IC Markets Asia Fundamental Forecast | 23 September 2025
What happened in the U.S. session?
Markets remain buoyant, helped by the Fed’s dovish pivot and strong tech sector performance, but heightened volatility is expected as traders await substantial macro data later in the week. Safe-haven assets like gold have outperformed in the face of inflation risks, while cryptocurrencies saw a reversal. The U.S. dollar stays resilient, and treasuries are steady as investors brace for further central bank guidance.
What does it mean for the Asia Session?
Asian traders should be alert to fresh PMI data from Europe and the U.S., key comments from Fed Chair Powell, and any shifts in risk sentiment following the recent Fed rate cut. U.S. fiscal issues and global central bank activity are likely to drive cross-asset volatility, with special attention warranted on JPY, AUD, USD moves, and gold and oil trends.
The Dollar Index (DXY)
Key news events today
Flash manufacturing PMI (1:45 pm GMT)
Flash services PMI (1:45 pm GMT)
Richmond manufacturing index (2:00 pm GMT)
Fed Chair Powell speaks (4:35 pm GMT)
What can we expect from DXY today?
The US Dollar is softer, reflecting growing rate cut expectations and mild underperformance in PMI data. Fed Chair Powell’s comments are the main risk event for additional moves, with traders focused on any signals of more dovish policy. Equities are boosted by easier monetary policy, while commodities benefit from the weaker dollar. Dollar sentiment and volatility remain closely tied to US macro data and Federal Reserve guidance throughout the day.
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
Flash manufacturing PMI (1:45 pm GMT)
Flash services PMI (1:45 pm GMT)
Richmond manufacturing index (2:00 pm GMT)
Fed Chair Powell speaks (4:35 pm GMT)
What can we expect from Gold today?
Gold’s performance reflects a confluence of supportive factors creating an exceptionally bullish environment. The Federal Reserve’s pivot toward monetary easing, combined with persistent central bank demand, robust ETF inflows, and ongoing geopolitical tensions, has propelled the precious metal to historic heights. With year-to-date gains exceeding 42% and strong technical momentum, gold continues to demonstrate its enduring appeal as both an inflation hedge and portfolio diversifier during periods of economic and geopolitical uncertainty.
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 faces a challenging environment as it navigates between domestic economic resilience and external headwinds. While strong PMI data and gradual RBA easing provide some support, the currency is pressured by US Dollar strength and China’s economic slowdown. Key catalysts this week include today’s PMI data, Wednesday’s inflation reading, and ongoing Fed communications, all of which will influence the AUD’s trajectory toward the RBA’s September 30 meeting. The currency’s ability to hold above key technical support levels will be crucial for maintaining its recent gains and preventing further declines toward multi-month lows.
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?
The New Zealand dollar is under significant pressure following the shocking GDP contraction that has fundamentally altered the monetary policy outlook. While trade data shows some resilience with strong export growth, the domestic economy’s weakness has prompted economists to call for aggressive rate cuts. The RBNZ is widely expected to deliver at least 25 basis points of easing in October, with a meaningful probability of a larger 50 basis point cut. The currency’s near-term trajectory will likely depend on incoming economic data and the extent of RBNZ policy action, with key support levels being tested around 0.5850.
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
No major news event
What can we expect from JPY today?
The Japanese yen faces a complex environment with the BoJ signaling gradual policy normalization while political uncertainty creates hesitation about aggressive tightening. Today’s Fed Chair Powell speech and upcoming Japanese PMI data will provide crucial direction for near-term yen performance. While the September 19 BoJ meeting showed increased hawkish sentiment with two dissenting votes, the yen’s inability to sustain gains highlights the challenging backdrop of divergent monetary policies and political risks. Markets continue to price in approximately 75% probability of a BoJ rate hike at the October meeting, making this a critical period for yen direction.
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
API crude oil stock (8:30 pm GMT)
What can we expect from Oil today?
Oil markets on Tuesday, September 23, 2025, face a complex interplay of competing forces. While geopolitical tensions in Europe and the Middle East provide short-term price support, fundamental oversupply concerns dominate the longer-term outlook. The combination of increasing Iraqi exports, potential Kurdistan pipeline restarts, significant U.S. inventory builds, and weakening global demand growth creates a bearish foundation for oil prices.
Next 24 Hours Bias
Weak Bearish
