IC Markets Global – Asia Fundamental Forecast | 19 December 2025
What happened in the U.S. session?
During the U.S. session, the combination of a downside CPI surprise and steady jobless claims shifted the narrative further toward a 2025 easing cycle that begins in March, rather than January, keeping a “goldilocks” feel to macro conditions. The immediate market reaction favored risk assets and duration: U.S. equity indices and gold outperformed, the front end of the Treasury curve rallied, and the dollar softened against major peers, with GBP, EUR, and pro‑cyclical FX among the main beneficiaries.
What does it mean for the Asia Session?
Asian traders should be prepared for elevated volatility centered on the Bank of Japan, with a widely expected hike from 0.50% to about 0.75% and Governor Ueda’s press conference likely to drive sharp moves in JPY and regional risk assets. Attention will then shift to UK retail sales as a gauge of European consumer resilience, followed by Canadian retail sales for insight into North American demand and CAD dynamics. Into the US session, existing home sales and the revised University of Michigan sentiment index will provide fresh reads on the US housing market and consumer confidence, shaping closing‑week positioning in USD, global equities, and high‑beta Asian currencies
The Dollar Index (DXY)
Key news events today
Existing Home Sales (3:00 pm GMT)
Revised UoM Consumer Sentiment (3:00 pm GMT)
What can we expect from DXY today?
The Dollar is trading near 98.4 on the DXY, modestly firmer intraday but still in a broader corrective downtrend after losing almost 9% over the past year as markets price in a post‑Fed‑cut environment with a shallower US rate premium. With no major US data releases scheduled, price action is expected to be flow‑ and headline‑driven, particularly around the Bank of Japan decision window, leaving USD vulnerable to further selling on any risk‑positive or dovish‑policy news but capable of short‑covering rallies if global risk sentiment sours.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) is widely expected to lower the federal funds rate target range by 25 basis points to 3.50%–3.75% at its December 9–10, 2025, meeting, marking the third consecutive cut after the October reduction to 3.75%–4.00%
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market showing further softening as the unemployment rate rose to 4.4% in September 2025 amid modest job gains.
- Officials note persistent downside risks to growth alongside resilient activity, with inflation easing to 3.0% year-over-year CPI in September but remaining elevated due to tariff effects; core PCE stands at around 2.8% as of October.
- Economic activity grew at a 3.8% annualized pace in Q2 2025 per revised estimates, though Q3 and Q4 face headwinds from trade tensions, fiscal restraint, and data disruptions like the government shutdown.
- September’s Summary of Economic Projections forecasts 2025 unemployment at a median 4.5%, with PCE inflation near 3.0% and core PCE at 3.1%, signaling a gradual disinflation path; updates expected on December 10 may adjust for higher unemployment and lower growth.
- The Committee maintained its data-dependent approach, noting a softening labor market and inflation above the 2% target, while deciding to lower the federal funds rate target range by 25 basis points to 3.50%-3.75%. Dissent persisted, with multiple members opposing the cut or advocating for a hold, reflecting divisions similar to recent meetings.
- The FOMC confirmed the conclusion of its quantitative tightening program effective December 1, 2025, with Treasury rolloff caps at $5 billion per month and agency MBS caps at $35 billion per month to ensure ample reserves and market stability.
- The next meeting is scheduled for 27 to 28 January 2026.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
Existing Home Sales (3:00 pm GMT)
Revised UoM Consumer Sentiment (3:00 pm GMT)
What can we expect from Gold today?
Gold remains close to record territory in the mid‑$4,300/oz region after a roughly 60–70% surge this year, with intraday forecasts pointing to a volatile but upward‑tilted range around $4,255–$4,440 and no clear sign yet of a major top. The market tone is broadly bullish but increasingly cautious, as traders balance strong tailwinds, lower real rates, central‑bank and safe‑haven demand, de‑dollarization flows, and persistent geopolitical and inflation concerns against the risk of corrective pullbacks from historically stretched levels as year‑end liquidity thins.
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?
Going into Friday, the Australian Dollar is on the defensive, trading just below 0.66 after several sessions of losses that pushed it to a two‑week low against the US Dollar, with the move driven mainly by a firmer USD and cautious global risk sentiment rather than fresh domestic shocks. Australia’s data calendar for the day is light, featuring only lower‑tier credit indicators, so traders are focusing on external catalysts such as US economic releases, equity market swings, and evolving expectations for Fed and RBA policy, while technical analysts continue to flag the 0.67 region as a key resistance level that must be cleared for any sustained AUD recovery.
