IC Markets – Asia Fundamental Forecast | 10 December 2025
What happened in the U.S. session?
Overnight U.S. trade was dominated by pre‑FOMC positioning rather than fresh data, with investors weighing the likelihood of a December rate cut against the risk that the Fed guides to a slower easing cycle in 2026. Equity indices slipped modestly from recent highs, U.S. Treasury yields firmed, and the dollar stayed underpinned, while oil and gold traded more quietly as markets awaited clearer policy signals.
What does it mean for the Asia Session?
Chinese inflation data, the Bank of Canada’s rate decision, key U.S. labour and inflation releases, and the highly anticipated FOMC rate decision and press conference, all of which could drive sharp moves in USD, CAD, CNH, equities, and bonds. These come against a backdrop of cautious risk sentiment in Asia as equities have already softened ahead of the Fed, with markets pricing a possible 25 bp cut but watching closely for guidance on the 2026 path for U.S. rates.
The Dollar Index (DXY)
Key news events today
Employment Cost Index q/q (1:30 pm GMT)
Federal Funds Rate (7:00 pm GMT)
FOMC Economic Projections (7:00 pm GMT)
FOMC Statement (7:00 pm GMT)
FOMC Press Conference (7:30 pm GMT)
What can we expect from DXY today?
The Dollar is trading slightly below the 100 level on the U.S. Dollar Index, reflecting a soft tone after a period of gradual weakening over the past year. Markets are fixated on the FOMC meeting later in the day, where a modest 25 bp “insurance” cut is widely expected as the Fed responds to softer jobs data and rebalanced risks around growth and inflation. Because easing is already partially priced in, traders see the main Dollar risk in the policy message: a more dovish path and deeper cuts could push the Dollar lower, while a surprise hold or hawkish guidance could spark a short squeeze and lift the currency back above the 100 level.
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
Employment Cost Index q/q (1:30 pm GMT)
Federal Funds Rate (7:00 pm GMT)
FOMC Economic Projections (7:00 pm GMT)
FOMC Statement (7:00 pm GMT)
FOMC Press Conference (7:30 pm GMT)
What can we expect from Gold today?
Gold is trading in a tight consolidation just below record highs today, with spot prices roughly in the low‑4,200s as markets largely price in a Fed rate cut at the December 10 FOMC meeting but remain wary of any hawkish surprise on forward guidance. The macro backdrop of softer US yields and a weaker dollar continues to underpin bullion, while ongoing geopolitical tensions sustain safe‑haven interest, yet technicals show fading short‑term momentum and a sideways structure between roughly 4,050 support and 4,240 resistance that could resolve either into a breakout to new highs if the Fed is more dovish than expected.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
Cash Rate (3:30 am GMT)
RBA Rate Statement (3:30 am GMT)
RBA Press Conference (4:30 am GMT)
What can we expect from AUD today?
Today’s Australian dollar story is dominated by a hawkish‑tilting RBA versus a still‑easing Fed, which keeps the bias for AUD/USD modestly upward while leaving the currency vulnerable to swings in global risk appetite and any surprises in US policy communication. In practical terms, the market treats dips in AUD crosses as potential buying opportunities as long as the cash rate remains at 3.6% and incoming Australian inflation and labour data do not significantly undercut the RBA’s concern about persistent price pressures.
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
RBNZ Gov Breman Speaks (9:10 pm GMT)
What can we expect from NZD today?
The New Zealand Dollar is trading just under 0.58 against the US Dollar, consolidating near a one‑month high after a solid early‑December rally. The currency remains supported by expectations that the RBNZ has largely finished cutting rates and by improved risk appetite linked partly to stronger Chinese data, although 0.58 is acting as stiff technical resistance and some analysts warn that failure to break higher could trigger profit‑taking.
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 Gov Ueda Speaks (9:00 am GMT)
What can we expect from JPY today?
The Japanese yen is trading weaker near recent lows as markets wait for fresh confirmation of a Bank of Japan rate hike later in December, with USD/JPY around the mid‑156 area and volatility driven mainly by shifting expectations for U.S.–Japan yield differentials. USD/JPY has edged higher toward about 156.9 as of December 9–10, reflecting renewed dollar strength and modest selling of the yen after its brief recovery earlier this month.
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
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from Oil today?
Oil is trading slightly lower to steady around the high‑50s to low‑60s per barrel region on Wednesday, 10 December 2025, with markets focused on a mix of soft demand expectations, recovering supply, and major central‑bank decisions that could affect future energy consumption. Geopolitical risk from the Ukraine conflict and tensions involving Russia and Venezuela is providing a floor under prices, as traders weigh the chance of further disruptions to Russian exports or sanctions changes.
Next 24 Hours Bias
Medium Bullish
