IC Markets Asia Fundamental Forecast | 19 August 2025
What happened in the U.S session?
The overnight US session was marked by moderate equity declines as traders awaited vital retail earnings and policy signals from Jackson Hole. Data releases confirm resilience in retail and moderate but persistent inflation, keeping rate cut bets alive. Communications, real estate, and select tech stocks saw selling, while Treasuries moved higher on inflation signals. Crypto assets dipped sharply in Asia trading, and Gulf equities were pressured by the regional focus on US policy. Investors remain risk-aware, anticipating significant developments later in the week.
What does it mean for the Asia sessions?
Asian equities are expected to open positively, buoyed by a robust performance on Wall Street. The S&P 500 and Nasdaq are at record highs, supporting risk appetite across the region. China’s LPR announcement and market reactionJapan’s trade and machinery orders dataOngoing US-China trade talks and policy headlines movements amid a weaker US dollar and surging Asian currencies, Corporate earnings reports and sector rotation, especially in tech and EV sectorsExpect continued volatility from geopolitical headlines and economic data, but the immediate outlook for Asian equities on August 19 remains firmly positive.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
The US dollar is stronger on August 19, 2025, on the back of risk events, Fed outlook, and strong domestic data. Major FX pairs are broadly weaker against the USD (EUR/USD, GBP/USD, AUD/USD). Market focus remains on the Jackson Hole Symposium and US rate cut probabilities, as well as geopolitical developments in Europe. Strong US wholesale price data and solid July retail sales pushed traders to pare back aggressive bets on a Federal Reserve rate cut next month.
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
Medium Bearish
Gold (XAU)
Key news events today
No major news event
What can we expect from Gold today?
Gold prices are holding firm above $3,300/oz, buoyed by geopolitical tension, looming Fed policy shifts, central bank demand, and global currency volatility. Near-term movements are likely to be range-bound as investors await the outcomes of key diplomatic talks and monetary policy signals, but medium- to long-term sentiment remains bullish.
The gold market is highly sensitive this week to ongoing diplomatic efforts around the Russia-Ukraine conflict. A key peace summit involving US President Donald Trump, Ukrainian President Zelenskiy, and top European leaders is scheduled for this week. A perceived reduction in geopolitical risk could soften gold prices in the short term.
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?
On August 19, 2025, the Australian Dollar faces pressure from a stronger US Dollar and global trade tensions. RBA’s recent rate cuts and positive domestic jobs data provide support, while weak Chinese stats and expectations of further monetary easing temper bullish sentiment. Markets remain highly attentive to consumer confidence data, central bank commentary, and major US economic updates this week.RBA Governor Michele Bullock signaled a flexible approach, with decisions made meeting-by-meeting, and highlighted the need to balance price stability against moderating inflation and evolving market volatility.
Central Bank Notes:
- The RBA held its cash rate steady at 3.85% at the July meeting on 8 July 2025, following a 25-basis-point reduction in May and in line with widespread market expectations, after recent data showed inflation tracking within the target band.
- Inflation continues to ease from its peak, with higher interest rates helping to rebalance demand and supply across the Australian economy. Data for the June quarter signaled ongoing progress, though underlying pressures persist in certain sectors.
- Trimmed mean inflation for the June quarter likely remained near 2.9% and headline CPI around 2.4%, both within the RBA’s 2–3% target range. The Board noted further evidence of inflation convergence, but flagged that not all price categories are moving in tandem.
- Financial markets have exhibited increased volatility in the wake of global tariff and trade policy developments—especially following recent announcements from the U.S. and the EU. This has pushed asset prices higher but contributed to an uncertain outlook for domestic growth and employment.
- Private domestic demand showed a tentative recovery. Real household incomes improved, and signs of easing household financial stress emerged, but some business sectors continued to face subdued demand, limiting their ability to pass on cost increases.
- Labour market conditions remained tight overall. Employment continued to expand, with low rates of underutilization. Business surveys suggest labour availability remains a constraint, though there are signs of a gradual easing compared to earlier in 2025.
- Underlying wage growth softened modestly, though unit labour cost growth remains elevated due to below-trend productivity gains. The Board remains attentive to developments in wage and productivity dynamics as cost pressures continue to evolve.
