IC Markets Asia Fundamental Forecast | 23 July 2025
What happened in the U.S. session?
Overnight U.S. trading was characterised by unexpectedly soft manufacturing data, a modest build in oil inventories, and cautious messaging from Federal Reserve officials. U.S. government bonds and defensive equity names outperformed, while the dollar and crude oil both edged lower in response to the releases and headlines. The Richmond Fed’s manufacturing index plunged to -20, representing a significant miss versus expectations and suggesting continued weakness in the regional manufacturing sector.
This contrasts with the modest improvement in services, highlighting the ongoing divergence between the manufacturing and services sectors in the U.S. economy. The timing of Fed Chair Powell’s speech, coinciding with the weaker manufacturing data, likely contributed to heightened volatility across major asset classes—particularly in interest rate-sensitive instruments and regional economic indicators.
What does it mean for the Asia Session?
The Asia session on July 23 is likely to be driven by U.S.–China–EU trade developments, political aftershocks in Japan, major inflation and PMI data from Japan and Singapore, and cross-asset rotation ahead of key corporate earnings and U.S. macroeconomic data. Traders should anticipate choppier trading conditions and elevated event risk, with defensive positioning and close attention to real-time news flow advised.
The Dollar Index (DXY)
Key news events today
Existing home sales (2:30 pm GMT)
What can we expect from DXY today?
The US dollar remains in a volatile position heading into July 23, 2025, as trade policy uncertainty and inflation-driven hesitation from the Federal Reserve contribute to a weakening trend. The next key event likely to influence the dollar’s direction is the Fed’s meeting on July 30. Until then, the dollar is expected to remain sensitive to tariff negotiations and new inflation data, with the broader trend tilted toward depreciation amid global and political uncertainty. As the July 23 session unfolds, the dollar remains vulnerable, weighed down by expectations of Fed easing, concerns over debt sustainability, and continued uncertainty surrounding US trade policy.
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 18 June 2025.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run; uncertainty around the economic outlook has diminished but remains elevated.
- The Committee is attentive to the risks to both sides of its dual mandate and judges that the unemployment rate remains low, labour market conditions remain solid, but inflation is somewhat elevated.
- Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace.
- GDP growth forecasts were revised downward for 2025 (1.4% vs. 1.7% in the March projection) while PCE inflation projections have been adjusted higher for 2025, with core inflation expected to reach 3.1% (vs. 2.8% in the March projection), 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 29 to 30 July 2025.
Next 24 Hours Bias
Weak Bullish
Gold (XAU)
Key news events today
Existing home sales (2:30 pm GMT)
What can we expect from Gold today?
Gold is holding near recent multi-year highs as safe-haven demand intensifies amid trade tensions, weak U.S. yields, and ongoing economic uncertainties. The outlook remains positive but cautious, given persistent market volatility and key technical resistance levels.
Trade uncertainty continues to drive some safe-haven demand. The U.S. has several trade deals in the works, and there are rumors that the EU and the U.S. might not be able to reach an agreement or at least are not close to one yet,” said Jim Wyckoff, senior analyst at Kitco Metals.
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 is stabilising just above 0.65 USD, weighed down by cautious RBA guidance and softer economic data. Although a rate cut is anticipated in August, much will depend on upcoming inflation releases and global trade developments. Market sentiment is currently neutral to bearish, with key risk factors including U.S. monetary policy, negotiations with China, and domestic growth indicators.
Central Bank Notes:
- The RBA maintained its cash rate at 3.85% on 8 July, voted by a majority of 6 to 3, to mark a second consecutive hold on rates.
- 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.
- In the March quarter, headline inflation, which has partly been affected by temporary cost-of-living relief, was at the midpoint of the target range while trimmed mean inflation was at 2.9%.
- The baseline forecast in May was for underlying inflation to continue to moderate to around the midpoint of the 2–3% range, while recent monthly CPI Indicator data suggest that June quarter inflation is likely to be broadly in line with the forecast, they were slightly stronger than expected.
- While the final scope of U.S. tariffs and policy responses in other countries remains unknown, financial market prices have rebounded with an expectation that the most extreme outcomes are likely to be avoided.
- Trade policy developments are nevertheless still expected to have an adverse effect on global economic activity, and there remains a risk that households and firms delay expenditure pending greater clarity on the outlook.
