Soft Inflation Clears Path For RBA Cut, BoC And Fed Next

Forex

Economic

Summary:

Aussie weakened broadly on Asian session after Australia’s Q2 CPI data cemented expectations for another RBA rate cut in August. However, the decline in Aussie lacks strong momentum so far.

The softness in both headline and core inflation readings has effectively given the central bank the green light to proceed with its cautious easing cycle. But the absence of more significant economic weakness—especially in labor markets—means there’s little pressure to accelerate easing. Governor Michele Bullock’s recent dismissal of June’s uptick in unemployment supports the case for steady, quarterly rate reductions.

Elsewhere in the currency markets, Yen is leading gains as traders brace for Thursday’s BoJ meeting, with speculations of a hawkish tilt in tone or projections. Kiwi and Euro are also firm. Aussie is sitting at the bottom, followed by Sterling and Dollar. Loonie and Swiss Franc are largely in the middle of the pack.Markets are facing a busy schedule ahead, with Eurozone GDP, US ADP employment, and US Q2 GDP advance release coming in quick succession. These will be followed by the BoC and FOMC rate decisions. The combination of macro data and central bank signals could drive sharp intraday moves across currencies and yields.

On trade, US-China negotiations in Stockholm ended without breakthrough. Officials indicated it’s now up to US President Donald Trump to determine whether to extend the current tariff truce past the August 12 deadline. A failure to do so could see tariff rates snap back to triple-digit levels.US Treasury Secretary Scott Bessent stressed that only Trump can finalize any extension. He hinted at another round of discussions in about 90 days and noted “good personal interaction” with Chinese Vice Premier He Lifeng. Talks reportedly made progress on technical matters like rare earth exports.

Technically, EUR/USD is hovering near its 55-day EMA. Bulls will want to see support hold to maintain the view that the pullback from 1.1829 is corrective. A sustained break below, however, would open up deeper losses toward 1.1198, the 38.2% retracement of the 1.0176 to 1.1829 advance.

Soft Inflation Clears Path For RBA Cut, BoC And Fed Next_1

Dollar loses momentum ahead of Fed’s potential dovish tilt

Fed is widely expected to keep interest rates unchanged 4.25–4.50%. Markets have priced in over a 97% chance of a hold, making the decision a foregone conclusion. However, the markets would watch out for any dovish signals from the Fed, which could put pressure on the Dollar, particularly if policy language starts to point more clearly toward a September cut.

Key to the announcement will be whether dovish members like Governors Christopher Waller and Michelle Bowman begin to shift their rhetoric into formal dissent— casting votes for an immediate cut. If additional policymakers join them, markets will likely interpret it as confirmation that a policy pivot is nearing. Fed Chair Jerome Powell’s tone in the post-meeting press conference will also be crucial in guiding expectations into the fall.Currently, futures markets see a roughly 65% chance of a rate cut in September. Any softening in Powell’s stance or language around tariff uncertainty and inflation could raise those odds.

Soft Inflation Clears Path For RBA Cut, BoC And Fed Next_2

Economic data released ahead of the Fed will help set the stage. A 2.4% annualized Q2 GDP print is expected, following Q1’s surprising -0.5% contraction. However, this strength is largely technical, driven by a reversal in imports following tariff-related stockpiling in Q1, rather than an underlying surge in domestic activity.

Technically, USD/JPY’s rebound from 145.84 lost momentum ahead of 149.17 resistance. Intraday bias is turned neutral first. On the upside, firm break of 149.17 will resume whole rally from 139.87 and target 100% projection of 139.87 to 148.64 from 142.66 at 151.43, which is close to 151.22 fibonacci level. Nevertheless, break of 147.50 minor support will extend the corrective pattern from 149.17 with another falling leg towards 145.84 first.

Soft Inflation Clears Path For RBA Cut, BoC And Fed Next_3

BoC to hold fire again, September cut still in play

BoC is widely expected to hold its overnight rate steady at 2.75% today, marking a third consecutive pause in its rate-cut cycle. The slight improvement in the labor market, with unemployment edging back down to 6.9% in June, gives the central bank breathing space to maintain its current stance. However, core inflation pressures remain stubborn, with CPI common stuck at 2.6%, far from the bank’s comfort zone.With policy already sitting in the neutral range, the BoC is likely opting for a wait-and-see approach, especially given ongoing trade uncertainties and the potential for delayed tariff pass-throughs to consumer prices later in the year. While underlying growth concerns persist, there’s a case for keeping policy steady until inflation dynamics become clearer.

