IC Markets – Asia Fundamental Forecast | 28 October 2025
What happened in the U.S. session?
Equities and risk assets were the session’s clear beneficiaries, while the USD softened and gold/oil were more subdued. Market sentiment remains closely tied to ongoing central bank decisions, global trade diplomacy, and upcoming major earnings reports. Renewed optimism about a U.S.–China trade resolution was a primary market driver, with a scheduled meeting between President Trump and President Xi Jinping boosting risk sentiment.
What does it mean for the Asia Session?
Asian traders should watch for key US data releases and positive risk sentiment on Tuesday, 28th October 2025. The main scheduled events include the Richmond Manufacturing Index and the Conference Board (CB) Consumer Confidence Index from the US, both of which are closely monitored for signs of US economic health and market direction. Asian equity markets remain upbeat, supported by optimism around a possible US-China trade deal, expectations of upcoming Federal Reserve rate cuts, and improving investor sentiment.
The Dollar Index (DXY)
Key news events today
Richmond manufacturing index (12:00 pm GMT)
CB consumer confidence (Tentative)
What can we expect from DXY today?
The US Dollar is under modest pressure as traders focus on upcoming FOMC decisions, weaker consumer confidence, and renewed US-China tensions. While recent inflation data and rate cut bets contribute to dollar softness, equity market strength and mixed global flows create ongoing volatility. Expect price action to remain choppy until after the Fed’s rate decision and major data releases this week.
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 lower than expected at 3.0% year-over-year, easing inflation pressure but still warranting vigilance given 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
Medium Bearish
Gold (XAU)
Key news events today
Richmond manufacturing index (12:00 pm GMT)
CB consumer confidence (Tentative)
What can we expect from Gold today?
Gold prices sharply retreated in the last days of October 2025, dropping below the $4,000 per ounce mark after reaching record highs near $4,380 earlier in the month. The decline was triggered largely by profit-taking, optimism around US-China trade negotiations, and a stronger risk appetite in broader markets. As of October 27, gold was trading near $3,992 per troy ounce, reflecting a monthly gain but a weekly setback after an extended rally earlier in the year.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
No major news event
What can we expect from AUD today?
The Australian Dollar advanced today, driven by renewed hopes for US-China trade progress and diverging monetary policy expectations that currently favor the AUD. However, underlying domestic economic concerns and skepticism in the market may limit sustained gains, keeping traders watchful for new economic data and global headlines for further direction.
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 trends 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 labor demand. Weak productivity continues to keep unit labor 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 NZD is supported by easing trade war concerns and a dovish Fed outlook, but held back by risk aversion and ongoing US-China trade policy uncertainties. Technical indicators suggest consolidation with the potential for moves in either direction, depending on upcoming news and employment data from New Zealand. The NZD/USD pair traded close to 0.5770 in Asia, buoyed by news of a potential framework agreement to avoid additional US tariffs on Chinese imports and anticipation of the meeting between US President Donald Trump and Chinese President Xi Jinping later in the week.
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
Medium Bearish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from JPY today?
The Japanese Yen trades weak near 153 per dollar, driven by expectations of continued monetary support from the BOJ, new government stimulus plans, and favorable US dollar dynamics amidst elevated yields. Domestic economic data signals slower growth, while fintech innovation advances with the debut of a yen-pegged stablecoin.
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
Strong Bearish
Oil
Key news events today
API crude oil stock (8:30 pm GMT)
What can we expect from Oil today?
Oil prices surged, fuelled by optimism surrounding US-China trade negotiations and new US sanctions on Russian oil. Supply risks caused local fuel price spikes in Asia, while market analysts cautioned about persistent oversupply projections through 2026 and ongoing geopolitical tensions. Despite recent price gains, the International Energy Agency (IEA) still forecasts a surplus in oil supplies through 2026, particularly from the US, Canada, Brazil, Guyana, and Argentina, which outpace demand growth.
Next 24 Hours Bias
Medium Bullish
