IC – Asia Fundamental Forecast | 29 July 2026

by | Jul 29, 2026

IC – Asia Fundamental Forecast | 29 July 2026

What happened in the U.S. session?

Market participants largely refrained from making aggressive moves ahead of today’s highly anticipated FOMC interest rate decision, policy statement, and Fed Chair’s press conference, which are expected to set the direction for the U.S. dollar, Treasury yields, equities, and precious metals. Meanwhile, falling crude oil prices on improving geopolitical sentiment pressured energy markets, while corporate earnings created divergence across U.S. stock indices, with the Dow benefiting from strong earnings and the Nasdaq remaining under pressure due to continued weakness in semiconductor stocks.

What does it mean for the Asia Session?

Wednesday’s Asian session is expected to be driven initially by Australia’s inflation data, which could produce significant volatility in the Australian dollar if the figures differ from expectations. However, many traders may avoid taking large positions ahead of the much-anticipated Federal Reserve decision later in the day. While the Fed is widely expected to leave interest rates unchanged at 3.75%, investors will closely analyze the policy statement and Chair Kevin Warsh’s comments for any indication of future tightening or easing.
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The Dollar Index (DXY)

Key news events today

Federal Funds Rate (6:00 pm GMT)

FOMC Statement (6:00 pm GMT)

FOMC Press Conference (6:30 pm GMT)

What can we expect from DXY today?

The U.S. dollar is supported by cautious optimism ahead of the Federal Reserve’s interest rate decision. Although the Fed is widely expected to keep the benchmark rate unchanged at 3.75%, investors will closely analyze the FOMC statement and Chair Kevin Warsh’s remarks for clues on the timing of future rate hikes. With inflation still above target, resilient economic activity, and recent energy price volatility, the Fed is expected to maintain a data-dependent stance. As a result, today’s policy announcement and press conference are likely to generate significant volatility across the U.S. dollar, Treasury yields, gold, stock indices, and major currency pairs.

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

Weak Bullish

Gold (XAU)

Key news events today

Federal Funds Rate (6:00 pm GMT)

FOMC Statement (6:00 pm GMT)

FOMC Press Conference (6:30 pm GMT)

What can we expect from Gold today?

Gold has been trading cautiously ahead of the Fed meeting as investors avoid taking large positions before receiving fresh policy signals. Market participants generally expect the Fed to keep rates unchanged, but any indication that inflation remains a concern or that additional rate hikes are still possible would likely strengthen the U.S. dollar and Treasury yields, creating downside pressure on gold. Conversely, if the Fed adopts a more dovish tone by acknowledging easing inflation or signaling that further tightening is unlikely, the U.S. dollar could weaken, and gold may rally.

Next 24 Hours Bias
Strong bullish

The Australian Dollar (AUD)

Key news events today

CPI m/m (1:30 am GMT)

CPI y/y (1:30 am GMT)

Trimmed Mean CPI m/m (1:30 am GMT)

What can we expect from AUD today?

The Australian dollar (AUD) is expected to experience elevated volatility as traders focus on Australia’s Q2 CPI inflation data (Headline CPI, Trimmed Mean CPI, and Monthly CPI), followed later in the day by the U.S. Federal Reserve interest rate decision and FOMC statement. Markets are treating the Australian inflation release as the key determinant of whether the Reserve Bank of Australia (RBA) may tighten monetary policy further after Governor Michele Bullock reiterated that inflation remains too high and that additional rate hikes remain possible if price pressures persist. Higher-than-expected CPI or Trimmed Mean inflation would likely strengthen the AUD by increasing expectations of another RBA rate hike, while weaker inflation would reduce tightening expectations and could pressure the currency lower.

Central Bank Notes:

  • The Reserve Bank of New Zealand’s Monetary Policy Committee (MPC) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at its 8 July 2026 Monetary Policy Review, marking the first rate increase of the current tightening cycle. Unlike the split decision in May, the Committee reached a consensus that reducing monetary stimulus was appropriate to return inflation to target.
  • Although global oil prices have fallen following the partial reopening of the Strait of Hormuz, the RBNZ warned that inflation remains above its 1–3% target range and that lingering energy-related cost pressures continue to pose upside risks. The Bank reiterated that further OCR increases are likely, although the timing will remain dependent on incoming economic data.
  • The RBNZ now expects headline inflation to have peaked at 3.9% in Q2 2026, lower than the 4.3% peak projected in May, reflecting weaker oil prices. Inflation is forecast to ease to around 3.3% in Q3 2026 before gradually returning to the 2% midpoint by mid-2027, while underlying domestic inflation remains persistent.
  • The Committee judged that the current OCR remains accommodative, even after the July increase, and stated that additional tightening will probably be required over coming meetings. Policymakers emphasized that future decisions will depend on inflation expectations, firms’ pricing behaviour, labour market conditions, and the pace of economic recovery rather than following a predetermined path.
  • Economic activity slowed during the June quarter as higher energy costs temporarily weighed on demand, but the RBNZ expects the recovery to resume in the September quarter. The Bank’s Kiwi-GDP nowcasting model projects 0.6% quarterly GDP growth in Q3 2026, supported by improving business confidence, lower fuel prices, and stronger household purchasing power as inflation moderates.
  • External conditions remained mixed, with elevated global energy price volatility and geopolitical risks supporting upside inflation risks, while softer demand from key trading partners, especially China, continued to weigh on Australian export momentum.
  • Financial markets now broadly expect the RBA to hold rates at 4.35% through the third quarter, with the probability of further tightening slightly reduced but still present if services inflation or wage data re-accelerate.
  • The July statement emphasized a continued “data-dependent and patient” approach, signaling that policy will remain restrictive for longer if inflation proves persistent, while avoiding any commitment to near-term easing despite slower growth signals.
  • The next meeting is on 4 to 5 August 2026.