Markets continue to expect further easing this year. A Reuters poll shows that nearly two-thirds of economists forecast a 25 basis point cut in September, followed by another by year-end. That would bring the policy rate down to 2.25%, aligning with weakening demand and persistent disinflation pressures if they materialize.

Technically, considering bullish convergence condition in D MACD, USD/CAD’s break of 55 D EMA this week suggests that it might already be correcting the whole fall from 1.4791. Further rebound is likely in the near term. Though, strong resistance should emerge below 1.4014 (38.2% retracement of 1.4791 to 1.3538 at 1.4017 to limit upside.

Soft Inflation Clears Path For RBA Cut, BoC And Fed Next_4

Australia CPI cools to 2.1% in Q2, June reading undershoots

Australia’s inflation pressures continued to ease in Q2, reinforcing expectations for further policy easing from the RBA.Headline CPI rose 0.7% qoq, down from Q1’s 0.9% qoq and under the 0.8% qoq consensus. On an annual basis, CPI slowed from 2.4% yoy to 2.1% yoy, the lowest since early 2021, and below expectation of 2.2% yoy.Trimmed mean inflation, the RBA’s preferred gauge, also moderated from 0.7% qoq to 0.6% qoq. Annual rate fell from 2.9% to 2.7% yoy, matched expectations, and marking the lowest since Q4 2021.Underlying disinflation is broadening too. Annual services inflation cooled from 3.7% yoy to 3.3% yoy, the weakest since Q2 2022. Goods inflation dipped back to 1.1% yoy after a brief uptick from Q4’s 0.8% yoy to Q1’s 1.3% yoy.The June monthly CPI dropped from 2.1% yoy to 1.9% yoy, also below expectations of 2.1% yoy, and undershoots RBA’s 2-3% target band.

NZ ANZ business confidence ticks up to 47.8, easing inflation signals more RBNZ cuts ahead

New Zealand’s ANZ Business Confidence ticked higher in July, rising from 46.3 to 47.8. Own Activity Outlook edged down slightly from 40.9 to 40.6. The share of firms expecting to raise prices over the next three months dropped to 43.5%—the lowest since December 2024. Inflation expectations also dipped from 2.71% to 2.68%.ANZ described the inflation signals as “benign,” noting declines across both cost and pricing expectations. The bank suggested that RBNZ may soon shift from worrying about inflation staying too high to concerns about it falling too low, implying a greater likelihood of deeper monetary easing than currently priced in by markets or flagged by the RBNZ itself.

EUR/AUD Daily Outlook

Daily Pivots: (S1) 1.7694; (P) 1.7746; (R1) 1.7787;

EUR/AUD recovered after hitting 1.7717 support and intraday bias stays neutral. On the downside, decisive break of 1.7717 will revive the case that rise from 1.7245 has completed. Corrective pattern from 1.8554 should have then started the third leg. Deeper decline should be seen to 1.7459 support first. Nevertheless, strong bounce from current level, followed by break of 1.7972 resistance, will resume the rise from 1.7245 through 1.8094.

Soft Inflation Clears Path For RBA Cut, BoC And Fed Next_5

In the bigger picture, price actions from 1.8554 medium term top are seen as a corrective pattern. While deeper pullback might be seen, downside should be contained by 38.2% retracement of 1.4281 (2022 low) to 1.8554 at 1.6922 to bring rebound. Up trend from 1.4281 is expected to resume at a later stage.

