IC Markets Global – Asia Fundamental Forecast | 29 June 2026
What happened in the U.S. session?
A combination of stronger consumer activity and firmer inflation. Personal income and personal spending both rose 0.7% in May, while headline PCE inflation accelerated to 4.1% year over year and core PCE climbed to 3.4%, reinforcing the view that inflation remains above the Federal Reserve’s comfort zone. Initial jobless claims unexpectedly fell to 215,000, signaling continued labor-market resilience, and first-quarter GDP was revised up to 2.1%.
What does it mean for the Asia Session?
Asian traders begin the week with attention centered on the aftermath of easing Middle East tensions, expectations for major central bank policy, and the performance of the U.S. dollar following Friday’s market close. Crude oil remains under pressure after the reopening of key supply routes and signs that Asian refiners have largely secured alternative crude supplies, reducing immediate concerns over shortages. Meanwhile, the Japanese yen remains close to multi-decade lows against the U.S. dollar, keeping the possibility of official intervention in focus.
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 after ending last week with its strongest monthly performance in nearly a year. The greenback continues to be supported by expectations that the Federal Reserve will keep interest rates higher for longer following resilient U.S. economic data and persistent inflation. Although the dollar eased slightly on Friday after softer inflation figures and a sharp decline in oil prices reduced immediate rate-hike expectations, it still posted a weekly gain and remains well-supported by higher Treasury yields and strong global demand for U.S. assets.
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
Medium Bullish
Gold (XAU)
Key news events today
No major news event
What can we expect from Gold today?
Gold began the week under pressure as investors continued to favor the U.S. dollar and Treasury yields following the Federal Reserve’s recent hawkish tone. Although gold staged a modest rebound after last week’s U.S. inflation (PCE) data weakened the dollar, the precious metal remains well below its January record high, with traders focused on upcoming U.S. labor market data and any signals on the timing of future Fed policy.
Next 24 Hours Bias
Weak Bullish
The Australian Dollar (AUD)
Key news events today
No major news event
What can we expect from AUD today?
The Australian dollar (AUD) begins Monday, with traders focused on the Reserve Bank of Australia’s policy outlook, domestic inflation, and global risk sentiment. Although the RBA kept the cash rate unchanged at 4.35% at its June meeting, markets continue to debate whether persistent inflation could require another rate hike later this year.
Central Bank Notes:
- The Reserve Bank of Australia (RBA) kept its cash rate unchanged at 4.35% at the 15–16 June 2026 meeting, maintaining a restrictive policy stance as policymakers assessed whether the May rate increase was sufficient to contain renewed inflation pressures.
- The RBA voted to hold the cash rate at 4.35%, reiterating that inflation remains too high and warning that monetary policy may need to stay restrictive for an extended period, while leaving the door open to further tightening if price pressures persist.
- Inflation remains elevated, with headline CPI still above the RBA’s 2–3% target range, while underlying inflation measures, particularly trimmed mean CPI, continue to show sticky price pressures in services, rents, insurance, and household expenses, complicating the disinflation process.
- Labour-market conditions remain relatively resilient despite signs of gradual cooling, with unemployment staying historically low and wage growth still elevated enough to risk reinforcing inflation persistence, especially in labour-intensive service sectors.
- External risks remain important to the outlook, as elevated commodity prices and ongoing geopolitical tensions in the Middle East continue to pose upside risks to energy costs and imported inflation, while slower growth in major trading partners—particularly China—creates downside risks for Australian exports.
- Financial markets broadly price the cash rate remaining at 4.35% through July, with expectations favouring an extended pause unless inflation or labour-market data materially surprise to the upside; however, markets still assign a limited probability of one additional hike later in 2026.
- The RBA continues to stress a “data-dependent” policy framework, emphasizing that future decisions will be guided by inflation, employment, wages, and consumer-spending data, while balancing the need to restore price stability without unnecessarily weakening economic activity.
- The June communication maintained a hawkish-neutral tone, acknowledging some progress in inflation moderation but emphasizing that risks remain skewed to the upside, particularly from sticky domestic services inflation and external energy-price shocks, supporting a cautious approach into the July meeting.
