New Zealand Cuts Rates to 3-Year Low as Growth Stalls, Signals More Easing Ahead

Economic

Summary:

The Reserve Bank of New Zealand lowered its cash rate to 3.00%, the lowest since 2022, and flagged further reductions as weak growth, rising unemployment, and global headwinds weigh on the economy....

Policy Shift Toward Looser Settings

The Reserve Bank of New Zealand (RBNZ) reduced its official cash rate (OCR) by 25 basis points to 3.00% on Wednesday, marking the lowest level in three years. The move, largely anticipated by economists, reflects policymakers’ increasing concern over sluggish domestic growth and mounting global uncertainties. The central bank noted that second-quarter economic activity had stalled, with policymakers debating cuts as deep as 50 basis points before settling on the more measured quarter-point reduction.

This decision continues a trend of aggressive monetary loosening since August 2024, during which the RBNZ has delivered 250 basis points in rate cuts. The aim is to stimulate household and business activity, with confidence that inflation will remain contained within the 1–3% target range, returning to 2% in 2026.

Market Reaction: Kiwi Dollar Slides

Financial markets responded swiftly to the RBNZ’s dovish tone. The New Zealand dollar fell 0.8% to $0.5845, while two-year swap rates sank to 2.96%, their lowest level since early 2022. The reaction highlights the causal link between expectations for further rate cuts and weakening currency performance, as investors anticipate lower returns on New Zealand assets.

The RBNZ emphasized that the recovery remains fragile, hampered by cautious household and business sentiment, weak global growth, and the drag from U.S. tariff policy. Domestically, unemployment is rising, adding further strain to demand. While New Zealand has emerged from last year’s recession, the rebound has been modest, with tight government fiscal policy compounding private-sector weakness.

In its updated Monetary Policy Statement, the RBNZ projected the OCR would fall further to an average of 2.71% in Q4 2025, below its May forecast of 2.92%. For Q1 2026, the forecast dropped to 2.55%, down from 2.85%. These projections reinforce the central bank’s signal that additional easing remains on the table, conditional on inflation continuing to moderate.

Balancing Inflation and Growth Risks

While inflation currently sits at 2.7% within the RBNZ’s target band it is expected to edge up to 3.0% in Q3 before easing. This outlook gives the central bank some flexibility to cut further, though the balance of risks remains delicate. A sharper slowdown in domestic consumption or global trade could justify deeper easing, whereas any sustained inflationary spike from tariffs or supply disruptions would constrain policy space.

The RBNZ’s decision underscores its priority of cushioning a vulnerable economy from both domestic and global headwinds. With inflation stable, policymakers see room to cut further, though the pace will depend on how growth and labor markets evolve in the coming quarters. For now, markets are preparing for a lower rate trajectory, weaker kiwi performance, and a monetary environment shaped more by defensive easing than by inflationary fears.

Source: Reuters

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Commodity

Gold Consolidates After Recent Dip

Spot gold traded around $3,315 an ounce in early Asia on Wednesday, maintaining a 0.5% loss from the prior session. The dip came as optimism over potential progress in Ukraine peace efforts reduced safe-haven demand. Yet, the metal remains supported by its strong year-to-date performance, having gained over 25% on robust central bank purchases, ETF inflows, and persistent geopolitical risks.

The key focus now turns to Federal Reserve Chair Jerome Powell’s annual Jackson Hole speech on Friday. Markets have largely priced in a quarter-point rate cut for September, a move that would typically benefit gold given its non-yielding nature. However, the inflation outlook complicates the picture: last week’s hotter-than-expected CPI report led traders to partially scale back expectations for aggressive easing.

This illustrates a causal tension: while lower rates directly support gold by reducing opportunity costs, elevated inflation may limit the Fed’s willingness to ease, restraining bullion’s upside in the near term.

Political Pressure vs. Inflation Risks

President Donald Trump has publicly pushed for deeper rate cuts to counteract the drag from his tariff agenda, which itself risks fueling inflationary pressures. Powell, wary of undermining the Fed’s inflation mandate, faces a delicate balancing act. For gold markets, this political-economic tug-of-war generates uncertainty but also underpins demand as investors seek protection against policy missteps.

Despite short-term fluctuations, the structural drivers of gold remain intact. Continued de-dollarization efforts, strong central bank buying, and geopolitical uncertainty have reinforced demand. Meanwhile, silver, palladium, and platinum were steady in Asian trade, reflecting subdued movement across the broader precious metals complex.

Gold’s consolidation ahead of Powell’s speech reflects a market caught between dovish expectations and inflation realities. If Powell emphasizes growth risks and hints at easing, bullion could regain upward momentum. But if he signals caution on inflation, the rally may pause. Either way, gold’s year-long resilience suggests investors continue to see it as a strategic hedge in an environment shaped by monetary uncertainty and geopolitical strain.

Source: Bloomberg

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Samantha Luan

Economic

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Political

New Zealand's central bank cut its policy rate by 25 basis points to a three-year low of 3.00% on Wednesday, and flagged further reductions in coming months as policymakers warned of domestic and global headwinds to growth.The New Zealand dollar fell as much as 0.8% to $0.5845, while two year swap rates slumped as deep as 2.96% -- their lowest level since early 2022 -- as the decidedly dovish stance caught markets off guard.

The Reserve Bank of New Zealand said the economy had stalled in the second quarter, and that the committee debated holding rates as well as reducing them by 25 basis points or 50 basis points.The cut in the official cash rate by a quarter point was in line with a Reuters poll in which all but two of the 30 economists surveyed correctly forecast the RBNZ's decision, after the bank held policy steady in July.The central bank has slashed rates by 250 basis points since August 2024 to underpin a fragile recovery, taking advantage of expectations inflation will return to 2% next year and to buffer the economy from a broad shakeup in U.S. tariff policy.

“There are upside and downside risks to the economic outlook. Cautious behaviour by households and businesses could further dampen economic growth. Alternatively, the economic recovery could accelerate as the full effects of interest rate reductions flow through the economy,” the RBNZ said in its accompanying policy statement.The central bank forecast in its Monetary Policy Statement that the cash rate will be at 2.71% in the fourth quarter of 2025, below a forecast of 2.92% in May. In the first-quarter of 2026 it expects it to average 2.55%, lower than the previously forecast 2.85%.

"If medium-term inflation pressures continue to ease as expected, there is scope to lower the OCR further," the statement added.A global front-runner in withdrawing pandemic-era stimulus, the RBNZ lifted rates 525 basis points between October 2021 and September 2023 to curb inflation in the most aggressive tightening since the official cash rate was introduced in 1999.

The punishing borrowing costs, however, took a heavy toll on demand and tipped the economy into recession last year. While, the South Pacific nation has emerged from the slump, growth remains weak and is being further hampered by a slowdown in the global economy and the government’s tight fiscal policy. Adding to the domestic economic stress, unemployment is also rising. New Zealand's annual inflation remains within the RBNZ's 1%-3% target band at 2.7% and the central bank is forecasting it will increase to 3.0% in the third quarter.

Source: Yahoo Finance

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From Refurbishment to Rebuild

What began in 2018 as a modest A$260 million refurbishment of the Reserve Bank of Australia’s (RBA) Sydney headquarters has morphed into one of the most expensive office overhauls in the country’s history. The discovery of widespread asbestos in the 22-story building at 65 Martin Place has forced the RBA to shift from partial refurbishment to a near-total rebuild. Staff were initially expected to remain on-site during renovations, but health risks prompted a full evacuation, with the bank leasing new premises nearby.

The project’s estimated cost has now risen to A$1.2 billion ($774 million), almost five times the original plan. A significant causal factor is the asbestos removal process, which alone accounts for roughly half of projected expenses and is not expected to conclude until 2027. The completion timeline has been extended to mid-2031, nearly a year beyond the end of Governor Michele Bullock’s seven-year term.

Despite the blowout, the central bank’s new governance board has approved continuation after a cost-benefit review concluded that completing the renovation remains the most economical option compared to alternatives. However, the board, which includes high-profile members such as former Telstra CEO David Thodey and Gilbert + Tobin co-founder Danny Gilbert, has signaled it will reassess the project once asbestos removal is finalized.

Governance, Accountability, and Comparisons Abroad

Unlike the U.S. Federal Reserve’s ongoing headquarters renovation, which has drawn political scrutiny and even threats of litigation from President Donald Trump against Chair Jerome Powell, the RBA has not become a political flashpoint. The project is self-funded, but it indirectly affects taxpayers because the central bank pays dividends to the government. Those transfers have already been suspended in recent years due to large losses incurred from pandemic stimulus operations.