Economic Indicators Update

GMT	CCY	EVENTS	ACT	F/C	PP
01:00	NZD	ANZ Business Confidence Jul	47.8		46.3
01:00	NZD	ANZ Activity Outlook Jul	40.6		40.9
01:30	AUD	Monthly CPI Y/Y Jun	1.90%	2.10%	2.10%
01:30	AUD	CPI Q/Q Q2	0.70%	0.80%	0.90%
01:30	AUD	CPI Y/Y Q2	2.10%	2.20%	2.40%
01:30	AUD	Trimmed Mean CPI Q/Q Q2	0.60%	0.70%	0.70%
01:30	AUD	Trimmed Mean CPI Y/Y Q2	2.70%	2.70%	2.90%
05:30	EUR	France Consumer Spending M/M Jun		-0.30%	0.20%
05:30	EUR	France GDP Q/Q Q2 P		0.10%	0.10%
06:00	EUR	Germany Retail Sales M/M Jun		0.50%	-1.60%
06:00	EUR	Germany GDP Q/Q Q2 P		-0.10%	0.40%
08:00	CHF	UBS Economic Expectations Jul			-2.1
09:00	EUR	Eurozone GDP Q/Q Q2 P		0.00%	0.60%
09:00	EUR	Eurozone Economic Sentiment Jul		94.8	94
09:00	EUR	Eurozone Industrial Confidence Jul		-11	-12
09:00	EUR	Eurozone Consumer Confidence Jul		-14.7	-14.7
09:00	EUR	Eurozone Services Sentiment Jul		3.4	2.9
12:15	USD	ADP Employment Change Jul		75K	-33K
12:30	USD	GDP Annualized Q2 P		2.40%	-0.50%
12:30	USD	GDP Price Index Q2 P		2.30%	3.80%
13:45	CAD	BoC Interest Rate Decision		2.75%	2.75%
14:00	USD	Pending Home Sales M/M Jun		0.30%	1.80%
14:30	CAD	BoC Press Conference
14:30	USD	Crude Oil Inventories		-2.3M	-3.2M
18:00	USD	Fed Interest Rate Decision		4.50%	4.50%
18:30	USD	FOMC Press Conference

Source: ACTIONFOREX

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Economic

Commercialization in Full Swing: Tencent and Black Lake Lead the Way

Chinese AI firms are now demonstrating tangible profitability as business adoption deepens. Tencent’s AI customer service tools based on its Hunyuan model have significantly reduced reliance on human operators, with implementation times dropping from months to mere weeks. Its AI resolves over 80% of customer queries at Toyota FAW, more than doubling its success rate in just six months.

Black Lake Technologies, backed by Temasek, is benefiting from this enterprise push. CEO Zhou Yuxiang noted a surge in interest from AI model engineers seeking to shift from foundational research to real-world industrial application. His company, which supports small Chinese factories with AI tools for efficiency gains, is riding a wave of post-e-commerce “FOMO” as business owners seek to avoid missing out on the AI revolution.

This trend aligns with falling AI usage costs and rising availability of open-source models like Z.ai’s recent release, which undercut major domestic rivals like Moonshot and DeepSeek. This open-source strategy has enabled broader access to generative AI without the steep infrastructure costs borne by industry leaders like OpenAI.

Data as Infrastructure: A New Growth Frontier

With AI model maturity rising, the bottleneck has shifted to high-quality data. Firms like DeepExi and Haitian Ruisheng are capitalizing on this shift by offering tailored data services from domain-specific tuning to automated and expert-reviewed data labeling. DeepExi boasts an 88.3% revenue surge in 2024, supporting major clients in healthcare and industrial manufacturing.

Haitian Ruisheng, which works with giants like ByteDance, Tencent, and Amazon, reported first-half 2025 revenues of 148.9 million yuan up over 61% year-on-year and doubled net profit. The firm sees future monetization potential in education, healthcare, tourism, and embodied intelligence, particularly robotics.

Global Expansion and Strategic Alignment

Beyond the domestic market, Chinese AI firms are quietly going global. Tencent now offers virtual human services in Japan and identification/translation tools across Southeast Asia. Haitian Ruisheng is setting up operations in Singapore, seeking a foothold in international markets as AI becomes an exportable service.

China’s broader strategic vision was reinforced at the 2025 World AI Conference in Shanghai, where Premier Li Qiang proposed a global AI cooperation framework. Beijing aims to guide AI integration across agriculture, education, and industry, emphasizing scale and state-backed coordination.

Policy Context and Market Environment

This commercialization momentum occurs as broader trade tensions between the US and China remain unresolved. The uncertain extension of a tariff truce weighs on investor sentiment, with the Hang Seng down 0.45% and mainland CSI 300 up 0.51%. Yet the CSI 300’s 5% YTD gain indicates confidence in the domestic economy, underpinned partly by AI-driven modernization.

Meanwhile, China is reinforcing demographic and disaster resilience, rolling out annual child subsidies and boosting flood response after deadly rains in Beijing. These efforts aim to shore up the consumer base that AI-powered services may eventually serve.

