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IC Markets Global – Asia Fundamental Forecast | 28 May 2026

What happened in the U.S. session?

AI-driven tech rally that pushed the S&P 500 and Nasdaq to record closes, with Micron’s 19% jump to $1 trillion market cap as the standout story amid a global memory shortage. This optimism outweighed geopolitical concerns from Middle East tensions, though oil prices fell 3% on hopes for U.S.-Iran negotiations. Macroelectrically, May’s Consumer Confidence eased to 93.1, and jobless claims came in at 209K, signaling steady but not overheating economic conditions.

What does it mean for the Asia Session?

Elevated oil prices (Brent above $100) are driven by Middle East tensions and U.S.–Iran peace talk uncertainty, which are fueling global market volatility and recession fears. Currency markets are critical, with the yen drifting toward 157.00/$ and China’s yuan strengthening to a three-year high against the dollar, signaling shifting capital flows and potential trade implications ahead of President Trump’s anticipated visit to China.

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The Dollar Index (DXY)

Key news events today

Core PCE Price Index m/m (12:30 pm GMT)

Prelim GDP q/q (12:30 pm GMT)

Prelim GDP Price Index q/q (12:30 pm GMT)

Unemployment Claims (12:30 pm GMT)

New Home Sales (2:00 pm GMT)

What can we expect from DXY today?

The U.S. dollar is on a strong upward trajectory, bolstered by surging Treasury yields and heightened market expectations of a Federal Reserve interest rate hike due to persistent inflationary pressures from rising energy costs. The currency posted its best weekly performance in two months with a 1.2% gain, as traders now price in better-than-even odds of a Fed rate increase by December, reflecting confidence in the U.S. economy’s resilience amid global geopolitical tensions.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate target range steady at 3.50%–3.75% at its April 28–29, 2026, meeting, as oil prices remain elevated around $108 per barrel for Brent crude amid ongoing US-Israel tensions with Iran, alongside surging inflation from energy shocks, further delaying any 2026 rate cuts potentially beyond September.
• The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market showing mixed signals as nonfarm payrolls rose by 178,000 in March 2026—beating lowered expectations but driven partly by strike reversals—and the unemployment rate edged down to 4.3% from 4.4% in February.
• Officials face heightened risks from geopolitical tensions, soaring oil prices, and accelerating inflation, with CPI jumping to 3.3% year-over-year in March 2026 from 2.4% in February due to a 10.9% monthly energy surge, headline PCE pressured higher, and core PCE estimates around 3.1% or more.
• Economic activity continues to cool after robust Q4 2025 growth near 5%, with the Atlanta Fed GDPNow estimating Q1 2026 growth at 1.3% amid softer consumer spending, strike impacts, and labor data despite some resilience.
• March 2026’s Summary of Economic Projections forecasts 2026 unemployment at a median around 4.4%, GDP growth revised higher, and core PCE up to 2.7%, with the dot plot still signaling one cut in 2026 to a median 3.25%–3.50% funds rate amid softer labor but inflation upticks.
• The Committee maintains its data-dependent stance amid a mixed labor market, inflation well above target from oil shocks, and geopolitical risks, likely holding rates at 3.50%-3.75% with persistent divisions and hawkish tones on cuts.
• The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to manage reserves amid post-2025 balance sheet adjustments.
• The next meeting is scheduled for 16 to 17 June 2026.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

Core PCE Price Index m/m (12:30 pm GMT)

Prelim GDP q/q (12:30 pm GMT)

Prelim GDP Price Index q/q (12:30 pm GMT)

Unemployment Claims (12:30 pm GMT)

New Home Sales (2:00 pm GMT)

What can we expect from Gold today?

Gold is expected to consolidate around $4,540–$4,550 per ounce as investors weigh ongoing Middle East geopolitical risks, particularly stalled US-Iran peace talks and threats to the Strait of Hormuz, against Federal Reserve policy concerns. The metal recently fell below $4,500 on rising global rate hike bets before recovering, with persistent inflation fears keeping Treasury yields high and weighing on gold prices.

Next 24 Hours Bias
Medium Bearish

The Australian Dollar (AUD)

Key news events today

No major news event

What can we expect from AUD today?

The Australian dollar is under pressure following unexpected inflation data released on May 26 that moved rate hike chances to zero for June, with April’s CPI falling to 4.2% from March’s 4.6%. The currency briefly dipped to 71.56 US cents before stabilizing around 71½ cents, as traders recalibrated their expectations for RBA monetary policy after the inflation surprise.

