IC – Asia Fundamental Forecast | 02 November 2026
What happened in the U.S. session?
The U.S. session ended with significant pressure on equities, particularly technology stocks, as investors became increasingly concerned about AI valuations and corporate spending. Intel’s sharp decline added to the negative sentiment.
Meanwhile, strong U.S. economic growth and persistent inflation concerns continued to support expectations that the Federal Reserve could maintain a restrictive monetary policy or consider another rate increase. This remains supportive of the U.S. dollar but creates headwinds for gold.
What does it mean for the Asia Session?
Asian markets start Monday with a cautious outlook as investors balance concerns about China’s slowing manufacturing activity, weakness in global technology stocks, and continuing geopolitical tensions in the Middle East.
The US dollar could remain supported by expectations of further Federal Reserve tightening, while gold faces pressure from elevated bond yields. The Australian and New Zealand dollars could struggle if concerns about China’s economic outlook increase.
The Dollar Index (DXY)
Key news events today
ISM Manufacturing PMI (9:00 am GMT)
What can we expect from the DXY today?
The U.S. dollar begins Monday relatively stable, with the Dollar Index trading around 101.94. Investors are cautious ahead of Tuesday’s U.S. midterm elections and this week’s important economic releases.
The Federal Reserve’s recent hawkish stance and elevated Treasury yields continue to provide some support for the dollar. However, political uncertainty and concerns about the U.S. economic outlook could limit further gains.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) kept interest rates unchanged at 3.75%–4.00% at its October 27–28 meeting. The decision was approved by a 10–2 vote, following September’s 25-basis-point rate hike. Two members preferred another 25-basis-point increase.
- The labor market remains relatively stable. The Fed noted that job gains have kept pace with workforce growth and that the unemployment rate has changed little. Employment conditions remain an important factor in future policy decisions.
- Inflation remains above the Fed’s 2% target. Policymakers want more economic data to assess whether inflation is moving sustainably towards the target. Persistent inflation could increase the possibility of further rate hikes.
- The Fed upgraded its assessment of the U.S. economy from a solid pace of growth to a strong pace. Domestic spending remains resilient, productivity growth is strong, and business investment remains robust. However, geopolitical developments continue to create uncertainty.
- The Fed has kept the door open to further rate hikes if inflation remains elevated. The latest decision suggests policymakers want more evidence before making their next move. Markets are watching closely for signals about a possible rate increase in December.
- Chair Kevin Warsh continues to emphasize the importance of bringing inflation back to the 2% target. The October decision reflects a cautious approach, with the Fed waiting for more information before adjusting interest rates again.
- The Fed’s decision could influence the U.S. dollar, Treasury yields, gold, and other financial markets. Expectations of higher interest rates may support the dollar and pressure gold, while signs of easing inflation could weaken the dollar and support gold prices. Market reactions will depend on incoming economic data and expectations for future policy.
- The next meeting is scheduled for 8 to 9 December 2026.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
ISM Manufacturing PMI (9:00 am GMT)
What can we expect from the Gold today?
Gold is entering Monday under significant pressure following last week’s sell-off. Although prices have attempted a recovery towards $3,900, the broader outlook remains cautious.
The main problem for gold is rising oil prices and renewed inflation concerns, which are increasing expectations that the Federal Reserve may raise interest rates again in December. This is supporting the dollar and limiting gold’s recovery.
Next 24 Hours Bias
Strongly Bearish
The Australian Dollar (AUD)
Key news events today
Cash Rate (9:30 pm GMT)
RBA Monetary Policy Statement (9:30 pm GMT)
RBA Rate Statement (9:30 pm GMT)
RBA Press Conference (10:30 pm GMT)
What can we expect from the AUD today?
The Australian dollar is facing mixed trading conditions this Monday. Expectations of another RBA interest-rate increase are providing support, particularly as Australian inflation remains elevated. However, the currency is struggling to gain momentum because of US dollar strength, geopolitical uncertainty, and concerns about China’s economic performance.
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 Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from the NZD today?
The New Zealand dollar is facing renewed selling pressure following the RBNZ’s unexpected decision to hold interest rates at 2.75%. Although Governor Anna Breman indicated that further rate increases are likely, uncertainty surrounding the timing of monetary tightening has weakened investor confidence in the kiwi.