- The next meeting is on 6 to 7 July 2026.
Next 24 Hours Bias
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
The New Zealand dollar remains under pressure at the start of the week, although losses have moderated following softer U.S. inflation data that slightly weakened the U.S. dollar. Market sentiment is still cautious as investors await the Reserve Bank of New Zealand policy meeting on 8 July, with the Official Cash Rate currently at 2.25%. While the RBNZ surprised markets last month by adopting a more hawkish tone and signaling that future rate hikes remain possible if inflation proves persistent, traders are looking for fresh domestic data before increasing bullish NZD positions.
Central Bank Notes:
- The Reserve Bank of New Zealand’s Monetary Policy Committee (MPC) held the Official Cash Rate (OCR) steady at 2.25% at its 27 May 2026 Monetary Policy Statement, but the decision was unprecedented—a 3-3 split requiring Governor Anna Breman’s casting vote. Three members (Hansen, Gourley, Gai) voted for an immediate 25bp hike to 2.50%, while three (Breman, Silk, Conway) voted to hold.
- While the OCR remained unchanged, the RBNZ issued its most hawkish guidance since the cutting cycle ended, stating the OCR will “likely need to rise sooner and by more than previously envisioned.” Market pricing now indicates a 72–73% probability of a rate hike at the next meeting on 8 July 2026, with swaps pricing in roughly 16bps of tightening.
- Annual CPI inflation remained at 3.1% in Q1 2026 (above the 1–3% target band) for two consecutive quarters. The RBNZ now forecasts inflation to peak at 4.3% in the September 2026 quarter—driven by Middle East oil shocks—before returning to the 2% target midpoint by mid-2027.
- The RBNZ revised its terminal OCR forecast upward to 3.28% over the next three years (from 3.0%), implying approximately 100 basis points of total tightening ahead. The updated path suggests at least two additional hikes by year-end 2026, with the OCR potentially rising to 2.50% by September 2026 and higher thereafter.
- GDP growth is projected at 0% in Q2 2026 and only 0.2% quarter-on-quarter in Q3, reflecting an early but unconvincing recovery. Unemployment, currently at 5.3% (near a decade-high), is expected to peak at 5.4% and remain there until June 2027.
- Retail sales volume rose 0.9% in Q1 2026, and electronic card data showed 2.7% annual growth in March, but high-frequency data reveals shrinking budget room as wholesale interest rates climb. Mortgage holders are increasingly shifting to two-year fixed rates for repayment certainty despite the OCR hold.
- Stronger dairy and meat export revenues (meat exports up 7% to $13.2B FY2026) and a softer NZD (TWI ~68%) support the external balance, while Middle East oil volatility poses upside inflation risks. The NZD jumped 0.7% against the USD immediately after the announcement, and two-year swap rates rose 3bps.
- Markets now expect the first hike in this tightening cycle, with the MPC’s internal division suggesting any future decision may again be contentious. Policy remains below the ~3% neutral rate, but the shift from “wait-and-see” to “preemptive tightening” is now clear.
- The next meeting is on 8 July 2026.
Next 24 Hours Bias
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from JPY today?
The Japanese yen begins under pressure as markets continue to assess the implications of the Bank of Japan’s recent 25-basis-point interest rate hike to 1.00%, its highest policy rate in more than three decades. While the BOJ has become increasingly hawkish due to persistent inflation, traders remain skeptical that gradual tightening alone will be enough to provide lasting support for the yen, especially with U.S. interest rate expectations remaining relatively elevated.
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 markets begin the week under renewed downward pressure after last week’s sharp sell-off. The immediate geopolitical risk premium has eased as crude shipments continue to move through the Strait of Hormuz despite recent regional tensions, reducing fears of a prolonged global supply disruption. At the same time, Saudi Arabia has resumed normal export operations from key terminals, while expectations of increasing OPEC+ production and relatively soft Chinese demand have reinforced concerns that the market could shift back into oversupply during the second half of 2026.
Next 24 Hours Bias
Medium Bearish