Central Bank Notes:

• The Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.35% at the 5 May 2026 meeting, moving into a more restrictive stance as inflation pressures re‑accelerated and the board judged the previous 4.10% level insufficient to re‑anchor the medium‑term outlook.
• The RBA lifted the cash rate from 4.10% to 4.35% at the 5 May meeting in an 8–1 vote, flagging that the stance is now “more restrictive” and that the Council sees a low but non‑trivial chance of further hikes if inflation risks crystallise.
• Headline CPI has jumped to 4.6% year‑on‑year for the 12 months to March 2026, up from around 3.7% in February, with trimmed‑mean inflation still above 3.0% (about 3.3–3.8% depending on the series), keeping inflation clearly outside the 2–3% target band.
• Recent monthly indicators remain sticky in services, housing‑related costs, and discretionary spending, with January and March data showing only modest easing and some upside surprises in housing‑price‑related components, underpinning the case for a stronger‑than‑expected May hike.
• Global growth has been modestly revised up but remains tempered by ongoing geopolitical tensions, commodity‑price volatility, and elevated oil prices linked to the Middle East conflict, which directly feed into Australian import‑price and transport‑cost inflation.
• Markets now price the cash rate at 4.35% in June, with futures pathways suggesting a high‑probability hold at the June meeting and only a modest chance of another 25bp hike later in 2026, contingent on further upside in CPI or services‑price data.
• The RBA continues to emphasise its “data‑dependent” approach under the dual mandate, seeking to bring inflation back toward target without materially undershooting growth or employment, while acknowledging that the Middle East‑driven shock has shifted the path of inflation and policy.
• The May communication leaned hawkishly neutral to hawkish, with the decision to hike by 25bp and a run‑of‑material referencing rising inflation expectations and the risk of second‑round effects, while still leaving room for a pause in June if upcoming monthly CPI and labour‑force data show a moderating trend.
• The next meeting is on 15 to 16 June 2026.

Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

Annual Budget Release (2:00 pm GMT)

What can we expect from NZD today?

The New Zealand dollar is trading in a narrow range around 0.58–0.59 against the US dollar, having fluctuated between 0.58325 and 0.59015 over the past week. The NZD remains subdued following the Reserve Bank of New Zealand’s May 2026 inflation expectations release, which showed rising one-year (3.41%) and two-year (2.53%) inflation expectations for Q2 2026.

Central Bank Notes:

• The Reserve Bank of New Zealand’s Monetary Policy Committee (MPC) held the Official Cash Rate (OCR) steady at 2.25% at its 27 May 2026 Monetary Policy Statement, but the decision was unprecedented—a 3-3 split requiring Governor Anna Breman’s casting vote. Three members (Hansen, Gourley, Gai) voted for an immediate 25bp hike to 2.50%, while three (Breman, Silk, Conway) voted to hold.
• While the OCR remained unchanged, the RBNZ issued its most hawkish guidance since the cutting cycle ended, stating the OCR will “likely need to rise sooner and by more than previously envisioned.” Market pricing now indicates a 72–73% probability of a rate hike at the next meeting on 8 July 2026, with swaps pricing in roughly 16bps of tightening.
• Annual CPI inflation remained at 3.1% in Q1 2026 (above the 1–3% target band) for two consecutive quarters. The RBNZ now forecasts inflation to peak at 4.3% in the September 2026 quarter—driven by Middle East oil shocks—before returning to the 2% target midpoint by mid-2027.
• The RBNZ revised its terminal OCR forecast upward to 3.28% over the next three years (from 3.0%), implying approximately 100 basis points of total tightening ahead. The updated path suggests at least two additional hikes by year-end 2026, with the OCR potentially rising to 2.50% by September 2026 and higher thereafter.
• GDP growth is projected at 0% in Q2 2026 and only 0.2% quarter-on-quarter in Q3, reflecting an early but unconvincing recovery. Unemployment, currently at 5.3% (near a decade-high), is expected to peak at 5.4% and remain there until June 2027.
• Retail sales volume rose 0.9% in Q1 2026, and electronic card data showed 2.7% annual growth in March, but high-frequency data reveals shrinking budget room as wholesale interest rates climb. Mortgage holders are increasingly shifting to two-year fixed rates for repayment certainty despite the OCR hold.
• Stronger dairy and meat export revenues (meat exports up 7% to $13.2B FY2026) and a softer NZD (TWI ~68%) support the external balance, while Middle East oil volatility poses upside inflation risks. The NZD jumped 0.7% against the USD immediately after the announcement, and two-year swap rates rose 3bps.
• Markets now expect the first hike in this tightening cycle, with the MPC’s internal division suggesting any future decision may again be contentious. Policy remains below the ~3% neutral rate, but the shift from “wait-and-see” to “preemptive tightening” is now clear.
• The next meeting is on 8 July 2026.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

Tokyo Core CPI y/y (11:30 pm GMT)

What can we expect from JPY today?

