IC Markets Asia Fundamental Forecast | 10 June 2025
What happened in the U.S. session?
With no major data releases on Monday, it was a relatively low-key day of trading as the dollar index (DXY) dipped as low as 98.81 before settling around the region of 99 while spot prices for gold stabilised around %3,325/oz after briefly tumbling under the $3,000 handle. Overall market sentiment was positive with the major U.S. equity indices edging higher overnight.
What does it mean for the Asia Session?
Australia’s consumer confidence picked up toward the end of last year and has remained relatively stable. The Westpac Index rose by 2.2% MoM to 92.1 in May, rebounding from a 6.0% fall in April to mark the third increase this year amidst a recovery in financial markets and the outcome of the Federal election. Meanwhile, the NAB Business Confidence Index showed mixed sentiment in April, with a sharp rebound in manufacturing and modest gains in wholesale, construction, and finance, and property and business services, while conditions weakened in mining, and transport and utilities, along with easing business conditions. Weaker-than-anticipated business and consumer confidence could create near-term headwinds for the Aussie on Tuesday.
The Dollar Index (DXY)
Key news events today
NFIB Small Business Index (10:00 am GMT)
What can we expect from DXY today?
The NFIB Small Business Index has declined over the past four consecutive months, falling from December’s 105.1 to April’s print of 95.8, reflecting ongoing concerns about trade policy unpredictability between the U.S. and its major trading partners. The forecast of 95.9 points to a somewhat unchanged reading, highlighting a certain level of optimism as overall market sentiment has improved since mid-April. Despite any sort of improvement in small business confidence, the dollar is expected to remain under heavy overhead pressures.
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% on 7 May 2025.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run, but uncertainty around the economic outlook has increased further.
- The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.
- Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilised at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
- GDP growth forecasts were revised downward for 2025 (1.7% vs. 2.1% in the December projection) while PCE inflation projections have been adjusted slightly higher for 2025, with core inflation expected to reach 2.5%, partly due to tariff-related pressures.
- In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
- Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25B to $5B while maintaining the monthly redemption cap on agency debt and agency mortgage-backed securities at $35B.
- The next meeting is scheduled for 17 to 18 June 2025.
Next 24 Hours Bias
Weak Bullish
Gold (XAU)
Key news events today
NFIB Small Business Index (10:00 am GMT)
What can we expect from Gold today?
The NFIB Small Business Index has declined over the past four consecutive months, falling from December’s 105.1 to April’s print of 95.8, reflecting ongoing concerns about trade policy unpredictability between the U.S. and its major trading partners. The forecast of 95.9 points to a somewhat unchanged reading, highlighting a certain level of optimism as overall market sentiment has improved since mid-April. Despite any sort of improvement in small business confidence, the dollar is expected to remain under heavy overhead pressures, which could provide a lift for gold.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
Westpac Consumer Sentiment (12:30 am GMT)
NAB Business Confidence (1:30 am GMT)
What can we expect from AUD today?
Australia’s consumer confidence picked up toward the end of last year and has remained relatively stable. The Westpac Index rose by 2.2% MoM to 92.1 in May, rebounding from a 6.0% fall in April to mark the third increase this year amidst a recovery in financial markets and the outcome of the Federal election. Meanwhile, the NAB Business Confidence Index showed mixed sentiment in April, with a sharp rebound in manufacturing and modest gains in wholesale, construction, and finance, and property and business services, while conditions weakened in mining, and transport and utilities, along with easing business conditions. Weaker-than-anticipated business and consumer confidence could create near-term headwinds for the Aussie on Tuesday.
Central Bank Notes:
- The RBA reduced its cash rate by 25 basis points (bps), bringing it down to 3.85% on 20 May, following a pause on 1 April.
- Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
- Data on inflation for the March quarter provided further evidence that inflation continues to ease. At 2.9%, annual trimmed mean inflation was below 3% for the first time since 2021 and headline inflation, at 2.4%, remained within the target band of 2 to 3%.
- While recent tariff announcements have resulted in a rebound in financial market prices, there is still considerable uncertainty about the final scope of the tariffs and policy responses in other countries, contributing to a weaker outlook for growth, employment and inflation in Australia.
- Private domestic demand appears to have been recovering, real household incomes have picked up and there has been an easing in some measures of financial stress. However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices.
- At the same time, a range of indicators suggests that labour market conditions remain tight. Employment is continuing to grow, measures of labour underutilisation are at relatively low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers.
- Looking through quarterly volatility, wage growth has softened over the past year or so but productivity growth has not picked up and growth in unit labour costs remains high.
- There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments. While the central projection is for growth in household consumption to continue to increase as real incomes rise, recent data suggest that the pick-up will be a little slower than was expected three months ago.
- There is a risk that any pick-up in consumption is even slower than this, resulting in continued subdued growth in aggregate demand and a sharper deterioration in the labour market than currently expected.
- With inflation expected to remain around target, the Board therefore judged that an easing in monetary policy at this meeting was appropriate, assessing that this move would make monetary policy somewhat less restrictive.
