Gold Near Record Highs as Fed Rate Cut Looms, Investors Eye Policy Clues and Geopolitical Risks

Economic

Commodity

Summary:

Gold prices are hovering just below record levels near $3,640/oz as investors anticipate a Federal Reserve rate cut and monitor global economic and political tensions...

Gold Surges Ahead of Fed Decision on Easing Cycle

Gold remains firmly near its all-time high, trading around $3,635–$3,640 per ounce as markets anticipate a 25-basis-point rate cut by the U.S. Federal Reserve this week. The metal has gained nearly 40% year-to-date, driven by a combination of falling Treasury yields, a weakening U.S. dollar, and heightened geopolitical and monetary uncertainty.

Investors are now seeking clarity on whether the Fed will signal further easing in 2025, potentially extending into 2026. The backdrop of labor market softness and persistently uneven inflation data has increased the likelihood of a broader rate-cutting cycle. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, while a weaker dollar enhances gold’s global affordability.

Macroeconomic Forces Replacing Trade Noise as Key Driver

Analysts from ANZ Group Holdings noted in a recent report that "macroeconomic numbers are likely to take over from tariff-related headlines," as markets shift their focus toward how Trump-era protectionist policies may affect broader U.S. growth metrics and inflation trajectories.

While the recent focus has been on U.S. tariffs and tensions with China, the Fed's dovish turn now dominates investor narratives. The current market environment reflects a strong correlation between gold prices and forward-looking monetary conditions rather than immediate trade developments.

Geopolitical Instability Adds to Bullion’s Appeal

Beyond interest rate dynamics, broader uncertainty remains a key catalyst for gold. Former President Donald Trump’s aggressive stance toward the Fed highlighted by his attempts to remove Fed Governor Lisa Cook has created institutional volatility that is further boosting safe-haven demand.

Goldman Sachs analysts suggest that this combination of domestic political instability and global central bank buying could push prices toward $5,000 per ounce if current trends hold. Central banks, particularly in emerging markets, have significantly increased gold reserves amid concerns over currency stability and geopolitical fragmentation.

Strong Demand Despite Profit-Taking and Volatility

Despite a modest 0.2% pullback in early Monday trading, gold continues to outperform other precious metals. