IC Markets – Asia Fundamental Forecast | 18 November 2025
What happened in the U.S. session?
Overnight, U.S. session headlines produced outsized volatility in technology and rate-sensitive stocks, as increased tariff threats, skepticism about AI valuations, and shifting expectations for a Federal Reserve rate cut drove sector rotations and defensive flows. The end of the government shutdown means traders now await a flurry of backlogged macroeconomic reports, likely to set the stage for continued market dynamism and event-driven positioning in the sessions ahead.
What does it mean for the Asia Session?
Focus on Australia’s central bank minutes for guidance on AUD trajectory. Monitor developments from the SCO summit impacting multi-national trade and regional connectivity. Watch for volatility in Asia FX, particularly JPY and AUD, as central bank policy and geopolitics intersect. Keep an eye on Asian tech and ESG-themed news, as sector leadership may shift around headline events.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
The US dollar remains supported by diminishing Federal Reserve rate cut expectations, with December odds now at 46%. Fed officials Barr, Barkin, and Logan speak today, providing potential policy guidance. Critical economic data delayed by the 43-day government shutdown is beginning to flow, with the September jobs report due Thursday and trade price indices releasing today. The dollar index trades around 99.40, up 0.79% over the past month but down 6.46% year-over-year. USD strength is most pronounced against JPY (near 155) and commodity currencies like AUD (toward 0.65).
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 3.75% — 4.00% at its October 28–29, 2025, meeting, marking the second consecutive cut following the 25 basis points reduction in September.
- The Committee maintained its long-term objectives of maximum employment and 2% inflation, noting that the labor market continues to soften, with modest job creation and an unemployment rate edging higher. In comparison, inflation remains above target at around 3.0%.
- Policymakers highlighted ongoing downside risks to economic growth, tempered by signs of resilient economic activity. September’s consumer price index (CPI) came in slightly below expectations at 3.0% year-over-year, easing inflationary pressure but still warranting vigilance amid tariff-driven price effects.
- Economic activity expanded modestly in the third quarter, with GDP growth estimates around 1.0% annualized; however, uncertainty remains elevated amid persistent global trade tensions and the U.S. government shutdown, which is impacting data availability.
- The updated Summary of Economic Projections reflects an anticipated unemployment rate averaging approximately 4.5% for 2025, with headline and core personal consumption expenditures (PCE) inflation projections holding near 3.0%, indicating a slow easing path ahead.
- The Committee emphasized its flexible, data-dependent approach and underscored that future policy adjustments will be guided by incoming labor market and inflation data. As in prior meetings, there was dissent, including one member advocating a more aggressive 50-basis-point cut.
- The FOMC announced the planned conclusion of its balance sheet reduction (quantitative tightening) program, intending to cease runoff in the near term to maintain market stability, with Treasury redemption caps held steady at $5 billion per month and agency mortgage-backed securities caps at $35 billion.
- The next meeting is scheduled for 9 to 10 December 2025.
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
No major news event
What can we expect from Gold today?
Gold finds itself at a critical juncture, caught between near-term technical weakness and hawkish Federal Reserve expectations on one side, and extraordinary structural demand from central banks and institutional investors on the other. The metal is consolidating around $4,070-$4,080 after an 11% correction from October’s record highs, with technical indicators suggesting potential further weakness toward $3,950-$4,000 before the next leg higher begins.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
Monetary Policy Meeting Minutes (12:30 am GMT)
What can we expect from AUD today?
Tuesday marks a pivotal day for the Australian Dollar as traders await the RBA’s November meeting minutes for clues on future policy direction. The AUD is caught between competing forces: strong domestic labor market data and the RBA’s hawkish hold stance supporting the currency, while US Dollar strength amid diminished Fed rate-cut expectations and mixed Chinese economic signals are applying downward pressure. With the RBA pricing only a 6% chance of a December rate cut and the Fed’s December move now a coin toss at 46% probability, interest rate differentials are becoming increasingly important for AUD/USD direction.
Central Bank Notes:
- The Reserve Bank of Australia held its cash rate steady at 3.60% at the November policy meeting, citing persistent inflationary pressures and lingering uncertainties in both domestic and global outlooks. This is the third consecutive pause following the cut in August.
- Policymakers remain alert to renewed inflation momentum. After a temporary uptick in September’s CPI, trimmed mean inflation for Q3 stands at 3.0%, above the intended 2–3% band. The RBA now anticipates that core inflation will stay above target until at least mid-2026, delaying any hopes of further easing.
- Headline CPI climbed by 3.2% in the year to September 2025, driven by resilient housing (+2.5%) and insurance costs, while discretionary goods inflation is subdued. The transition to monthly CPI reporting from November will improve the accuracy of inflation tracking.
- Domestic demand remains firm, particularly in services and housing, while manufacturing and discretionary retail continue to lag. Household incomes have stabilized, but high borrowing costs and elevated rents are constraining consumption and risking a slowdown in Q1 2026.
- Labor market tightness persists, though job growth has moderated. Underutilization edged higher. Wage growth is plateauing, but weak productivity is keeping unit labor costs elevated—a medium-term risk that remains central to the Board’s narrative.