- Setting aside overseas developments, private domestic demand appears to have been recovering gradually, 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, various indicators suggest that labour market conditions remain tight while 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, wages growth has softened from its peak 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, with the March quarter national accounts confirming that domestic demand has been picking up over the past six months.
- There are also uncertainties regarding the lags in the effect of recent monetary policy easing and how firms’ pricing decisions and wages will respond to the balance between demand and supply for goods and services, tight conditions in the labour market and continued weak productivity outcomes.
- The Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5% on a sustainable basis and noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for domestic activity and inflation.
- The Board will be attentive to the data and the evolving assessment of risks to guide its decisions and 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 12 August 2025.
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 fell to around $0.596 on Tuesday, giving back recent gains amid growing expectations that the Reserve Bank will resume monetary easing due to soft economic data. Although annual inflation rose to a one-year high, it came in below forecasts, while quarterly CPI slowed further and also missed expectations. Analysts said the data gives the RBNZ little reason to expect CPI to reach the top of its 1–3% target band this year, reinforcing the case for a rate cut at the August meeting.
Market odds for a cut rose to 85%, up from 61% before the inflation release. Adding to the dovish outlook, the trade surplus narrowed sharply in June to a five-month low, as imports surged by 19%, outpacing export growth of 10%. Meanwhile, global trade concerns continued to weigh on sentiment after U.S. Treasury Secretary Scott Bessent stated that the administration prioritizes the quality of trade deals over timing, with President Trump set to decide whether to extend deadlines for countries showing progress.
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 pick-up in household consumption and business investment, but 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
Medium Bearish
The Japanese Yen (JPY)
Key news events today
BOJ Core CPI (5:00 am GMT)
What can we expect from JPY today?
The Japanese yen strengthened ahead of July 23, 2025, buoyed by political developments and anticipation of new fiscal measures following the upper house election results. Inflation remains elevated, with further data releases expected imminently. Overall, while volatility persists, the yen’s medium-term outlook continues to be shaped by a combination of domestic politics, the Bank of Japan’s policy stance, and global economic trends.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 17 June, 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. The scheduled amount of monthly long-term government bond purchases will, in principle, be reduced by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, aiming for a level of around ¥2 trillion in January to March 2027.
- Japan’s economy, while showing some weak movements in certain areas, is recovering moderately. Overseas economies, though partly exhibiting weakness due to the effects of various countries’ trade policies, are generally growing at a moderate pace. Exports and industrial production, while showing some last-minute demand due to the U.S. tariff increases, are basically moving sideways.
- On the price front, looking at the year-on-year rate of change in consumer prices (excluding fresh food), the rate is currently in the mid-3% range, reflecting continued pass-through of wage increases to sales prices, as well as the effects of past rises in import prices and recent increases in food prices such as rice. Expected inflation rates are rising moderately.
- As for consumer prices (excluding fresh food), the effects of past import price increases and recent rises in food prices such as rice, which have pushed up inflation so far, are expected to wane. During this period, the underlying rate of increase in consumer prices may stagnate somewhat due to the slowdown in growth pace.
- Looking ahead, the Japanese economy is expected to slow its growth pace, as overseas economies decelerate due to the effects of various countries’ trade policies, putting downward pressure on Japanese corporate profits, etc., although accommodative financial conditions will provide some support. Thereafter, as overseas economies return to a moderate growth path, Japan’s growth rate is expected to increase.
- As the growth rate rises, labour shortages intensify, and medium- to long-term expected inflation rates rise, inflation is expected to gradually increase. In the latter half of the projection period in the “Outlook Report,” inflation is expected to move at a level generally consistent with the “price stability target”.
- There are various risk factors, but in particular, the outlook for the development of trade policies in various countries and the resulting uncertainty regarding overseas economic and price trends is extremely high. It is necessary to closely monitor the impact on financial and foreign exchange markets, as well as on Japan’s economy and prices.
- The next meeting is scheduled for 31 July 2025.
Next 24 Hours Bias
Weak Bullish
The Euro (EUR)
Key news events today
German 10-year bund auction (9:00 am GMT)
What can we expect from EUR today?
The euro remains resilient but faces mounting headwinds from trade tensions, a plateau in economic activity, and the lagged effects of recent policy shifts. Markets and policymakers will be closely watching the outcome of tomorrow’s ECB meeting, as well as ongoing diplomatic and trade developments with key partners. Meanwhile, the region’s flagship women’s football tournament is bringing prominence and positive attention to Europe on the world stage.
