IC Markets Asia Fundamental Forecast | 16 October 2025
What happened in the U.S. session?
The U.S. session was characterized by volatility and mixed sentiment, with the S&P 500 and chipmakers posting gains, while global risk appetite was challenged by escalating U.S.-China trade tensions and new sanctions from Beijing.Gold and other metals attracted safe-haven flows, while equities rebounded on robust earnings. Rate cut expectations were supported by dovish Fed remarks and the effects of the government shutdown, with monetary policy remaining a market focal point.
What does it mean for the Asia Session?
Asian markets are poised for a volatile session, driven by data releases, central bank communications, and underlying geopolitical and trade dynamics. Expect AUD and regional FX to react strongly to Australia’s employment data.Watch UK GDP and related prints for sterling volatility.US manufacturing, Fed speakers, and ongoing trade issues will steer global risk sentiment.
The Dollar Index (DXY)
Key news events today
Philly Fed manufacturing index (12:30 pm GMT)
FOMC member Waller speaks (1:00 pm GMT)
What can we expect from DXY today?
The US Dollar on Thursday is showing bearish momentum amid ongoing government shutdown uncertainty, delayed economic data, and expectations of upcoming Federal Reserve rate cuts. Although the Dollar has experienced brief gains from safe-haven flows and rival currency weakness, the overall outlook remains for gradual weakening through late October.
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 Bullish
Gold (XAU)
Key news events today
Philly Fed manufacturing index (12:30 pm GMT)
FOMC member Waller speaks (1:00 pm GMT)
What can we expect from Gold today?
Gold surged to new all-time highs, trading above $4,200 per ounce as safe-haven demand soared amid mounting geopolitical tensions and expectations for further US rate cuts. This marks the ninth straight quarterly gain for gold, continuing its record-breaking rally for the year. The US Federal Reserve is signaling more interest rate cuts, amplifying gold’s role as a hedge against inflation and monetary uncertainty
Next 24 Hours Bias
Strong Bullish
The Australian Dollar (AUD)
Key news events today
Employment change (12:30 am GMT)
Unemployment rate (12:30 am GMT)
What can we expect from AUD today?
On Thursday, the Australian Dollar stabilized after earlier pressure from global trade disputes and upbeat domestic jobs data. Despite an uptick in unemployment, the resilient job growth supported a partial recovery, while broader sentiment remains cautious on extended trade tensions and global monetary policy outlook. The AUD’s immediate prospects will depend on upcoming central bank commentary and international data releases.
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
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
The NZD is weak as investors react to dovish signals from the RBNZ, a challenging export outlook, and global economic uncertainty. Downside risks remain with technical indicators and macro conditions favoring continued pressure, although a bullish correction is possible if resistance levels are reclaimed. The latest fall stems from the RBNZ’s recent 50 basis point rate cut to 2.5%, signaling risk of further monetary easing as New Zealand’s economic outlook remains fragile.
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?
Today, the Japanese Yen consolidated recent gains as political turmoil in Tokyo fostered uncertainty, while global safe-haven demand intensified due to rising trade tensions and the ongoing US fiscal gridlock. The Bank of Japan’s policy stance and technical resistance levels in USD/JPY have created a temporary pause in Yen depreciation, with markets closely watching upcoming economic data and policy developments for the next decisive move.
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 Bullish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil prices are under persistent pressure today, October 16, 2025, hovering at multi-month lows due to oversupply fears and weakening demand expectations amid US-China trade friction. Markets are watching for signs of inventory drawdowns or geopolitical de-escalation before confidence and prices rebound. US Oil Inventories: Expectations remain for another weekly build in US crude oil inventories, sustained by record-high US production and robust refinery demand, though gasoline stocks are forecasted to decline.
Next 24 Hours Bias
Medium Bearish
