IC Markets – Asia Fundamental Forecast | 28 July 2026

IC Markets – Asia Fundamental Forecast | 28 July 2026

What happened in the U.S. session?

During the U.S. session overnight, geopolitical developments dominated global markets, with reports that the United States and Iran paused military strikes and resumed diplomatic engagement, significantly reducing fears of an immediate disruption to oil supplies through the Strait of Hormuz. As a result, WTI and Brent crude oil prices fell sharply by around 5–8%, reversing much of last week’s geopolitical risk premium. The decline in energy prices improved overall market risk sentiment, lifting equity futures and reducing demand for traditional safe-haven assets. Meanwhile, the U.S. dollar traded slightly weaker against most major currencies as investors shifted toward risk-sensitive assets.

What does it mean for the Asia Session?

Tuesday’s Asian session is expected to be relatively quiet, with the primary focus on RBA Governor Michele Bullock’s speech, which has the potential to move the Australian dollar if she provides fresh guidance on inflation or future interest rates. Beyond Australia, traders are likely to remain cautious ahead of a busy week that includes major central bank decisions and key macroeconomic releases. Later in the day, attention will shift to the U.S. Conference Board Consumer Confidence report, where expectations are for a modest improvement to 92.1 from 91.2. Stronger confidence could boost the U.S. dollar and risk sentiment, while a weaker reading may increase expectations for a more accommodative Federal Reserve outlook later this year.
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The Dollar Index (DXY)

Key news events today

CB Consumer Confidence (2:00 pm GMT)

What can we expect from DXY today?

The U.S. dollar is on a softer footing after risk sentiment improved across global markets. The main catalyst has been the temporary pause in the U.S.-Iran conflict, which triggered a sharp decline in crude oil prices, reducing demand for the dollar as a traditional safe-haven currency. At the same time, investors are positioning cautiously ahead of the Federal Reserve’s July 28–29 policy meeting, where rates are widely expected to remain unchanged, although markets still assign roughly a one-in-three chance of a 25-basis-point rate hike.

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

CB Consumer Confidence (2:00 pm GMT)

What can we expect from Gold today?

Gold traded with a slightly bullish to bullish bias supported by a softer U.S. dollar and falling crude oil prices after signs of easing tensions between the United States and Iran. The decline in oil prices reduced immediate inflation concerns, encouraging expectations that the Federal Reserve could avoid another rate hike this week, although markets continue to price in the possibility of a September increase. Investors are now focused on the Federal Reserve policy meeting, U.S. Core PCE inflation data later this week, and today’s U.S. Conference Board Consumer Confidence report, while the RBA Governor Bullock’s speech could influence broader risk sentiment during the Asian session.

Next 24 Hours Bias
Medium bullish

The Australian Dollar (AUD)

Key news events today

RBA Gov Bullock Speaks (3:05 am GMT)

What can we expect from AUD today?

The Australian dollar (AUD) is trading cautiously on Tuesday, as markets await two major domestic catalysts: RBA Governor Michele Bullock’s speech later today and Australia’s June CPI inflation report on Wednesday. Investors are looking for any indication that the Reserve Bank of Australia remains concerned about persistent inflation and whether another interest-rate increase may be required. Ahead of these events, AUD/USD has struggled to sustain gains above the 0.7000 level, with traders reducing exposure before the key announcements.

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) is on a relatively firm footing after receiving support from the Reserve Bank of New Zealand’s recent hawkish policy stance. Earlier this month, the RBNZ raised the Official Cash Rate to 2.50% and maintained that inflation risks remain elevated, reinforcing expectations that additional tightening may still be required if price pressures persist. That outlook has been strengthened by New Zealand’s latest Q2 CPI reading of 4.1% year-over-year, which exceeded both market and RBNZ forecasts, even though much of the increase was driven by higher fuel costs rather than domestic inflation. 

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 is beginning Tuesday on a cautious footing as traders await this week’s Bank of Japan (BOJ) policy decision, with markets widely expecting the central bank to keep its policy rate unchanged at 1.00%. However, investors are focused on the BOJ’s forward guidance after persistent inflation, elevated energy prices, and the yen’s prolonged weakness increased expectations that policymakers could signal another rate hike later this year, potentially as early as September or October. The yen has recently traded near multi-decade lows against the U.S. dollar, with Japanese officials continuing to warn they are closely monitoring excessive currency volatility, keeping intervention risks in focus.

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

API Crude Oil Stock (8:30 pm GMT)

What can we expect from Oil today?

Oil prices are under pressure after a sharp selloff during the previous session, as markets continue to react to the U.S. decision to pause military strikes against Iran. The easing of geopolitical tensions has reduced immediate fears of major supply disruptions through the Strait of Hormuz, triggering profit-taking after crude had surged above $100 per barrel earlier in July. However, the downside remains limited because shipping through the region has not fully normalized, exports remain below typical levels, and risks persist from disruptions in the Red Sea and Black Sea.

Next 24 Hours Bias
Strong Bullish