The Japanese yen has remained under pressure in May 2026, with USD/JPY trading around 158.9 after breaching the critical 160 level in late April, a 21-month high driven by the widening interest rate gap between the Fed and Bank of Japan, rising oil prices, and lingering Iran conflict tensions.

Central Bank Notes:

• The Policy Board of the Bank of Japan left the short‑term policy rate unchanged at 0.75% at the 27–28 April 2026 meeting, with markets broadly expecting the same level into May 2026 as the bank continues a data‑dependent, gradual‑normalisation stance.
• The BOJ targets the uncollateralized overnight call rate around 0.75%, signaling that any further hikes toward 1.0% will hinge on wage‑inflation persistence, yen stability, and real‑activity data rather than a pre‑announced timetable.
• JGB tapering continues on plan, with outright purchases trimmed by ¥400 billion quarterly through Q1 2026, then reduced to ¥200 billion from April onward, aiming for roughly ¥2–3 trillion in monthly net purchases by mid‑2026, adjustable if market or yen volatility spikes.
• Japan’s economy posts moderate growth into Q1 2026, supported by resilient exports and prior stimulus, but the BOJ has downgraded its 2026 growth outlook as external headwinds and Middle‑East‑related shocks weigh on the pace.
• Core CPI (ex‑fresh food) is running in the mid‑1% range y/y, with headline inflation at about 1.5% y/y in March 2026, while core‑core measures remain above 2%, reflecting sticky services‑side and wage‑driven inflation.
• Input‑cost pressures ease from prior peaks, yet services inflation, the 2026 shunto wage deals near 5%, and expectations anchored above 2% support continued price pressures, with upside risks from further yen weakness and geopolitical spikes.
• Near‑term real GDP may run below trend due to policy tightening and external shocks (e.g., Iran‑related energy risks), but negative real rates, wage gains, and targeted fiscal/capex support should underpin a gradual rebound in consumption and investment.
• Medium‑term, overseas recovery, labor‑shortage‑driven wage growth, and productivity improvements are expected to keep core inflation near or above 2%, enabling the BOJ to gradually lift rates toward 1.0% in 2026–2027 if activity and wage‑inflation conditions remain aligned.
• The next meeting is on 15 to 16 June 2026.

Next 24 Hours Bias

Strong Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Oil markets today remain in a volatile consolidation phase following the dramatic April 2026 price surge caused by the US-Iran conflict and Strait of Hormuz blockade, with crude now trading around $88/barrel, down significantly from the April 7 high of $138/barrel for Brent but still elevated compared to pre-conflict levels.

Next 24 Hours Bias
Weak Bearish

The post IC Markets Global – Asia Fundamental Forecast | 28 May 2026 first appeared on IC Your Trading Edge | Official Blog.

The headlines cite Iran’s deputy secretary to the national security council in saying that “all of Iran’s frozen assets must be released and returned without conditions”. Adding that they are “seeking the release of all funds held by the US and this is the legal right of Iran”.

As mentioned here, this is one of the supposed preconditions that the US is trying to push for in agreeing to the memorandum of understanding. The US wants Iran to fulfill obligations on dismantling its nuclear programme and make deliver on promises before actually lifting any sanctions and freeing up any frozen funds.

However, Iran wants the opposite of that in a move that reflects something similar to the 2015 JCPOA. That being they want the US to lift sanctions and allow access to these frozen funds before or while they are working to “surrender” on nuclear arrangements. But as we’ve seen before this, the motive by Iran is mostly to just buy time and delay for as much as they can in order to get what they want without actually doing anything on the nuclear front.

So, US president Trump wants to draw a hard line on that. But if Iran also will not budge and wants the US to blink first, how will both sides resolve this issue?

If one piece of the puzzle doesn’t fit, the whole picture cannot be completed. In other words, no deal can be struck if even just one precondition cannot be satisfied. And that’s where it seems like both sides are stuck right now despite all the talk of an “imminent” agreement to sign off on the memorandum of understanding.

This is just one part of four major key preconditions that needs to be settled. And nothing can be agreed until everything is agreed essentially.

This article was written by Justin Low at investinglive.com.