- The Board will be attentive to the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
- The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
- The next meeting is on 8 July 2025.
Next 24 Hours Bias
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
After hitting an overnight high of 0.6065, the Kiwi retreated from this level to settle around 0.6046 by the end of the U.S. session. This currency pair continued to pull back at the beginning of Tuesday’s Asia session, sliding towards the threshold of 0.6000.
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 25 basis points bringing it down to 3.25% on 28 May, marking the sixth consecutive rate cut.
- The Committee stated that annual consumer price index inflation increased to 2.5% in the first quarter of 2025 while inflation expectations across firms and households have also risen.
- However, core inflation is declining and there is spare productive capacity in the economy; these conditions are consistent with inflation returning to the mid-point of the 1 to 3% target band over the medium term.
- The New Zealand economy is recovering after a period of contraction as high commodity prices and lower interest rates are supporting overall economic activity but recent developments in the international economy are expected to reduce global economic growth.
- Both tariffs and increased policy uncertainty overseas are expected to moderate New Zealand’s economic recovery and reduce medium-term inflation pressures. However, there remains considerable uncertainty around these judgements.
- Labour market conditions remain weak while the unemployment rate is expected to peak this quarter at 5.2%.
- Inflation is within the target band, and the Committee is well placed to respond to domestic and international developments to maintain price stability over the medium term.
- The next meeting is on 9 July 2025.
Next 24 Hours Bias
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Optimism surrounding Monday’s trade negotiations between the U.S. and China caused demand for safe-haven assets such as the yen to wane. USD/JPY rose strongly in early Asia trade as this currency pair rallied past the 145 handle.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 1 May, 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 Bank will continue its plan to reduce the amount of its monthly outright purchases of JGBs, aiming to reach about 3 trillion yen by January-March 2026.
- Japan’s economic growth is likely to moderate, as trade and other policies in each jurisdiction lead to a slowdown in overseas economies and to a decline in domestic corporate profits and other factors, although factors such as accommodative financial conditions are expected to provide support. Thereafter, Japan’s economic growth rate is likely to rise, with overseas economies returning to a moderate growth path.
- The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be in the range of 2.0-2.5% for fiscal 2025, in the range of 1.5-2.0% for fiscal 2026, and at around 2% for fiscal 2027. The effects of the past rise in import prices and of the recent rise in food prices such as rice prices – these factors have pushed up the inflation rate so far – are expected to wane.
- Meanwhile, underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy. Thereafter, however, underlying CPI inflation is expected to increase gradually.
- Regarding the employment and income situation, despite the deceleration in the economy, labour market conditions are likely to remain tight, as it will become more difficult for labour supply of women and seniors to increase.
- Comparing the projections through fiscal 2026 with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rate for fiscal 2024 is somewhat higher, but the projected growth rates for fiscal 2025 and 2026 are lower due to the effects of trade and other policies in each jurisdiction.
- There are various risks to the outlook. In particular, it is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them. It is therefore necessary to pay due attention to the impact of these developments on financial and foreign exchange markets and on Japan’s economic activity and prices.
- With regard to the risk balance, risks to economic activity are skewed to the downside for fiscal 2025 and 2026. Risks to prices are also skewed to the downside for fiscal 2025 and 2026.
- The next meeting is scheduled for 17 June 2025.
Next 24 Hours Bias
Weak Bullish
The Euro (EUR)
Key news events today
Sentix Investor Confidence (8:30 am GMT)
What can we expect from EUR today?
One month after the massive shock that rocked investors due to U.S. tariff policy which sent the Sentix economic data into free fall, investors are revising their economic assessments, and in some cases significantly. Both the current situation and expectations showed signs of recovery in May and we could see overall sentiment improve further in June, a result that could support the Euro.
Central Bank Notes:
- The Governing Council reduced the three key ECB interest rates by 25 basis points on 5 June to mark the seventh successive rate cut.
- Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.15%, 2.40% and 2.00% respectively.
- Inflation is currently at around the Governing Council’s 2% medium-term target. In the baseline of the new Eurosystem staff projections, headline inflation is set to average 2.0% in 2025, 1.6% in 2026 and 2.0% in 2027. The downward revisions compared with the March projections, by 0.3 percentage points for both 2025 and 2026, mainly reflect lower assumptions for energy prices and a stronger euro. Staff expect inflation excluding energy and food to average 2.4% in 2025 and 1.9% in 2026 and 2027, broadly unchanged since March.
- Staff see real GDP growth averaging 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027. The unrevised growth projection for 2025 reflects a stronger-than-expected first quarter combined with weaker prospects for the remainder of the year. While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term.
- Higher real incomes and a robust labour market will allow households to spend more. Together with more favourable financing conditions, this should make the economy more resilient to global shocks. Wage growth is still elevated but continues to moderate visibly, and profits are partially buffering its impact on inflation.
- The Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target. Especially in current conditions of exceptional uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.
- The Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission, and it is not pre-committing to a particular rate path.
- The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
- The next meeting is on 24 July 2025.
