IC Markets – Asia Fundamental Forecast | 06 October 2026
What happened in the U.S. session?
The economy remained relatively strong, with U.S. services activity expanding, but the jump in the ISM prices index to 74.0 highlighted renewed inflation pressure. This kept Treasury yields elevated and supported the dollar. At the same time, French fiscal concerns pushed the euro to a 17-month low, while the announcement of coordinated G7 emergency oil-stock releases and improving Middle Eastern exports pressured crude prices lower. U.S. equities nevertheless remained strong, with the Nasdaq reaching a record high.
What does it mean for the Asia Session?
The biggest Asian-market event on Tuesday is BOJ Governor Ueda’s speech, particularly because Japanese bond yields are already under significant upward pressure. Any hint that the BOJ remains comfortable with further rate increases could strengthen the yen and push Japanese yields higher. Meanwhile, China’s mainland markets remain closed for Golden Week, reducing regional liquidity, while the Philippines’ 7.2% inflation reading provides another important signal about Asian inflationary pressures.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from the DXY today?
The strongest support is coming from exceptionally high U.S. Treasury yields and continued demand for the greenback, while weakness in the euro and yen is amplifying the dollar’s gains. The main counterweight is the weaker U.S. labor market, which has reduced expectations for an October Fed hike. Traders will therefore be watching today’s U.S. trade data, weekly employment data, and Fed Vice Chair Bowman’s comments closely for clues about whether the dollar’s rally can continue. The FOMC minutes tomorrow are likely to be an even bigger catalyst.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) raised the federal funds target range by 25 basis points to 3.75%–4.00% at its September 15–16, 2026, meeting. The decision was approved unanimously by a 12–0 vote, marking a shift from the July meeting, when rates were held at 3.50%–3.75%. The Fed said the move was intended to support its dual mandate and promote a more timely return of inflation toward its 2% objective.
- The labor market remains relatively resilient. The September FOMC statement said job gains have kept pace with workforce growth and that the unemployment rate has changed little. The Fed continues to monitor employment conditions closely alongside inflation when determining the appropriate path for monetary policy.
- Inflation remains above the Federal Reserve’s 2% target and continues to be a key policy concern. The September decision explicitly noted that inflation remains elevated. The latest projections put median headline PCE inflation at 3.7% for 2026, before falling to 2.3% in 2027, 2.1% in 2028, and 2.0% in 2029. Core PCE inflation is projected at 3.4% in 2026, declining to 2.5% in 2027 and 2.2% in 2028.
- Economic activity continues to expand at a solid pace. The Fed highlighted resilient domestic spending, strong productivity growth, and robust capital investment, although uncertainty remains elevated partly because of geopolitical developments. The September projections raised the median 2026 GDP-growth forecast to 2.3%, compared with 2.2% in the June projections.
- The September projections show a higher expected policy-rate path than in June. The median projection for the federal funds rate is now 4.1% at the end of 2026, compared with 3.8% in the June projections. The median is projected at 4.1% in 2027, 3.9% in 2028, and 3.6% in 2029. This indicates that policymakers’ projected rate path remains relatively restrictive while inflation is expected to move gradually toward the target.
- Chair Kevin Warsh continues to emphasize the importance of returning inflation to 2%. Ahead of the September meeting, Warsh indicated that the Fed would have further work to do if policymakers could not gain sufficient confidence that inflation was moving toward the 2% objective. The September decision subsequently delivered a 25-basis-point hike, while the Committee continued to emphasize its assessment of incoming economic data and risks.
- The September economic projections show a more balanced growth outlook but continued inflation risks. The median unemployment forecast is 4.1% for 2026 and 2027, while the Fed projects GDP growth of 2.3% in 2026 and 2.4% in 2027. At the same time, PCE inflation is expected to remain substantially above target through 2026 before moving closer to 2% over subsequent years.
- The next meeting is scheduled for 27 to 28 October 2026.
Next 24 Hours Bias
Strongly Bullish
Gold (XAU)
Key news events today
No major news event
What can we expect from the Gold today?