The governance implications are significant: while the project reflects compliance with strict heritage requirements, its ballooning costs illustrate how underestimation of building risks in this case asbestos can dramatically reshape budgetary priorities for public institutions.

A Record-Breaking Australian Office Project

According to the Australian Financial Review, the renovation of the 60-year-old landmark is now among the most expensive office refurbishments ever attempted in Australia. This transformation highlights a broader structural issue: as central banks face rising expectations for transparency and cost discipline, infrastructure miscalculations can erode public trust, particularly when taxpayer-related funds are indirectly at stake.

The RBA’s headquarters renovation has evolved from a routine modernization project into a multi-billion-dollar test of governance, financial prudence, and institutional credibility. While asbestos removal justifies the expanded scope, the scale of the blowout raises difficult questions about project oversight and public accountability. With completion now scheduled for 2031, the renovation will outlast the tenure of the current governor, leaving her successors to manage both the legacy of costs and the challenge of defending the central bank’s stewardship of public resources.

Source: Bloomberg

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FastBull Featured

[Quick Facts]

1. The United States adds 407 Steel and Aluminum-Derived Products to the tariff list.

2. White House says the Presidents of Russia and Ukraine have expressed willingness to negotiate.

3. EU announces new round of sanctions against Russia to be introduced in September.

4. Ukrainian Foreign Minister says trilateral talks may yield breakthrough.

5. Tariff shocks intensify as Japan's exports see the worst drop in four years.

6. UK pay growth stays at 3%, employers eye Autumn Budget.

7. China and India reach 10-point consensus at Special Representatives' Meeting on border issues.

8. Canada's inflation stays low in July, but core inflation remains elevated.

9. US housing starts rebound to five-month high in July.

[News Details]

The United States adds 407 Steel and Aluminum-Derived Products to the tariff list

On August 19th, the U.S. Department of Commerce announced that it has added 407 product categories to the tariff list for steel and aluminum products, with a tariff rate of 50%. The Commerce Department stated in its announcement that the newly added list covers a wide range of items, including hundreds of products such as wind turbines and their components, mobile cranes, railway vehicles, furniture, compressors, and pumping equipment.

White House says the Presidents of Russia and Ukraine have expressed willingness to negotiate

On August 19th, White House Press Secretary Leavitt stated that U.S. troops will not be deployed to Ukraine but can provide assistance in coordination and security. Trump has instructed the national security team to coordinate with Europe. Leavitt said that Trump proposed a solution for NATO to purchase U.S. weapons. She also mentioned that Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy have expressed willingness to sit down for negotiations, and Trump hopes for direct diplomacy between Russia and Ukraine. Currently, arrangements for a meeting between Zelenskyy and Putin are underway.

EU announces new round of sanctions against Russia to be introduced in September

On August 19th, the European Council held a video conference to discuss the Washington meeting on Ukraine. EU High Representative for Foreign Affairs and Security Policy Kaja Kallas stated after the meeting that EU leaders are committed to achieving lasting peace to protect Ukraine's and Europe's vital security interests. Kallas said the EU will continue to take measures against Russia, and the next round of sanctions targeting Moscow is expected to be introduced in September. She added that these issues have been prioritized on the agenda for discussions among EU foreign and defense ministers next week.

Ukrainian Foreign Minister says trilateral talks may yield breakthrough

Ukrainian Foreign Minister Andrii Sybiha said on social media today, August 19th, that the upcoming meeting between the leaders of Ukraine, the United States, and Russia may achieve a breakthrough on the path to peace. He pointed out that although Ukrainian President Zelenskyy and U.S. President Trump, with the participation of European and NATO leaders, are making efforts to advance the peace process, Moscow continues to take actions by launching new attacks and acts of sabotage. He emphasized the importance of stopping the killings, achieving lasting peace, and providing reliable security guarantees.

Tariff shocks intensify as Japan's exports see the worst drop in four years

U.S. tariffs continue to pressure global trade, with Japanese exports experiencing their steepest decline in more than four years, casting a shadow over economic growth prospects amid still-fragile domestic consumption. Japan's Ministry of Finance reported on Wednesday that exports in July fell 2.6% year-on-year, exceeding the median forecast of a 2.1% drop. This also marks the largest decline since February 2021. Imports dropped 7.5% during the month, resulting in a trade deficit of 117.5 billion yen. The export decline may heighten concerns about whether the Japanese economy can continue to expand. Despite weak domestic consumption, Japan's economy has managed to grow for the past five quarters, but further export weakness could drag the economy into stagnation. Persistent export declines may also prompt the Bank of Japan (BoJ) to adopt a cautious stance. Whether the Japanese economy can maintain resilience under U.S. tariff pressures is one of the factors that the BoJ considers in determining the optimal timing for its next interest rate hike. It is widely expected that the central bank will hold policy steady when it announces its decision on September 19th.

