IC Markets Asia Fundamental Forecast | 14 October 2025
What happened in the U.S. session?
Major U.S. equities reversed Friday’s rout on Trump’s more conciliatory China statements. Gold and silver soared to new highs on safe-haven flows, while oil stayed range-bound. Semiconductor and AI-focused stocks outperformed on demand optimism and easing trade fears. Key U.S. economic data remained delayed due to the ongoing government shutdown, keeping volatility elevated.The U.S. dollar strengthened slightly against other major currencies, while fixed income stayed muted with bond markets closed.
What does it mean for the Asia Session?
Traders should expect heightened volatility in Asian markets driven by ongoing US-China trade friction and the potential for major market-moving statements from central bank leaders (RBA, Fed, BOE). Gold and safe-haven assets are in favor, while Asian equities remain under pressure. Key macroeconomic releases and speeches will set the tone for Asia-Pacific FX pairs and broader risk sentiment.
The Dollar Index (DXY)
Key news events today
Fed Chair Powell speaks (4:20 pm GMT)
What can we expect from DXY today?
The dollar starts with moderate strength, supported by the anticipation of Powell’s speech and temporarily abated trade tensions. The outlook for the USD is shaped by the potential continuation of Fed rate cuts, sticky inflation, and nervous market sentiment, given government shutdown delays and unresolved trade issues with China. Near-term volatility is expected, with the Fed’s forward guidance and geopolitical headlines dictating major moves for the dollar across global markets.
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
Weak Bearish
Gold (XAU)
Key news events today
Fed Chair Powell speaks (4:20 pm GMT)
What can we expect from Gold today?
Gold’s breakthrough above $4,100 per ounce represents a historic milestone driven by a confluence of factors, including renewed US-China trade tensions, Federal Reserve dovish expectations, record ETF inflows, and sustained central bank buying. While technical indicators suggest potential for near-term consolidation, the fundamental backdrop remains supportive with multiple analysts forecasting continued gains toward $5,000 per ounce by 2026. Fed Chair Powell’s speech on Tuesday will be closely watched for additional policy guidance that could influence gold’s next directional move.
Next 24 Hours Bias
Strong Bullish
The Australian Dollar (AUD)
Key news events today
Monetary policy meeting minutes (12:30 am GMT)
What can we expect from AUD today?
The Australian Dollar staged a notable recovery, rising 0.7% to 65.14 US cents as US-China trade tensions eased following more conciliatory rhetoric from the Trump administration. However, the currency remains under pressure from domestic factors, including rising inflation expectations (4.8% in October), deteriorating consumer confidence (92.1, a six-month low), and the RBA’s increasingly hawkish stance on monetary policy.
Central Bank Notes:
- The RBA held its cash rate steady at 3.60% at its October meeting on 29–30 September 2025, marking a second consecutive pause after August’s 25 basis point cut. The move affirms the Bank’s data-dependent approach as inflation trends within the target range.
- Inflation indicators remained stable through September, with headline CPI likely anchoring near 2.2%—comfortably within the 2–3% band. Insurance and housing costs remain sticky but are increasingly offset by moderation in discretionary goods.
- Trimmed mean inflation is estimated at around 2.8%, signaling underlying pressures remain contained. The Board continues to flag food and energy price volatility as short-term risks, though the broader disinflation narrative holds.
- Global conditions remain a source of uncertainty. U.S. policy expectations and uneven growth in China continue to weigh on commodities, even as trade disruptions have eased marginally since mid-year.
- Domestic growth shows resilience in the housing and services sectors, though manufacturing remains subdued. Household incomes have stabilized, but consumption remains only modest, capped by high borrowing costs.
- The labor market maintains relative tightness, though job growth has slowed notably since the first half of the year. Underutilization has ticked higher, but overall employment conditions remain supportive.
- Wage growth is plateauing, reflecting softer labor demand. Weak productivity continues to keep unit labor costs elevated, underscoring a medium-term concern highlighted repeatedly by the RBA.
- Household consumption prospects remain fragile. The combination of high rents and weak discretionary appetite suggests risks of a consumer-led slowdown in Q4 if confidence fails to rebound.
- The Board reiterated that subdued household spending poses risks to business sentiment and may dampen investment and job creation in the coming quarters.
- Monetary policy remains mildly restrictive. The RBA balanced confidence in inflation progress with caution around global and domestic demand risks, keeping further adjustments conditional on incoming data.
- The Bank reaffirmed its dual commitment to price stability and full employment, noting its readiness to act should conditions shift markedly.
- The next meeting is on 5 to 6 November 2025.
Next 24 Hours Bias
Medium Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
The New Zealand Dollar remains under significant pressure as markets continue to digest the implications of the RBNZ’s aggressive 50 basis point rate cut from the previous week. Trading near six-month lows around 0.5730-0.5740 against the US Dollar, the currency faces headwinds from both dovish monetary policy expectations and underlying economic weakness. With markets pricing in further rate cuts and key economic data releases scheduled throughout the week, the NZD’s recovery prospects remain limited in the near term.
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 Bearish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from JPY today?
The Japanese yen amid unprecedented political uncertainty. The collapse of the LDP-Komeito coalition has complicated Takaichi’s path to the premiership and raised questions about Japan’s economic policy direction. While the yen remains under pressure at multi-month lows around 152 per dollar, verbal intervention warnings from Japanese authorities suggest growing concern about the currency’s rapid decline. The upcoming BOJ meeting on October 29-30 will be crucial for determining the monetary policy path, with markets significantly reducing expectations for an October rate hike.
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 Bearish
Oil
Key news events today
API crude oil stock (8:30 pm GMT)
What can we expect from Oil today?
Oil prices are rebounding modestly from multi-month lows. The outlook remains volatile, with price recovery hinging heavily on US–China trade negotiations, the pace of OPEC+ supply growth, and the resolution of localized supply issues in major consuming regions. Short-term price movements are particularly sensitive to any signals of trade de-escalation or fresh disruptions, and the broader trend remains capped by potential oversupply and macroeconomic uncertainty. The market is searching for a catalyst amid a cautious and fluid environment.
Next 24 Hours Bias
Medium Bearish