Gold is caught between two opposing forces today. Falling expectations for an October Fed hike, fiscal concerns, and safe-haven demand are supportive, while a strong U.S. dollar and exceptionally high Treasury yields are limiting the upside. For Tuesday, the key short-term question is whether XAU/USD can reclaim $4,160–$4,190 or instead break below $4,112. Overall, the near-term tone is neutral-to-bearish while below resistance, but the longer-term safe-haven and central-bank demand story remains supportive.
Next 24 Hours Bias
Strongly Bearish
The Australian Dollar (AUD)
Key news events today
No major news event
What can we expect from the AUD today?
The AUD has a mildly positive bias this morning, but the outlook is mixed. Support is coming from relatively high Australian interest rates, improving Chinese manufacturing activity, firmer iron ore, and stronger global equity sentiment. However, the sharp deterioration in Australian consumer confidence, persistent 4% inflation, and growing concerns about economic growth are keeping traders cautious.
Central Bank Notes:
- The RBA raised the cash rate by 25bps to 4.60% on 29 September, its fourth hike of 2026 and the highest cash rate since 2011. The RBA said higher rates are needed to bring inflation back to target, while further tightening remains possible if inflationary pressures persist.
- Inflation has become a major concern for the RBA. August CPI rose to 4.0% year-on-year, up sharply from 3.5% in July, while trimmed-mean inflation remained at 3.6%. Higher housing and fuel costs were important contributors, keeping underlying inflation well above the RBA’s 2–3% target.
- The labor market is cooling but remains relatively resilient. Australia’s unemployment rate increased to 4.6% in August, while employment increased by around 39,500. The rise in unemployment provides some evidence that higher rates are slowing the economy, although employment growth remains positive.
- Wage growth remains an important inflation risk. The Wage Price Index increased 0.8% quarter-on-quarter and 3.2% year-on-year in Q2 2026. Moderating wage growth would help ease domestic inflation pressures, but wages remain above levels that would be consistent with very low inflation.
- Household demand is showing signs of slowing under higher interest rates. Household spending was unchanged in August after strong increases in June and July, although spending was still 6.8% higher than a year earlier. Housing activity also weakened, with total dwelling approvals falling 6.1% in August.
- Economic growth remains positive but subdued. Australia’s GDP increased 0.4% in Q2 2026 and 2.1% year-on-year, suggesting the economy is still expanding but not particularly strongly. The RBA will need to balance persistent inflation against the growing impact of restrictive monetary policy on households and housing.
- Global energy prices are becoming an additional inflation risk. Middle East tensions and disruptions to energy supplies have pushed oil prices higher, while China’s suspension of fuel exports in October has added pressure to Asian fuel markets. Higher energy costs could keep Australian inflation elevated and make it harder for the RBA to ease policy.
- The next meeting is on 2-3 November 2026.
Next 24 Hours Bias
Strongly Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from the NZD today?
The NZD is starting Tuesday on the defensive. The biggest negative factor is the powerful US dollar and elevated US Treasury yields, which have pushed NZD/USD toward the 0.5580 support area. However, the domestic picture is not uniformly negative: New Zealand’s business confidence surged to 43%, suggesting improving expectations for economic activity. The key event for the NZD today is the Global Dairy Trade auction at 12:00 UTC, while traders will also be watching expectations for the 28 October RBNZ decision.
Central Bank Notes:
- The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 25 basis points to 2.75% at its 2 September 2026 Monetary Policy Statement meeting. The decision was reached by consensus, marking another step in the bank’s tightening cycle as policymakers seek to bring inflation sustainably back toward the 2% midpoint.
- Inflation remains the key reason behind the RBNZ’s tightening stance. Annual consumer inflation increased to 4.1% in the June 2026 quarter, driven largely by higher fuel prices associated with the Middle East conflict. The RBNZ expects inflation to remain above 3% for the remainder of 2026 before returning to the 1–3% target range next year and moving toward the 2% midpoint.