UK pay growth stays at 3%, employers eye Autumn Budget

Pay data firm Brightmine reported that in the three months to July, UK private sector employers maintained a pay settlement growth rate of 3%, and economic uncertainty, along with the possibility of further tax increases, suggest this cautious approach is likely to continue. This marks the eighth consecutive month that Brightmine's monthly report has shown a median pay settlement of 3%; the median pay growth a year ago was 4%.

Sheila Attwood, Director of HR Insight and Data at Brightmine, said that while official data last week showed the UK economy grew by 0.3% in the second quarter (stronger than expected), employers are unlikely to take much comfort from it. She noted that in the face of ongoing economic uncertainty and the upcoming Autumn Budget, many employers continue to make decisions cautiously, keeping pay increases at around 3%. Many businesses have said they are being squeezed by the tax hikes introduced in April. Chancellor of the Exchequer Rachel Reeves now faces pressure to plug a projected shortfall in public finances later this year. The Bank of England is closely monitoring wage growth to help determine when and whether to cut interest rates again. Earlier this month, the central bank lowered borrowing costs but signaled that further cuts may be more gradual due to inflationary pressures. Brightmine studied 19 pay settlements that took effect in the three months to July 31st, covering more than 600,000 employees.

China and India reach 10-point consensus at Special Representatives' Meeting on border issues

On August 19, 2025, the 24th meeting of the Special Representatives of China and India on the Boundary Question was held in New Delhi, India. The Chinese Special Representative, Wang Yi, member of the Political Bureau of the CPC Central Committee and Director of the Office of the Central Commission for Foreign Affairs, and the Indian Special Representative, National Security Advisor Ajit Doval, in accordance with the strategic guidance of the leaders of the two countries and in a positive and constructive manner, had candid and in-depth exchanges of views on the boundary question between China and India, and reached the following 10-point consensus:

1. Both sides positively evaluated the progress made in implementing the important consensus reached by the leaders of the two countries since their meeting in Kazan, and noted that the boundary regions between China and India have remained peaceful and stable since the 23rd round of talks.

2. Both sides reaffirmed the importance of maintaining peace and stability in the boundary regions, emphasized the need to resolve relevant issues through friendly consultations to promote the overall development of China-India relations.

3. Both sides agreed to approach the situation from the political perspective of the overall bilateral relationship, and to seek a fair, reasonable and mutually acceptable framework for resolving the boundary question in accordance with the political guiding principles agreed by the two countries in 2005.

4. Both sides agreed to establish a demarcation expert group under the framework of the Working Mechanism for Consultation and Coordination (WMCC) on China-India Border Affairs to explore the possibility of advancing demarcation negotiations in areas where conditions are ripe.

5. Both sides agreed to establish a working group under the framework of the WMCC to advance effective border management and control, maintaining peace and stability in boundary areas.

6. In addition to the existing general-level talks in the western section of the boundary, both sides agreed to establish a general-level talks mechanism in the eastern and central sections, and to hold a new round of general-level talks in the western section as soon as possible.

7. Both sides agreed to utilize the border management and control mechanisms through diplomatic and military channels, first reaching consensus on relevant principles and methods to promote de-escalation and management processes.

8. Both sides exchanged views on cross-boundary river cooperation and agreed to use the expert-level mechanism for cross-boundary rivers to maintain communication on renewing the cross-boundary river flood reporting memorandum of understanding. The Chinese side agreed to share emergency hydrological information on relevant rivers with the Indian side based on humanitarian principles.

9. Both sides agreed to reopen three traditional boundary trade markets.

10. Both sides agreed to hold the 25th round of talks in China in 2026.

Canada's inflation stays low in July, but core inflation remains elevated

Canada's Consumer Price Index (CPI) rose 1.7% year-over-year in July, down from 1.9% in June, as falling gasoline prices helped keep overall inflation low, but core inflation measures remained stubbornly high. On a monthly basis, CPI increased by 0.3% in July, up from 0.1% in June. Gasoline prices fell 16.1% year-over-year, more than the previous 13.4%.