Central Bank Notes:
- The Reserve Bank of Australia held its cash rate steady at 3.60% at the November 2025 policy meeting, adopting a cautious tone amid a surprise uptick in inflation data for the September quarter. This marks the fourth consecutive pause since the 25 basis point cut in August. The Board attributed some of the inflation rise to temporary factors like higher petrol prices and council rates, but noted signs of more persistent pressures from consumer demand.
- Policymakers emphasized vigilance on inflation, with trimmed mean inflation expected to remain elevated in the near term before nearing the 2–3% target midpoint by mid-2027. Recent data showed underlying inflation staying above target until at least the second half of 2026, prompting upward revisions to forecasts. Capacity pressures are seen as slightly more pronounced than previously assessed, delaying any easing.
- Headline CPI for the September quarter exceeded expectations, driven partly by temporary items, while underlying measures signal ongoing stickiness. The shift to monthly CPI reporting, with the first full edition in November 2025, will enhance real-time inflation monitoring. Housing and services remain resilient contributors to price pressures.
- Domestic demand shows firmness in services alongside below-trend growth elsewhere, with capacity pressures not expected to ease significantly. The labor market is gradually softening, with unemployment projected to stabilize around 4.4%, though wage growth and productivity dynamics keep unit labor costs a concern. Household spending faces headwinds from high borrowing costs.
- Global risks include geopolitical tensions and commodity volatility, set against modestly revised-up world growth outlooks. The Board describes its policy as mildly restrictive and data-dependent, balancing inflation control with employment goals. No rate hike was considered despite the inflation surprise.
- Monetary policy remains mildly restrictive to address lingering price stability risks amid household and global vulnerabilities. Communications reaffirm the dual mandate of 2–3% inflation and full employment, with readiness to adjust based on incoming data.
- Market expectations point to the cash rate holding through early 2026, with a possible modest cut to 3.3% mid-year if inflation eases as forecast. The new monthly CPI data will be key for timely insights.
- Monetary policy remains mildly restrictive, balancing progress on price stability against vulnerabilities in household demand and global outlook. Board communications reaffirm a dual mandate: price stability and full employment, while underscoring readiness to respond should risks materialize sharply.
- Analysts generally expect the cash rate to remain at current levels through early 2026, with only modest cuts possible later in the year if inflation moderates. The new monthly CPI release (first full edition Nov 2025) will be watched closely for timely signals on price trends.
- The next meeting is on 2 to 3 February 2026.
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?
Today, the New Zealand Dollar is trading in a consolidative, slightly defensive posture around the mid‑0.57s against the US Dollar, retreating from early‑December highs as risk appetite cools and strong domestic GDP data fails to shift RBNZ policy expectations toward imminent tightening. The broader trend over the past month remains modestly positive for NZD, but with the Fed already cutting rates, the RBNZ seen on hold, and global markets turning more cautious, short‑term price action is likely to revolve around whether NZD/USD can defend support near 0.5750 or slips back toward the lower end of its recent range.
Central Bank Notes:
- The Monetary Policy Committee (MPC) left the Official Cash Rate (OCR) unchanged at 2.25% at its 26 November 2025 meeting, following the widely anticipated 25-basis-point reduction from 2.50%, and signaled that policy is now firmly in stimulatory territory while keeping the option of further easing on the table if needed.
- The decision was again reached by consensus, with members judging that the cumulative 325 basis points of easing over the past year warranted a period of assessment, even as several emphasized a willingness to cut further should incoming data point to a more protracted downturn or renewed disinflationary pressures.
- Headline consumer price inflation is projected to hover near 3% in late 2025 before gradually easing toward the 2% midpoint of the 1–3% target band through 2026, supported by contained inflation expectations around 2.3% over the two-year horizon and an expected pickup in spare capacity.
- The MPC noted that domestic demand remains subdued but shows tentative signs of stabilisation, with softer household spending and construction only partially offset by improving services activity; nevertheless, policymakers still expect services inflation to ease as wage growth moderates and the labour market loosens further over the coming year.
- Financial conditions continue to ease as wholesale and retail borrowing rates reprice to the lower OCR, contributing to gradually rising mortgage approvals and improving housing-related sentiment, although broader business credit growth remains patchy and sensitive to uncertainty about the durability of the recovery.
