IC Markets Asia Fundamental Forecast | 3 April 2025
What happened in the U.S. session?
The latest announcements of tariffs by U.S. President Donald Trump on Liberation Day rattled financial markets, sparking fierce demand for safe-haven assets such as the Japanese yen, Swiss franc and of course precious metals such as gold. The ‘risk-off’ sentiment caused USD/JPY to dive under 148 as it shed over 1% while USD/CHF plummeted nearly 0.7% overnight – spot prices for gold surged over 1% as a new intraday high of $3,167.72/oz was recorded. Meanwhile, the dollar index (DXY) plunged over 0.6% to hover around the level of 103.
What does it mean for the Asia Session?
As Asian markets digest the latest tariff salvo, financial markets remain on edge as a ‘risk-off’ mood encompasses overall sentiment. The overnight moves are likely to gain further momentum as the day progresses.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (12:30 pm GMT)
ISM Services PMI (2:00 pm GMT)
What can we expect from DXY today?
Unemployment claims have remained relatively low and stable over the past four weeks – a sign of a resilient labour market. The latest estimate of 225k points to another week of relatively low claims while the Institute for Supply Management (ISM) is anticipated to report services activity expanding robustly in March. However, given the latest slew of tariff announcements by U.S. President, financial markets have been turned on their heads with demand for the dollar tanking overnight.
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 19 March 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; the Committee is attentive to the risks to both sides of its dual mandate.
- Recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilized 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 is 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 6 to 7 May 2025.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
Unemployment Claims (12:30 pm GMT)
ISM Services PMI (2:00 pm GMT)
What can we expect from Gold today?
Unemployment claims have remained relatively low and stable over the past four weeks – a sign of a resilient labour market. The latest estimate of 225k points to another week of relatively low claims while the Institute for Supply Management (ISM) is anticipated to report services activity expanding robustly in March. However, given the latest slew of tariff announcements by U.S. President, financial markets have been turned on their heads with demand for safe-haven assets such as gold surging overnight.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The Aussie initially dived from 0.6300 to as low as 0.6226 following the latest announcements of tariffs by U.S. President Donald Trump on Liberation Day. However, the Aussie recovered swiftly as demand for the greenback plummeted, triggering a sharp reversal – this currency pair bounced strongly back toward the 0.6300 mark as Asian markets came online.
Central Bank Notes:
- The RBA maintained the cash rate at 4.10% on 1 April, following a 25-basis point reduction on 18 February.
- 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.
- Recent information suggests that underlying inflation continues to ease in line with the most recent forecasts published in the February Statement on Monetary Policy.
- Private domestic demand appears to be 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 suggest that labour market conditions remain tight. Despite a decline in employment in February, 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. Wage pressures have eased a little more than expected but productivity growth has not picked up and growth in unit labour costs remains high.
- There are notable uncertainties about the outlook for domestic economic activity and inflation. The central projection is for growth in household consumption to continue to increase as income growth rises. But there is a risk that any pick-up in consumption is slower than expected, resulting in continued subdued output growth and a sharper deterioration in the labour market than currently expected.
- Uncertainty about the outlook abroad also remains significant. On the macroeconomic policy front, recent announcements from the U.S. on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures. Geopolitical uncertainties are also pronounced.
- The Board’s assessment is that monetary policy remains restrictive and the continued decline in underlying inflation is welcome, but there are nevertheless risks on both sides and the Board is cautious about the outlook.
- The Board will rely upon the data and the evolving assessment of risks to guide its decisions and is resolute in its determination to sustainably return inflation to target and will do what is necessary to achieve that outcome.
- The next meeting is on 20 May 2025.
Next 24 Hours Bias
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
Following the latest announcements of tariffs by U.S. President Donald Trump on Liberation Day, demand for the greenback tanked to provide a strong boost for the Kiwi. This currency pair rose strongly toward 0.5750 at the beginning of Thursday’s Asia session.
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 3.75% on 19 February, marking the fourth consecutive rate cut.
- The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band; inflation expectations are at target and core inflation continues to fall towards the target mid-point.
- Economic activity in New Zealand remains subdued and with spare productive capacity, domestic inflation pressures continue to ease. Price and wage-setting behaviours are adapting to a low-inflation environment while the price of imports has fallen, also contributing to lower headline inflation.