There’s a lot of back and forth going on but ultimately, the bottom line is that the US and Iran have not yet agreed to a memorandum of understanding. The “deal to end the conflict” was supposed to be “imminent” since the weekend. But fast forward now to Thursday, and we’re yet to see any official word on how things are playing out.

That is keeping markets on edge today with the situation not helped by conflicting headlines and also increased tensions on the ground. The US have launched another strike at Iran overnight, with this being the second attack in the past three days. The situation is tense and volatile, resulting in more caution as we get into the new day.

Besides that, Iran also continues to maintain that they won’t move on their red lines here. That is something that puts a dent on the recent optimism and may allude to the notion that an agreement may not be as “imminent” as it seems. As mentioned yesterday, both the US and Iran know what puzzle pieces are needed to complete the picture. The only question now is how are they going to fit all of that together and make it stick?

So far today, oil prices are nudging up with WTI crude higher by nearly 4% to be above $92 currently. Meanwhile, US futures have dropped off after the more cautious showing yesterday in Wall Street. S&P 500 futures are now down 0.4% with Nasdaq futures down 0.8% currently.

In other markets, bond yields are creeping back up again with 10-year Treasury yields higher by 4 bps to 4.52%. And looking to precious metals, we are seeing gold drop heavily again today – down nearly 2% to $4,373, its lowest in two months and contesting a break of its 200-day moving average. The key technical level is one that may lead to a steeper decline in the precious metal as outlined here.

This article was written by Justin Low at investinglive.com.

• Google engineer Polymarket insider trading case: What young traders should learn
• Gold has been slammed on renewed hostilities in the Gulf
• Fed’s Goolsbee warns AI hype and oil shock are combining to push rates higher
• Kuwait air defenses responding to hostile missile and drone attacks
• New Zealand budget deficit narrows but growth downgrade and inflation peak loom
• US sanctions Iran’s Hormuz toll body as Bessent vows maximum pressure on Tehran
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• Australia capex surges on data centre spend but households cut back sharply
• Bank of Korea holds at 2.50% but dot plot points firmly to rate hikes ahead
• Japanese bond yields rise as bridging bond plan stirs fresh fiscal worry. Yen soft.
• Bitcoin Analysis Today: BTC Tries to Defend 74,400 as Bearish 4h Structure Holds
• US and Iran offer clashing accounts of fresh Hormuz confrontation near Bandar Abbas
• PBOC sets USD/ CNY reference rate for today at 6.8240 (vs. estimate at 6.7861)
• Fed’s Jefferson says stopping second-round inflation effects is the Fed’s core task
• ECB’s Lane warns Iran war inflation could persist long after conflict ends
• Fed’s Kashkari says inflation much too high and remains his top priority
• South Korea’s Kospi kopping it, drops lower ahead of Bank of Korea decision
• Fed’s Jefferson says monetary policy is well positioned to respond, not prejudge June meet
• US strikes Iranian military site and downs drones in new Hormuz threat operation
• Hormuz explosions, Iran. Report it was US defense operation, ceasefire still holds.
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• US stocks: BoA warns of summer stock rout as cash levels fall and bullish sentiment peaks
• Iran’s red lines unchanged as nuclear talks deadlock persists on all four core issues
• Oil: Private inventory survey shows a headline crude oil draw smaller than expected
• RBNZ’s Breman signals cash rate must rise further as inflationary pressures build
• Fed’s Cook flags oil price as key risk as she watches inflation expectations closely
• Fed and ECB take centre stage at BOJ conference day two fireside chat
• RBNZ Gov Breman sees weaker growth, inflation. Monitoring.
• Economic and event calendar in Asia Thursday, May 28, 2026 – central bankers speaking
• Fed Gov Cook says rates should hold for now but flags hike risk on stubborn inflation

Summary:

• Oil surged to session highs after Iran launched missiles and drones against Kuwait and claimed responsibility for striking a US air base, effectively ending any pretence that the ceasefire remains functional
• The IRGC said the Kuwait attack was direct retaliation for the earlier US strike near Bandar Abbas Airport and warned any further US action would trigger a more decisive response
• US-Iran nuclear and Hormuz talks stalled, pushing Brent crude back higher after earlier peace hopes had briefly pulled prices lower this week
• The US sanctioned Iran’s Persian Gulf Strait Authority, the body administering Hormuz tolls, with Treasury Secretary Bessent saying maximum pressure on Tehran continues
• A chorus of central bankers gathered in Tokyo struck a consistently hawkish tone, with Fed officials Cook, Jefferson, Kashkari, and Goolsbee all flagging upside inflation risks and resistance to early easing
• ECB Chief Economist Lane warned second-round energy shock effects would persist well beyond any Iran war resolution
• The Bank of Korea held rates at 2.50% but two members dissented for an immediate hike and the dot plot showed the majority of projections pointing to 3.00% within six months
• RBNZ Governor Breman signalling hikes would come sooner and by more than previously expected
• New Zealand’s budget forecast a narrower 2025/26 deficit but cut its 2026/27 GDP growth forecast to 2.3% and projected inflation peaking at 4.0% in Q2 2026
• Australian Q1 capex surged 6.5%, driven by data centre equipment investment, though the gain is expected to be largely offset by higher capital goods imports in next week’s GDP figures; April household spending fell 1.1%, more than double expectations
• Regional equities fell; the US dollar rose; gold dropped more than $60

