IC Markets Global – Asia Fundamental Forecast | 05 May 2026
What happened in the U.S. session?
U.S. markets grappled with Middle East tensions driving oil prices higher (WTI ~$94-105/bbl) and Treasury yields up (10-year at 4.40%), alongside data like stronger-than-expected March Factory Orders and the Fed’s SLOOS signaling potential credit conditions; Barclays’ no-Fed-cuts 2026 call amid Iran war inflation risks bolstered the USD against majors, while stocks wavered with S&P/Nasdaq near records but Dow sagging on geopolitical oil shocks and yield pressure.
What does it mean for the Asia Session?
Asian traders should concentrate on oil‑driven volatility linked to US–Iran developments around the Strait of Hormuz, renewed yen‑intervention risk around USD/JPY near 160, and AI‑led equity strength in Japan, South Korea, and Taiwan; any fresh headlines on Middle‑East truces, coordinated FX defence, or megacap tech earnings will likely magnify intraday swings in energy, FX, and regional tech‑heavy indices.
The Dollar Index (DXY)
Key news events today
ISM Services PMI (2:00 pm GMT)
JOLTS Job Openings (2:00 pm GMT)
New Home Sales (2:00 pm GMT)
New Home Sales (Feb Data)
What can we expect from DXY today?
The US dollar is trading modestly lower today in thin markets due to the Golden Week holiday, hovering near 98.1–98.3 on the DXY after recovering from April’s weakness. The main focus is the Reserve Bank of Australia’s rate decision (expected to hike 25bps to 4.35%), which could strengthen the Australian dollar near its four-year high against the greenback.
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 April 28–29, 2026, meeting, as oil prices remain elevated around $108 per barrel for Brent crude amid ongoing US-Israel tensions with Iran, alongside surging inflation from energy shocks, further delaying any 2026 rate cuts potentially beyond September.
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market showing mixed signals as nonfarm payrolls rose by 178,000 in March 2026—beating lowered expectations but driven partly by strike reversals—and the unemployment rate edged down to 4.3% from 4.4% in February.
- Officials face heightened risks from geopolitical tensions, soaring oil prices, and accelerating inflation, with CPI jumping to 3.3% year-over-year in March 2026 from 2.4% in February due to a 10.9% monthly energy surge, headline PCE pressured higher, and core PCE estimates around 3.1% or more.
- Economic activity continues to cool after robust Q4 2025 growth near 5%, with the Atlanta Fed GDPNow estimating Q1 2026 growth at 1.3% amid softer consumer spending, strike impacts, and labor data despite some resilience.
- March 2026’s Summary of Economic Projections forecasts 2026 unemployment at a median around 4.4%, GDP growth revised higher, and core PCE up to 2.7%, with the dot plot still signaling one cut in 2026 to a median 3.25%–3.50% funds rate amid softer labor but inflation upticks.
- The Committee maintains its data-dependent stance amid a mixed labor market, inflation well above target from oil shocks, and geopolitical risks, likely holding rates at 3.50%-3.75% with persistent divisions and hawkish tones on 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 manage reserves amid post-2025 balance sheet adjustments.
- The next meeting is scheduled for 16 to 17 June 2026.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
No major news event
What can we expect from Gold today?
Gold is edging lower in early‑May 2026 trading, with spot prices hovering in the low‑4,600s USD per ounce and intraday moves confined to a narrow band around 4,580–4,630 USD, reflecting mild dollar strength and cautious positioning rather than a fundamental reversal. Despite this short‑term softness, the broader macro backdrop, ongoing geopolitical tensions, elevated fiscal deficits, and expectations of eventually looser monetary policy.
Next 24 Hours Bias
Medium Bearish
The Australian Dollar (AUD)
Key news events today
Cash Rate (4:30 am GMT)
RBA Monetary Policy Statement (4:30 am GMT)
RBA Rate Statement (4:30 am GMT)
RBA Press Conference (5:30 am GMT)
What can we expect from AUD today?
The Australian dollar is trading near multi‑year highs versus the US dollar on Tuesday, 5th May 2026, as markets brace for a widely expected 25 bps RBA rate hike that would lift the cash rate to around 4.35% and extend the cycle of tightening amid persistent inflation and robust domestic conditions.
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
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
Employment Change q/q (10:45 pm GMT)
Unemployment Rate (10:45 pm GMT)
What can we expect from NZD today?
The New Zealand Dollar on 5 May 2026 is consolidating after a recent rally, supported by tightening‑bias RBNZ expectations and a weaker US dollar, but capped by still‑modest domestic rate‑hike odds and persistent global risk swings, leaving the Kiwi in a narrow, range‑bound mode around the 0.583–0.5900 zone.