- Uncertainties persist for both domestic activity and inflation. Consumption growth has risen, but more slowly than anticipated three months ago, with global and domestic factors both contributing to the cautious outlook.
- There remains a risk that household spending picks up more slowly than forecast, which could result in ongoing subdued aggregate demand and a sharper deterioration in employment conditions.
- Given that inflation is expected to remain around the target band, the Board judged that it was appropriate to keep policy settings unchanged in July, maintaining a position that is still mildly restrictive.
- The Board continues to monitor all incoming data and assesses risks carefully, with a focus on global trends, domestic demand indicators, inflation outcomes, and the labour market outlook.
- The RBA remains committed to its mandate of price stability and full employment and stands ready to adjust policy as needed to achieve these objectives.
- The next meeting is on 11 to 12 August 2025.
Next 24 Hours Bias
Medium Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
The NZD is slightly firmer, with the market’s attention fixed on Wednesday’s RBNZ policy meeting and continued global central bank cues. The broader outlook points to controlled inflation and a dovish RBNZ, keeping the NZD on a modestly pressured path barring any hawkish surprises.
Zealand’s Performance of Services Index rose to 48.9 in July, up from 47.6 in June. This is still below expansion territory (50+), but shows some resilience. New Zealand’s inflation expectations for Q3 2025 eased slightly (two-year expectations at 2.28%, one-year at 2.37%), supporting the RBNZ’s dovish stance.
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to hold the Official Cash Rate (OCR) at 3.25% on 9 July, marking the first pause following six consecutive rate cuts.
- The MPC cited heightened uncertainty and near-term inflation risks as reasons to wait until August for further action.
- Although the annual consumer price index inflation increased to 2.5% in the first quarter of 2025, it remained within the MPC’s target range of 1 to 3%, noting that the outlook for medium-term inflation pressures has evolved broadly in line with the May MPS projections.
- While it is expected to be near the upper end of the band in the second and third quarters of this year, easing core inflation and spare capacity in the economy should help return it toward the 2% midpoint over time.
- The MPC noted that, despite global factors, domestic financial conditions are evolving broadly as expected, as mortgage and deposit interest rates have continued to decline, reflecting a lower OCR, strong bank liquidity, and soft credit growth.
- In aggregate, GDP growth over the December and March quarters was stronger than expected, reflecting a pickup in household consumption and business investment. However, higher-frequency indicators suggest weaker-than-expected growth in April and May.
- Large economic policy shifts overseas and concerns about sovereign risk could result in additional financial market volatility and increased bond yields, while prolonged economic uncertainty might induce further precautionary behaviour by households and firms, slowing the domestic economic recovery.
- Subject to medium-term inflation pressures continuing to ease in line with the Committee’s central projections, the Committee expects to lower the OCR further, broadly consistent with the projection outlined in May.
- The next meeting is on 20 August 2025.
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 remains on a weakening trajectory against major currencies, particularly the US Dollar, as global and domestic factors exert pressure. Geopolitical events and US monetary policy are key influences driving daily moves in JPY. BoJ continues its cautious policy stance, with inflation not high enough for urgent tightening. The Yen’s weakness remains a notable trend as analysts project further depreciation, with forecasts estimating USD/JPY could reach 148.5 by the quarter’s end and possibly 152.63 by August 2026.
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
Strong Bullish
Oil
Key news events today
API Crude Oil Stock (8:30 pm GMT)
What can we expect from Oil today?
On Monday, August 18, 2025, Brent crude futures settled 1.14% higher at $66.60 per barrel, while the U.S. West Texas Intermediate (WTI) crude was up 0.99% to $63.42 per barrel. This marks a recovery from last week’s losses for both benchmarks. Brent crude is around $66.60/barrel, and WTI is at $63.42/barrel.OPEC+ output hike for September is set at 547,000 bpd, aimed at recapturing market share and stabilizing supply. U.S., Russia, and Ukraine negotiations and U.S. pressure on India’s Russian oil purchases impact trader sentiment.Regional gasoline prices are rising, while diesel and kerosene prices are dropping, reflecting nuanced supply and demand dynamics in different fuel types.
Next 24 Hours Bias
Medium Bearish