- The RBA highlights geopolitical tensions and volatile commodity markets as primary global risks, against a backdrop of modest upward revisions to world growth forecasts. The Board stresses that its stance remains “cautious and data-dependent,” with ongoing vigilance on inflation, labor, and spending trends.
- 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 9 December 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 faces a challenging environment as it navigates weak domestic economic conditions, a dovish RBNZ monetary policy stance, and concerns about China’s economic slowdown. While inflation expectations remain well-anchored and some positive developments have emerged (U.S. tariff removal, strong export data), the currency remains vulnerable to further downside. The upcoming RBNZ meeting on November 26 and ongoing China economic data will be critical determinants of the NZD’s near-term trajectory.
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to cut the Official Cash Rate (OCR) by 50 basis points to 2.50% on 8 October 2025, exceeding market expectations for a smaller 25-basis-point reduction and signaling a stronger commitment to reviving growth.
- The decision was reached by consensus, marking a shift from previous split votes, and reflected policymakers’ shared view that sustained economic weakness and persistent disinflationary pressures required a more front-loaded policy response.
- Annual consumer price inflation stood at 2.7% in the June quarter and is seen nearing 3% for the September quarter—above the 2% midpoint but within the 1–3% target range. Despite high near-term readings, the MPC projects inflation will return toward 2% by the first half of 2026 as spare capacity and moderating tradables curb price momentum.
- Policymakers acknowledged that domestic demand remains weak, with household spending, business investment, and construction activity under pressure. While still elevated, services inflation is expected to ease gradually as wage growth slows and unemployment edges higher.
- Financial conditions have eased with expectations as wholesale and retail borrowing rates adjust to lower policy settings. Bank lending data indicate a modest uptick in mortgage approvals, though broader credit demand remains subdued.
- GDP growth stalled in the middle of 2025, with high-frequency indicators showing continued weakness into the third quarter. A combination of elevated costs for essentials and falling savings continues to restrain household consumption, while global trade frictions weigh on business sentiment.
- The MPC noted that global uncertainty—particularly from US trade regulation changes and soft Chinese demand—continues to pose downside risks to export sectors, though these are partly offset by a weaker New Zealand dollar improving competitiveness.
- Subject to data confirming a sustained soft patch in activity and moderating inflation pressures, the MPC signaled further scope to reduce the OCR toward 2.25% at its next meeting on 26 November 2025, consistent with current market and Westpac forecasts.
- The next meeting is on 26 November 2025.
Next 24 Hours Bias
Weak Bullish
The Japanese Yen (JPY)
Key news events today
No major news events
What can we expect from JPY today?
The Japanese yen faces mounting headwinds as Prime Minister Takaichi’s political pressure on the BOJ coincides with disappointing economic data. The third-quarter GDP contraction has significantly reduced December rate hike expectations, with markets now pricing in only a 50% probability of action this year. Today’s Takaichi-Ueda meeting will be closely watched for signals on the government’s tolerance for BOJ policy independence.
Central Bank Notes:
- The Policy Board of the Bank of Japan met on 30–31 October and, by a clear majority vote, decided to maintain its key monetary policy approach for the upcoming period.
- The BOJ will continue to encourage the uncollateralized overnight call rate to remain at around 0.5%, in line with the prior stance.
- The gradual quarterly reduction in monthly outright purchases of Japanese Government Bonds (JGBs) remains intact, with amounts unchanged from the previous schedule. Purchases are set to decrease by about ¥400 billion per quarter through March 2026, shifting to about ¥200 billion per quarter from April to June 2026, and targeting a ¥2 trillion purchase level for Q1 2027. The bank reaffirmed its intention to maintain flexibility, with readiness to respond if market conditions warrant an adjustment.
- Japan’s economy continues to show moderate recovery, primarily led by solid capital expenditures, although export growth and corporate activity remain restrained by external demand uncertainty and the ongoing effects of U.S. trade policies.
- Annual headline inflation (excluding fresh food) accelerated to 2.9% year-on-year in September, marking the first uptick in four months and staying above the BOJ’s 2% target. Broad-based inflation persists, with food and energy cost pressures, but wage growth continues to support household consumption. Input cost pressures from the earlier surge in imports eased slightly.
- Short-term inflation momentum could moderate as food-price hikes ease, though rent, healthcare, and service-sector price increases tied to labor shortages provide support. Firms and households maintain a gradual upward drift in inflation expectations.
- For the near term, BOJ projects growth below trend as external demand stays subdued and corporate investment plans remain cautious. Still, accommodative financial conditions and steady gains in real labor income will underpin domestic consumption.
- Over the medium term, as overseas economies recover and trade conditions normalize, Japan’s growth potential should improve. Persistent labor market tightness, higher wage settlements, and rising medium- to long-term inflation expectations are expected to keep core inflation on a gradual upward trajectory, converging toward the 2% price stability target later in the forecast horizon.
- The next meeting is scheduled for 18 to 19 December 2025.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
API Crude Oil Stock (8:30 pm GMT)
What can we expect from Oil today?
The oil market is characterized by a fundamental imbalance between rapidly growing supply and sluggish demand growth. While geopolitical tensions, particularly U.S. sanctions on Russian oil companies and Ukrainian infrastructure attacks, have provided periodic price support, the underlying bearish trend driven by supply surplus concerns remains dominant.
Next 24 Hours Bias
Medium Bullish
