IC Markets Asia Fundamental Forecast | 19 September 2025
What happened in the U.S. session?
The overnight U.S. session was dominated by the Fed’s interest rate cut and its guidance for fewer future reductions than market expectations, creating volatility and sector rotation within equities. Financials and consumer staples outperformed, while technology and housing-related stocks faced pressure due to both Fed messaging and disappointing housing data. The U.S. dollar exhibited notable volatility around the Fed’s announcement, and commodities such as oil and gold responded to both macro headlines and inventory data.
What does it mean for the Asia Session?
On 19th September 2025, Asian traders should focus on the Bank of Japan’s rate decision and press conference for monetary policy signals, UK and Canadian retail sales for consumer trend insights, and potential action in equity and currency markets driven by Chinese economic data and international political developments. Market participants should be especially vigilant for surprise BOJ commentary and any hints of further stimulus from China, as these could sharply impact FX and equity volatility.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
The US dollar has continued its recent downtrend, largely influenced by the US Federal Reserve’s decision to cut interest rates by 25 basis points earlier this week, with dovish signals suggesting more cuts are likely this year. This has led to widespread dollar weakness across major currency pairs, while expectations of further US policy easing dominate market sentiment. The US dollar is broadly weaker today as markets digest the Fed’s dovish signals and soft US economic data, with the outlook remaining bearish barring an unexpected policy surprise.
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 Bearish
Gold (XAU)
Key news events today
No major news event
What can we expect from Gold today?
Gold prices continued their historic rally into Friday, September 19th, 2025, hovering near record highs in anticipation of further central bank easing and ongoing investor demand for safe havens amid economic uncertainty. Gold remains in focus as investors respond to central bank policy, economic uncertainty, and inflation, positioning the metal for potential further gains into late 2025.
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 performing strongly against major currencies, supported by resilient commodity prices and bullish risk sentiment, although softer employment data has tempered recent gains slightly. Today, the Australian Dollar (AUD) is trading near multi-month highs against the US Dollar, underpinned by stable commodity prices and a relatively strong economic outlook. However, some recent data, such as weaker employment growth, have surprised to the downside and contributed to softer government yields.
Central Bank Notes:
- The RBA held its cash rate steady at 3.60% at its September meeting on 8–9 September 2025, following a 25 basis point reduction at the August meeting. This maintains a cautious yet supportive stance, with the decision largely anticipated given recent evidence of inflation settling within the target band.
- Inflation readings continue to ease, with headline CPI most likely tracking near 2.1–2.3%—comfortably within the 2–3% target range. September quarter figures are pending, but leading indicators show further moderation in non-housing components, even as insurance and housing-related costs remain sticky.
- The RBA’s preferred trimmed mean inflation is estimated at around 2.7%–2.9%, further reflecting progress toward the midpoint of the target range. Energy and food volatility still create some short-term uncertainty, but underlying inflation is broadly on track.
- Global conditions are a key source of risk. While U.S.–EU trade tensions have stabilized slightly, volatility in equities and commodities persists, with uncertainty feeding through to Australia’s trade and export outlook.
- Domestic demand shows tentative improvement. Real household incomes and a stabilizing housing sector have underpinned modest consumption growth, though business investment remains uneven—service sectors outperforming manufacturing and construction.
- Labor market tightness persists, but momentum continues to slow from earlier in the year. Employment gains remain, but job vacancies and hiring intentions have softened, with underutilization rising marginally for the second straight month.
- Wage growth has slowed in line with easing labour pressures, but unit labour costs remain elevated due to weak productivity. The RBA continues to flag subdued productivity as a medium-term cost risk.
- Forward indicators suggest household consumption may be softer than previously forecast. Elevated rents and high borrowing costs are dampening discretionary spending, despite modest income recovery.
- The Board continues to highlight the risk that household spending could underperform, potentially weighing on business investment and job creation if confidence remains subdued.
- Monetary policy remains mildly restrictive, in line with greater inflation control and ongoing economic rebalancing. The decision to hold rates recognizes both progress and ongoing uncertainties, with future moves explicitly tied to incoming data.
- The Reserve Bank reinforced its goals of price stability and full employment, stating readiness to adjust policy if economic or inflation outcomes diverge from baseline projections.
- The next meeting is on 29 to 30 September 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?
NZD came under heavy pressure today as markets reacted to weak GDP numbers and reinforced expectations for central bank rate cuts. With technical and fundamental factors aligned to the downside, sentiment remains bearish for the New Zealand Dollar in the near term. The New Zealand Dollar experienced sharp declines today, mainly due to disappointing GDP data and ongoing expectations for monetary policy easing by the Reserve Bank of New Zealand (RBNZ).
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 Bullish
The Japanese Yen (JPY)
Key news events today
BOJ Policy Rate (3:00 am GMT)
Monetary Policy Statement (2:30 am GMT)
BOJ Press Conference (6:30 am GMT)
What can we expect from JPY today?
The latest developments for the Japanese Yen on Friday, September 19, 2025, center around the Bank of Japan’s monetary policy meeting. The central bank is widely expected to keep its key interest rate unchanged at 0.5%. Market participants closely monitor Governor Kazuo Ueda’s press conference for clues on future policy tightening, as persistent inflation, political uncertainty, and trade dynamics with the U.S. influence the BoJ’s cautious stance.
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 Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil prices on Friday, September 19, 2025, ended the trading week on a lower note due to concerns over a US economic slowdown, rising global supply, and persistent geopolitical tensions. Brent crude settled near $67.44/barrel, while WTI traded below $64/barrel, with both benchmarks seeing moderate declines from earlier in the week. Oil prices face ongoing downward pressure, with supply-side risks, economic uncertainty, and technical signals indicating a cautious outlook for the remainder of September 2025.
Next 24 Hours Bias
Weak Bearish
