IC Markets Asia Fundamental Forecast | 1 April 2025 | IC Markets

IC Markets Asia Fundamental Forecast | 1 April 2025

What happened in the U.S. session?

The Chicago PMI advanced 2.1 points to 47.6 in March to mark its third consecutive monthly gain, taking the index to the highest level since November 2023. However, it remains in contractionary territory for the sixteenth successive month. The increase was largely driven by a rise in production, with smaller increases in employment while order backlogs and new orders also contributed to the improvement but supplier deliveries declined. Coupled with a report that stated U.S. President Donald Trump will consider higher tariffs against a broader range of countries, financial markets remain on the edge as further tariffs raise grave concerns over slower global economic growth. The dollar index (DXY) hovered around the 104 level for most parts of Monday while spot prices for gold continue to soar, hitting an overnight high of $3,127.92/oz.

What does it mean for the Asia Session?

The manufacturing downturn in Japan deepened in March as output and new orders both fell solidly while a modest rise in staff numbers supported further decline in backlogs. Not only did this sector record its ninth consecutive month of contraction, but manufacturing conditions deteriorated at the strongest pace for a year. Despite another month of deteriorating PMI activity, the yen strengthened on Tuesday with USD/JPY falling towards 149.50. Global trade policy uncertainties could be a driver for safe-haven flows, triggering demand for the yen.

Driven by a further slowdown in underlying inflation, the Reserve Bank of Australia (RBA) expressed growing confidence that inflation is moving sustainably toward the midpoint of its 2 to 3% target range while highlighting an uncertain economic outlook – a slower-than-expected rebound in private demand and uncertainty over the sustainability of the household spending recovery that began in late 2024. The RBA may make another 25-basis point reduction at today’s board meeting to kick start a sluggish economy – also keep a close ear to Governor Michele Bullock’s press conference which will commence an hour after the announcement.

The Dollar Index (DXY)

Key news events today

ISM Manufacturing PMI (2:00 pm GMT)

JOLTS Job Opening (2:00 pm GMT)

What can we expect from DXY today?

Key U.S. macroeconomic data released today will provide deep insights into the state of the manufacturing sector and the labour market. The Institute for Supply Management (ISM) has reported a return to expansion for the manufacturing sector in January and February but the ongoing backdrop of trade policy uncertainties could weigh on economic growth. The forecasts for March point to a slowdown in output, falling back into contraction with an estimate of 49.5. Meanwhile, the JOLTS job openings could also slide lower as growth concerns linger.

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

ISM Manufacturing PMI (2:00 pm GMT)

JOLTS Job Opening (2:00 pm GMT)

What can we expect from Gold today?

Next 24 Hours Bias

Strong Bullish

The Australian Dollar (AUD)

Key news events today

RBA Rate Statement (3:30 am GMT)

RBA Press Conference (4:30 am GMT)

What can we expect from AUD today?

Central Bank Notes:

The RBA reduced the cash rate by 25 basis points to bring it down to 4.10% on 18 February, marking the first rate cut since November 2020.
Financial conditions are restrictive, which is weighing on demand and is helping to bring down underlying inflation; growth in private demand has been subdued.
Underlying inflation has moderated over the past three quarters with trimmed mean inflation easing to 3.2% over 2024 and it is expected to reach the 2–3% target range in early 2025, which is sooner than expected at the time of the November Statement.
The unemployment rate declined a little in late 2024 to 4% with much of the strength in the labour market underpinned by strong employment growth, which has also bolstered household incomes.
The announcement of tariffs between the United States and other major economies poses challenges to the global outlook but the scale and incidence of the tariffs and their effects remain highly uncertain – which may itself delay some investment until the outlook becomes clearer.
Economic activity strengthened in China but growth there is still facing structural headwinds while domestic economic growth is forecast to pick up and the labour market is forecast to remain tight.
If the cash rate follows the market path, underlying inflation is projected to be a little above 2.5% over most of the forecast period. The anticipated recovery of GDP growth and lingering tightness in labour market conditions are expected to sustain some upward pressure on inflation.
Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment.
The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying 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 next meeting is on 1 April 2025.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The Kiwi will likely be influenced by the direction of the Aussie today as the Reserve Bank of Australia (RBA) announces its interest rate decision at its board meeting. Higher volatility should be expected for this currency pair during the Asian trading hours.

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

Manufacturing PMI (12:30 am GMT)

What can we expect from JPY today?

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:
1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
2. 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

Medium Bearish

The Euro (EUR)

Key news events today

Manufacturing PMI (8:00 am GMT)

CPI (9:00 am GMT)

What can we expect from EUR today?

The final Manufacturing PMI report is all but certain to show this sector contracting since mid-2022 while consumer inflation remains persistently sticky, leading to a mixed set of results. The euro could be whipsawed during the European trading hours but a hot CPI print could lift this currency pair higher.

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

Weak Bullish

The Swiss Franc (CHF)

Key news events today

Retail Sales (6:30 am GMT)

What can we expect from CHF today?

Consumer spending in Switzerland increased at an annual rate of 1.3% in January, softer than market expectations of a 1.6% gain. This marked the weakest growth in retail trade activity since last June when the retail sales fell 3%, as sales moderated for categories such as food, beverages & tobacco; non-food products; and service stations. The forecasts for February point to a slight improvement with sales anticipated to rise 1.5% YoY. Demand for the franc could pick up should consumer spending jump in the latest report.

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

Manufacturing PMI (8:30 am GMT)

What can we expect from GBP today?

Manufacturing activity in the U.K. dropped to 44.6 in March from 46.9 in the previous month, below forecasts of 46.4. This flash reading pointed to the sixth straight month of worsening conditions in the manufacturing sector, pushing the index to its lowest since late 2023. Manufacturing production fell the most since October 2023 and there was also a steep export-led downturn in overall sales. The final PMI report is anticipated to show an unchanged reading of 44.6 and deteriorating conditions could weigh on the pound before the start of the European trading hours.

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

Manufacturing PMI (1:30 pm GMT)

What can we expect from CAD today?

After expanding strongly from September of 2024 to January 2025, manufacturing activity in Canada unexpectedly contracted in February as it fell to 47.8, missing market forecasts of 51.9. This preliminary result pointed to the first decline in factory activity since August of last year and the sharpest since December 2023, pressured by contractions in both output and new orders. Firms noted that clients adopted a cautious approach due to uncertainty around trade policies between Canada and the U.S., driving new export orders to drop the most since September. The final PMI report is all but certain to cement contraction for this sector and potentially create headwinds for the Loonie during the U.S. session later today.

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 Bullish

Oil

Key news events today

Caixin Manufacturing PMI (1:45 am GMT)

What can we expect from Oil today?

Oil prices surged nearly 3% on Monday as supply concerns rose following U.S. President Donald Trump’s threats to impose further tariffs on Russia as well as planning a possible attack on Iran. Heightened geopolitical risks propelled WTI oil to hit an overnight high of $71.83 per barrel, climbing to a 5-week high. Meanwhile, China’s manufacturing sector improved in February to mark a fifth consecutive month of expansion as both output and new orders rose amid evidence of improved market conditions. The previous report marked the fastest rise in output and new orders for three months, suggesting robust PMI activity for March. Should the latest report point to another month of steady expansion, oil prices would likely receive another strong tailwind.

Next 24 Hours Bias

Medium Bullish

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