While US and European firms continue to pour billions into foundational model training with uncertain returns, Chinese firms have pivoted toward faster commercial wins. By combining open-source models, enterprise tools, and global ambition, China’s AI sector is writing its own revenue-first playbook one increasingly grounded in pragmatic, scalable business applications.

Source: CNBC

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Trade Leverage as a Peacekeeping Tool

President Donald Trump’s decision to dangle 36% tariffs over Thailand and Cambodia during their five-day border conflict appears to have accelerated the ceasefire signed on Monday. With at least 42 lives lost, Trump’s direct calls to both countries’ leaders and subsequent threat to withhold access to the US market served as a catalyst for urgent negotiation. His social media declaration that “we do not want to make any Deal, with either Country, if they are fighting” turned economic pressure into geopolitical leverage.

This maneuver reflects a broader Trump doctrine: using tariffs not only as economic weapons but as diplomatic bargaining chips. His claim that such tactics ended previous tensions between India and Pakistan aligns with a recurring theme in his administration bypassing traditional diplomacy in favor of transactional, pressure-based negotiations.

China’s Quiet Mediation Strategy Challenged

Trump’s headline-grabbing role starkly contrasted with China’s low-key presence at the ceasefire talks. While Beijing dispatched representatives, it avoided threats or overt interventions, adhering to its long-standing policy of non-interference. Chinese Foreign Minister Wang Yi framed the border conflict as a legacy of Western colonialism, reaffirming China’s preference for regional forums like ASEAN to handle local disputes.

But Trump’s intervention allowed Washington to claim peacemaker status in China’s geopolitical backyard, casting doubt on Beijing’s soft power strategy, particularly in Cambodia, where Chinese influence has been rising through Belt and Road projects and infrastructure financing.

Economic Stakes and Regional Realignment

Both Thailand and Cambodia had significant incentives to comply. The looming US tariffs would have placed them at a steep disadvantage compared to neighboring exporters like Indonesia (19%), the Philippines (19%), and Vietnam (20%). While Cambodia remains economically tethered to China, with Chinese firms funding airports, expressways, and canals, its trade deficit with the US ($12 billion) made Trump’s threat credible and painful.

Thailand, too, faced pressure. Its acting Prime Minister’s remarks upon returning to Bangkok “we will get something very good out of it” signaled optimism that compliance might lead to renewed trade talks and tariff relief. The balance both countries seek to maintain between China’s financial influence and US market access has now shifted, even temporarily, in favor of Washington’s pressure-based model.

Geopolitical Risks and Long-Term Trade Fallout

While Trump’s strategy may have delivered a quick diplomatic win, its sustainability and cost-effectiveness remain questionable. The use of economic punishment to extract political outcomes risks creating resentment or encouraging dependency rather than partnership. China’s response quietly replacing USAID projects in Cambodia illustrates its long game in the region, offering development without demands for political change.

Moreover, the broader pattern of threatening tariffs also evident in Trump’s recent actions against Brazil and his stance toward Europe and China could erode trust and cooperation, leading allies and partners to seek hedges against US unpredictability. The short-term peace dividend may therefore come at the expense of long-term diplomatic credibility.

President Trump’s use of tariff threats to broker peace between Thailand and Cambodia marks a bold and unconventional diplomatic success. Yet, it underscores the transactional nature of his foreign policy, one that relies on pressure rather than partnership. While China lost the spotlight in this episode, its steady investment and non-coercive model may continue to resonate more deeply in Southeast Asia’s long-term strategic calculus.

Source: Bloomberg

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Commodity

Tariff Threat Casts Shadow Over Global Copper Supply

Copper markets continue to react nervously to President Trump’s protectionist stance, with a planned 50% tariff on copper imports scheduled to take effect on August 1. The policy, intended to boost U.S. domestic mining and refining, represents a major disruption to the global copper supply chain, particularly for top exporter Chile. The absence of clarity on implementation details has heightened anxiety, even as Chile prepares to lobby for an exemption during upcoming talks in Washington. However, U.S. Trade Representative Jamieson Greer dampened hopes by affirming that the duties would be globally applied without exception.

The tariff deadline is expected to mark the end of a previously lucrative trade in copper into the U.S., one that had tightened global supplies. That tension has recently eased, with both the London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE) flipping to contango, indicating more immediate supply availability and a softening of near-term scarcity.