Oil dominated the session from start to finish, and the arc of the price action told the story of the day. Prices initially pushed higher after a US official confirmed that American forces had struck an Iranian military site near Bandar Abbas and intercepted four one-way attack drones that had been launched toward a US navy vessel and a commercial ship. A fifth drone launcher was hit on the ground before it could fire. Iran’s account contradicted the US version almost entirely, with Tehran claiming its navy had merely fired warning shots at a US tanker running without radar, and that the subsequent US strike caused neither casualties nor damage. The competing narratives unsettled markets without resolving anything.

A brief retreat in oil prices followed, but the pullback proved short-lived. The session’s most dramatic development arrived later when Iran launched ballistic missiles and drones against Kuwait. Locals reported air raid alerts, explosions, and at least one air defence engagement. The IRGC subsequently confirmed the attack, stating it had targeted a US air base in direct retaliation for the Bandar Abbas strike and warning that any further US military action would trigger a more decisive response. Washington, the IRGC said, bears full responsibility for the consequences.

The Kuwait attack, combined with the named retaliation framing and the explicit threat of escalation, renders the ceasefire framework effectively hollow. What has been a persistent low-level military exchange in and around the Strait of Hormuz has now extended geographically into Gulf state territory. Oil hit its session high on the news. The US dollar strengthened. Gold fell more than $60, reflecting a rotation toward the dollar as the safe-haven of choice in an environment where geopolitical risk is accelerating rather than abating.

On the financial pressure track, the United States sanctioned the Persian Gulf Strait Authority, Iran’s body for administering Hormuz passage requests and toll collection, with Treasury Secretary Bessent describing the action as targeting the toll regime directly and affirming that maximum pressure on Tehran remains the policy.

The central bank dimension of the session was almost as busy as the geopolitical one. A gathering of senior policymakers at a Bank of Japan conference in Tokyo produced a remarkably unified hawkish message. Fed Vice Chair Jefferson said policy is well positioned and that, given a resilient labour market, it is appropriate to keep the focus on returning inflation to 2%. He drew a precise line between first-round energy price effects, which monetary policy cannot prevent, and second-round expectation effects, which it must.

Earlier, Governor Cook said inflation is clearly moving in the wrong direction and that she is prepared to raise rates if disinflation does not materialise. Kashkari said inflation is still far too high and bringing it down remains his overriding priority. Goolsbee added a structural dimension, arguing that anticipated AI productivity gains are themselves inflationary and that the oil shock compounds rather than offsets that pressure, pushing back directly against the view that AI gives central banks room to ease.

ECB Chief Economist Lane warned that Iran conflict inflation could persist long after the fighting stops, citing second-round effects, supply chain repositioning, and non-linear price dynamics from the ECB’s own experience.

The Bank of Korea held its benchmark rate at 2.50% as expected but the decision carried unmistakable hawkish intent: two members dissented for an immediate hike, the inflation forecast was revised sharply higher to 2.7% for 2026, and 19 of 21 dot plot projections showed rates moving higher within six months, with the majority pointing to 3.00%. Kospi dropped 3%.

In New Zealand, RBNZ Governor Breman told lawmakers that hikes would arrive sooner and go further than previously expected as the bank wrestles with war-driven energy inflation. New Zealand’s budget, released on the same day, added context: Treasury projected inflation peaking at 4.0% in Q2 2026 and cut the 2026/27 GDP growth forecast to 2.3% from 3.4%.

In Australia, first-quarter private capital expenditure rose 6.5%, a strong headline driven almost entirely by data centre equipment investment. The ABS noted the lift explicitly, and analysts flagged that much of the national accounts impact would be faded by higher capital goods imports. The more domestically significant number was April household spending, which fell 1.1%, more than double the expected decline, with discretionary spending recording its steepest monthly drop since February 2024. Friday brings the Fed’s preferred inflation gauge, the PCE report, and markets will be watching closely for any sign that the disinflation the Fed is counting on is beginning to appear.

