IC Markets – Asia Fundamental Forecast | 21 October 2026
What happened in the U.S. session?
The U.S. session was driven mainly by U.S.–Iran headlines, falling oil prices, and weak housing data. The weaker housing figures pushed Treasury yields lower and weighed on the dollar, while hopes for progress toward a peace agreement caused sharp swings in oil. U.S. stocks finished mostly higher, supported by corporate earnings, although technology shares remained under pressure.
What does it mean for the Asia Session?
Asian traders should focus on Middle East tensions, oil prices, the U.S. dollar, bond yields, and Asian equity-market sentiment. Oil supply risks are supporting crude prices and increasing inflation concerns, while a weaker dollar and expectations around central-bank decisions are influencing currencies and gold. The Australian dollar is benefiting from a more hawkish RBA outlook, while USD/JPY remains sensitive to U.S. yields and Japanese policy risks. Later, UK inflation and Bailey’s speech could move GBP, followed by New Zealand CPI for NZD.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from the DXY today?
The US dollar is under pressure today as Treasury yields decline and expectations for an October Fed rate hike fade. The market expects the Fed to hold rates next week, while a possible December hike may provide some support to the dollar later. With little major US data due today, traders should watch bond yields, oil prices, and geopolitical developments. UK and New Zealand inflation releases may also create volatility in GBP/USD and NZD/USD.
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
Medium Bullish
Gold (XAU)
Key news events today
No major news event
What can we expect from the Gold today?
Gold is facing bearish pressure as inflation concerns, oil-price movements, and uncertainty over future Fed policy keep traders cautious. XAU/USD is trading near $4,120, with $4,100 acting as an important support level. A break below support could lead to further losses, while a weaker US dollar and lower bond yields could help gold recover. Traders should watch US dollar movements, Treasury yields, oil prices, and Fed commentary for the next major move.
Next 24 Hours Bias
Medium Bearish
The Australian Dollar (AUD)
Key news events today
No major news event
What can we expect from the AUD today?
The Australian dollar has a mildly bullish outlook today, supported by a weaker U.S. dollar, expectations that the RBA may keep interest rates high, and stronger Chinese growth. However, uncertainty over future RBA rate hikes and global market sentiment could limit further gains. Traders should watch AUD/USD around 0.7000, U.S. dollar movements, and upcoming Australian inflation data.
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
Medium Bearish
The Kiwi Dollar (NZD)
Key news events today
CPI q/q (9:45 pm GMT)
What can we expect from the NZD today?
The New Zealand dollar has recently gained against the US dollar, supported by expectations of another RBNZ rate hike and a softer US dollar. However, NZD/USD slipped slightly on Wednesday as traders awaited the key inflation report. Stronger-than-expected CPI could push the Kiwi higher, while weaker inflation could trigger a decline. Traders should watch the CPI release and changing expectations for the RBNZ’s 28 October 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 lackluster 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
Medium Bearish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from the JPY today?
The Japanese yen remains under pressure, with USD/JPY trading around 158. The BOJ is expected to keep rates unchanged next week, but persistent inflation could lead to another hike in December. For traders, the key drivers are U.S. bond yields, BOJ rate expectations, and the risk of Japanese intervention. A stronger dollar could push USD/JPY higher, while a more hawkish BOJ or intervention could send the pair lower.
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
Medium Bearish
Oil
Key news events today
EIA Crude Oil Inventories (12:30 pm GMT)
What can we expect from the Oil today?
Oil prices are moving higher because Middle East tensions are threatening supply and shipping routes. Brent is around $110, and WTI is near $99 in the latest reported snapshot. Further attacks or falling U.S. inventories could push prices higher, while progress toward peace could trigger a decline. The market’s main direction depends on geopolitical news and U.S. inventory data, so traders should expect volatility.
Next 24 Hours Bias
Medium Bullish
