IC Markets Asia Fundamental Forecast | 01 October 2025
What happened in the U.S. session?
Overnight, U.S. markets wrestled with high-stakes headlines around the government shutdown, which triggered a safe-haven bid for gold, softened the dollar, and injected volatility into equities. Economic releases remained on track for September 30 but may be delayed imminently if a shutdown materializes. Month-end equities flows were erratic. Gold was the chief beneficiary, while a weaker dollar and lower Treasury yields reflected mass uncertainty. Key macro data and sector moves now hinge on the resolution of government funding.
What does it mean for the Asia Session?
The main themes for Asian traders on October 1, 2025, are central bank expectations (BoJ and RBA), risky macro headlines (US shutdown, trade tensions), and commodity price swings. The Japanese yen and Australian dollar may see notable moves, and safe-haven assets like gold are in focus. Markets will remain sensitive to fresh economic data releases and political headlines through the Asian and early European trading hours.
The Dollar Index (DXY)
Key news events today
ADP non-farm employment change (12:15 pm GMT)
ISM Manufacturing PMI (2:00 pm GMT)
ISM Manufacturing Prices (2:00 pm GMT)
What can we expect from DXY today?
The US Dollar opened October 2025 on a softer footing as investors remain cautious about a possible federal government shutdown and its impact on financial markets. The Dollar Index (DXY) hovered near 98 after two straight sessions of declines, while broader market sentiment is shaped by a tug-of-war between recent solid US economic data and ongoing political uncertainty about federal spending negotiations.
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
ADP non-farm employment change (12:15 pm GMT)
ISM Manufacturing PMI (2:00 pm GMT)
ISM Manufacturing Prices (2:00 pm GMT)
What can we expect from Gold today?
Gold prices hit all-time highs today, fueled by escalating economic and political risks, strong ETF inflows, and expectations of easier U.S. monetary policy. This historic rally reflects gold’s enduring status as the premier safe-haven asset during global uncertainty. Gold reached new record highs, trading at around $3,858 per troy ounce amid heightened global uncertainty, political tensions, and concerns over a potential U.S. government shutdown, which have significantly boosted safe-haven demand this week.
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 strengthened today, Tuesday, October 1, 2025, as the Reserve Bank of Australia (RBA) held the cash rate steady at 3.6%, with the AUD/USD extending gains for a third consecutive session, supported by positive Chinese manufacturing data and a weakening US Dollar amid US government funding concerns.The Australian Dollar remains strong, driven by stable RBA policy, solid Chinese data, and global risk aversion centered around US fiscal turmoil.
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 (NZD) experienced a modest rebound ahead of October 1, 2025, benefiting from US Dollar weakness due to fears over a possible US government shutdown. Despite the bounce to around the 0.579–0.580 level, sentiment remains cautious as a bearish trend persists, with traders looking ahead to potential Reserve Bank of New Zealand (RBNZ) rate cuts to support the domestic economy.
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 JPY is trading stronger against major currencies, benefiting from safe-haven flows as U.S. government shutdown risks rise and U.S. dollar momentum stalls. However, weak Japanese economic data and uncertainty over the BoJ’s next move inject two-way volatility into the market, with all eyes on upcoming economic releases and political events for further direction.
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
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from Oil today?
Oil prices fell slightly as markets weighed increasing OPEC+ production, resumed Iraqi Kurdistan exports, and global economic jitters against ongoing geopolitical risks and concerns over Russian output. Brent crude traded near $67 per barrel, and U.S. WTI hovered around $63, both extending previous declines and reflecting the expectation of a rising supply glut. Investors are cautious as oil prices are pressured by potential oversupply but supported by persistent geopolitical risk.
Next 24 Hours Bias
Medium Bullish
