IC Markets Asia Fundamental Forecast | 25 September 2025
What happened in the U.S. session?
The U.S. session overnight was characterized by caution on Fed rate cut timing, surprise strength in housing data, ongoing geopolitical headlines, and sharp moves in commodities and interest rates. Tech equities and safe-haven assets sold off, while defense stocks and the dollar gained. Treasury yields rose, crude oil rallied, and macroeconomic releases added volatility to both risk assets and defensive plays.
What does it mean for the Asia Session?
Thursday’s Asian session presents a mixed environment with key inflation data from Japan, continued technology sector strength, and central bank policy divergence creating both opportunities and risks. The Tokyo CPI release will be particularly critical for setting BOJ expectations and yen direction, while the broader theme of Fed easing versus potential BOJ tightening continues to shape currency and equity markets across the region. Traders should remain alert to any unexpected developments in the ongoing U.S.-China trade situation and monitor commodity price movements as global growth concerns persist.
The Dollar Index (DXY)
Key news events today
Final GDP q/q (12:30 pm GMT)
Core Durable Goods Orders m/m (12:30 pm GMT)
Durable Goods Orders m/m (12:30 pm GMT)
Final GDP Price Index q/q (12:30 pm GMT)
Existing Home Sales (2:00 pm GMT)
What can we expect from DXY today?
The US dollar experienced a notable rebound, climbing to three-week highs as Fed Chair Powell adopted a more cautious stance on future rate cuts. While markets still expect additional easing, Powell’s emphasis on “two-sided risks” and data-dependent policy has reduced expectations for aggressive dovishness. Despite this recent strength, the dollar remains down over 10% for the year, reflecting broader concerns about Fed policy, labor market weakness, and global capital reallocation. Key factors to watch include upcoming employment data, inflation reports, and the Fed’s October meeting, which will determine whether this dollar recovery can sustain or if the broader weakening trend resumes into the fourth quarter.
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
Final GDP q/q (12:30 pm GMT)
Core Durable Goods Orders m/m (12:30 pm GMT)
Durable Goods Orders m/m (12:30 pm GMT)
Final GDP Price Index q/q (12:30 pm GMT)
Existing Home Sales (2:00 pm GMT)
What can we expect from Gold today?
Gold’s remarkable 2025 performance continues as the metal trades near all-time highs, supported by a confluence of factors including Federal Reserve easing expectations, robust central bank buying, record ETF inflows, ongoing geopolitical tensions, and a weaker US dollar. While Powell’s cautious stance has introduced some near-term volatility, the underlying bullish drivers remain intact. Friday’s PCE data will be crucial for determining whether gold can break decisively above the $3,800 resistance level or faces a technical correction.
Next 24 Hours Bias
Strong Bullish
The Australian Dollar (AUD)
Key news events today
No major news event
What can we expect from AUD today?
The Australian Dollar experienced significant strengthening on Wednesday following the release of higher-than-expected August CPI data, which showed inflation accelerating to 3.0% annually. This development has reduced expectations for near-term RBA rate cuts, with markets now pricing in a hold at the September 30 meeting and decreased probability of a November cut. While the currency gained ground against major peers, underlying economic conditions remain mixed, with the labor market softening and PMI data showing deceleration in business activity. The RBA’s path forward will likely depend on upcoming quarterly inflation data and continued assessment of global economic uncertainties, particularly regarding China’s economic health and its impact on Australian commodity exports.
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
No major news event
What can we expect from NZD today?
The New Zealand dollar faces a challenging period as it navigates through economic contraction, aggressive monetary easing expectations, and leadership transition at the central bank. While the appointment of Anna Breman as the new RBNZ governor provides some stability and continuity, the currency remains under pressure from weak domestic fundamentals and expectations of substantial interest rate cuts ahead. The NZD’s performance will largely depend on upcoming economic data releases and the new governor’s policy approach when she takes office in December 2025.
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
Medium Bullish
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 continues to face headwinds as it approaches the psychologically important 150 level against the dollar. While the BoJ maintained its cautious approach in September, growing internal dissent and the surprise announcement of asset sales signal an increasing willingness to normalize policy. Political uncertainty surrounding the October 4 LDP leadership election adds another layer of complexity to the monetary policy outlook. Key upcoming events include Tokyo CPI data on Friday and the potential for intervention if the yen weakens significantly past 150. Market expectations remain tilted toward a BoJ rate hike in October, which could provide support for the currency in the coming weeks.
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
Weak Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil markets are characterized by a complex interplay of tightening short-term supply conditions and longer-term oversupply concerns. Immediate bullish factors include surprise US inventory draws, ongoing export disruptions from Iraq’s Kurdistan region, and escalating geopolitical tensions as Ukrainian attacks intensify pressure on Russian energy infrastructure. However, OPEC+’s continued production increases and forecasts of significant global inventory builds suggest downward pressure on prices in the coming quarters. The market remains highly sensitive to geopolitical developments, with the Russia-Ukraine conflict and Middle East tensions maintaining a substantial risk premium in current pricing.
Next 24 Hours Bias
Weak Bearish