- Economic growth is expected to recover during 2025 as lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions. Higher prices for some key commodities and a lower exchange rate will increase export revenues and employment growth is expected to pick up in the second half of the year as the domestic economy recovers.
- Global economic growth is expected to remain subdued in the near term as geopolitics, including uncertainty about trade barriers, is likely to weaken global growth. Global economic activity is also likely to remain fragile over the medium term given increasing geoeconomic fragmentation.
- Consumer price inflation is expected to be volatile in the near term, due to a lower exchange rate and higher petrol prices. Nevertheless, the Committee is well placed to maintain price stability over the medium term.
- The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the Committee confidence to continue lowering the OCR. If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.
- The next meeting is on 9 April 2025.
Next 24 Hours Bias
Medium Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The latest announcements of tariffs by U.S. President Donald Trump on Liberation Day rattled financial markets, sparking fierce demand for safe-haven assets such as the yen. The ‘risk-off’ sentiment caused USD/JPY to dive under 148 as it shed over 1% overnight – this currency pair continued to slide lower toward 147.50 as Asian markets came online.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 19 March, by a unanimous vote, to maintain 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 economy has continued to recover moderately, with some sectors showing improvement. Exports and industrial production have remained relatively stable, while corporate profits continue on an improving trend and business sentiment maintains a favourable level.
- The employment and income situation has shown moderate improvement, with private consumption on a moderately increasing trend despite ongoing impacts from price rises.
- On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been in the range of 3.0-3.5% recently. Services prices continue to rise moderately, reflecting factors such as wage increases, while the effects of cost pass-through from past import price rises have diminished.
- Inflation expectations have continued to rise moderately, with underlying CPI inflation gradually increasing toward the price stability target of 2%. The virtuous cycle between wages and prices continues to strengthen, with businesses increasingly reflecting higher costs in selling prices.
- Japan’s economy is expected to maintain growth above its potential rate, supported by moderately growing overseas economies and the intensifying virtuous cycle from income to spending, underpinned by accommodative financial conditions.
- The next meeting is scheduled for 19 June 2025.
Next 24 Hours Bias
Strong Bearish
The Euro (EUR)
Key news events today
Composite PMI (8:00 am GMT)
What can we expect from EUR today?
Composite PMI activity in the Euro Area is anticipated to edge higher from 50.2 in the previous month to 50.4 in March, based on the final estimates. Composite output had returned to expansion in January but growth has been marginal at best. The euro surged overnight to break past 1.0900 with ease and the upward momentum is likely to gain further traction as the day progresses.
Central Bank Notes:
- The Governing Council reduced the three key ECB interest rates by 25 basis points on 6 March to mark the fifth 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 2.65%, 2.90% and 2.50% respectively.
- The Council acknowledged that monetary policy was becoming meaningfully less restrictive, easing borrowing costs for businesses and households with inflation projected to average 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027, while core inflation also neared the 2% target.
- Although domestic inflation remains elevated due to delayed wage and price adjustments, wage growth is moderating.
- Economic growth forecasts were revised downward to 0.9% for 2025 and 1.2% for 2026, reflecting weak exports and investment.
- 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 ECB remains data-dependent and will adjust its policy as needed to ensure inflation stabilizes around its 2% medium-term target without committing to a specific rate path.
- The next meeting is on 17 April 2025.
Next 24 Hours Bias
Medium Bullish
The Swiss Franc (CHF)
Key news events today
CPI (6:30 am GMT)
What can we expect from CHF today?
Inflationary pressures in Switzerland have dissipated significantly since the fourth quarter of 2022 with consumer inflation easing to an annual rate of 0.3% in February. Prices pressures are expected to moderate lower in March, a result that should dampen demand for the Swiss franc but financial markets have been rattled by the latest announcements of tariffs by U.S. President Donald Trump on Liberation Day. Demand for safe-haven assets such as the franc have surged, causing USD/CHF to dive nearly 0.7% overnight – this currency pair was hovering around 0.8770 at the beginning of the Asia session.
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
Medium Bearish
The Pound (GBP)
Key news events today
Composite PMI (8:30 am GMT)
What can we expect from GBP today?
The final Composite PMI reading for the U.K. is expected to increase to 52.0 in March from 51.0 in the previous month. This would mark the highest level of PMI activity in six months and could provide further lift for the pound as European trading gets underway.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to maintain the Bank Rate at 4.50% on 19 March 2025, while one member preferred to reduce it by 25 basis points (bps).