Next 24 Hours Bias

Medium 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 with a cautious tone today as markets focus on the combination of domestic inflation pressure, Reserve Bank of New Zealand (RBNZ) policy expectations, and upcoming U.S. Federal Reserve events. New Zealand’s latest inflation data remains the key driver for the NZD outlook, with annual CPI rising to 4.1% in Q2 2026, above the RBNZ’s comfort zone and increasing expectations that monetary policy may remain restrictive for longer. The RBNZ has already raised its Official Cash Rate by 25 basis points to 2.50% in July, signalling concern about persistent inflation risks and leaving the door open for further tightening if price pressures remain elevated. 

Central Bank Notes:

  • The Reserve Bank of New Zealand’s Monetary Policy Committee (MPC) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at its 8 July 2026 Monetary Policy Review, marking the first rate increase of the current tightening cycle. Unlike the split decision in May, the Committee reached a consensus that reducing monetary stimulus was appropriate to return inflation to target.
  • Although global oil prices have fallen following the partial reopening of the Strait of Hormuz, the RBNZ warned that inflation remains above its 1–3% target range and that lingering energy-related cost pressures continue to pose upside risks. The Bank reiterated that further OCR increases are likely, although the timing will remain dependent on incoming economic data.
  • The RBNZ now expects headline inflation to have peaked at 3.9% in Q2 2026, lower than the 4.3% peak projected in May, reflecting weaker oil prices. Inflation is forecast to ease to around 3.3% in Q3 2026 before gradually returning to the 2% midpoint by mid-2027, while underlying domestic inflation remains persistent.
  • The Committee judged that the current OCR remains accommodative, even after the July increase, and stated that additional tightening will probably be required over coming meetings. Policymakers emphasized that future decisions will depend on inflation expectations, firms’ pricing behaviour, labour market conditions, and the pace of economic recovery rather than following a predetermined path.
  • Economic activity slowed during the June quarter as higher energy costs temporarily weighed on demand, but the RBNZ expects the recovery to resume in the September quarter. The Bank’s Kiwi-GDP nowcasting model projects 0.6% quarterly GDP growth in Q3 2026, supported by improving business confidence, lower fuel prices, and stronger household purchasing power as inflation moderates.
  • Domestic demand remains uneven, with tourism, agriculture, and export industries continuing to outperform, while discretionary retail spending, construction, and housing activity remain subdued. The RBNZ believes spare capacity in the economy should limit widespread pass-through of higher business costs into consumer prices, although this remains an important upside inflation risk.
  • Financial conditions have eased since the May meeting as wholesale interest rates declined, and the New Zealand dollar depreciated, helping exporters but potentially adding to imported inflation. The Committee noted that shorter-term mortgage rates had increased earlier in the year, while longer-term borrowing costs have begun to stabilize alongside lower market interest-rate expectations.
  • The MPC concluded that maintaining price stability remains its primary objective, stressing that while further rate increases are expected, policy will remain data-dependent. The Committee believes returning inflation to the 2% midpoint is essential to achieving a sustainable recovery in employment, household incomes, and long-term economic growth.
  • The next meeting is on 2 September 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 yen remains bearish in the short term as USD/JPY trades near elevated levels, but downside risks for USD/JPY are increasing due to potential BoJ tightening, possible Japanese intervention concerns, and upcoming central-bank volatility. Traders should watch the 163–164 zone closely; a break higher could extend yen weakness, while a shift in Fed expectations or stronger BoJ guidance could trigger a sharp JPY rebound.

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

Medium Bearish

Oil

Key news events today

EIA Crude Oil Inventories (2:30 pm GMT)

What can we expect from Oil today?

Crude oil markets are trading with a cautious tone today as traders continue to balance geopolitical risks in the Middle East, OPEC+ supply decisions, and upcoming U.S. Federal Reserve policy signals. Oil prices weakened recently after optimism around possible U.S.–Iran diplomatic progress reduced immediate fears of supply disruptions, with Brent crude falling toward the mid-$80s and WTI moving lower. However, risks remain elevated due to uncertainty around shipping routes, including the Strait of Hormuz, and potential disruptions to regional energy flows.

Next 24 Hours Bias
Weak Bullish

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