Central Bank Notes:
- The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) is widely expected to hold the Official Cash Rate (OCR) steady at 2.25% at its 8 April 2026 Monetary Policy Review, aligning with unanimous market consensus from Reuters polls and previews.
- The MPC continues its data-dependent “wait-and-see” approach after February’s pause, balancing stimulus from prior 325-basis-point cuts against inflation’s path back to the 2% target, with readiness for gradual normalization only if the recovery strengthens or inflation exceeds forecasts.
- Headline CPI, last at 3.1%, is on track to re-enter the 1-3% band in Q2 2026 and hit 2% by mid-2027, aided by spare capacity, moderating wages, and softer food/fuel prices; two-year business inflation expectations have ticked up slightly to 2.37%.
- Household spending and housing remain subdued amid cautious consumption, low net migration, and labor market softness, though easing retail rates support budgets; high-frequency GDP indicators show steadying momentum in an early recovery phase.
- Accommodative borrowing costs from the low OCR are boosting mortgage approvals and sentiment, but business credit growth lags due to uneven confidence; overall stimulus persists below the 3% neutral rate.
- Risks are balanced, with a favorable global environment—including stronger dairy/meat exports and a softer NZ dollar—offsetting oil shocks and prior China/US trade worries; vigilance remains on second-round inflation effects.
- Forecasts point to potential OCR hikes starting late 2026 (e.g., December) or early 2027 to 2.50% by year-end if activity/inflation firms, but policy stays supportive if recovery unfolds gradually as expected.
- The next meeting is on 27 May 2026.
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 limited activity amid Japan’s Golden Week holiday, with thin liquidity leading to volatile but contained movements in Asian trading sessions. The USD/JPY pair briefly strengthened as much as 0.8% to ¥155.72 before retracing, following last week’s suspected intervention where authorities reportedly spent around ¥5.4 trillion ($34.5 billion) to support the yen after it weakened past ¥160.
Central Bank Notes:
- The Policy Board of the Bank of Japan left the short‑term policy rate unchanged at 0.75% at the 27–28 April 2026 meeting, with markets broadly expecting the same level into May 2026 as the bank continues a data‑dependent, gradual‑normalisation stance.
- The BOJ targets the uncollateralized overnight call rate around 0.75%, signaling that any further hikes toward 1.0% will hinge on wage‑inflation persistence, yen stability, and real‑activity data rather than a pre‑announced timetable.
- JGB tapering continues on plan, with outright purchases trimmed by ¥400 billion quarterly through Q1 2026, then reduced to ¥200 billion from April onward, aiming for roughly ¥2–3 trillion in monthly net purchases by mid‑2026, adjustable if market or yen volatility spikes.
- Japan’s economy posts moderate growth into Q1 2026, supported by resilient exports and prior stimulus, but the BOJ has downgraded its 2026 growth outlook as external headwinds and Middle‑East‑related shocks weigh on the pace.
- Core CPI (ex‑fresh food) is running in the mid‑1% range y/y, with headline inflation at about 1.5% y/y in March 2026, while core‑core measures remain above 2%, reflecting sticky services‑side and wage‑driven inflation.
- Input‑cost pressures ease from prior peaks, yet services inflation, the 2026 shunto wage deals near 5%, and expectations anchored above 2% support continued price pressures, with upside risks from further yen weakness and geopolitical spikes.
- Near‑term real GDP may run below trend due to policy tightening and external shocks (e.g., Iran‑related energy risks), but negative real rates, wage gains, and targeted fiscal/capex support should underpin a gradual rebound in consumption and investment.
- Medium‑term, overseas recovery, labor‑shortage‑driven wage growth, and productivity improvements are expected to keep core inflation near or above 2%, enabling the BOJ to gradually lift rates toward 1.0% in 2026–2027 if activity and wage‑inflation conditions remain aligned.
- The next meeting is on 15 to 16 June 2026.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
API Crude Oil Stock ( 8:30 pm GMT)
What can we expect from Oil today?
Oil markets remain volatile with WTI around $102-105/bbl and Brent at $113+, driven by US-Iran clashes in the Strait of Hormuz, including denied missile strikes on US vessels, Iranian shipping rules, and UAE port attacks disrupting nearly 20% of global supply while Trump launches ship escorts and OPEC+ modestly boosts output amid the UAE’s cartel exit.
Next 24 Hours Bias
Strong Bullish