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?
The Swiss franc’s rapid appreciation, driven by U.S. policy uncertainty, could prompt the Swiss National Bank (SNB) to intervene soon, as Swiss industry hopes the safe-haven currency’s surge can be curbed before it delivers another blow to an already tariff-threatened sector. The franc has risen roughly 9% against the dollar so far this month, on track for its biggest monthly gain since the 2008 financial crisis. Last week, it reached its strongest level since January 2015, when the SNB scrapped its minimum exchange rate.
The Swiss franc remains exceptionally strong, supported by global risk aversion and SNB policy measures aimed at limiting its appreciation. Exporters are facing mounting headwinds, while domestic deflation risks persist. Further intervention or interest rate adjustments by the SNB are possible if the franc’s upward trajectory continues.
Central Bank Notes:
- The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.25% to 0% on 19 June 2025, marking the sixth consecutive reduction.
- Inflationary pressure has decreased further as compared to the previous quarter, decreasing from 0.3% in February to -0.1% in May, mainly attributable to lower prices in tourism and oil products.
- Compared to March, the new conditional inflation forecast is lower in the short term. In the medium term, there is hardly any change from March, putting the average annual inflation at 0.2% for 2025, 0.5% for 2026 and 0.7% for 2027.
- The global economy continued to grow at a moderate pace in the first quarter of 2025 but the global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions.
- Swiss GDP growth was strong in the first quarter of 2025, but this development was largely because, as in other countries, exports to the U.S. were brought forward.
- Following the strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year; the SNB expects GDP growth of 1% to 1.5% for 2025 as a whole, while also anticipating GDP growth of 1% to 1.5% for 2026.
- 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 25 September 2025.
Next 24 Hours Bias
Weak Bullish
The Pound (GBP)
Key news events today
No major news event
What can we expect from GBP today?
The Pound is likely to remain range-bound in the near term as traders await decisive economic signals and further guidance from the BoE. Key risks include persistent inflation, sluggish growth, and changes in global trade policies. Markets will be particularly sensitive to upcoming PMI data and central bank communications this week.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to maintain the Bank Rate at 4.25% on 19 June 2025, with three members preferring to reduce the Bank Rate by 25 basis points.
- 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 £100 billion over the next 12 months to a total of £558 billion, starting in October 2024. On 19 June 2025, the stock of UK government bonds held for monetary policy purposes was £590 billion.
- There has been substantial disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations.
- Twelve-month CPI inflation increased to 3.4% in May from 2.6% in March, in line with expectations in the May Monetary Policy Report. The rise was largely due to a range of regulated prices and previous increases in energy prices.
- Underlying UK GDP growth appears to have remained weak, and the labour market has continued to loosen, leading to clearer signs that a margin of slack has opened up over time.
- Measures of pay growth have continued to moderate and, as in May, the Committee expects a significant slowing over the rest of the year.
- Global uncertainty remains elevated while energy prices have risen owing to an escalation of the conflict in the Middle East, prompting the Committee to remain sensitive to heightened unpredictability in the economic and geopolitical environment.
- There remain two-sided risks to inflation. Given the outlook and continued disinflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate and the Committee will continue to monitor closely the risks of inflation persistence and what the 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 7 August 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?
The Canadian dollar begins July 23 on a stable footing, supported by easing recession fears, resilient though cautious business sentiment, and a robustly active corporate debt market. Persistent trade tensions and softness in the housing market continue to pose headwinds, but worst-case risks appear to be receding. Two reports from the Bank of Canada indicate that tariff-related uncertainty continued to dampen both business and consumer sentiment in the second quarter. However, previously anticipated worst-case trade scenarios now seem less likely. The central bank’s Business Outlook Survey noted that while business sentiment remains “subdued,” it has improved from the sharp declines recorded in March and April 2025.
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
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from Oil today?
Oil markets are experiencing a period of price declines driven by trade tensions, increased supply from OPEC+, and seasonal shifts in global demand. Recent price volatility reflects geopolitical uncertainty and anticipated policy moves, particularly the possibility of new U.S. tariffs. Despite the downward trend in global crude benchmarks, retail fuel prices in several countries are rising or remain elevated due to domestic factors.
Next 24 Hours Bias
Weak Bullish
