond market or if excessive yen fluctuations threaten financial stability.
• Japan’s economy shows moderate but uneven growth heading into mid-2026, supported by resilient domestic demand, corporate investment, and recovering external activity, although weaker global manufacturing momentum and geopolitical tensions continue to weigh on the export outlook.
• Core CPI (excluding fresh food) remains near the mid-1% y/y range, while underlying inflation indicators, including core-core measures and services inflation, continue to hover around or above 2%, supported by stronger wage dynamics and pass-through effects from prior cost increases.
• Domestic inflation pressures remain supported by 2026 Shunto wage settlements near 5%, labor shortages, and firm services pricing. However, easing import costs and stabilizing commodity prices are helping moderate headline inflation, while risks persist from renewed energy volatility and yen depreciation.
• Near-term real GDP growth may remain below trend, reflecting the lagged impact of tighter financial conditions and external uncertainty, but rising household incomes, accommodative real rates, and fiscal support measures are expected to gradually support consumption and business investment.
• Over the medium term, the BOJ continues to expect that labor-market tightness, wage growth, and structural productivity improvements will help sustain inflation around the 2% target, leaving room for a gradual move toward 1.0% policy rates into late-2026 or 2027, provided inflation and economic momentum remain aligned.
• The next meeting is on 30 to 31 July 2026.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Oil enters Monday with a bullish fundamental backdrop, supported primarily by ongoing geopolitical tensions in the Middle East and tightening physical crude supplies. Supply disruptions linked to the Iran conflict, attacks on Red Sea shipping, and reduced exports from Kazakhstan have kept physical oil markets exceptionally tight, while Saudi Arabia continues adjusting export routes to avoid conflict zones. Although weaker global demand expectations remain a longer-term headwind, the immediate focus is on supply security, leaving crude prices well supported and likely to remain volatile as traders react to any escalation or signs of de-escalation in regional tensions.

Next 24 Hours Bias
Strong Bullish