IC – Asia Fundamental Forecast | 09 October 2026
What happened in the U.S. session?
The U.S. session was driven mainly by oil-market volatility, persistent inflation concerns, and expectations of further Fed tightening. Jobless claims came in slightly better than expected, reinforcing the view that the labor market remains resilient. The Nasdaq and S&P 500 fell as technology stocks weakened, while natural gas declined after a larger-than-expected inventory build.
What does it mean for the Asia Session?
Asian traders should prepare for a session driven mainly by US monetary-policy expectations, high oil prices, and pressure on technology stocks. With relatively few major Asian economic releases, the direction of the dollar, Treasury yields, and crude oil could be more influential than the local data calendar. Keep a close eye on USD/JPY, AUD/USD, gold, and regional equity indices while watching Japan’s machine tool orders and Malaysia’s industrial production for country-specific catalysts.
The Dollar Index (DXY)
Key news events today
Prelim UoM Consumer Sentiment (2:00 pm GMT)
Prelim UoM Inflation Expectations (2:00 pm GMT)
What can we expect from the DXY today?
The US dollar remains supported by elevated Treasury yields and expectations that the Federal Reserve may raise interest rates again later this year. However, the dollar eased slightly on Thursday as European bond-market pressure moderated. Today, traders should watch US consumer sentiment, inflation expectations, Treasury yields, and oil prices for fresh direction. Stronger inflation concerns could support the dollar, while softer data and falling yields could trigger further weakness.
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
Prelim UoM Consumer Sentiment (2:00 pm GMT)
Prelim UoM Inflation Expectations (2:00 pm GMT)
What can we expect from the Gold today?
Gold is showing a modest recovery after hitting a two-month low, but the overall outlook remains uncertain. A strong US dollar and elevated Treasury yields continue to weigh on prices, while concerns about government debt and continued central-bank buying provide support. The key factors are US consumer sentiment, inflation expectations, movements in the dollar and bond yields, and geopolitical developments. Watch for a clear price reaction before deciding whether gold is likely to continue lower or extend its recovery.
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 faces a cautious to bearish short-term outlook, mainly because of US dollar strength, elevated US bond yields, and weaker Australian consumer sentiment. Higher Australian inflation expectations and the possibility of further RBA tightening may provide some support, while oil prices and developments in China remain important external influences.
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
No major news event
What can we expect from the NZD today?
The New Zealand dollar (Kiwi) remains under pressure near the 0.5600 level against the US dollar (NZD/USD). Recent market updates point to a stronger US dollar, elevated global bond yields, and geopolitical uncertainty as key factors weighing on the currency. However, improving New Zealand business confidence and expectations of further Reserve Bank of New Zealand (RBNZ) rate hikes could provide some support.
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
Strongly Bearish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from the JPY today?
The Japanese yen enters Friday, 9 October, with conflicting forces shaping its outlook. The BOJ’s concerns about broadening inflation increase the possibility of further interest-rate hikes, potentially supporting the yen. However, elevated U.S. yields and a firm dollar continue to weigh on the currency, while intervention concerns could trigger sudden moves in USD/JPY. Traders should monitor U.S. dollar movements, Japanese monetary-policy signals, and any official comments on currency intervention.
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 Bearish
Oil
Key news events today
No major news event
What can we expect from the Oil today?
Oil prices are rising as Middle East tensions and Hurricane Isaias threaten global supply. Brent closed at $104.28 and WTI at $91.49 on Thursday, with traders focused on shipping risks, U.S. production disruptions, and diplomatic developments involving Iran. The short-term outlook remains bullish but highly volatile. Prices could rise further if supply disruptions worsen, while signs of de-escalation could trigger a correction.
Next 24 Hours Bias
Strongly Bullish
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