This article was written by Eamonn Sheridan at investinglive.com.

New Zealand forecast a narrower 2025/26 budget deficit of NZ$15.06 billion but cut its 2026/27 GDP growth forecast to 2.3% and projected inflation peaking at 4.0% in Q2 2026.

Summary:
Source: New Zealand Budget 2026, released 28 May 2026; New Zealand Debt Management Office; Finance Minister

• The 2025/26 OBEGAL deficit is forecast at NZ$15.06 billion, narrower than the NZ$16.93 billion projected in December’s half-year fiscal update
• The 2026/27 OBEGAL deficit is forecast at NZ$14.09 billion, wider than the NZ$12.99 billion forecast in December
• Net debt is forecast to peak at 46.1% of GDP in 2027/28, down from a prior peak forecast of 46.9%; the 2025/26 net debt estimate is 42.4% of GDP against a December forecast of 43.3%
• GDP growth for 2026/27 is forecast at 2.3%, well below the December estimate of 3.4%
• New Zealand Treasury sees inflation peaking at 4.0% in Q2 2026
• Gross bond issuance for 2026/27 is unchanged at NZ$34 billion; four-year gross issuance to June 2030 was trimmed to NZ$124 billion from NZ$130 billion
• The Finance Minister announced a new prudential levy on banks, non-bank deposit takers, insurers, and other financial market participants, expected to recover around NZ$209 million over four years
• The government expects to return to an OBEGAL surplus in 2029/30

New Zealand delivered a budget on Thursday that showed a modestly improved near-term fiscal position relative to December forecasts, but paired it with a significant downgrade to economic growth and a projection that inflation will peak at 4.0% in the current quarter, adding to the pressure already bearing on the Reserve Bank of New Zealand.

The operating balance before gains and losses deficit for 2025/26 came in at NZ$15.06 billion, narrower than the NZ$16.93 billion projected in December’s half-year economic and fiscal update. Net debt for the current year was also revised down slightly, to 42.4% of GDP from 43.3% in December, and the peak debt level was trimmed to 46.1% of GDP in 2027/28, compared with a prior forecast of 46.9% across 2027/28 and 2028/29. The government said it expects to return to an OBEGAL surplus by 2029/30.

The near-term improvement, however, sits alongside a deterioration in the forward outlook. The 2026/27 OBEGAL deficit is now forecast at NZ$14.09 billion, wider than the NZ$12.99 billion projected in December, suggesting that fiscal consolidation through the middle years of the decade is proving harder to achieve than the government had anticipated.

The growth picture is the more striking revision. New Zealand Treasury cut its 2026/27 GDP growth forecast to 2.3% from 3.4% in December, a downgrade of more than a percentage point that reflects the weight of higher borrowing costs, softer global demand, and the inflationary headwinds flowing from the Iran conflict and its energy market consequences. Treasury projects inflation peaking at 4.0% in the second quarter of 2026, a level that reinforces the hawkish tone the RBNZ struck this week when Governor Breman signalled the committee sees the cash rate needing to move higher.

On bond issuance, the Debt Management Office held gross bond issuance for 2026/27 steady at NZ$34 billion, in line with December guidance, while trimming the four-year gross issuance programme to NZ$124 billion from NZ$130 billion, a modest reduction in supply that will be noted by fixed income markets.

The Finance Minister used the budget to announce a new prudential levy covering banks, non-bank deposit takers, insurers, and other financial market participants, designed to recover approximately NZ$209 million over four years. The measure is modest in revenue terms but adds to the regulatory cost environment for New Zealand’s financial sector at a time when institutions are already navigating a shifting rate outlook.

—

The narrower 2025/26 deficit and lower debt peak will offer some reassurance to NZ bond markets, and the reduction in four-year gross issuance from NZ$130 billion to NZ$124 billion removes some supply pressure from the curve. However, the sharp downgrade to the 2026/27 GDP growth forecast, from 3.4% to 2.3%, and the projection of inflation peaking at 4.0% in Q2 2026 present a stagflationary undertone that complicates the outlook. The widening of the 2026/27 OBEGAL deficit relative to December estimates signals that near-term fiscal consolidation is proving harder than expected. The prudential levy on banks and financial institutions is a modest revenue measure but adds to the regulatory cost burden on the sector.

This article was written by Eamonn Sheridan at investinglive.com.

