IC Markets Asia Fundamental Forecast | 17 September 2025
What happened in the U.S. session?
The overnight U.S. session on September 16, 2025, was characterized by cautious positioning ahead of the Federal Reserve’s anticipated rate cut, with markets digesting surprisingly strong retail sales data that reinforced the resilience of consumer spending. The session’s key developments included significant funding market stress evidenced by SOFR’s spike, individual stock volatility driven by corporate-specific news (Oracle’s TikTok involvement, Warner Bros. Discovery’s deal uncertainty), and broad sector rotation favoring energy while pressuring financials.
What does it mean for the Asia Session?
Wednesday, September 17, 2025, presents a packed schedule of high-impact events for Asian traders. The Federal Reserve’s widely anticipated rate cut will likely dominate market sentiment, potentially weakening the US dollar and supporting risk assets across Asian markets. The Bank of Canada’s expected rate reduction reflects broader global easing trends, while UK inflation data will test the Bank of England’s resolve regarding future policy moves.
The Dollar Index (DXY)
Key news events today
Federal Funds Rate (6:00 pm GMT)
FOMC Economic Projections (6:00 pm GMT)
FOMC Statement (6:00 pm GMT)
FOMC Press Conference (6:30 pm GMT)
What can we expect from DXY today?
The U.S. dollar faces its most challenging day in months as the Federal Reserve prepares to announce its first rate cut of 2025. With the currency already at multi-month lows against major counterparts and markets fully pricing in monetary policy easing, today’s decision and Powell’s subsequent commentary will be crucial in determining whether the dollar’s bearish trend accelerates or finds some stabilization. The combination of labor market weakness, political pressure, and dovish market expectations has created a perfect storm for dollar weakness, with the currency’s future trajectory heavily dependent on the Fed’s policy guidance for the remainder of 2025.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) voted, by majority, to lower the federal funds rate target range by 25 basis points to 4.00%–4.25% at its September 16–17, 2025, meeting, marking the first policy rate adjustment since December 2024 after five consecutive holds.
- The Committee maintained its long-term objective of achieving maximum employment and 2% inflation, acknowledging recent labor market softening and continued tariff-driven price pressures.
- Policymakers expressed elevated concern about downside risks to growth, citing a stalling labor market, modest job creation, and an unemployment rate drifting up toward 4.4%. At the same time, inflation remains above target, with CPI at 3.2% and core inflation at 3.1% as of August 2025; higher energy and food prices, largely attributable to tariffs, continue to weigh on headline measures.
- Although economic activity expanded at a moderate pace in the third quarter, the growth outlook has weakened. Q3 GDP growth is estimated near 1.0% (annualized), with full-year 2025 GDP growth guidance revised to 1.2%, reflecting slowing household consumption and tighter financial conditions.
- In the updated Summary of Economic Projections, the unemployment rate is projected to average 4.5% for the year, with headline PCE inflation revised up slightly to 3.1% for 2025. The Committee anticipates core PCE inflation to remain stubborn, requiring sustained vigilance and a flexible approach to risk management.
- The Committee reiterated its data-dependent approach and openness to further adjustments should employment or inflation deviate meaningfully from current forecasts. Several members dissented, either advocating a larger 50 basis point cut or preferring no adjustment at this meeting, revealing heightened divergence within the Committee.
- Balance sheet reduction continues at a measured pace. The monthly Treasury redemption cap remains at $5B and the agency MBS cap at $35B, as the Board aims to support orderly market conditions in the face of evolving global and domestic uncertainty.
- The next meeting is scheduled for 28 to 29 October 2025.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
Federal Funds Rate (6:00 pm GMT)
FOMC Economic Projections (6:00 pm GMT)
FOMC Statement (6:00 pm GMT)
FOMC Press Conference (6:30 pm GMT)
What can we expect from Gold today?