- Recent data confirm that GDP momentum is weak but not deteriorating as sharply as earlier in 2025, with high-frequency indicators pointing to a shallow recovery from a low base and ongoing headwinds from elevated living costs and fragile confidence weighing on discretionary consumption and investment.
- The MPC reiterated that external risks remain skewed to the downside, particularly from softer Chinese demand and uncertainty around United States trade policy, but noted that a lower New Zealand dollar continues to provide some offset via improved export competitiveness and support for tradables inflation.
- Looking ahead to early 2026, the Committee maintained a mild easing bias, indicating that a further cut toward 2.00–2.10% cannot be ruled out if activity fails to gain traction or if inflation undershoots projections, but current forecasts envisage the OCR remaining near 2.25% for an extended period provided inflation converges toward target and the recovery proceeds broadly as expected.
- The next meeting is on 18 February 2026.
Next 24 Hours Bias
Medium Bullish
The Japanese Yen (JPY)
Key news events today
BOJ Policy Rate (Tentative)
Monetary Policy Statement (Tentative)
BOJ Press Conference (Tentative)
What can we expect from JPY today?
The Japanese yen today is in a holding pattern but underpinned by strong expectations that the BoJ will deliver a landmark rate hike to 0.75% at its December 18–19 meeting, bringing policy to a three‑decade high. Price action in USD/JPY around the mid‑155s reflects this tug‑of‑war between anticipated domestic tightening and broader dollar dynamics, while markets brace for elevated volatility and potential carry‑trade unwinds once Friday’s decision and guidance hit the tape.
Central Bank Notes:
- The Policy Board of the Bank of Japan will meet on 18–19 December with markets almost fully pricing a 25-basis-point hike, which would raise the short-term policy rate from 0.50% to around 0.75%, as the bank moves further away from its ultra-loose stance while stressing that any tightening will remain gradual and data-dependent.
- The BOJ is expected to continue guiding the uncollateralized overnight call rate in a narrow band around the new policy rate, near 0.75%, while signaling that the pace and timing of any additional hikes will depend on how past increases affect bank lending, corporate financing conditions, and overall economic activity.
- The quarterly path of JGB purchases remains on a pre-announced, gradual taper: outright purchases are being reduced by about ¥400 billion per quarter through March 2026, then by roughly ¥200 billion per quarter from April to June 2026, with the bank still aiming for JGB purchases to settle near ¥2 trillion in Q1 2027 and retaining flexibility to adjust the pace if market functioning or yield volatility deteriorate.
- Japan’s economy has softened in the near term, with Q3 2025 GDP contracting at an annualized pace of about 2.3% as weaker residential investment and external demand weighed on activity, even as business sentiment in manufacturing has recently improved to a roughly four-year high.
- Core consumer inflation (excluding fresh food) accelerated to around 3.0% year-on-year in October, up from 2.9% in September and remaining above the BOJ’s 2% target, while the “core-core” measure excluding both fresh food and energy rose to about 3.1%, underscoring persistent underlying price pressures.
- In the very near term, some input-cost pressures are easing as earlier import price surges fade, but services inflation linked to labor shortages, along with steady wage gains, continues to support broader price momentum; firms’ and households’ medium-term inflation expectations remain anchored slightly above 2%, keeping short-term inflation risks tilted to the upside.
- For the coming quarters, the BOJ assesses that real growth will likely run below potential as the economy digests tighter financial conditions and past yen depreciation, though accommodative real rates, positive real wage growth, and improving corporate sentiment should help sustain a modest recovery in private consumption and business investment.
- Over the medium term, as overseas demand stabilizes and domestic labor markets remain tight, the BOJ expects wage settlements and inflation expectations to keep core inflation on a gradual upward trajectory around or slightly above 2%, providing room for further cautious rate normalization as long as financial conditions remain supportive and the recovery is not derailed.
- The next meeting is scheduled for 22 to 23 January 2026.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil is trading slightly higher today, with WTI in the mid‑50s and Brent near 60 dollars per barrel as the market digests a rebound from recent multi‑year lows. Prices were lifted earlier in the week after President Donald Trump ordered a full blockade of sanctioned Venezuelan tankers, heightening supply‑disruption fears, but sentiment remains cautious because global production and inventories still suggest an oversupplied market. Over the past month, crude has lost around 5% and is down close to 18% over the past year, reflecting persistent demand concerns despite ongoing geopolitical flashpoints
Next 24 Hours Bias
Medium Bearish