- Energy prices and geopolitical developments remain an important upside risk to inflation. Higher petrol and diesel prices have increased transportation and production costs, feeding into prices for goods and services such as food and air travel. The RBNZ remains concerned that renewed increases in energy prices could make inflation more persistent than currently expected.
- The RBNZ indicated that further OCR increases may still be required this year, but policy is not on a predetermined path. Future decisions will depend on the balance of risks to medium-term inflation, including inflation expectations, domestic price pressures, economic activity, and the response of households and businesses to tighter financial conditions.
- New Zealand’s economic recovery appears to have resumed, although growth remains uneven. Economic activity was lacklustre during the June quarter as higher fuel costs reduced household purchasing power. However, stronger export prices and resilient demand from trading partners are supporting income growth and investment, particularly in export-oriented sectors.
- Household demand and the housing market remain areas of weakness. Weak income growth, job insecurity, and relatively flat house prices continue to weigh on household spending and residential investment, particularly in Auckland and Wellington. The RBNZ nevertheless expects the recovery to strengthen gradually as inflation declines and purchasing power improves.
- The labor market remains relatively soft, but the Bank expects conditions to improve as economic activity strengthens. High unemployment and subdued household demand remain a concern, but stronger economic growth should gradually encourage businesses to increase hiring. This creates a delicate balance for the RBNZ between containing inflation and avoiding unnecessary weakness in employment and output.
- The RBNZ continues to see strong export performance as an important support for the economy. New Zealand’s agricultural and other export sectors are benefiting from resilient global demand and strong commodity prices, helping offset weakness in domestic consumption and residential investment.
- The next meeting is on 28 October 2026.
Next 24 Hours Bias
Strongly Bearish
The Japanese Yen (JPY)
Key news events today
BOJ Gov Ueda Speaks (6:35 am GMT)
What can we expect from the JPY today?
The yen starts Tuesday on the defensive, with USD/JPY near ¥158, but today’s Ueda speech is the major potential catalyst. The BOJ has already raised rates to 1.25%, and stronger business sentiment plus persistent inflation risks keep the possibility of further tightening alive. However, markets are not yet convinced that another October hike is coming. For yen traders, Ueda’s tone, Japanese bond yields, and the U.S.–Japan yield differential are the key factors to watch today.
Central Bank Notes:
- The BOJ raised its policy rate by 25 basis points to 1.25% at its September 17–18 meeting, the highest level in 31 years. The decision passed 7–2.
- The BOJ said underlying inflation remains firm and is increasingly consistent with its 2% price-stability target, supported by wage growth and services prices.
- Further rate hikes remain possible, but the BOJ will continue to assess wage growth, inflation, economic activity, and financial-market conditions before making additional adjustments.
- The Bank continues its gradual reduction of Japanese Government Bond purchases while retaining flexibility to respond if market volatility becomes excessive.
- Japan’s economy continues to expand moderately, supported by domestic demand and business investment, although global trade uncertainty, geopolitical risks, and higher energy costs remain important risks.
- Yen weakness remains a key concern, as depreciation can increase imported inflation. The BOJ is closely monitoring exchange-rate movements and their impact on prices and financial conditions.
- Governor Kazuo Ueda signaled that the September hike reflects growing confidence that inflation is becoming more sustainable, while the two dissenting members preferred to wait before tightening further.
- Looking ahead: The BOJ remains on a gradual normalization path. Future hikes will depend mainly on inflation, wages, domestic demand, and financial conditions rather than a fixed timetable.
- The next meeting is on 29 to 30 October 2026.
Next 24 Hours Bias
Weak Bullish
Oil
Key news events today
API Crude Oil Stock (8:30 pm GMT)
What can we expect from the Oil today?
Oil is currently caught between improving supply and persistent geopolitical risk. The recovery in Middle Eastern exports and the G7’s planned 100-million-barrel reserve release are keeping a lid on prices, with Brent holding around $100 and WTI around $89. However, ongoing attacks around Saudi Arabia and the wider Gulf mean traders are reluctant to aggressively sell oil because any disruption to Saudi production or Gulf shipping could quickly send prices higher.
Next 24 Hours Bias
Strongly Bullish
