This outlook contains information correct as at 1430hr on 02 June 2026
While the IMF's chief economist has warned of a global recession, citing the war in Iran as a greater risk than President Trump's flip-flops, equity markets continue to move in the opposite direction. Historically, equity markets tend to lead economies by six to nine months.
On Monday, 1 June, the Dow closed at a new record of 51,078 after hitting a record high of 51,161; the S&P 500 closed just below 7,600 after another record high of 7,617; and the NASDAQ closed at a new record of 30,513 after hitting a high of 30,633. The Nikkei on 29 May also hit a new record at 66,505, and even Singapore’s Straits Times Index (STI), usually considered a rather unexciting market, hit a record high of 5,102 on 25 May.
Putting aside the on-and-off talk of an end to the war in Iran and other geopolitical concerns, equity markets seem to indicate that all has been forgotten.
US PCE inflation is approaching 4%, the biggest acceleration since late 2021. The University of Michigan's US Consumer Sentiment index plunged to 44.8 in May, a record low in the survey’s 74‑year history. Consumer anxiety is fuelled by worsening affordability as inflation expectations rise, driven by war-fuelled energy shocks and higher prices. On the flip side, May Non-Farm Payrolls added 115,000 jobs versus 65,000 expected, indicating continued labour market resilience.
New Fed Governor Christopher Waller, like Chairman designate Kevin Warsh, favoured rate cuts. But Waller executed a stunning U-turn as he was sworn in on 22 May. He declared a rate cut is now "no more likely than a hike" and called it "crazy" to discuss easing given inflation data. FED funds futures traders are pricing in a 50% chance of a rate hike by October and a certainty by year-end.
As the world's leading energy importer by a significant margin, China is seeing its economy slow as high energy prices reignite talk of further stimulus. With the negative impact on consumers, it is hoped that AI and internet firms will position themselves for long-term growth, supported by policy tailwinds and innovation. While mostly still at or above 50.0, May PMI data reinforced the slowdown evident in April’s indicators. China’s full-year GDP is expected to moderate to 4.7%.
Bitcoin hit a three-month high above USD82,000 on 10 May before starting a decline to just above USD70,000. It appears the recent geopolitical uncertainty has been a negative for it.
Oil industry experts warned that supply disruptions caused by the closure of the Strait of Hormuz will persist through the end of the year, even if the waterway reopens promptly, and hinted at higher prices.
But the chart clearly shows prices are just ranging, and the pattern suggests oil prices might be lower in the coming months. Oil prices have eased with WTI trading at around USD 90 per barrel.
The USD remains firm, with the DXY Index at around 99.19, up from 98.50 on 5 May. The USD is likely to maintain its strength for the rest of the year.
Overnight US 10-Year Treasuries closed unchanged at 4.45% (5 May 4.44%), Australian 10-Year Govt Bonds closed up 0.02% at 4.9% (5 May 5.0%), and Euro 10-Year Bonds closed up 0.07% at 3.0% (5 May 3.09%).
Sources: Bloomberg, MSNBC, Reuters, Morningstar, Business Times, 02 June 2026
The Unemployment Rate rose to 4.5% (vs 4.3% prior). The data came in weaker than the RBA’s forecasts, suggesting labour market tightness is easing sooner than anticipated. Headline inflation is cooling faster than expected to 4.2% from 4.6% in March. The above data is likely to reduce pressure for further policy tightening. RBA is expected to hold the rate steady at its next MPC on 15 – 16 June. With no further interest rate hikes likely, AUDUSD upside should moderate, and some profit-taking may be seen.
As expected, AUDUSD’s challenge of the Resistance Zone at 0.7260 – 0.7320 failed. It has dropped back, finding some support below 0.7150. We can expect AUDUSD to break below in the next few weeks towards Support at 0.6900 – 0.7000.
EURUSD
Unless a sustainable Iran peace deal materialises, the ECB may be heading for a June rate hike at its June 10 – 11 meeting. Governing Council members have cited concerns as inflation expectations worsen. This may provide temporary support for EURUSD.
In line with our view, EURUSD was unable to push above Resistance at 1.1820. We can expect EURUSD to decline towards 1.1490 over the next few weeks.
Image Source: Bloomberg 02 June 2026
GBPUSD
The UK has a host of problems, the main being political uncertainty as PM Keir Starmer fights to remain in Office amid ongoing political scandals. If the politics are not in order, the economic and social issues cannot be resolved. The Pound would remain under pressure as the USD regains some positive traction amid uncertainty over a potential US-Iran peace deal and hawkish bets on the US Federal Reserve.
It has been one full year, and GBPUSD has failed repeated attempts to establish above Resistance at 1.3650. We maintain the view that GBPUSD would range trade between 1.3200 and 1.3650 over the next few months, with a bearish bias. It is very likely we may see a very severe test of Support at 1.3200.
Image Source: Bloomberg 02 June 2026
USDJPY
Japan’s economy grew much faster than expected this year, supporting the case for further Bank of Japan interest rate hikes. Q1 real GDP rose 2.1% YoY, exceeding economists’ forecast for a 1.7% expansion. However, this, together with verbal and significant actual intervention, has not stopped JPY from weakening, as USD/JPY continues to move inexorably higher.
USDJPY is still in the Uptrend Channel and moving to again challenge the 160.00 strong psychological resistance level. It is likely for USDJPY to break above this Resistance, moving up the Channel towards the 165.00 level.
Image Source: Bloomberg 02 June 2026
USDSGD
Singapore’s Q1 2026 GDP was revised sharply higher to 6.0% YoY from 4.6% YoY, with the revision exceeding both Bloomberg and market consensus. The Ministry of Trade and Industry maintained its 2026 GDP forecast range at “2.0% to 4.0%” amid sustained AI-related tailwinds, which outweigh the limited drag from the Middle East conflict. The SGD is expected to maintain its strength against the USD and is likely to strengthen into year-end.
USDSGD should trade in a range between 1.2600 and 1.2800 in the coming weeks, with a downward bias.
Image Source: Bloomberg 02 June 2026
AUDSGD
AUDSGD is consolidating above 0.9100, after which we can expect a fall back towards the 0.8930 level.
Image Source: Bloomberg 02 June 2026
XAUUSD
Gold has eased to below USD4,500, down roughly 4% in May. XAUUSD has remained below the 50-day Moving Average since mid-March, suggesting it has reached its high for this year. We stick with the technical wave count target of USD4,000 for the next Support area.
Image Source: Bloomberg 02 June 2026
Note: In the Candlesticks Chart, Green bars mean the Close is higher than the Open price, and Brown bars mean the Close is lower than the Open price