IC Markets Asia Fundamental Forecast | 29 August 2025

IC Markets Asia Fundamental Forecast |  29 August 2025

What happened in the U.S session?

The U.S. session was defined by stable inflation data, a robust GDP revision, and cautious market optimism amid expectations for possible Fed easing in September. Key instruments impacted included U.S. equities (with tech stocks showing particular volatility), the dollar, and Treasury yields. Commodities, especially oil, declined due to seasonal and supply factors. Market focus remains on upcoming inflation figures and guidance from Federal Reserve officials. The latest U.S. session saw several important macroeconomic data releases and financial news developments, with the most significant impact on U.S. stocks, the dollar, and Treasury yields.

What does it mean for the Asia sessions?

Friday, August 29th, represents a data-heavy session for Asian traders, with Japan’s Tokyo CPI serving as the primary focal point for regional monetary policy expectations. The combination of Fed dovishness from Powell’s Jackson Hole speech, ongoing U.S.-Asia trade tensions, and mixed regional economic signals creates a complex trading environment.

Tokyo CPI data represents the most significant release for Asian markets on August 29th. The Tokyo Core CPI is expected to decline from 2.9% in July to 2.5% year-over-year, marking a potential five-month low. This data serves as a crucial leading indicator for national inflation trends and will heavily influence Bank of Japan policy expectations.

The Dollar Index (DXY)

Key news events today

Core PCE price index m/m (12:30 pm GMT)

Revised UoM consumer sentiment (2:00 pm GMT)

What can we expect from DXY today?

The dollar faces a complex set of challenges as August 29 unfolds. While the Core PCE inflation data release today will be critical for Fed policy direction, the unprecedented legal battle over Lisa Cook’s dismissal has introduced political uncertainty into monetary policy. The dollar’s recent weakness reflects both growing expectations for Fed rate cuts and concerns about central bank independence. Trump’s ongoing tariff policies continue to reshape trade relationships globally, while the elimination of the de minimis exemption today adds another layer of trade complexity. Markets appear optimistic despite these uncertainties, but the dollar’s trajectory will largely depend on today’s inflation data and the resolution of the Fed governance crisis.

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

Weak Bullish

Gold (XAU)

Key news events today

Core PCE price index m/m (12:30 pm GMT)

Revised UoM consumer sentiment (2:00 pm GMT)

What can we expect from Gold today?

Friday’s PCE inflation data will be pivotal in determining gold’s near-term direction. The convergence of dovish Fed expectations, unprecedented challenges to central bank independence, dollar weakness, and robust institutional demand has created a highly supportive environment for gold.

With technical resistance levels within reach and multiple fundamental tailwinds in place, gold appears well-positioned for continued strength into the final months of 2025. The ongoing legal battle over Fed independence adds an unprecedented political dimension to gold’s investment thesis, potentially extending the current rally as investors seek refuge from institutional uncertainty.

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 strength on Friday reflects a confluence of supportive factors, including stabilized commodity prices, improved China-Australia relations, robust mining sector performance, and reduced expectations for aggressive RBA rate cuts. While global uncertainties remain, including potential trade tensions and Chinese economic volatility, the near-term outlook for the AUD appears constructive, supported by Australia’s commodity export strength and gradually improving economic fundamentals. China remains Australia’s largest trading partner, accounting for nearly one-third of Australia’s total trade. The relationship is crucial for Australia’s commodity-dependent economy, as China imports more than 65% of its iron ore from Australia.

Central Bank Notes:

• The RBA held its cash rate steady at 3.85% at the August meeting on 11–12 August 2025, maintaining its stance after keeping rates unchanged in July. The decision was widely expected, reflecting confidence that inflation is settling sustainably within the target.
• Inflation continues to moderate, though headline outcomes for the September quarter are not yet available. Timely indicators suggest price pressures in housing-related services and insurance remain elevated, even as tradables inflation stays subdued.
• The RBA’s preferred measure, trimmed mean inflation, is estimated to track close to 2.8 — 2.9%, signaling continued progress toward the midpoint of the 2–3% target range. Headline CPI is likely near 2.3%, subject to volatility in energy and food prices.
• Global conditions remain a source of uncertainty. The market reaction to ongoing U.S.–EU trade frictions has tempered slightly, but volatility persists across equity and commodity markets. These developments continue to feed into Australia’s trade outlook and business sentiment.
• Domestic demand showed further signs of recovery. Household consumption strengthened modestly over the winter months, helped by improving real incomes and a stabilizing housing market. However, business investment intentions remain mixed, with service industries stronger than manufacturing and construction.
• Labour market conditions remain relatively tight, but indicators point to reduced momentum compared with the first half of 2025. Job vacancies have eased, and while employment growth continues, underutilization edged slightly higher for the first time this year.
• Wage growth has moderated further, consistent with easing labour demand, though unit labour costs remain above average due to weak productivity performance. The RBA continues to flag productivity as a medium-term risk to cost dynamics.
• Forward-looking indicators suggest consumption growth may be softer than previously assumed, with households cautious despite modest income gains. Elevated rents and high borrowing costs continue to weigh on discretionary spending.
• The Board reasserted the risk that household spending may underperform forecasts, potentially dampening business conditions and leading to weaker labour demand if confidence fails to strengthen.
• The overall stance of monetary policy remains mildly restrictive, consistent with inflation outcomes near target and ongoing progress toward balance in the economy. The Board judged it prudent to leave rates unchanged, while emphasizing that adjustments remain contingent on incoming data.
• The Reserve Bank reaffirmed its commitment to price stability and full employment, noting its readiness to adjust settings if conditions diverge materially from baseline projections..
• The next meeting is on 8 to 9 September 2025.
  
