IC Markets Asia Fundamental Forecast | 04 September 2025

IC Markets Asia Fundamental Forecast |  04 September 2025

What happened in the U.S session?

The overnight US session was dominated by weaker-than-expected labor market data, particularly the JOLTS job openings report, which reinforced expectations for imminent Federal Reserve rate cuts. This drove significant currency weakness in the US dollar, bond yield volatility with initial spikes followed by retreats, and a flight to safe-haven assets like gold. Equity markets showed resilience with higher futures, supported by positive developments for Alphabet, while concerns about AI valuations and tariff policies continued to create uncertainty. The week’s focus now shifts to Friday’s crucial nonfarm payrolls report, which could determine the magnitude of the Fed’s rate cut decision.

What does it mean for the Asia sessions?

Thursday’s Asian session will be heavily influenced by US employment data and the ongoing Fed rate cut narrative, with markets showing 91.7% probability of a September cut. China’s strong service performance contrasts with its weakness in manufacturing, creating sector-specific opportunities. Political uncertainties in Japan and Fed independence concerns in the US continue supporting haven assets like gold, which recently hit record highs above $3,560. Currency markets reflect this divergence, with the Swiss franc strengthening on tariff concerns and the yen weakening on political instability. Asian traders should focus on employment data reactions, yuan strength from services growth, and continued haven flows into gold and other defensive assets.

The Dollar Index (DXY)

Key news events today

ADP Non-farm employment change (12:15 pm GMT)

Unemployment Claims (12:30 pm GMT)

ISM Services PMI (2:00 pm GMT)

What can we expect from DXY today?

The US dollar faces continued pressure on September 4, 2025, as markets await crucial economic data releases while pricing in a high probability of Federal Reserve rate cuts. Weak labor market indicators, political pressure on Fed independence, and broad-based currency weakness are the primary drivers of dollar decline. Today’s ADP employment, jobless claims, and ISM Services PMI data will provide critical insights into economic momentum ahead of Friday’s pivotal Non-Farm Payrolls report. With technical support holding precariously around 98.00 and fundamental headwinds intensifying, the dollar’s near-term outlook remains challenged unless economic data significantly surprises to the upside.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at its meeting on July 29–30, 2025, keeping policy unchanged for the fifth consecutive meeting.
• The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.
• Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.
• The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.
• In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.
• The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.
• As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.
• The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Medium Bullish

Gold (XAU)

Key news events today

ADP Non-farm employment change (12:15 pm GMT)

Unemployment Claims (12:30 pm GMT)

ISM Services PMI (2:00 pm GMT)

What can we expect from Gold today?

Gold’s rally to record highs above $3,570 reflects a perfect storm of supportive factors: overwhelming expectations for Fed rate cuts, concerns about central bank independence due to political interference, strong institutional demand from central banks seeking dollar alternatives, and robust investment flows into gold ETFs.With multiple technical breakouts achieved and analysts targeting $3,700 as the next major level, gold’s bullish momentum appears well-established heading into Thursday’s trading session. The key risk factors to monitor include any stronger-than-expected economic data that could reduce Fed easing expectations, though the current trajectory suggests continued strength in the precious metals complex.

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 enters September 4, 2025, in a strengthening position supported by robust domestic economic growth and expectations of continued US Dollar weakness. While the AUD has faced headwinds from China’s manufacturing slowdown and declining commodity prices, strong GDP performance and the RBA’s measured approach to monetary easing have provided fundamental support. The currency is positioned for potential gains toward 0.68-0.70 by year-end, contingent on Federal Reserve policy decisions and China’s economic trajectory. Technical indicators suggest short-term bullish momentum, though broader direction remains dependent on evolving US monetary policy and global risk sentiment.

Central Bank Notes:

