IC – Asia Fundamental Forecast | 28 September 2026
What happened in the U.S. session?
Strong U.S. business investment and rising inflation expectations supported the Fed-tightening narrative, while falling oil prices and easing Middle East tensions provided some relief to equities and inflation-sensitive markets.
The biggest cross-market signal remains the combination of elevated Treasury yields and persistent inflation expectations, which continues to support a tighter-for-longer Fed outlook.
What does it mean for the Asia Session?
Asian traders are focused on the interaction between U.S.-China diplomacy, Middle East energy risks, and elevated global yields. The reported extension of the U.S.-China tariff reduction and trade truce could support Asian risk assets, while continued uncertainty surrounding the Strait of Hormuz could keep oil prices and inflation expectations volatile. Meanwhile, the 5%+ U.S. 10-year Treasury yield and renewed attention on USD/JPY remain key factors for Asian FX markets.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from the DXY today?
Strong U.S. economic activity, persistent inflation, elevated Treasury yields, and expectations of further Fed tightening are supporting demand for the U.S. dollar. However, the recent pullback in oil prices and a stronger yen could create some near-term volatility. The August PCE report and upcoming employment data are likely to be key tests of the dollar’s current strength.
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 under pressure heading into Monday’s session as higher Treasury yields, a stronger U.S. dollar, and expectations of further Fed hikes outweigh some of the traditional safe-haven demand from ongoing Middle East tensions.
The key battle for XAU/USD this week is likely to be between hawkish U.S. monetary policy expectations and geopolitical safe-haven demand. A further rise in Treasury yields and the DXY could keep gold under pressure, while softer U.S. economic data, falling yields, or renewed Middle East tensions could provide a catalyst for a rebound in gold.
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 is facing bearish short-term pressure heading into Monday, although the RBA remains an important potential source of support. Strong Australian employment data and persistent inflation are keeping the RBA relatively hawkish, while softer PMI data and rising unemployment suggest that the economy is also losing some momentum. At the same time, a stronger U.S. dollar and higher U.S. Treasury yields are adding further pressure on AUD/USD.
Central Bank Notes:
- The Reserve Bank of Australia (RBA) is expected to maintain a cautious, data-dependent policy stance heading into its September 2026 Monetary Policy Meeting. The cash rate target remains at 4.35%, following three increases earlier in 2026. The RBA has indicated that monetary policy needs to remain sufficiently restrictive to bring inflation back toward the 2–3% target while allowing the Board to assess the effects of previous tightening on household demand, employment, and economic activity.
- Inflation remains the central issue for the September meeting, although headline price pressures have continued to moderate. Australia’s CPI rose 3.8% year-on-year in June 2026, down from 4.0% in May, while trimmed-mean inflation remained at 3.6%. This suggests that underlying inflation is proving more persistent than headline inflation and remains above the RBA’s 2–3% target band. Housing costs continue to be an important source of inflationary pressure, while the end of some electricity rebates has also contributed significantly to household costs.
- The August and September inflation data will be particularly important for determining the RBA’s next move. The ABS is scheduled to release the July 2026 CPI on 26 August, giving policymakers a fresh inflation reading before the September meeting. The data will help determine whether the recent moderation in headline inflation is becoming more broad-based or whether services and domestic cost pressures remain stubborn.
- The labor market remains relatively resilient, but there are early signs of moderation. Australia’s unemployment rate was 4.4% in June, while employment increased by approximately 76,300 people and the participation rate rose to 67.0%. The increase in employment gives the RBA room to maintain a restrictive policy stance, although rising unemployment or a significant decline in employment growth could strengthen the case for eventually easing monetary policy.
- Wage growth will remain an important indicator for the September decision. The latest available Wage Price Index showed wages increasing 0.8% quarter-on-quarter and 3.3% year-on-year in the March quarter. The June-quarter wage data is scheduled for release on 19 August 2026, meaning the RBA will have this information available before its September meeting. A stronger-than-expected wage result could reinforce concerns about persistent domestic inflation, while softer wage growth would support the argument that inflation is gradually returning toward target.
- Household demand and economic growth will remain closely monitored. Higher borrowing costs continue to place pressure on mortgage holders and discretionary household spending. At the same time, improving real incomes and easing headline inflation could gradually support consumption later in the year. The RBA will therefore need to balance the risk of keeping rates restrictive for too long against the risk of easing policy before underlying inflation has been sufficiently contained.
- Global economic and commodity-market conditions remain an important risk for Australia. Developments in energy prices, geopolitical tensions, and China’s economic performance could have significant implications for Australia’s inflation and export outlook. A renewed increase in energy prices could raise Australia’s inflation outlook, while weaker prices could weigh on commodity exports, business activity, and overall economic growth.
- Financial markets are likely to remain highly sensitive to incoming inflation and employment data. With the cash rate already at 4.35%, markets will closely assess whether the RBA is approaching the end of its tightening cycle or whether another increase could become necessary. A sustained decline in underlying inflation and weaker domestic demand would strengthen expectations for eventual rate cuts, while persistent services inflation, strong wages or renewed energy-price pressures could keep the possibility of another hike alive.
- The next meeting is on 28-29 September 2026.
Next 24 Hours Bias
Medium Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from the NZD today?
The New Zealand dollar maintains a bearish bias. While the domestic economy is showing signs of resilience and the RBNZ remains in a tightening cycle, these positives are currently being offset by strong U.S. Treasury yields, broad USD strength, and uncertainty surrounding the pace of future RBNZ rate hikes. As a result, NZD/USD has moved lower toward the 0.5650–0.5600 area, making movements in U.S. yields and upcoming RBNZ policy expectations particularly important for the Kiwi this week.
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 concerns, 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 yen is facing intervention risk alongside a more hawkish Bank of Japan (BOJ). Japan is becoming increasingly uncomfortable with yen weakness, while Trump’s reported concerns add another layer of pressure on Tokyo to prevent excessive depreciation. The recent rate check has made the market particularly sensitive to USD/JPY approaching intervention-sensitive levels. At the same time, elevated U.S. yields and strong U.S. economic data remain the main forces working against sustained yen appreciation.
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 signalled 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 Bearish
Oil
Key news events today
No major news event
What can we expect from the Oil today?
Oil enters Monday with the market caught between supply disruptions and hopes of normalization. The biggest upside risk remains a renewed escalation around the Strait of Hormuz, while the main downside catalyst would be a credible U.S.–Iran agreement that restores normal shipping and crude exports.
For now, supply remains constrained, and inventories are historically depleted, keeping the underlying oil market tight. However, improving flows and ongoing diplomatic headlines are creating significant two-way volatility.
Next 24 Hours Bias
Medium Bearish
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