  Next 24 Hours Bias

Weak Bearish


The Kiwi Dollar (NZD)

Key news events today

No major new event

What can we expect from NZD today?

The New Zealand Dollar faces a challenging environment as Friday, August 29, 2025, approaches. The RBNZ’s dovish monetary policy shift, combined with deteriorating domestic economic conditions, including rising unemployment and stalled growth, has created significant downward pressure on the currency. While business confidence has shown modest improvement and the central bank’s easing cycle provides some economic support, the NZD remains vulnerable to further weakness.

Technical indicators suggest the currency is testing key support levels, with potential for continued volatility as markets digest the implications of New Zealand’s shifting economic landscape. The path forward will largely depend on incoming economic data and the RBNZ’s willingness to implement further rate cuts to support the struggling economy.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to cut the Official Cash Rate (OCR) by 25 basis points to 3.00% on 20 August 2025, marking a three-year low and continuing the easing cycle after July’s pause. The vote was split 4-2, with two members advocating a 50-basis-point cut, highlighting diverging views within the Committee.
• Policymakers indicated that significant uncertainty and a stalling economic recovery prompted this move, leaving the door open for further rate cuts later in the year, with a possible trough around 2.5% by December.
• Annual consumer price index inflation rose to 2.7% in the June quarter and is expected to reach 3% for the September quarter—at the upper end of the MPC’s 1 to 3% target band—but medium-term expectations remain anchored near the 2% midpoint..
• Despite the near-term uptick, headline inflation is projected to return toward 2% by mid-2026, as tradables inflation pressures ease and significant spare capacity continues to dampen domestic price momentum.
• Domestic financial conditions are broadly aligning with MPC expectations, as lower wholesale rates have translated into reduced borrowing costs for households. However, declining consumption and investment demand, higher unemployment, and subdued wage growth reflect ongoing economic slack.
• GDP growth stalled in the second quarter of 2025, contrasting with earlier projections. High-frequency indicators point to continued weakness driven by rising prices for essentials, weakening household savings, and constrained business lending.
• The MPC cautioned that ongoing global tariff uncertainties and policy shifts, especially recent changes in US trade regulations, could amplify market volatility and present both upside and downside risks to New Zealand’s recovery.
• Subject to medium-term inflation pressures continuing to ease as projected, the MPC signaled scope for further OCR cuts, possibly down to 2.5% by year-end, consistent with the latest Monetary Policy Statement outlook.

       ● The next meeting is on 22 October 2025.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

No major news event

What can we expect from JPY today?

The Japanese yen showed mixed signals on Friday, August 29, 2025, with moderate inflation data providing some relief while maintaining levels above the central bank’s target. The currency has demonstrated resilience with monthly gains against the dollar, supported by expectations of BoJ policy normalization and reduced trade uncertainty following the US-Japan agreement. However, political risks and the timing of central bank action remain key variables for near-term yen performance. Market participants continue to watch for signs of sustained wage growth and economic momentum that could support the BoJ’s gradual shift toward higher interest 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

Weak Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

The oil market entering Friday, August 29, 2025, reflects a complex interplay of geopolitical tensions, supply-demand fundamentals, and trade policy developments. While short-term bullish factors include ongoing Russia-Ukraine tensions, strong U.S. inventory draws, and potential Trump sanctions on Russia, the market faces longer-term bearish pressures from OPEC+ production increases, the end of the summer driving season, and oversupply concerns.

The implementation of 50% U.S. tariffs on India represents a significant escalation in trade tensions, though Indian buyers appear determined to continue purchasing Russian oil despite the financial penalties. WTI and Brent crude prices remain elevated near multi-week highs, but analysts expect increased volatility as markets balance competing supply and demand signals.

Next 24 Hours Bias

Weak Bullish