The main drivers of the increase were food and shelter costs. Food prices rose 3.3% in July, up from 2.9% in June. Shelter, the largest component of the CPI basket, increased by 3.0% in July, up from 2.9% in June (the first rise since February last year), mainly driven by a smaller decline in natural gas costs and a 5.1% increase in rents.

The Bank of Canada closely watches core inflation measures. The CPI median, one of these measures, rose to 3.1% in July from 3.0% in June. Over 37% of the CPI basket still showed increases above 3%.

US housing starts rebound to five-month high in July

Data released on Tuesday showed that US housing starts in July rose at an annualized rate of 5.2% month-over-month, higher than the market expectation of -1.7% and the previous 4.6%. The total number of housing starts annualized in July reached 1.428 million units, also above the market expectation of 1.29 million units and the previous 1.321 million units.

Specifically, volatile multi-family housing starts surged nearly 10%, marking the fastest pace since mid-2023. Single-family home starts, which make up the largest share of residential construction, increased by 2.8%, with the annualized total reaching 939,000 units.

Despite the rebound in July, US homebuilders have grown more cautious over the past two years as doubling mortgage rates have discouraged many homeowners from moving, suppressing demand and leading to the highest level of new home supply since 2007. Although builders have cut prices and offered generous incentives, residential construction has weighed on economic growth in four out of the past five quarters.

[Today's Focus]

UTC+8 10:00 Reserve Bank of New Zealand August Interest Rate Decision

UTC+8 11:00 Reserve Bank of New Zealand Governor Adrian Orr Holds Monetary Policy Press Conference

UTC+8 14:00 Germany July Producer Price Index (PPI)

UTC+8 14:00 UK July Consumer Price Index (CPI)

UTC+8 15:15 European Central Bank President Christine Lagarde Attends a World Economic Forum Event

UTC+8 23:00 Federal Reserve Governor Christopher Waller Speaks at Wyoming Blockchain Symposium

UTC+8 02:00 Federal Reserve Releases Minutes of Monetary Policy Meeting

UTC+8 03:00 Atlanta Fed President Raphael Bostic Speaks on Economic Outlook

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IC Markets

Commodity

Forex

Economic

What happened in the U.S session?

U.S. equities (especially tech and homebuilders), bond yields, the USD, and oil prices were the asset classes most sensitive to overnight headlines and macro data. U.S. stocks opened the week under pressure, especially the S&P 500 and Nasdaq, with the tech sector leading declines. Major drivers included worries over tariffs, mixed signals about potential Fed rate cuts, and weaker retail earnings reports

What does it mean for the Asia sessions?

Asian traders should monitor central bank policy decisions, especially from New Zealand and China’s major international conferences, market reactions to macroeconomic data, and the movements of leading tech and energy stocks on August 20, 2025. The Reserve Bank of New Zealand (RBNZ) is set to cut its official cash rate by 25 basis points to 3%. This move aims to support the economy amid subdued inflation and a weak labor market. Official statements and press conferences from the RBNZ will provide further indications of monetary policy direction.

The Dollar Index (DXY)

The dollar’s latest developments are dominated by cautious trading ahead of pivotal Fed and economic events. Directional clarity likely hinges on the disclosures and tone from today’s FOMC minutes and Powell’s Friday speech at Jackson Hole. The US Dollar continues to show broad-based firmness ahead of these major events. For example, the Australian Dollar (AUD) has fallen to a two-week low against the USD, while the Pound Sterling (GBP) has retraced some gains as traders await UK CPI data.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% at its meeting on July 29–30, 2025, keeping policy unchanged for the fifth consecutive meeting.

● The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.

● Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.

● The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.

● In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.

● The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.

● As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.

● The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Gold remains near historically elevated levels, supported by strong year-to-date gains amid geopolitical and economic uncertainty. Short-term price action is mixed, with markets watching for developments in global politics and monetary policy for further direction. Gold has experienced some volatility recently.On August 19, 2025, gold closed at around $3,317.96 per troy ounce, down 0.43% from the previous day. Over the past month, the price has dipped by about 2.4%, but it remains up over 32% compared to the same period a year ago. Gold futures opened earlier this week at $3,378.30, indicating notable year-to-date gains, with prices up 28.3% since the start of 2025. Despite recent corrections, the long-term uptrend remains strong

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

The AUD faces downward pressure due to a firm US Dollar, an outlook for additional RBA rate cuts, and global macro headwinds, despite improvements in consumer sentiment and stable labor market data. The Australian Dollar has declined to a two-week low against the US Dollar, currently trading near 0.6450. The AUD/USD rate has been drifting lower since mid-August, down 0.68% from the previous session and showing a general weakening trend of 1.18% over the past month and a 4.38% drop over the last 12 months.Central Bank Notes:

● The RBA held its cash rate steady at 3.85% at the July meeting on 8 July 2025, following a 25-basis-point reduction in May and in line with widespread market expectations, after recent data showed inflation tracking within the target band.