Australian private capital expenditure surged 6.5% in Q1, driven by data centre equipment investment, while April household spending fell 1.1%, more than double the expected decline.

Summary:
Source: Australian Bureau of Statistics, Private New Capital Expenditure and Expected Expenditure, March 2026 quarter, released 28 May 2026

• Total new private capital expenditure rose 6.5% quarter-on-quarter in Q1, well above the 1.0% forecast and the prior 0.4% reading
• The ABS attributed the lift specifically to investment in data centre equipment
• Plant and machinery capex rose 18.1% quarter-on-quarter; buildings and structures fell 3.8%, reversing a prior gain of 2.3%
• Estimate 2 for 2026-27 capital expenditure is $173.4 billion, 9.9% above Estimate 1 for the same year
• Separately, April household spending fell 1.1% month-on-month, more than double the expected 0.5% decline and a sharp reversal from the prior 1.6% gain
• Discretionary household spending fell 0.8% in April, the largest monthly drop since February 2024, with analysts describing it as the first signs of demand destruction
• Much of the capex boost is expected to be offset in next week’s national accounts figures due to the corresponding rise in capital goods imports

Australian private capital expenditure surged well beyond expectations in the March quarter, driven almost entirely by a boom in data centre equipment investment, but the result came with an immediate caveat: the bulk of the gain is import-intensive, and much of its national accounts impact is expected to wash out in next week’s GDP figures.

Total new private capital spending rose 6.5% quarter-on-quarter in seasonally adjusted terms, the Australian Bureau of Statistics reported on Thursday, against a forecast of 1.0% and a prior reading of just 0.4%. The ABS was explicit about the source: the lift in investment was the result of investment in data centre equipment, a direct reflection of the global AI infrastructure buildout that is reshaping business investment patterns across developed economies.

The composition within the capex figures illustrated both the strength and the narrowness of the result. Plant and machinery investment, the category that captures equipment including data centre hardware, rose 18.1% in the quarter. Buildings and structures, by contrast, fell 3.8%, reversing a 2.3% gain in the prior period. The investment boom is real, but it is concentrated in a single category driven by a single theme.

The forward-looking expenditure estimate added a further positive note. Estimate 2 for capital spending in 2026-27 came in at $173.4 billion, running 9.9% ahead of Estimate 1 for the same financial year, suggesting businesses are planning to sustain elevated investment levels through the year ahead.

The household spending figures released alongside the capex data told a different story. April household spending fell 1.1% month-on-month, more than double the 0.5% decline expected by markets and a sharp reversal from a 1.6% gain the prior month. Discretionary spending bore the brunt, falling 0.8% in its steepest monthly decline since February 2024. Analysts described the discretionary result as the first signs of demand destruction, a signal that higher living costs and borrowing pressures are beginning to bite into consumer behaviour in a more meaningful way.

The two data points together present the RBA with a characteristically mixed picture: a business investment number that flatters the headline but carries limited domestic multiplier effect, and a consumer sector showing genuine signs of strain. Whether that strain is enough to influence the rate outlook will depend in part on how persistent the discretionary pullback proves in coming months.

—

The capex headline is strong but the ABS caveat is critical: the surge in equipment investment is heavily concentrated in data centre imports, meaning much of the national accounts impact next week is likely to be offset by higher capital goods imports, limiting the net contribution to GDP. The household spending miss is the more domestically significant number, with discretionary spending down 0.8% in its largest single-month fall since February 2024. That combination, an investment boom driven by imported equipment and a consumer pulling back, is not the balanced growth picture the RBA would want to see heading into its next policy assessment.

This article was written by Eamonn Sheridan at investinglive.com.

Oil up a little on the news:

• Fars News Agency report three explosions east of Bandar Abbas
• Iranian air defense systems activated
• United States has carried out a defense operation in Bandar Abbas, Iran, official tells Faytuks Network, adding that “this does not affect the ceasefire”

This article was written by Eamonn Sheridan at investinglive.com.

Jefferson, Lane and Greene are all speaking in Tokyo. I’ll have more to come on this separately

This article was written by Eamonn Sheridan at investinglive.com.

