IC Markets Global – Asia Fundamental Forecast | 03 July 2026
What happened in the U.S. session?
June U.S. employment report, which showed weaker-than-expected non-farm payroll growth, while the unemployment rate unexpectedly declined as labor force participation eased. The softer headline jobs data reinforced expectations that the Federal Reserve may have greater scope to lower interest rates in the coming months, weighing on the U.S. dollar and Treasury yields. Gold rallied on the back of the weaker dollar and falling yields, while U.S. equity markets advanced as investors welcomed the prospect of a less restrictive monetary policy outlook.
What does it mean for the Asia Session?
Market reaction to the weaker-than-expected U.S. June non-farm payrolls report, which showed only 57,000 jobs added, well below expectations. The softer labor data has reduced expectations for further near-term Federal Reserve rate hikes, sending the U.S. dollar lower, boosting gold prices by more than 2%, and supporting risk sentiment across global equities. Meanwhile, the Japanese yen strengthened sharply amid renewed speculation that Japanese authorities could intervene to support the currency, making USD/JPY one of the key pairs to watch during the Asian session.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
The U.S. dollar is under broad selling pressure after a much weaker-than-expected June U.S. labor market report significantly reduced expectations that the Federal Reserve will raise interest rates in the near term. Nonfarm payrolls increased by only 57,000 versus expectations of around 110,000, while previous months’ job gains were revised lower, reinforcing signs that the labor market is losing momentum. Although the unemployment rate unexpectedly edged down to 4.2%, markets focused on the slowdown in hiring, prompting Treasury yields to decline and the U.S. Dollar Index (DXY) to fall toward the 100.8 area.
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
No major news event
What can we expect from Gold today?
Gold prices rallied sharply, extending gains after a much weaker-than-expected U.S. June non-farm payrolls report reinforced expectations that the Federal Reserve may take a less aggressive stance on interest rates in the coming months. The softer labor data weighed on the U.S. dollar, increasing the appeal of non-yielding assets such as gold, while ongoing geopolitical uncertainty surrounding U.S.-Iran relations continued to support safe-haven demand. Central bank buying also remained a supportive factor, with the World Gold Council reporting continued official-sector purchases in May.
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) is ending the week on a firmer footing after weaker-than-expected U.S. June non-farm payrolls data significantly reduced expectations of another near-term Federal Reserve rate hike, weighing on the U.S. dollar and improving demand for higher-beta currencies such as the Aussie. Earlier this week, the AUD had been pressured by the Reserve Bank of Australia’s June meeting minutes, which highlighted ongoing inflation risks while keeping the door open to further tightening if necessary, and by investor caution ahead of key U.S. data.
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 Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
The New Zealand dollar (NZD) is trading with a cautiously positive bias, supported by improving domestic business confidence but restrained by expectations that the Reserve Bank of New Zealand will leave its Official Cash Rate unchanged at 2.25% at next week’s policy meeting. Investors have been encouraged by stronger-than-expected ANZ business outlook data, suggesting New Zealand’s economy is gradually recovering, while a softer U.S. dollar has also provided some support to the Kiwi.
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 is ending the week on a firmer footing after a sharp rebound against the U.S. dollar, with markets increasingly focused on the possibility of Japanese currency intervention and the outlook for further policy tightening by the Bank of Japan. The yen strengthened after reports suggested Japanese authorities are adopting a more unpredictable intervention strategy to discourage speculative selling, while weaker-than-expected U.S. employment data also weighed on the dollar and narrowed U.S. interest-rate expectations.
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
Strong Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Crude oil prices remain under pressure, extending their recent decline as markets continue to price in improving global supply conditions and easing geopolitical risks in the Middle East. Optimism surrounding indirect U.S.-Iran negotiations has reduced concerns over prolonged disruptions in the Strait of Hormuz, while tanker traffic and exports through the strategic waterway have largely recovered, helping to increase available supply. Several major banks, including UBS, have lowered their Brent crude price forecasts after the improved outlook for oil flows, reinforcing bearish market sentiment.
Next 24 Hours Bias
Weak Bearish
The post IC Markets Global – Asia Fundamental Forecast | 03 July 2026 first appeared on IC Your Trading Edge | Official Blog.