IC Markets – Asia Fundamental Forecast | 03 November 2025
What happened in the U.S. session?
The overnight U.S. session was shaped by better-than-expected tech earnings and ongoing macroeconomic uncertainty, with the ISM Manufacturing PMI continuing to signal a slow manufacturing environment. Tech equities, the U.S. dollar, and safety assets (like Treasuries and gold) were among the most impacted financial instruments. The USD remained sensitive to the ISM Manufacturing PMI and related price indices releases, with currency traders closely watching for signs of further weakness or surprise improvements.
What does it mean for the Asia Session?
Monday, November 3, brings critical data that will set the tone for the week, with US manufacturing PMI and the RBA rate decision taking center stage. The US dollar’s strength, driven by reduced Fed easing expectations, the yen’s weakness from political uncertainty, and the Australian dollar’s bullish stance from inflation surprises, represents the major currency themes. Commodity markets show gold consolidating after record highs, while oil faces structural headwinds from oversupply.
The Dollar Index (DXY)
Key news events today
ISM manufacturing PMI (3:00 pm GMT)
ISM manufacturing prices (3:00 pm GMT)
What can we expect from DXY today?
The US dollar enters November 3 with strong momentum, supported by hawkish Federal Reserve rhetoric, improved geopolitical sentiment following the US-China trade deal, and continued economic resilience. However, notable risks remain, including uncertainty stemming from the ongoing government shutdown, potential manufacturing weakness indicated by sub-50 PMI readings, and elevated positioning that may prompt profit-taking. Today’s manufacturing PMI releases at 9:45 AM and 10:00 AM ET will offer key insights into the economy’s underlying strength and could shape the near-term direction of the dollar.
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 3.75%–4.00% at its October 28–29, 2025, meeting, marking the second consecutive cut following the 25 basis points reduction in September.
- The Committee maintained its long-term objectives of maximum employment and 2% inflation, noting that the labor market continues to soften, with modest job creation and an unemployment rate edging higher. In comparison, inflation remains above target at around 3.0%.
- Policymakers highlighted ongoing downside risks to economic growth, tempered by signs of resilient economic activity. September’s consumer price index (CPI) came in slightly lower than expected at 3.0% year-over-year, easing inflation pressure but still warranting vigilance given tariff-driven price effects.
- Economic activity expanded modestly in the third quarter, with GDP growth estimates around 1.0% annualized; however, uncertainty remains elevated amid persistent global trade tensions and the U.S. government shutdown, which is impacting data availability.
- The updated Summary of Economic Projections reflects an anticipated unemployment rate averaging approximately 4.5% for 2025, with headline and core personal consumption expenditures (PCE) inflation projections holding near 3.0%, indicating a slow easing path ahead.
- The Committee emphasized its flexible, data-dependent approach and underscored that future policy adjustments will be guided by incoming labor market and inflation data. As in prior meetings, there was dissent, including one member advocating a more aggressive 50-basis-point cut.
- The FOMC announced the planned conclusion of its balance sheet reduction (quantitative tightening) program, intending to cease runoff in the near term to maintain market stability, with Treasury redemption caps held steady at $5 billion per month and agency mortgage-backed securities caps at $35 billion.
- The next meeting is scheduled for 9 to 10 December 2025.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
ISM manufacturing PMI (3:00 pm GMT)
ISM manufacturing prices (3:00 pm GMT)
What can we expect from Gold today?
Gold’s consolidation around $4,000 reflects a market recalibrating after an extraordinary rally, with traders balancing reduced safe-haven demand from improved US-China relations against persistent structural drivers, including central bank buying, Fed policy uncertainty, and long-term debasement concerns. The precious metal faces near-term technical pressure from a strengthening dollar and hawkish Fed rhetoric, but most analysts maintain bullish medium-to-long-term outlooks with targets ranging from $4,500-$5,000 over the next 12-18 months.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
No major news event
What can we expect from AUD today?
The Australian Dollar enters Monday with firm upward momentum supported by strong inflation data, RBA caution on rates, and positive global market sentiment. Rate cuts are now unlikely in the near term, and technical setups favor further AUD/USD gains as long as current inflation and commodity trends persist. AUD/USD climbed above 0.6600 to reach recent three-week highs following the September quarter inflation release, which beat forecasts and reinforced the view that rate cuts are off the table for November and likely December as well.
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 Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
The NZD faces downward pressure as markets expect further RBNZ rate cuts and labor market weakness, but improving local business sentiment offers some offsetting support. The NZD/USD is projected to remain soft with only temporary rebounds possible, and all eyes are now on upcoming labor data and the RBNZ policy meeting later in the month.
