IC Markets Asia Fundamental Forecast | 16 September 2025
What happened in the U.S. session?
The US overnight session was dominated by Federal Reserve rate cut expectations, driving broad market optimism, with major indices reaching new records. Tesla’s massive insider buying and US-China trade negotiations provided additional market catalysts, while weakening consumer sentiment and China’s investigation into Nvidia introduced some caution. The convergence of monetary policy expectations, corporate developments, and geopolitical negotiations created a dynamic trading environment that favored technology stocks and risk assets while pressuring the dollar and bond yields.
What does it mean for the Asia Session?
Tuesday’s Asian session presents a potentially volatile but opportunity-rich environment driven primarily by Federal Reserve rate cut expectations and their cascading effects across global markets. The anticipated dollar weakness creates favorable conditions for Asian assets, while divergent regional central bank policies offer tactical trading opportunities. Key focus areas include Japan’s trade data release, currency positioning ahead of the Fed meeting, and continued monitoring of China’s economic trajectory. With sparse local economic data, global monetary policy developments will dominate market sentiment and positioning decisions for Asian traders.
The Dollar Index (DXY)
Key news events today
Core Retail Sales m/m (12:30 pm GMT)
Retail Sales m/m (12:30 pm GMT)
What can we expect from DXY today?
Financial markets are bracing for a potentially pivotal day for the US dollar. Today’s retail sales data and the anticipated Federal Reserve rate cut are front and center, likely shaping dollar direction for the weeks ahead. Broader market themes such as oil prices, policy divergence, and geopolitical factors remain influential but secondary to domestic US monetary policy developments.
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 Bearish
Gold (XAU)
Key news events today
Core Retail Sales m/m (12:30 pm GMT)
Retail Sales m/m (12:30 pm GMT)
What can we expect from Gold today?
Gold’s performance on Tuesday, September 16, 2025, represents the continuation of a historic bull market driven by a powerful combination of fundamental factors. The metal’s surge to new record highs above $3,680 per ounce reflects widespread expectations for Federal Reserve rate cuts, significant dollar weakness, ongoing geopolitical tensions, and sustained central bank buying.
Next 24 Hours Bias
Strong Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The Australian Dollar is benefiting from a perfect storm of supportive factors: broad USD weakness ahead of expected Fed easing, reduced expectations for further RBA cuts, and technical momentum carrying the currency to 10-month highs. While Chinese economic data remains a concern given the trade relationship, the AUD’s resilience suggests underlying strength in the current environment. Tuesday’s US retail sales data and Wednesday’s Fed decision will be key catalysts for the next phase of AUD movement.
Central Bank Notes:
- The RBA held its cash rate steady at 3.60% at its September meeting on 8–9 September 2025, following a 25 basis point reduction at the August meeting. This maintains a cautious yet supportive stance, with the decision largely anticipated given recent evidence of inflation settling within the target band.
- Inflation readings continue to ease, with headline CPI most likely tracking near 2.1–2.3%—comfortably within the 2–3% target range. September quarter figures are pending, but leading indicators show further moderation in non-housing components, even as insurance and housing-related costs remain sticky.
- The RBA’s preferred trimmed mean inflation is estimated at around 2.7%–2.9%, further reflecting progress toward the midpoint of the target range. Energy and food volatility still create some short-term uncertainty, but underlying inflation is broadly on track.
- Global conditions are a key source of risk. While U.S.–EU trade tensions have stabilized slightly, volatility in equities and commodities persists, with uncertainty feeding through to Australia’s trade and export outlook.
- Domestic demand shows tentative improvement. Real household incomes and a stabilizing housing sector have underpinned modest consumption growth, though business investment remains uneven—service sectors outperforming manufacturing and construction.
- Labor market tightness persists, but momentum continues to slow from earlier in the year. Employment gains remain, but job vacancies and hiring intentions have softened, with underutilization rising marginally for the second straight month.
- Wage growth has slowed in line with easing labour pressures, but unit labour costs remain elevated due to weak productivity. The RBA continues to flag subdued productivity as a medium-term cost risk.
- Forward indicators suggest household consumption may be softer than previously forecast. Elevated rents and high borrowing costs are dampening discretionary spending, despite modest income recovery.
- The Board continues to highlight the risk that household spending could underperform, potentially weighing on business investment and job creation if confidence remains subdued.
- Monetary policy remains mildly restrictive, in line with greater inflation control and ongoing economic rebalancing. The decision to hold rates recognizes both progress and ongoing uncertainties, with future moves explicitly tied to incoming data.
- The Reserve Bank reinforced its goals of price stability and full employment, stating readiness to adjust policy if economic or inflation outcomes diverge from baseline projections.
- The next meeting is on 29 to 30 September 2025.
Next 24 Hours Bias
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The New Zealand Dollar finds itself at a critical juncture on Tuesday, September 16, 2025. While benefiting from US dollar weakness and Fed easing expectations, the currency faces domestic headwinds from dovish RBNZ policy and anticipated economic contraction. The upcoming GDP release on September 18th will be crucial in determining whether recent gains can be sustained or if the currency will succumb to fundamental domestic weaknesses. Market participants are balancing short-term technical momentum against longer-term economic realities, creating a volatile environment for NZD traders.
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 events.
What can we expect from JPY today?
The Japanese Yen faces a challenging environment heading into the crucial BoJ meeting. Political uncertainty following PM Ishiba’s resignation has reduced expectations for immediate rate hikes, while persistent inflation above target and trade challenges create competing pressures. The upcoming Fed decision and Japan’s political developments this week will be critical drivers for USD/JPY direction, with volatility expected to remain elevated as these key events unfold.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 31 July, 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 maintain its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases will, in principle, continue to decrease by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, targeting a purchase level near ¥2 trillion in January to March 2027.
- Japan’s economy is experiencing a moderate recovery overall, though some sectors remain sluggish. Overseas economies are generally growing moderately, but recent trade policies in major economies have introduced pockets of weakness. Exports and industrial production in Japan are essentially flat, with any uptick largely driven by front-loaded demand ahead of U.S. tariff increases.
- On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. This reflects continued wage pass-through, previous import cost surges, and further increases in food prices, particularly rice. Expectations for future inflation have begun to rise moderately.
- The effects of the earlier import price and food cost increases are expected to fade during the outlook period. There may be a temporary stagnation in core inflation as overall growth momentum softens.
- Looking forward, the economy is likely to see a slower growth pace in the near term as overseas economies feel the pinch of ongoing global trade policies, putting downward pressure on Japanese corporate profits. Accommodative financial conditions are expected to buffer these headwinds somewhat. In the medium term, as global growth recovers, Japan’s growth rate is also expected to improve.
- With renewed economic expansion, intensifying labor shortages, and a steady rise in medium- to long-term expected inflation rates, core inflation is projected to gradually pick up. By the latter half of the BOJ’s projection period, inflation is forecast to move in line with the 2% price stability target.
- The next meeting is scheduled for 17 to 18 September 2025.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
API Crude Oil Stock (8:30 pm GMT)
What can we expect from Oil today?
The oil market on Tuesday, September 16, 2025, is characterized by conflicting pressures. While geopolitical tensions from Ukrainian attacks on Russian energy infrastructure and expected Federal Reserve rate cuts are providing upward price support, concerns about a looming global supply surplus from increased OPEC+ production and rising US inventories are capping gains. The market appears to be in a delicate balancing act between supply security concerns and oversupply fears, with prices likely to remain volatile as these competing forces play out.
Next 24 Hours Bias
Medium Bullish