Gold’s performance on September 17, 2025, reflects a convergence of powerful fundamental and technical factors. The precious metal’s advance to record highs above $3,700 represents the culmination of sustained central bank buying, dollar weakness, geopolitical uncertainty, and anticipation of Fed policy accommodation. While technical indicators suggest overbought conditions, the underlying drivers supporting gold remain robust, with major institutions forecasting continued gains toward $3,800-$4,000 levels over the coming months.
Next 24 Hours Bias
Strong Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The Australian dollar is experiencing its strongest performance in months, benefiting from a confluence of factors including expected US Federal Reserve rate cuts, resilient domestic economic growth, and recovering commodity prices. However, rising inflation expectations have reduced the likelihood of further RBA rate cuts in the near term, creating a more complex monetary policy outlook. The currency’s technical momentum suggests potential for further gains, particularly if the Federal Reserve delivers the expected rate cut on September 17 and Chinese economic stimulus measures boost commodity demand. Key risks include any unexpected hawkish shifts in RBA communication or deterioration in global risk sentiment.
Central Bank Notes:
- The RBA held its cash rate steady at 3.60% at its September meeting on 8–9 September 2025, following a 25 basis point reduction at the August meeting. This maintains a cautious yet supportive stance, with the decision largely anticipated given recent evidence of inflation settling within the target band.
- Inflation readings continue to ease, with headline CPI most likely tracking near 2.1–2.3%—comfortably within the 2–3% target range. September quarter figures are pending, but leading indicators show further moderation in non-housing components, even as insurance and housing-related costs remain sticky.
- The RBA’s preferred trimmed mean inflation is estimated at around 2.7%–2.9%, further reflecting progress toward the midpoint of the target range. Energy and food volatility still create some short-term uncertainty, but underlying inflation is broadly on track.
- Global conditions are a key source of risk. While U.S.–EU trade tensions have stabilized slightly, volatility in equities and commodities persists, with uncertainty feeding through to Australia’s trade and export outlook.
- Domestic demand shows tentative improvement. Real household incomes and a stabilizing housing sector have underpinned modest consumption growth, though business investment remains uneven—service sectors outperforming manufacturing and construction.
- Labor market tightness persists, but momentum continues to slow from earlier in the year. Employment gains remain, but job vacancies and hiring intentions have softened, with underutilization rising marginally for the second straight month.
- Wage growth has slowed in line with easing labour pressures, but unit labour costs remain elevated due to weak productivity. The RBA continues to flag subdued productivity as a medium-term cost risk.
- Forward indicators suggest household consumption may be softer than previously forecast. Elevated rents and high borrowing costs are dampening discretionary spending, despite modest income recovery.
- The Board continues to highlight the risk that household spending could underperform, potentially weighing on business investment and job creation if confidence remains subdued.
- Monetary policy remains mildly restrictive, in line with greater inflation control and ongoing economic rebalancing. The decision to hold rates recognizes both progress and ongoing uncertainties, with future moves explicitly tied to incoming data.
- The Reserve Bank reinforced its goals of price stability and full employment, stating readiness to adjust policy if economic or inflation outcomes diverge from baseline projections.
- The next meeting is on 29 to 30 September 2025.
Next 24 Hours Bias
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
GDP q/q (10:45 pm GMT)
What can we expect from NZD today?
The New Zealand dollar enters Wednesday’s double-barrelled risk events in a tight holding pattern. A Fed cut is broadly priced, so guidance on subsequent U.S. easing will dictate whether NZD/USD can finally clear the stubborn 0.60 ceiling. Domestically, a negative GDP print would confirm a mid-year growth stumble and likely accelerate RBNZ easing expectations, adding downward pressure. Offsetting these risks, record terms-of-trade readings and the new UAE free-trade deal strengthen New Zealand’s external position, providing fundamental support once global rate uncertainty settles.
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to cut the Official Cash Rate (OCR) by 25 basis points to 3.00% on 20 August 2025, marking a three-year low and continuing the easing cycle after July’s pause. The vote was split 4-2, with two members advocating a 50-basis-point cut, highlighting diverging views within the Committee.