● Inflation continues to ease from its peak, with higher interest rates helping to rebalance demand and supply across the Australian economy. Data for the June quarter signaled ongoing progress, though underlying pressures persist in certain sectors.

● Trimmed mean inflation for the June quarter likely remained near 2.9% and headline CPI around 2.4%, both within the RBA’s 2–3% target range. The Board noted further evidence of inflation convergence, but flagged that not all price categories are moving in tandem.

● Financial markets have exhibited increased volatility in the wake of global tariff and trade policy developments—especially following recent announcements from the U.S. and the EU. This has pushed asset prices higher but contributed to an uncertain outlook for domestic growth and employment.

● Private domestic demand showed a tentative recovery. Real household incomes improved, and signs of easing household financial stress emerged, but some business sectors continued to face subdued demand, limiting their ability to pass on cost increases.

● Labour market conditions remained tight overall. Employment continued to expand, with low rates of underutilization. Business surveys suggest labour availability remains a constraint, though there are signs of a gradual easing compared to earlier in 2025.

● Underlying wage growth softened modestly, though unit labour cost growth remains elevated due to below-trend productivity gains. The Board remains attentive to developments in wage and productivity dynamics as cost pressures continue to evolve.

● Uncertainties persist for both domestic activity and inflation. Consumption growth has risen, but more slowly than anticipated three months ago, with global and domestic factors both contributing to the cautious outlook.

● There remains a risk that household spending picks up more slowly than forecast, which could result in ongoing subdued aggregate demand and a sharper deterioration in employment conditions.

● Given that inflation is expected to remain around the target band, the Board judged that it was appropriate to keep policy settings unchanged in July, maintaining a position that is still mildly restrictive.

● The Board continues to monitor all incoming data and assesses risks carefully, with a focus on global trends, domestic demand indicators, inflation outcomes, and the labour market outlook.

● The RBA remains committed to its mandate of price stability and full employment and stands ready to adjust policy as needed to achieve these objectives.

Next 24 Hours Bias

Medium Bearish

The Kiwi Dollar (NZD)

The key event for the NZD today is the RBNZ’s expected rate cut to 3.00%, with markets watching for guidance on further monetary easing and the bank’s assessment of domestic and global risks. The NZD remains vulnerable to external economic developments, especially regarding China and U.S. trade policy, while domestic economic softness continues to shape the RBNZ’s cautious approach.

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 pickup in household consumption and business investment. However, 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

Weak Bearish

The Japanese Yen (JPY)

The yen is stabilizing around 147.8/USD, supported by positive Japanese economic data and market expectations of possible BoJ tightening, despite global risk flows and external pressures. The BoJ kept rates unchanged at 0.5% during its last meeting on July 31, 2025. The next policy decision is scheduled for September 18–19, 2025. The inflation outlook has been upgraded, with core inflation now expected at 2.7% for FY2025, keeping the door open for further rate hikes. However, the BoJ remains cautious, signaling that any tightening will be gradual and data-driven.

Central Bank Notes:

● The Policy Board of the Bank of Japan decided on 31 July, 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 BOJ will maintain its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases will, in principle, continue to decrease by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, targeting a purchase level near ¥2 trillion in January to March 2027.

● Japan’s economy is experiencing a moderate recovery overall, though some sectors remain sluggish. Overseas economies are generally growing moderately, but recent trade policies in major economies have introduced pockets of weakness. Exports and industrial production in Japan are essentially flat, with any uptick largely driven by front-loaded demand ahead of U.S. tariff increases.

● On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. This reflects continued wage pass-through, previous import cost surges, and further increases in food prices, particularly rice. Expectations for future inflation have begun to rise moderately.

● The effects of the earlier import price and food cost increases are expected to fade during the outlook period. There may be a temporary stagnation in core inflation as overall growth momentum softens.

