IC Markets Asia Fundamental Forecast | 18 September 2025
What happened in the U.S. session?
The U.S. session was marked by caution and tight trading ranges as markets awaited clarity from the Federal Reserve’s rate decision. Equity indices moved little except for standout company and sector-specific stories, the dollar found modest strength, and both safe havens (like Treasuries, gold) and commodities (like oil) responded mildly to macro data and evolving Fed expectations.
What does it mean for the Asia Session?
Thursday presents a data-heavy session for Asian markets with Australia’s employment figures and the UK’s monetary policy decision as primary catalysts. The broader backdrop remains supportive for risk assets given expectations for continued global monetary easing, though persistent inflation concerns, particularly in the UK, highlight the divergent paths central banks are taking. Oil market volatility and US-China trade developments add additional layers of complexity to the trading environment.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (12:30 pm GMT)
Philly Fed Manufacturing Index (12:30 pm GMT)
What can we expect from DXY today?
Thursday, September 18, 2025, represents a continuation of the dollar’s bearish momentum following the Fed’s rate cut decision. The combination of deteriorating labor market conditions, political uncertainty around Fed independence, and expectations for continued monetary easing has created a perfect storm for dollar weakness. While inflation risks could provide temporary support, the broader trend suggests continued pressure on the greenback as the Fed embarks on its easing cycle. Market participants are closely monitoring upcoming economic data and Fed communications for signals about the pace and extent of future rate cuts.
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
Medium Bearish
Gold (XAU)
Key news events today
Unemployment Claims (12:30 pm GMT)
Philly Fed Manufacturing Index (12:30 pm GMT)
What can we expect from Gold today?
Thursday, September 18, 2025, finds gold in a consolidation phase following its record-breaking rally to $3,703. The Federal Reserve’s 25 basis point rate cut has been well-received by markets, reinforcing expectations for continued monetary easing that should support gold prices. While technical indicators suggest some near-term consolidation or minor correction is possible, the fundamental backdrop remains strongly supportive with multiple catalysts, including dovish Fed policy, geopolitical tensions, and robust central bank demand.
Next 24 Hours Bias
Strong Bullish
The Australian Dollar (AUD)
Key news events today
Employment Change (1:30 am GMT)
Unemployment Rate (1:30 am GMT)
What can we expect from AUD today?
The AUD is near multi-month highs driven by steady domestic data and anticipation of central bank decisions. Labour market releases show stable job growth and unemployment, providing underlying support for the currency. RBA policy remains cautious, focusing on inflation and employment. Upcoming Fed decisions and Chinese demand for commodities will shape AUD’s next moves.
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 event
What can we expect from NZD today?
The New Zealand Dollar (NZD) on Thursday, 18th of September 2025, is trading cautiously as markets react to domestic economic data and global central bank decisions. The focus is on GDP figures and expectations for further monetary easing by the Reserve Bank of New Zealand (RBNZ), alongside significant moves in global currency markets due to anticipated U.S. Federal Reserve actions.
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
Weak Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Investor attention is firmly on the BoJ’s meeting and the Fed’s rate decision, with Japanese yen price action dictated by global monetary policy and ongoing domestic weakness in trade data. While market risk is slowly shifting toward potential Fed rate cuts, the BoJ’s cautious stance and domestic challenges limit the yen’s ability to strengthen significantly in the near term.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 17 September, 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 continue its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases remains unchanged from the prior decision, with a quarterly reduction pace of about ¥400 billion through March 2026 and about ¥200 billion per quarter from April to June 2026 onward, aiming for a purchase level near ¥2 trillion in January to March 2027.
- Japan’s economy continues to show a moderate recovery, with household consumption supported by rising incomes, although corporate activity has softened somewhat. Overseas economies remain on a moderate growth path, with the impact of global trade policies still weighing on Japan’s export and industrial production outlook.
- On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. Inflationary pressures remain broad-based, with persistent cost-push factors in food and energy, alongside solid wage pass-through. However, input cost pressures from past import surges are showing early signs of easing.
- Short-term inflation momentum may moderate as cost-push effects diminish, though rent increases and service-related price gains tied to labor shortages are likely to provide support. Inflation expectations among firms and households continue a gradual upward drift.
- Looking ahead, the economy is projected to grow at a slower-than-trend pace in the near term due to external demand softness and cautious corporate investment plans. However, accommodative financial conditions and steady increases in real labor income are expected to underpin domestic demand.
- In the medium term, as overseas economies recover and global trade stabilizes, Japan’s growth potential is likely to improve. With persistent labor market tightness and rising medium- to long-term inflation expectations, core inflation is projected to remain on a gradual upward trend, converging toward the 2% price stability target in the latter half of the projection horizon.
- The next meeting is scheduled for 30 to 31 October 2025.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
No major news event
What can we expect from Oil today?
The US Energy Information Administration projects Brent crude could decline further, averaging $59 per barrel in Q4 2025, due to accumulating global inventories and the shift in OPEC+ policy. While supply risks persist, especially from geopolitical flashpoints and potential Middle East instability, the markets are currently focused on demand concerns and looming global surplus . Analysts are watching the US Fed’s rate decision closely, as lower rates could eventually stimulate economic activity and oil demand, but near-term sentiment remains cautious, skewed toward further price softness.
Next 24 Hours Bias
Medium Bearish
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