- Policymakers indicated that significant uncertainty and a stalling economic recovery prompted this move, leaving the door open for further rate cuts later in the year, with a possible trough around 2.5% by December.
- Annual consumer price index inflation rose to 2.7% in the June quarter and is expected to reach 3% for the September quarter—at the upper end of the MPC’s 1 to 3% target band—but medium-term expectations remain anchored near the 2% midpoint.
- Despite the near-term uptick, headline inflation is projected to return toward 2% by mid-2026, as tradables inflation pressures ease and significant spare capacity continues to dampen domestic price momentum.
- Domestic financial conditions are broadly aligning with MPC expectations, as lower wholesale rates have translated into reduced borrowing costs for households. However, declining consumption and investment demand, higher unemployment, and subdued wage growth reflect ongoing economic slack.
- GDP growth stalled in the second quarter of 2025, contrasting with earlier projections. High-frequency indicators point to continued weakness driven by rising prices for essentials, weakening household savings, and constrained business lending.
- The MPC cautioned that ongoing global tariff uncertainties and policy shifts, especially recent changes in US trade regulations, could amplify market volatility and present both upside and downside risks to New Zealand’s recovery.
- Subject to medium-term inflation pressures continuing to ease as projected, the MPC signaled scope for further OCR cuts, possibly down to 2.5% by year-end, consistent with the latest Monetary Policy Statement outlook.
- The next meeting is on 22 October 2025.
Next 24 Hours Bias
Weak Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The Japanese Yen enters September 17, 2025, from a position of recent strength, primarily driven by US Dollar weakness amid Fed rate cut expectations. While the BoJ is expected to maintain its current policy stance this week, the combination of persistent inflation, political uncertainty, and external trade pressures creates a complex environment for the currency. The upcoming Fed decision and BoJ communication will be critical in determining whether the yen can sustain its recent gains or face renewed pressure from domestic political developments and trade headwinds.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 17 September, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:
- The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
- The BOJ will continue its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases remains unchanged from the prior decision, with a quarterly reduction pace of about ¥400 billion through March 2026 and about ¥200 billion per quarter from April to June 2026 onward, aiming for a purchase level near ¥2 trillion in January to March 2027.
- Japan’s economy continues to show a moderate recovery, with household consumption supported by rising incomes, although corporate activity has softened somewhat. Overseas economies remain on a moderate growth path, with the impact of global trade policies still weighing on Japan’s export and industrial production outlook.
- On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. Inflationary pressures remain broad-based, with persistent cost-push factors in food and energy, alongside solid wage pass-through. However, input cost pressures from past import surges are showing early signs of easing.
- Short-term inflation momentum may moderate as cost-push effects diminish, though rent increases and service-related price gains tied to labor shortages are likely to provide support. Inflation expectations among firms and households continue a gradual upward drift.
- Looking ahead, the economy is projected to grow at a slower-than-trend pace in the near term due to external demand softness and cautious corporate investment plans. However, accommodative financial conditions and steady increases in real labor income are expected to underpin domestic demand.
- In the medium term, as overseas economies recover and global trade stabilizes, Japan’s growth potential is likely to improve. With persistent labor market tightness and rising medium- to long-term inflation expectations, core inflation is projected to remain on a gradual upward trend, converging toward the 2% price stability target in the latter half of the projection horizon.
- The next meeting is scheduled for 30 to 31 October 2025.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from Oil today?
Oil markets on September 17, 2025, are characterized by bullish momentum driven primarily by supply disruption concerns stemming from Ukrainian attacks on Russian energy infrastructure. With Brent crude above $68 per barrel and WTI above $64 per barrel, prices have gained over 2% in recent sessions. The combination of Russian refinery attacks eliminating an estimated 300,000 barrels per day of capacity, expected Fed rate cuts supporting demand outlook, and cautious OPEC+ production increases is creating a supportive environment for crude prices in the near term. However, longer-term forecasts remain bearish due to anticipated inventory builds and supply growth outpacing demand, with major institutions projecting significant price declines through 2026.
Next 24 Hours Bias
Medium Bearish