● Looking forward, the economy is likely to see a slower growth pace in the near term as overseas economies feel the pinch of ongoing global trade policies, putting downward pressure on Japanese corporate profits. Accommodative financial conditions are expected to buffer these headwinds somewhat. In the medium term, as global growth recovers, Japan’s growth rate is also expected to improve.

● With renewed economic expansion, intensifying labor shortages, and a steady rise in medium- to long-term expected inflation rates, core inflation is projected to gradually pick up. By the latter half of the BOJ’s projection period, inflation is forecast to move in line with the 2% price stability target.

● There are multiple risks to the outlook, with especially elevated uncertainty regarding the future path of global trade policies and overseas price trends. The BOJ will continue to closely monitor their impact on financial and foreign exchange markets, as well as on Japan’s economy and inflation.

● The next meeting is scheduled for 17 to 18 September 2025.

Next 24 Hours BiasStrong Bullish

Oil

Oil markets are experiencing a bearish trend due to easing geopolitical tensions, increased supply from OPEC+, and slowing demand growth in major consuming countries, especially China. The focus in the coming days will remain on geopolitical negotiations, macroeconomic data, and monthly reports from energy agencies.Crude oil prices have continued to fall, with West Texas Intermediate (WTI) crude dipping to around $62.70 per barrel and Brent crude falling to about $65.80 per barrel as of August 19, 2025. This decline represents a drop of over 4.9% in the last month and about 14% compared to the same period last year. The downward pressure is driven by multiple factors, including global economic concerns and increasing OPEC+ output.Next 24 Hours Bias

Medium Bearish

Source: IC Markets

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Tech Weakness Drags Asian Shares

Shares across Asia opened lower after a heavy tech-led selloff in the U.S. pulled global sentiment down. MSCI’s broadest Asia-Pacific index outside Japan fell 0.47%, with Japan’s Nikkei 225 losing 1.2% and China’s CSI300 dropping 0.5%. Futures markets reflected the same caution, with Euro Stoxx 50, DAX, and FTSE futures all sliding, alongside declines in S&P 500 and Nasdaq futures.

Analysts attributed the retreat to investor concerns over policy and regulatory pressures facing U.S. technology firms. Reports that Nvidia and AMD agreed to hand over 15% of revenues from Chinese chip sales to the U.S. government, combined with speculation that Washington may take a 10% equity stake in Intel, highlighted growing state intervention in the sector. This development is not just correlation but causation regulatory actions directly undermine investor confidence in tech valuations, prompting a broad selloff.

Geopolitical Risks Reinforce Market Fragility

Market uncertainty was compounded by inconclusive talks between U.S. President Donald Trump, Ukrainian President Volodymyr Zelenskiy, and European leaders over the war in Ukraine. While Trump reiterated U.S. support for Ukraine’s security and even suggested possible air support, he ruled out ground troops. The lack of concrete commitments left geopolitical risk elevated, which in turn constrained investor appetite for equities.

In commodities, oil prices regained ground after Tuesday’s pullback, with Brent crude rising 0.46% to $66.09 per barrel and WTI climbing 0.6% to $62.72. The recovery reflects investor reassessment that sanctions on Russian crude remain in place, keeping global supply tight. This indicates a causal relationship where stalled Ukraine peace progress sustains oil supply risks, supporting prices.

Dollar Firms Ahead of Jackson Hole

Currency markets saw the U.S. dollar firm modestly ahead of the Jackson Hole symposium, where Fed Chair Jerome Powell is set to outline the policy outlook. The euro eased to $1.1633 and sterling to $1.3470, while the New Zealand dollar slipped to $0.5885 ahead of an expected rate cut by the RBNZ.

The dollar’s strength reflects investor hedging before Powell’s speech, as traders have nearly priced in a rate cut next month. Yet, as Vishnu Varathan of Mizuho noted, mixed inflation data (CPI vs PPI) leaves uncertainty over whether the Fed prioritizes inflation control or labor market risks. This uncertainty sustains dollar demand as a safe haven.

With Wall Street’s tech sector under regulatory pressure, geopolitical risks unresolved, and policy signals from Jackson Hole looming, Asian markets are positioned defensively. Investors are reducing exposure to high-valuation stocks while holding dollars ahead of potential monetary easing in the U.S. The near-term trajectory of equities and currencies will hinge on Powell’s remarks, which could either confirm expectations of a September rate cut or push markets to reassess the Fed’s tolerance for inflation risk.