IC Markets Global – Asia Fundamental Forecast |25 February 2026
What happened in the U.S. session?
The U.S. session was dominated by trade policy whiplash from Trump’s 15% tariff push post-Supreme Court setback, fueling broad equity declines, especially in tech-heavy indices, a gold rally, Treasury gains, and heightened volatility, while the mildly positive Dallas Fed report was sidelined.
What does it mean for the Asia Session?
Asian traders face a relatively light but sentiment-driven day with China’s steady LPR, Japan’s data amid soft growth, a pivotal Trump speech, and Australian inflation overhang, potentially driving early USD strength and cautious equity positioning ahead of U.S. data later in the week.
The Dollar Index (DXY)
Key news events today
President Trump Speaks (2:00 am GMT)
What can we expect from DXY today?
The US Dollar maintained ground near DXY 97.70 amid market digestion of President Trump’s retaliatory 15% tariffs on global imports after a Supreme Court setback, boosting safe-haven gold above $5,200 while major pairs like EUR/USD and GBP/USD showed minor fluctuations; no major intraday shifts reported yet, with Australian CPI data anticipated to influence sentiment.
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
Weak Bullish
Gold (XAU)
Key news events today
President Trump Speaks (2:00 am GMT)
What can we expect from Gold today?
Gold erased gains on February 24 due to AI speculation, a stronger dollar, and tariff uncertainties, hovering around key supports like $5,150-$5,175. Volatility persists post a 25% retreat from highs, with sovereign buying expected to floor prices near $5,400 per Goldman Sachs. Chinese demand and Middle East tensions could drive rebounds into Wednesday.
Next 24 Hours Bias
Strong Bullish
The Australian Dollar (AUD)
Key news events today
CPI m/m (12:30 am GMT)
CPI y/y (12:30 am GMT)
Trimmed Mean CPI m/m (12:30 am GMT)
RBA Gov Bullock Speaks (8:40 am GMT)
What can we expect from AUD today?
The AUD remains resilient near 0.706 amid USD weakness from US tariff jitters and ahead of Australia’s January CPI release today, forecasted at 3.7% YoY, which could bolster expectations for another RBA hike as inflation lingers above target; technicals point to bullish momentum with support at 0.7030, though global trade risks cap gains.
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 stay elevated through early 2027, driven by services, housing, and demand resilience despite some monthly cooling like 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
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 (NZD) has shown modest fluctuations in recent trading, influenced by ongoing US trade policy uncertainties and the Reserve Bank of New Zealand’s (RBNZ) dovish stance. As of the latest available data on February 24, 2026, NZD/USD traded around 0.5950-0.5965, up slightly amid a weaker USD due to tariff concerns from the Trump administration, though capped by RBNZ Governor Anna Breman’s signals of no near-term rate hikes.
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 Bullish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from JPY today?
The Japanese yen saw modest weakening against the USD, with USD/JPY rising 0.22% to around 155.02 amid ongoing political pressures from Prime Minister Sanae Takaichi, who reportedly urged Bank of Japan Governor Kazuo Ueda to delay further rate hikes during a recent meeting, extending the yen’s declines and underperforming G10 peers.
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
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from Oil today?
Oil markets show stability with slight gains amid ongoing geopolitical tensions and steady OPEC+ policies. As of the latest available data, WTI crude hovered around $66 per barrel, up modestly from prior sessions, while Brent traded near $71 per barrel, reflecting a monthly rise of about 9% driven by US-Iran strains and unexpected US inventory draws of 9 million barrels.
Next 24 Hours Bias
Weak Bearish