Currency Movements Offer Temporary Lift

A weakening U.S. dollar helped support copper prices on Wednesday, making dollar-denominated commodities more attractive to non-dollar investors. Copper rose 0.2% to $9,817 per ton on the LME during Shanghai trading hours, while other base metals also registered gains. The dollar’s softness provided a counterbalance to trade uncertainty, but analysts warn the upside may be limited unless policy clarity emerges soon.

Investors are also closely watching the trajectory of US-China trade negotiations. Although the latest round of talks in Stockholm ended without a formal pause to the current tariff truce, the tone remained constructive. A decision on whether to extend the tariff freeze is expected from President Trump soon. Any signal of easing tensions between the world’s two largest economies would likely improve sentiment in the broader industrial metals space.

Copper's slight rally reflects both relief over the weakening dollar and caution about a potentially seismic shift in trade policy. The looming 50% tariff could reshape trade flows and redefine supply chains, especially if no exemptions are granted. For now, the market remains in a state of watchful waiting, with direction likely to hinge on Trump’s tariff decision and the outcome of multilateral trade talks in early August.

Source: Bloomberg

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What does it mean for the Europe & US sessions?

Asian traders should remain alert for heightened volatility as markets shift from fading trade-deal optimism to new catalysts stemming from central bank meetings and key data releases. Defensive positioning is expected, with risk sentiment staying fragile ahead of U.S. and Japanese policy decisions, updated economic forecasts, and potential trade developments. On Wednesday, official quarterly inflation data for Australia will be released, a critical factor shaping the Reserve Bank of Australia’s monetary policy outlook. Any surprises could move the AUD and local rates markets as traders adjust expectations for next month’s RBA meeting.

What can we expect from DXY today?

The U.S. dollar is exhibiting a strong bullish trend today, supported by gains in trade policy, positive economic data, and increased global capital flows ahead of the upcoming Fed decision. Market participants should closely watch for any shift in the Fed’s tone, which could serve as the next key catalyst for the dollar’s direction. The U.S. Dollar Index (DXY) has extended its rally, trading above 98.8 after a 1% surge at the start of the week. This momentum positions the dollar for its strongest week of the year so far, bolstered by recent U.S. trade agreements, including a 15% tariff on EU imports that have strengthened the U.S. economy while pressuring the euro.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 Bearish

What can we expect from Gold today?

Gold is trading slightly higher early Wednesday, recovering from three-week lows as risk sentiment turns cautious and traders await clarity from the U.S. Federal Reserve meeting. For now, the yellow metal remains in a consolidation phase, with its direction hinging on upcoming policy decisions and economic headlines. Gold prices are currently around $3,327 per ounce, marking a modest 0.39% gain from the previous day. The precious metal remains within its recent range, holding above the key $3,300 support level despite ongoing market uncertainty.

Next 24 Hours Bias

Weak Bearish

What can we expect from AUD today?

The Australian Dollar remains weak and range-bound above 0.6500, with global risk sentiment, a firm US Dollar, and upcoming domestic inflation data and rate decisions shaping market tone. The outcome of Wednesday’s CPI report and the RBA’s response next week will be decisive for AUD direction in the near term. Key risks include trade headlines, signals from the Federal Reserve, and ongoing volatility in global equity and commodity markets, particularly as China–U.S. negotiations continue.

Central Bank Notes:

● The RBA held its cash rate steady at 3.85% at the July meeting on 8 July 2025, following a 25bps reduction in May and 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 signalled 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 shown increased volatility in the wake of global tariff and trade policy developments—especially as a result of recent U.S. and EU announcements. 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 underutilisation. 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.

● The next meeting is on August 11–12 2025.

Next 24 Hours Bias

Weak Bearish

What can we expect from NZD today?

The NZD remains weak today, driven by a stronger US dollar, uncertainty surrounding future US tariff policies, and a risk-off sentiment in global markets. With no major domestic news, the outlook depends largely on international developments and central bank signals over the next 24–48 hours.The New Zealand dollar (NZD/USD) continued its decline, trading around 0.595–0.596—near a one-week low and extending its losing streak to a fourth consecutive session. Over the past month, the NZD has lost about 2.2% in value, reflecting broad weakness against a stronger US dollar, and it is down approximately 0.87% over the past seven days.