- 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.
- Twelve-month CPI inflation increased to 3.0% in January from 2.5% in December, slightly higher than expected in the February Report; domestic price and wage pressures are moderating, but remain somewhat elevated.
- Although global energy prices have fallen back recently, they remain higher than last year and CPI inflation is still projected to rise to around 3.75% in 2025 Q3. While CPI inflation is expected to fall back thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures.
- While UK GDP growth estimates have been slightly stronger than expected at the time of the February Monetary Policy Report, business survey indicators generally continue to suggest weakness in growth and particularly in employment intentions. In recent quarters, subdued activity has been judged to reflect both demand and supply factors.
- The labour market had continued to ease, although it was still judged to be broadly in balance – some indicators of employment intentions had deteriorated markedly, to levels consistent with shrinking employment while other indicators, such as the number of vacancies, had not weakened to the same extent.
- Domestic price and wage pressures were moderating, but remained somewhat elevated. A range of indicators suggested that underlying pay growth had eased further in recent months, although annual growth in private sector regular average weekly earnings had picked up to 6.1% in the three months to January.
- 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 8 May 2025.
Next 24 Hours Bias
Medium Bullish
The Canadian Dollar (CAD)
Key news events today
Trade Balance (12:30 pm GMT)
What can we expect from CAD today?
Canada’s trade surplus widened to C$4.0B in January, the largest since May 2022 and well above market expectations of C$1.3B. Merchandise exports rose 5.5% to a record C$74.5B, while imports increased 2.3% to a record C$70.5B, marking the fourth consecutive monthly rise for both. Export growth was driven by motor vehicles and parts; energy products; and consumer goods. However, this surplus is now anticipated to narrow to C$3.4B in February – a drop of 15% – as the ongoing global trade tariffs ratcheted higher. However, the Loonie gained overnight as USD/CAD reversed off its highs of 1.4318 and dipped under 1.4300 – this currency pair was sliding toward 1.4250 as Asian markets came online on Thursday.
Central Bank Notes:
- The Bank of Canada reduced its target for the overnight rate by 25 basis points bringing it down to 2.75% on 12 March; this marked the seventh consecutive meeting where rates were reduced.
- The bank announced its plan to complete the normalization of its balance sheet, ending quantitative tightening, and will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.
- The Governing Council noted that the economy grew more than expected in the fourth quarter of last year, spurred by past rate cuts but growth is now expected to slow at the turn of the year due to increasing trade conflict with the United States.
- Employment growth strengthened in November through January and the unemployment rate declined to 6.6%. In February, job growth stalled. While past interest rate cuts have boosted demand for labour in recent months, there are warning signs that heightened trade tensions could disrupt the recovery in the jobs market. Meanwhile, wage growth has shown signs of moderation.
- Inflation remains close to the 2% target. The temporary suspension of the GST/HST lowered some consumer prices, but January’s CPI was slightly firmer than expected at 1.9%. Inflation is expected to increase to about 2½% in March with the end of the tax break. The Bank’s preferred measures of core inflation remain above 2%, mainly because of the persistence of shelter price inflation. Short-term inflation expectations have risen in light of fears about the impact of tariffs on prices.
- While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing U.S. tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest.
- While monetary policy cannot offset the impacts of a trade war, the Governing Council will carefully 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.
- The Council will also be closely monitoring inflation expectations and is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
- The next meeting is on 16 April 2025.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
Caixin Services PMI (1:45 am GMT)
What can we expect from Oil today?
The latest announcements of tariffs by U.S. President Donald Trump on Liberation Day rattled financial markets as concerns over a major global trade war escalated, significantly increasing the probability of a notable slowdown in global economic activity. Despite an exemption of tariffs on imports of oil, gas and refined products, providing some relief to the U.S. oil industry, crude oil prices slumped with WTI oil plunging over 3% as it tumbled towards the mark of $69 per barrel. In addition, the EIA crude oil inventories registered a strong build of 6.2M barrels of crude, exceeding the 6M rise in inventories as reported by the API on Tuesday. After four weeks of robust gains, overhead pressures for this commodity have intensified and prices are now subjected to head lower.
Next 24 Hours Bias
Medium Bearish