The NZD is also struggling against the Australian dollar because stronger Australian inflation has increased expectations of further RBA tightening.
Central Bank Notes:
- The Reserve Bank of New Zealand (RBNZ) kept the Official Cash Rate (OCR) unchanged at 2.75% on 28 October 2026. The decision was close, with four members voting to hold rates and three supporting a hike. The bank chose to assess incoming economic data before making further changes.
- Annual inflation eased from 4.1% in June to 3.7% in September 2026, but it remains above the RBNZ’s 1–3% target range. The bank expects inflation could rise to 4.4% by the end of the year, partly due to higher fuel costs.
- Ongoing disruptions in global energy markets are increasing fuel-price uncertainty. Higher energy costs could push up transportation and production expenses, keeping inflation elevated. A weaker New Zealand dollar is also adding to near-term inflation pressures.
- Although the RBNZ held rates in October, the close vote suggests further increases remain possible. Policymakers will monitor inflation, domestic price pressures, and economic activity before deciding whether additional tightening is necessary. The next decision will depend on incoming data rather than a fixed plan.
- New Zealand’s economy continues to recover, but growth remains uneven. Strong export performance and resilient demand from trading partners are supporting economic activity, while weak household spending and housing-market conditions continue to limit the recovery.
- Households remain under pressure from the cost of living and uncertain economic conditions. Weak spending and subdued housing activity could slow the recovery, making it important for the RBNZ to balance inflation control with economic growth.
- New Zealand’s labor market remains weak, with unemployment at 5.6% in the June 2026 quarter. Subdued wage growth is helping limit some inflation pressures, but a weak job market remains a concern for policymakers. The next unemployment report is scheduled for 4 November 2026.
- The RBNZ’s next monetary policy decision is scheduled for 9 December 2026. Traders will closely monitor inflation, employment data, fuel prices, and the bank’s guidance for clues about whether interest rates could rise further
- The next meeting is on 9 December 2026.
Next 24 Hours Bias
Strong Bearish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from the JPY today?
The Japanese yen is facing renewed weakness at the beginning of the week, with USD/JPY trading around 157.85 during the Asian session. The Bank of Japan’s decision to keep interest rates unchanged at 1.25% has disappointed investors looking for a more aggressive approach to monetary tightening. However, rising expectations of a December rate increase could provide support for the yen.
Central Bank Notes:
- The BOJ maintained its policy rate at 1.25% at its October 29–30 meeting. The decision was passed by an 8–1 vote, with one member favoring a 25-basis-point hike to 1.50%.
- The BOJ indicated that underlying inflation has reached levels consistent with its 2% target, although it still needs to ensure inflation remains stable around that level.
- Governor Kazuo Ueda maintained a cautious but increasingly hawkish stance, signalling that further interest-rate hikes remain possible as inflation risks increase.
- The bank revised its inflation outlook higher, highlighting rising energy and raw-material costs as potential sources of additional price pressure.
- Japan’s economy continues to recover moderately, while domestic demand and business conditions remain important factors in the BOJ’s policy decisions.
- Yen weakness remains a major concern because it increases import costs and adds to inflationary pressure. The BOJ continues to monitor exchange-rate movements closely.
- The BOJ is also continuing its balance-sheet normalization, including the gradual reduction of Japanese government bond purchases and adjustments to its ETF disposal plans.
- The BOJ remains on a gradual tightening path. Further rate increases will depend on inflation, wage growth, economic conditions, and financial-market developments. Markets are watching December for a possible rate hike.
- The next meeting is on 17-18 December 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 facing downward pressure at the beginning of Monday’s trading session as renewed diplomatic efforts between the United States and Iran raise hopes of easing Middle Eastern supply disruptions. OPEC+ has decided to maintain December production levels, providing some support to the market, while declining U.S. crude inventories also point to relatively tight supply conditions. However, uncertainty surrounding the Strait of Hormuz, elevated shipping costs, and the possibility of renewed military tensions remain important upside risks.
Next 24 Hours Bias
Strongly Bullish
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