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

Weak Bearish

What can we expect from JPY today?

The Japanese yen is trading near multi-session lows, weighed down by external trade dynamics and defensive positioning ahead of the Bank of Japan’s upcoming policy meeting. While markets expect cautious policy signals and an upward revision to the inflation forecast, any unexpected guidance or political developments could trigger volatility in both the yen and Japanese assets over the next 24–48 hours.

Currently, the yen (JPY) is hovering around 148.3–148.5 per U.S. dollar after a sharp three-session decline. The currency is down approximately 3.2% for the month but held relatively steady overnight as traders await central bank decisions and key international developments.

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:

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. 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 Bearish

What can we expect from EUR today?

Today, the euro remains under selling pressure, driven by investor disappointment over the U.S.–EU trade agreement, muted regional data, and caution ahead of the Federal Reserve’s decision. The currency is expected to stay sensitive to macroeconomic headlines and central bank policies as the session unfolds. The euro remains weak and is likely to stay volatile amid export headwinds from U.S. tariffs, a cautious ECB stance, and cooling sentiment ahead of key economic data and a major Fed announcement.Central Bank Notes:

● The Governing Council kept the three key ECB interest rates unchanged at its July 24 meeting, maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%, following eight consecutive cuts preceding this decision.

● The decision to hold rates steady was driven by evidence that inflation is stabilizing near the Governing Council’s medium-term target of 2%. Policymakers communicated that further moves on rates would be data-dependent, explicitly refraining from pre-committing to any future path amid persistent global and domestic uncertainties.

● According to the latest Eurosystem staff projections, headline inflation is expected to remain around 2.0% for 2025, with projections indicating 1.6% for 2026 and a rebound to 2.0% in 2027. Downward revisions from previous forecasts primarily reflect lower energy price assumptions and a stronger euro. Inflation excluding energy and food is seen averaging 2.4% in 2025 and 1.9% in 2026–2027, little changed from prior projections.

● Real GDP growth for the Eurozone is forecast at 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. The projections note that a strong first quarter offsets a weaker outlook for the rest of 2025. While business investment and exports are dampened by ongoing trade policy uncertainties—including recent U.S. tariff measures—rising government investment, particularly in defense and infrastructure, is expected to progressively underpin growth.

● Household spending should be supported by firm real income gains and a still-solid labour market. More favorable financing conditions are expected to help strengthen the economy’s resilience to further global shocks. Wage growth, although still elevated, continues to moderate, with profit margins partially absorbing cost pressures.

● Amid significant geopolitical and economic uncertainty, the Governing Council underscored its commitment to ensuring inflation stabilises sustainably at the 2% target. The ECB reiterated it would pursue a meeting-by-meeting, data-dependent approach to its monetary policy stance.

● Future rate decisions will be guided by the assessment of incoming economic and financial data, the outlook for inflation and underlying inflation dynamics, and the effectiveness of monetary policy transmission. The Council continues to stress that it is not pre-committed to any specific rate trajectory.

● The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are continuing to decline in an orderly and predictable way, as the Eurosystem has ceased reinvesting principal payments from maturing securities.

● The next meeting is on 11 September 2025

Next 24 Hours Bias

Medium Bearish

What can we expect from CHF today?

The Swiss franc has softened slightly as global risk sentiment improves and the U.S. dollar rebounds on trade news and Fed policy expectations. The SNB’s policy remains steady following its June rate cut, with near-term direction likely influenced by cross-asset risk trends, U.S. monetary developments, and potential renewed safe-haven demand. The franc faces competing forces, its continued safe-haven appeal versus reduced demand amid improving trade relations. While the SNB’s dovish stance and readiness to intervene highlight concerns about franc strength, recent improvements in inflation may limit the need for further aggressive easing.

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 Bearish

What can we expect from GBP today?

The pound remains soft and defensive heading into July 30, 2025, weighed down by slowing growth, persistent inflation, and expectations of BoE rate cuts. GBP/USD is trading near multi-month lows, while GBP/EUR saw a brief rebound but continues to hover near its 2023–2024 lows. Domestic economic weakness and strong U.S. dollar demand keep sterling under pressure.