• The RBA held its cash rate steady at 3.85% at the August meeting on 11–12 August 2025, maintaining its stance after keeping rates unchanged in July. The decision was widely expected, reflecting confidence that inflation is settling sustainably within the target.
• Inflation continues to moderate, though headline outcomes for the September quarter are not yet available. Timely indicators suggest price pressures in housing-related services and insurance remain elevated, even as tradables inflation stays subdued.
• The RBA’s preferred measure, trimmed mean inflation, is estimated to track close to 2.8 — 2.9%, signaling continued progress toward the midpoint of the 2–3% target range. Headline CPI is likely near 2.3%, subject to volatility in energy and food prices.
• Global conditions remain a source of uncertainty. The market reaction to ongoing U.S.–EU trade frictions has tempered slightly, but volatility persists across equity and commodity markets. These developments continue to feed into Australia’s trade outlook and business sentiment.
• Domestic demand showed further signs of recovery. Household consumption strengthened modestly over the winter months, helped by improving real incomes and a stabilizing housing market. However, business investment intentions remain mixed, with service industries stronger than manufacturing and construction.
• Labour market conditions remain relatively tight, but indicators point to reduced momentum compared with the first half of 2025. Job vacancies have eased, and while employment growth continues, underutilization edged slightly higher for the first time this year.
• Wage growth has moderated further, consistent with easing labour demand, though unit labour costs remain above average due to weak productivity performance. The RBA continues to flag productivity as a medium-term risk to cost dynamics.
• Forward-looking indicators suggest consumption growth may be softer than previously assumed, with households cautious despite modest income gains. Elevated rents and high borrowing costs continue to weigh on discretionary spending.
• The Board reasserted the risk that household spending may underperform forecasts, potentially dampening business conditions and leading to weaker labour demand if confidence fails to strengthen.
• The overall stance of monetary policy remains mildly restrictive, consistent with inflation outcomes near target and ongoing progress toward balance in the economy. The Board judged it prudent to leave rates unchanged, while emphasizing that adjustments remain contingent on incoming data.
• The Reserve Bank reaffirmed its commitment to price stability and full employment, noting its readiness to adjust settings if conditions diverge materially from baseline projections..
• The next meeting is on 8 to 9 September 2025.
  
  Next 24 Hours Bias

Medium Bullish


The Kiwi Dollar (NZD)

Key news events today

No major new event

What can we expect from NZD today?

The New Zealand Dollar faces a challenging environment as domestic economic headwinds intersect with shifting global monetary conditions. While recent Chinese economic improvements and broad USD weakness have provided near-term support, the RBNZ’s dovish policy stance and deteriorating labor market conditions suggest continued vulnerability. The currency is likely to remain range-bound with a slight bearish bias, particularly sensitive to domestic economic data releases and shifts in global risk sentiment. Key support levels around 0.5825-0.5850 will be critical to watch, with any sustained break potentially triggering deeper declines toward 0.5745.

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

Weak Bearish

The Japanese Yen (JPY)

Key news events today

No major news event

What can we expect from JPY today?

The Japanese yen faces a challenging environment with political turmoil surrounding PM Ishiba’s leadership, cautious BoJ monetary policy despite above-target inflation, and ongoing economic growth concerns. USD/JPY is likely to remain volatile around 148-150 levels, with political developments and the September 18-19 BoJ meeting serving as key catalysts. The currency’s weakness reflects both domestic uncertainties and the broader divergence between Japanese and US monetary policies.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 31 July, 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 maintain its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases will, in principle, continue to decrease by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, targeting a purchase level near ¥2 trillion in January to March 2027.
• Japan’s economy is experiencing a moderate recovery overall, though some sectors remain sluggish. Overseas economies are generally growing moderately, but recent trade policies in major economies have introduced pockets of weakness. Exports and industrial production in Japan are essentially flat, with any uptick largely driven by front-loaded demand ahead of U.S. tariff increases.
• On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. This reflects continued wage pass-through, previous import cost surges, and further increases in food prices, particularly rice. Expectations for future inflation have begun to rise moderately.
• The effects of the earlier import price and food cost increases are expected to fade during the outlook period. There may be a temporary stagnation in core inflation as overall growth momentum softens.
• Looking forward, the economy is likely to see a slower growth pace in the near term as overseas economies feel the pinch of ongoing global trade policies, putting downward pressure on Japanese corporate profits. Accommodative financial conditions are expected to buffer these headwinds somewhat. In the medium term, as global growth recovers, Japan’s growth rate is also expected to improve.
• With renewed economic expansion, intensifying labor shortages, and a steady rise in medium- to long-term expected inflation rates, core inflation is projected to gradually pick up. By the latter half of the BOJ’s projection period, inflation is forecast to move in line with the 2% price stability target.
• There are multiple risks to the outlook, with especially elevated uncertainty regarding the future path of global trade policies and overseas price trends. The BOJ will continue to closely monitor their impact on financial and foreign exchange markets, as well as on Japan’s economy and inflation.
• The next meeting is scheduled for 17 to 18 September 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Thursday’s oil market landscape is dominated by bearish fundamentals as OPEC+ accelerates production increases while global demand growth remains modest. The combination of record inventory builds, downward price revisions by major forecasting agencies, and mixed economic signals suggests oil prices may continue facing downward pressure through the remainder of 2025. While geopolitical risks from U.S.-Iran tensions and Middle East conflicts provide some support, the supply-demand imbalance appears to be the primary market driver heading into the crucial OPEC+ meeting this weekend.

Next 24 Hours Bias

Medium Bearish