IC Markets Asia Fundamental Forecast | 29 September 2025
What happened in the U.S. session?
U.S. markets were buoyed by strong consumer data and resilience in equities, but face headwinds from new tariffs and the risk of a government shutdown that could delay key macroeconomic releases, including the September jobs report. Equity indices posted highs, with notable stock-specific moves (EA, Intel, PCAR), while the dollar and yields remained firm amid inflation and spending strength. Oil outperformed among commodities, driven by supply factors.
What does it mean for the Asia Session?
Monday’s Asian trading session will be dominated by China’s PMI releases, which will set the tone for regional market sentiment ahead of China’s Golden Week holiday. The combination of RBA policy pause expectations, potential BOJ hawkishness from strong Tankan data, and ongoing debate around India’s rate policy creates a complex backdrop for Asian markets.
The Dollar Index (DXY)
Key news events today
Pending Home Sales m/m (2:00 pm GMT)
What can we expect from DXY today?
The dollar begins the week from a position of strength, supported by robust economic data, hawkish Fed rhetoric, and persistent inflationary pressures. While technical indicators suggest potential for further gains toward the 99.00 level, the currency faces near-term risks from potential government shutdown complications and evolving Fed policy expectations. The market’s focus will remain on incoming economic data, particularly employment figures, and Fed officials’ commentary for directional cues. The balance between economic resilience and employment concerns continues to shape the dollar’s trajectory, with traders positioning for what could be a pivotal week in determining the Fed’s policy path for the remainder of 2025.
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
Weak Bullish
Gold (XAU)
Key news events today
Pending Home Sales m/m (2:00 pm GMT)
What can we expect from Gold today?
Gold’s performance in late September 2025 represents one of the most sustained and powerful rallies in modern precious metals history. With prices trading near $3,790 per ounce and multiple fundamental drivers supporting further gains, the precious metal appears positioned to challenge the $4,000 level in the coming months. Central bank demand, Fed policy accommodation, geopolitical tensions, and robust investment flows all point to continued strength, though near-term consolidation around current levels remains possible as markets digest recent gains.
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 critical juncture as it navigates between domestic inflation pressures that support the currency and global growth concerns that weigh on commodity demand. Tuesday’s RBA meeting will likely reinforce the central bank’s data-dependent approach, with November remaining the most probable timing for the next rate cut. The currency’s performance will continue to be influenced by the interplay between RBA policy expectations, Chinese economic developments, US dollar strength, and commodity price movements, particularly iron ore.
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 continues to trend 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 labour demand. Weak productivity continues to keep unit labour 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
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
The New Zealand Dollar enters the week of September 29, 2025, facing multiple headwinds, including worse-than-expected economic data, expectations for aggressive monetary policy easing, and external pressures from China. While the appointment of Anna Breman as the new RBNZ Governor provides leadership stability, her tenure won’t begin until December, leaving acting Governor Christian Hawkesby to navigate the anticipated rate-cutting cycle.
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
Medium 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 complex environment as it enters the final quarter of 2025. While inflation remains above the BoJ’s 2% target, the pace of price increases is moderating, potentially delaying aggressive monetary tightening. The currency’s near-term direction will likely depend on whether USD/JPY can maintain support above 148.70, with political developments in Japan and US economic data providing additional volatility. Market participants are positioning for potential BoJ action in October or December, though the central bank’s cautious approach suggests any moves will be gradual and data-dependent.
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
Medium Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil markets enter the week supported by geopolitical supply disruptions from Ukraine’s campaign against Russian energy infrastructure and OPEC+ production challenges. While current fundamentals support higher prices through Q4 2025, structural oversupply concerns and demand growth disappointments suggest the rally may face significant headwinds heading into 2026. The market’s focus will likely remain on escalating Russia-Ukraine tensions, OPEC+ production developments, and US economic indicators that could influence global oil demand patterns.
Next 24 Hours Bias
Medium Bullish