Markets are positioned cautiously ahead of the August 7 Bank of England meeting, with at least one rate cut priced in. Focus remains on UK growth signals, particularly monthly GDP releases, alongside evolving labor market data and shifts in core inflation. GBP volatility continues to track developments in global risk sentiment, U.S. dollar strength, and changes in trade policy outlook.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

What can we expect from CAD today?

The Canadian dollar entered July 30 under pressure from a strengthening U.S. dollar and ongoing trade uncertainty. With the Bank of Canada widely expected to hold interest rates steady at 2.75%, attention shifts to forward guidance and how policymakers will balance persistent inflation concerns against weak economic growth and external trade risks. Additionally, the Canadian dollar is weighed down by recent U.S. trade agreements with Japan and the EU, which have strengthened the U.S. dollar while leaving Canada without a comparable deal.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

Medium Bearish

What can we expect from Oil today?

Oil prices maintained their recent strength on Wednesday, supported by escalating geopolitical tensions following Trump’s Russia ultimatum, optimism surrounding U.S.-EU trade agreements, and a shift in market sentiment toward bullish positioning. The market remains highly sensitive to developments related to the Russia-Ukraine deadline, Federal Reserve policy signals, and upcoming OPEC+ production decisions.

Next 24 Hours Bias

Weak Bullish

Source: IC Markets

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China–U.S. Trade War

Constructive Talks, But No Pause Yet: A Familiar Pattern

Despite hopeful rhetoric from U.S. and Chinese officials, the absence of a formal extension to the current tariff truce has cast a shadow over recent diplomatic progress. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer characterized the Stockholm negotiations as “very fulsome,” yet stressed that only President Trump would decide whether to maintain or reinstate the tariffs that had reached as high as 145% earlier this year.

This delay in announcement, especially after multiple signals suggesting a deal was imminent, has left markets in a holding pattern. The likelihood of a 90-day extension remains high, but the lack of confirmation reinforces the transactional and unpredictable nature of Trump’s trade strategy.

Markets Jittery as August 12 Deadline Looms

With no update on the 30% tariffs on Chinese imports or the 10% reciprocal tariffs on U.S. goods the risk of a sudden policy shift remains high. Even as officials cite progress on issues ranging from Nvidia’s AI chip exports to China’s rare earth mineral policies, the absence of a binding decision leaves the door open for market turbulence.

Henrietta Treyz of Veda Partners summarized investor sentiment succinctly: “As long as they push the deadline out 90 days and we don't revert to those 145% tariffs that the president escalated earlier in the year, then the market doesn't much care.” But until that extension is confirmed, volatility remains a tangible risk.

Trump Holds the Cards as Global Trade Talks Converge

President Trump’s central role in finalizing trade policy has created a bottleneck in ongoing global negotiations. Talks with the EU yielded a partial pact featuring 15% tariffs but left critical issues unresolved. Simultaneously, countries such as India, Mexico, South Korea, Canada, and Taiwan are racing to negotiate individual deals before Trump’s self-imposed July 31 deadline.

Notably, U.S. negotiators confirmed that dozens of countries will be notified by letter in coming days of their new tariff rates, expected to start between 15–20%, unless bilateral arrangements are reached.

No Face-to-Face Meeting on the Horizon Yet

Another key point from the Stockholm talks was the absence of any discussion about a face-to-face summit between Trump and Xi Jinping. Both sides emphasized policy discussions including China’s consumption of Russian oil and export controls but deliberately avoided raising the possibility of a presidential-level meeting. Trump stated he hopes to meet Xi “before the end of the year,” signaling that diplomacy is still in play, albeit slowly.

The failure to announce a tariff extension underscores a broader pattern of strategic ambiguity in U.S. trade policy under Trump. While talks with China, the EU, and others are progressing, the centralized decision-making model where all final calls rest with the president means economic certainty remains elusive. As the August 12 tariff snapback date nears, markets, businesses, and foreign governments are left navigating a high-stakes environment marked by brinkmanship, fragmented diplomacy, and accelerating deadlines. Without a clear signal from Washington, the specter of renewed trade warfare looms once again.

Source: Yahoo Finance

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Australia’s CPI in Focus as RBA Decision Looms

Australia’s quarterly CPI figures, due out in a few hours, could be the catalyst that forces the Reserve Bank of Australia (RBA) to deliver the 25bp cut we expected at their last meeting on 12 August. As their minutes confirmed, the RBA chose to wait for more information before pulling the trigger—highlighting that CPI excluding volatile items and travel has historically been a better predictor of quarterly inflation.

