IC – Asia Fundamental Forecast |03 March 2026

IC – Asia Fundamental Forecast |03 March 2026

What happened in the U.S. session?

U.S. markets reacted defensively overnight to resilient ISM Manufacturing data highlighting inflation risks (prices at 70.5) combined with U.S.-Iran conflict escalation, causing stock index futures to drop over 1%, oil to spike 8-13% on supply fears, and gold/USD to rally as safe havens, amplifying volatility ahead of the Monday open.

What does it mean for the Asia Session?

Asian traders face a volatile open amid escalating US-Iran conflict, driving oil prices toward $80 per barrel and boosting safe-haven gold, with regional equities like Tokyo’s Nikkei already down sharply. Key data includes the US ISM Manufacturing PMI releasing early Asia time (around 2:00 AM AEDT), potentially signaling economic health amid war impacts, alongside Japan’s 10-year JGB auction.

The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

The US dollar is slightly stronger, with the DXY index around 98.3, thanks to a risk‑off mood tied to Middle East tensions and a modest rebound after January’s weakness, while upcoming US data and Fed‑rate expectations keep the greenback well‑supported against most major currencies.

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 January 27–28, 2026, meeting, marking the second consecutive pause after three 25-basis-point cuts in late 2025.
• The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market remaining soft as the unemployment rate stood at 4.4% in December 2025 amid modest job gains of 50,000.
• Officials note balanced risks to growth and employment alongside sticky inflation, with CPI at 2.7% year-over-year in December 2025 and core PCE at 2.8% due to tariffs and housing pressures; headline PCE at 2.6%.
• Economic activity expanded robustly at 4.4% annualized in Q3 2025, with Q4 estimates around 5% per Atlanta Fed GDPNow, supported by consumer spending despite prior trade tensions and shutdown effects.
• December 2025’s Summary of Economic Projections forecasts 2025 unemployment at a median of 4.5%, 2026 GDP growth at 2.3%, and core PCE at 2.5% (down from prior 2.6%), with the dot plot signaling one more cut in 2026; January updates may reflect resilient Q4 growth.
• The Committee maintained its data-dependent approach, noting a stable but soft labor market and inflation above target, while holding rates steady at 3.50%-3.75%; dissents likely persist amid divisions on the pace of easing.
• The FOMC continues its adjusted quantitative tightening post-December 1, 2025, conclusion of the prior program, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to maintain ample reserves.
• The next meeting is scheduled for 17 to 18 March 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 prices surged significantly, driven by escalating US-Israel-Iran tensions, with spot prices reaching around $5,400 per ounce amid safe-haven demand. No specific intra-day updates for March 3 are available yet, but forecasts suggest continued volatility with projected ranges of $5,208 to $5,490.

Next 24 Hours Bias
Strong Bullish

The Australian Dollar (AUD)

Key news events today

No major news event

What can we expect from AUD today?

The Australian Dollar weakened against the USD to around 0.706 amid heightened Middle East conflict following US-Israel strikes on Iran and retaliatory actions, driving safe-haven flows into the greenback and offsetting earlier hawkish RBA expectations from strong January inflation data.

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

Strong Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news event

What can we expect from NZD today?

The New Zealand dollar is trading around 0.595 versus the US dollar, down from the 0.60 level earlier in February, as a dovish RBNZ stance and a stronger US dollar driven by Middle East risk‑off sentiment keep the kiwi under pressure despite a modest 12‑month gain against the greenback.

Central Bank Notes:

• The Monetary Policy Committee (MPC) left the Official Cash Rate (OCR) unchanged at 2.25% at its 18 February 2026 meeting, as widely expected, maintaining a unanimous decision and emphasizing a balance between supporting the nascent economic recovery and ensuring inflation returns sustainably to the 2% midpoint of the 1–3% target band.
• The Committee judged that the prior cumulative easing of 325 basis points provides ongoing stimulus, warranting patience amid uneven recovery signals, while noting readiness to normalize policy gradually as inflation pressures subside and activity strengthens.
• Headline CPI inflation, recently at 3.1%, is projected to dip back within the target band in the coming quarter—supported by spare capacity, modest wage growth, and declining food/fuel prices—before reaching 2.0% by mid-2027, with two-year-ahead business expectations edging up to 2.37%.
• Domestic demand shows gradual stabilization with softer household spending and a muted housing market, partially offset by easing retail rates boosting budgets, though cautious consumption, low migration, and a weak labour market continue to cap services inflation as wage moderation takes hold.
• Financial conditions remain accommodative as lower OCR flows through to borrowing costs, aiding mortgage approvals and housing sentiment, but business credit growth stays subdued amid uneven confidence and sensitivity to the recovery’s pace.
• Recent indicators point to weak but steadying GDP momentum in an early-stage rebound from 2025 lows, with high-frequency data showing gradual broadening despite persistent headwinds from elevated costs, fragile sentiment, and subdued investment.
• External risks are now viewed as balanced rather than downside-skewed, with a supportive global backdrop offsetting prior concerns over China and US trade policy, while a lower NZ dollar aids exports and tradables inflation.
• Looking to mid-2026, the MPC adopted a data-dependent stance with forecasts signaling OCR hikes likely from late 2026 or early 2027—potentially as soon as December if activity or inflation exceeds projections—while keeping policy accommodative for now if the gradual recovery aligns with expectations.
• The next meeting is on 7 April 2026.

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

Key news events today

BOJ Gov Ueda Speaks (4:00 am GMT)

What can we expect from JPY today?

The Japanese yen is trading near ¥157 per U.S. dollar, extending its recent underperformance amid a spike in Middle‑East tensions and elevated oil prices; while the yen’s traditional safe‑haven appeal has attracted some flows, weak net speculative positioning and lingering doubt about the Bank of Japan’s hiking pace have kept the currency under pressure, with markets still watching for clearer signals on Japanese monetary policy and the evolving geopolitical backdrop.

Central Bank Notes:

• The Policy Board of the Bank of Japan meets on 22–23 January 2026, with markets fully expecting the short-term policy rate to remain at 0.75%, following the December 2025 hike, as the bank assesses the impact of prior tightening while emphasizing gradual, data-dependent adjustments.
• The BOJ will continue targeting the uncollateralized overnight call rate around 0.75% and signal that future rate hikes depend on the effects of recent increases on bank lending, corporate financing, and economic activity, with some policymakers eyeing a possible move as early as April.
• JGB purchase tapering proceeds on schedule, with outright purchases reduced by ¥400 billion per quarter through March 2026, then ¥200 billion per quarter from April to June 2026, aiming for around ¥2 trillion monthly in Q1 2027, with flexibility if market conditions worsen.
• Japan’s economy showed recovery signs after the Q3 2025 contraction, with Q4 2025 GDP growth estimated positively amid export strength, though business sentiment among manufacturers softened to a six-month low of +7 in January 2026 due to weaker overseas demand.
• Core consumer inflation (excluding fresh food) eased to 2.3% year-on-year in December 2025 Tokyo CPI, down from 2.8-3.0% peaks earlier, while core-core (excluding fresh food and energy) stood at 2.6%, both above the 2% target but with moderating cost pressures.
• Near-term input costs continue easing from faded import surges, but services inflation and steady wage gains with early 2026 negotiations targeting 5% hikes sustain price momentum; medium-term inflation expectations remain anchored above 2%, tilting upside risks.
• In the coming quarters, real growth may moderate below potential amid tighter conditions and yen weakness, but accommodative real rates, real wage gains, and fiscal support are poised to bolster private consumption and investment recovery.
• ​Medium-term, stabilizing overseas demand and tight labor markets should drive wage growth and keep core inflation gradually around or above 2%, allowing cautious rate normalization if financial conditions stay supportive.
• The next meeting is on 18 to 19 March 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 prices surged significantly today due to escalating geopolitical tensions in the Middle East, particularly involving attacks on vessels in the Strait of Hormuz and US-Israeli strikes on Iran, prompting fears of disrupted crude supplies. Brent crude futures rose about 9%, trading above $79-$80 per barrel early Monday, up from around $72 the previous day.

Next 24 Hours Bias
Strong Bullish