• AUD/NZD experiences the largest single-day decline since 2022 on divergent drivers
• US sells 5-year notes at 4.182% vs 4.181% WI
• Trump: We’re not there yet on Iran deal, not satisfied with it
• Trump says Iran would not get sanctions relief in exchange for giving up enriched uranium
• ECB’s de Guindos says current shock is causing lower economic growth and higher inflation
• Tech sector tumbles: Healthcare and consumer cyclicals lead the charge
• White House on X indirectly denies the Iran’s state TV reported MoU draft
• US Richmond Fed May composite index +13 vs +3 prior
• The major US stock indices open higher on US-Iran deal optimism but gains fade
• Iran’s state TV says it has a draft of the initial unofficial framework for the MoU
• Weekly US ADP pulse 35.75K vs 42.25K prior
• ECB policymaker Makhlouf: I haven’t seen second-round effects on inflation emerging

The main news of the session was an Iran’s state TV report saying that they obtained a draft of the framework for the Memorandum of Understanding (MoU) and that it included the withdrawal of US military forces from vicinity of Iran and lifting of the naval blockade in exchange for the reopening of the Strait of Hormuz to pre-war levels.

This report was then denied by the White House and labeled as “complete fabrication”. They also added that nobody should believe what the Iranian state media is putting out.

In a phone call with PBS news, Trump explicitly stated that Iran would not receive sanctions relief in exchange for giving up its highly enriched uranium. This doesn’t sound like progress to me. Iran wants the removal of sanctions, unfreezing of assets, the lifting of the US blockade and limited compromise on nuclear material. Trump is saying that even if Iran gave up its highly enriched uranium, he won’t remove sanctions.

Lastly, Trump spoke at a Cabinet Meeting and said that they are not there yet on an Iran deal because they are not satisfied with it. He also added that Iran is negotiating on fumes suggesting that Tehran has no leverage and he has the upper hand. He added though that Iran is starting to give things the US demanded and that they are doing well in terms of the talks.

On the data side, we got the US weekly ADP pulse data which continued to point to resilient labour market and the Richmond Fed composite index which showed further improvement. The economic data has been strong and there’s no reason whatsoever for the Fed to cut rates further even if oil prices drop on a deal.

This article was written by Giuseppe Dellamotta at investinglive.com.

• Prior was 3.955%
• Bid to cover at 2.34 vs 2.33 prior
• Primary Dealers 12.8%
• Direct 12.3%
• Indirect 74.9%

A negligible tail of 0.1 bps. Treasury yields have been falling steadily since the May 19 highs. The optimism regarding a US-Iran deal helped ease inflation concerns as it also contributed to lower oil prices. Nevertheless, an agreement has not been reached yet and the Strait of Hormuz remains closed.

For background, the US Treasury funds federal borrowing by selling marketable securities, bills, notes, bonds, FRNs, and TIPS, through regularly scheduled public auctions that set the clearing yield. The 5-year note is auctioned monthly: announced in the second half of the month, sold a few business days later, and issued on the last calendar day. Bids come in two forms. Noncompetitive bids, typically from retail investors, agree to take whatever yield the auction produces. Competitive bids, dominated by primary dealers and large institutions, specify the yield the bidder is willing to accept. Treasury fills non-competitives first, then works competitive bids from lowest yield up until the offering size is exhausted, with all winners paying the highest accepted yield (a single-price, or “Dutch,” auction). The full calendar of auction sizes is laid out at the Quarterly Refunding announcement on the first Wednesday of February, May, August, and November.

This article was written by Giuseppe Dellamotta at investinglive.com.

• We’re not there yet on an Iran deal. We’re not satisfied with it.
• Maybe we go back and finish it, maybe we don’t.
• Iran is negotiating on fumes.
• Iran can’t have a nuclear weapon.

Rubio’s comments:

• Trump preference is to negotiate with Iran.
• I think there’s been progress towards a deal.
• We will see over the next hours and days.

The fact that Trump is saying that Iran is negotiating on fumes is telling you that he thinks he has the upper hand, and Iran has no leverage whatsoever. I’m afraid Trump won’t compromise on anything with the stock market trading at record highs.

You can follow it live below:

This article was written by Giuseppe Dellamotta at investinglive.com.

• Full article here

During a phone call with PBS News, Trump explicitly stated that Iran would not receive sanctions relief in exchange for giving up its highly enriched uranium. This comes amid ongoing efforts between the US and Iran to end three months of conflict and reach an agreement on a memorandum of understanding.

On Truth Social, Trump claimed that negotiations with Iran were “proceeding nicely” and he was scheduled to meet with his Cabinet today to further discuss these diplomatic efforts. Iran has recently accused the US of acting in “bad faith” following military strikes during peace talks.

This doesn’t sound like progress to me. Iran wants removal of sanctions, unfreezing of assets, the lifting of the US blockade and limited compromise on nuclear material. Trump is saying here that even if Iran gave up its highly enriched uranium, he won’t remove sanctions.

This article was written by Giuseppe Dellamotta at investinglive.com.