Data source: Australian Bureau of Statistics (ABS), London Stock Exchange Group (LSEG)

Australia’s trimmed mean CPI is expected to have slowed to 2.7% y/y in Q2 from 2.9%, or held steady at 0.7% q/q.Weighted mean CPI is expected to remain unchanged at 2.1% y/y.Headline CPI is forecast to slow to 2.1% y/y (down from 2.4%), or 0.8% q/q (down from 0.9%).

I’d like to say that a 2.7% trimmed mean would effectively confirm an RBA cut, but the RBA have really been pushing the envelope on caution lately. Still, with the monthly CPI ex volatile items and travel already sitting at 2.6%, perhaps we’ll be treated to a 2.6% trimmed mean and a q/q print of 0.6% or lower—which could spark renewed bets of a cut in August.Add to that the fact unemployment ticked up 0.2 percentage points to 4.3%, and the case for the RBA to act is certainly building.

Fed and BOC Expected to Hold Rates, Q2 US GDP Looms

The Federal Reserve (Fed) are expected defy Trump wishes of an interest rate cut today and hold at their 4.25 – 4.5% band. Fed fund futures imply a 97.9% probability of no action, and it is very rare for the Fed to defy market expectations without an economic catastrophe. Fed fund futures also imply a 64.7% chance of a cut in September.Note that Q2 GDP figures are released in the hours ahead of the FOMC meeting, though they are unlikely to change Fed expectations. The Bank of Canada (BOC) are also expected to hold their interest rate at 2.75%.

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

The Australian dollar has continued to grind higher against the US dollar, although the USD Index is rebounding from recent lows and the case for RBA rate cuts is building. The weekly RSI (2) on AUD/USD reached its most overbought level in four weeks—its highest since September—and has yet to reach oversold territory. This suggests AUD/USD could be due for a leg lower towards 0.64 in the near term.That said, I’m not anticipating a particularly large pullback in AUD/USD. The weekly RSI (14) is confirming the broader bullish trend and has not yet reached overbought levels. Additionally, the RBA has limited scope to cut rates relative to current market expectations, while the case for Fed cuts is also strengthening.

Data source: TradingView AUD/USD

AUD/USD Technical Analysis: Chart

While my bias remains for AUD/USD to fall to 0.64 over the coming weeks, the pair is currently trying to hold above the monthly pivot point at 0.6515 and the 50-day EMA at 0.6503. This area also aligns with a high-volume node (HVN) from price action since April. Should today’s Australian CPI data fail to convince RBA doves that a rate cut is all but certain, it raises the potential for a bounce on the daily chart before downside momentum resumes.

Furthermore, the US dollar index (DXY) has reached a key resistance level that could help limit AUD/USD losses in the near term. The daily RSI (2) is also on the cusp of reaching oversold territory.Should a bounce materialise, we can return to the timeless classic of bears fading rallies into cycle highs—a repeatable feature of AUD/USD price action since mid-April.

Data source: TradingView AUD/USD

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Source: Bloomberg

IC Markets Asia Fundamental Forecast | 30 July 2025

What does it mean for the Europe & US sessions?

What can we expect from DXY today?

What can we expect from Gold today?

What can we expect from AUD today?

What can we expect from NZD today?

What can we expect from JPY today?

What can we expect from EUR today?

What can we expect from CHF today?

What can we expect from GBP today?

What can we expect from CAD today?

What can we expect from Oil today?

Source: IC Markets

Tariff Decision Delayed as US-China Talks Yield No Breakthrough, Trump to Make Final Call

Constructive Talks, But No Pause Yet: A Familiar Pattern

Markets Jittery as August 12 Deadline Looms

Trump Holds the Cards as Global Trade Talks Converge

No Face-to-Face Meeting on the Horizon Yet

Source: Yahoo Finance

RBA and Fed Decisions in Focus

Australia’s CPI in Focus as RBA Decision Looms

Data source: Australian Bureau of Statistics (ABS), London Stock Exchange Group (LSEG)

Fed and BOC Expected to Hold Rates, Q2 US GDP Looms

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

Data source: TradingView AUD/USD

AUD/USD Technical Analysis: Chart

Data source: TradingView AUD/USD

Source:FOREX.com

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