IC Markets Asia Fundamental Forecast | 21 October 2025
What happened in the U.S. session?
Markets during the U.S. session steadied after prior volatility. Equity benchmarks advanced on optimism surrounding earnings and potential monetary easing, while oil weakened and bond yields rose marginally. Macroeconomic uncertainty persisted due to the federal shutdown’s impact on data flow, but GDP tracking and consumption metrics continued to signal a resilient U.S. economy heading into late October.
What does it mean for the Asia Session?
Asian traders balanced optimism from improving growth forecasts and bullish equities with caution over trade risks and slowing Chinese momentum. The day’s narrative was dominated by Fed policy expectations, AI-fueled tech sector strength, and a watchful tone on U.S.-China diplomacy ingredients that shaped a cautiously risk-on trading environment across Asian markets.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
The US dollar enters Tuesday’s session broadly steady, trading near the mid-98 range on the DXY, with investors cautious ahead of delayed US inflation data and watching political signals from Washington and Beijing. The overarching tone is one of consolidation — the dollar is neither extending its rebound nor revisiting lows, reflecting a balance between softer rate expectations and stable global risk sentiment.
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
No major news event
What can we expect from Gold today?
Gold is hovering around the $4,260–$4,280 per ounce range, having regained momentum after last week’s consolidation phase below $4,200. Market forecasts suggest a possible retest of the $4,325–$4,380 resistance zone, with potential for a push beyond $4,400 if bullish momentum persists. On the downside, short-term support lies near $4,200 and $4,163, levels that could attract dip-buying if price corrections occur.
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 is trading cautiously ahead of tomorrow’s Asian session, likely remaining range-bound unless fresh catalysts emerge. Weak labour market data, subdued Chinese demand, and global risk-off trends continue to pressure the AUD. the Australian Dollar is expected to stay under bearish pressure near 0.65, with downside risks dominating unless global sentiment improves or Chinese growth stabilizes.
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 recovered slightly to about 0.574 USD on Monday after losing ground earlier in October, supported by in-line inflation data showing consumer prices rose 3% in Q3—exactly at the top of the RBNZ’s target band. While the data indicated some sticky inflation, underlying measures remain subdued, which gives policymakers room to continue easing in November.
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 remains under moderate pressure due to political transition and policy expectations, though downside momentum appears contained by U.S. yield softness and safe-haven demand. The Japanese yen traded defensively ahead of Japan’s leadership vote, with USD/JPY hovering near 150.7–151.2. The currency continued to weaken slightly as markets priced in the likely appointment of Sanae Takaichi as Japan’s first female prime minister, an outcome seen as dovish for monetary policy.
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 markets are dominated by oversupply fears, weak demand, and trade friction, pushing Brent to roughly $60.70 and WTI to $57.20 per barrel. The near‑term outlook remains bearish, with traders awaiting the API crude inventory data later today and upcoming Federal Reserve speeches for fresh demand‑side cues. Trade tensions between the United States and China have re‑emerged after Washington reinstated tariffs on select Chinese imports and imposed sanctions on key commodities.
Next 24 Hours Bias
Medium Bearish