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to cut the Official Cash Rate (OCR) by 50 basis points to 2.50% on 8 October 2025, exceeding market expectations for a smaller 25-basis-point reduction and signaling a stronger commitment to reviving growth.
- The decision was reached by consensus, marking a shift from previous split votes, and reflected policymakers’ shared view that sustained economic weakness and persistent disinflationary pressures required a more front-loaded policy response.
- Annual consumer price inflation stood at 2.7% in the June quarter and is seen nearing 3% for the September quarter—above the 2% midpoint but within the 1–3% target range. Despite high near-term readings, the MPC projects inflation will return toward 2% by the first half of 2026 as spare capacity and moderating tradables curb price momentum.
- Policymakers acknowledged that domestic demand remains weak, with household spending, business investment, and construction activity under pressure. While still elevated, services inflation is expected to ease gradually as wage growth slows and unemployment edges higher.
- Financial conditions have eased with expectations as wholesale and retail borrowing rates adjust to lower policy settings. Bank lending data indicate a modest uptick in mortgage approvals, though broader credit demand remains subdued.
- GDP growth stalled in the middle of 2025, with high-frequency indicators showing continued weakness into the third quarter. A combination of elevated costs for essentials and falling savings continues to restrain household consumption, while global trade frictions weigh on business sentiment.
- The MPC noted that global uncertainty—particularly from US trade regulation changes and soft Chinese demand—continues to pose downside risks to export sectors, though these are partly offset by a weaker New Zealand dollar improving competitiveness.
- Subject to data confirming a sustained soft patch in activity and moderating inflation pressures, the MPC signaled further scope to reduce the OCR toward 2.25% at its next meeting on 26 November 2025, consistent with current market and Westpac forecasts.
- The next meeting is on 26 November 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?
While inflation data provide a potential reason for BOJ tightening, persistent dovish signals mean the yen remains under downside pressure against the dollar, with any appreciation likely to be gradual and dependent on both BOJ policy evolution and US dollar momentum. The opening of Japanese markets for holiday trading may add some volatility, but underlying trends favor continued yen weakness for now.
Central Bank Notes:
- The Policy Board of the Bank of Japan met on 30–31 October and, by a clear majority vote, decided to maintain its key monetary policy approach for the upcoming period.
- The BOJ will continue to encourage the uncollateralized overnight call rate to remain at around 0.5%, in line with the prior stance.
- The gradual quarterly reduction in monthly outright purchases of Japanese Government Bonds (JGBs) remains intact, with amounts unchanged from the previous schedule. Purchases are set to decrease by about ¥400 billion per quarter through March 2026, shifting to about ¥200 billion per quarter from April to June 2026, and targeting a ¥2 trillion purchase level for Q1 2027. The bank reaffirmed its intention to maintain flexibility, with readiness to respond if market conditions warrant an adjustment.
- Japan’s economy continues to show moderate recovery, primarily led by solid capital expenditures, although export growth and corporate activity remain restrained by external demand uncertainty and the ongoing effects of U.S. trade policies.
- Annual headline inflation (excluding fresh food) accelerated to 2.9% year-on-year in September, marking the first uptick in four months and staying above the BOJ’s 2% target. Broad-based inflation persists, with food and energy cost pressures, but wage growth continues to support household consumption. Input cost pressures from the earlier surge in imports eased slightly.
- Short-term inflation momentum could moderate as food-price hikes ease, though rent, healthcare, and service-sector price increases tied to labor shortages provide support. Firms and households maintain a gradual upward drift in inflation expectations.
- For the near term, BOJ projects growth below trend as external demand stays subdued and corporate investment plans remain cautious. Still, accommodative financial conditions and steady gains in real labor income will underpin domestic consumption.
- Over the medium term, as overseas economies recover and trade conditions normalize, Japan’s growth potential should improve. Persistent labor market tightness, higher wage settlements, and rising medium- to long-term inflation expectations are expected to keep core inflation on a gradual upward trajectory, converging toward the 2% price stability target later in the forecast horizon.
- The next meeting is scheduled for 18 to 19 December 2025.
Next 24 Hours Bias
weak Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
OPEC+ is increasing output modestly in December but pausing hikes for Q1 2026. Oil prices are below recent averages, heading for a third straight month of declines. Market weakness is driven by oversupply, sluggish demand (especially from China), and persistent geopolitical developments. Near-term price action could see further volatility, with technical support watching the $58–$63 range closely.
Next 24 Hours Bias
Medium Bearish