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Swiss banks will resume operations on Tuesday following a closure on Whit Monday. Demand for the greenback picked up on Monday due to optimism surrounding the trade negotiations between the U.S. and China. USD/CHF stabilised around the 0.8200 handle before rising toward 0.8250 as Asian markets came online on Tuesday.
Central Bank Notes:
- The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.50% to 0.25% on 20 March 2025, marking the fifth consecutive reduction.
- Underlying inflationary pressure has decreased further this quarter.
- Inflation in the period since the last monetary policy assessment has again been lower than expected, decreasing from 0.7% in November to 0.3% in February, primarily due to lower electricity prices.
- In the shorter term, the new conditional inflation forecast is slightly higher than December: 0.3% for Q2 2025, 0.4% for 2025 overall, and 0.8% for 2026 and 2027, based on the assumption that the SNB policy rate remains at 0.25% over the entire forecast horizon.
- GDP growth in Switzerland remains moderate, with the services sector continuing to show slightly stronger growth, while manufacturing faces challenges.
- The SNB anticipates GDP growth of around 1.0% to 1.5% for 2025.
- The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
- The next meeting is on 19 June 2025.
Next 24 Hours Bias
Weak Bullish
The Pound (GBP)
Key news events today
Labour Force Report (6:00 am GMT)
What can we expect from GBP today?
The Labour Force report is expected to show claimant count change increase from 5,200 in the prior month to 9,500 in May, while the unemployment rate is anticipated to edge higher from 4.5% to 4.6% – this would mark the highest jobless rate since August 2021. However, with virtually no signs of demand for the greenback, Cable could remain elevated even if a ‘soft’ set of employment figures is released.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5 to 4 to reduce the Bank Rate by 25 basis points (bps), bringing it down to 4.25% on 8 May 2025.
- Two members preferred a larger cut of 50 bps, while two opted to hold rates steady at 4.5%.
- The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
- Progress on disinflation in domestic price and wage pressures is generally continuing. Twelve-month CPI inflation fell to 2.6% in March from 2.8% in February, close to expectations in the February Report.
- Although indicators of pay growth remain elevated, a significant slowing is still expected over the rest of the year.
- Wholesale energy prices have fallen back since the February Report. Previous increases in energy prices are still likely to drive up CPI inflation from April onwards, to 3.5% for 2025 Q3, but is expected to fall back thereafter.
- Underlying UK GDP growth is judged to have slowed since the middle of 2024 and has been much less volatile than growth in headline GDP – growth was expected to have been around zero in 2025 Q1, well below Bank staff’s projection for headline growth of 0.6%.
- Underlying employment growth has also softened recently and the labour market has continued to loosen. The ratio of vacancies to unemployment has fallen further and is now judged to be below its equilibrium level – the impact of higher Employers’ National Insurance Contributions (NICs) on employment appears to have been fairly small to date.
- Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate and it will continue to monitor closely the risks of inflation persistence and what the evolving evidence may reveal about the balance between aggregate supply and demand in the economy.
- Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
- The next meeting is on 19 June 2025.
Next 24 Hours Bias
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
Optimism surrounding Monday’s trade negotiations between the U.S. and China saw the greenback return to favour, lifting USD/CAD overnight. This currency pair rose above the 1.3700 handle at the beginning of Tuesday’s Asia session and with no major domestic catalysts, direction will be dictated by the level of demand for the U.S. dollar.
Central Bank Notes:
- The Bank of Canada maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% on 4th June – marking the second consecutive meeting where rates were kept on hold.
- The Governing Council noted that the ongoing increase and decrease of various U.S. tariffs, coupled with highly uncertain outcomes of bilateral trade negotiations and tariff rates remaining well above their levels at the beginning of 2025, placed downside risks on growth and lifted inflation expectations, warranting caution regarding the continuation of monetary easing.
- The higher uncertainty stemmed from the absence of a clear tariff path by the U.S. and persistent threats of new trade actions, which prompted the BoC Governing Council to highlight risks such as the extent to which higher US tariffs reduce demand for Canadian exports.
- Canada’s economic growth in the first quarter came in at 2.2%, slightly stronger than the original forecast, while the composition of GDP growth was largely as expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence.
- Housing activity was down, driven by a sharp contraction in resales, while government spending also declined. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued.
- The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9% while CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6%.
- The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up, while recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs.
- The Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs while proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy.
- The Governing Council will focus on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval by supporting economic growth while ensuring that inflation remains well-controlled.
- The next meeting is on 30 July 2025.
Next 24 Hours Bias
Weak Bullish
Oil
Key news events today
API Crude Oil Stock (8:30 pm GMT)
What can we expect from Oil today?
After initially sliding lower on Monday, crude oil prices reversed course to jump over 1% as WTI futures rose above $65 amidst optimism surrounding the U.S.-China trade negotiations that commenced in London on Monday. Moving over to U.S. inventories, the API stockpiles declined over the past two weeks to highlight higher demand for crude in the U.S. – should this trend continue, it could provide another lift for oil prices later today. WTI oil futures remained elevated as Asian markets came online on Tuesday.
Next 24 Hours Bias
Medium Bullish
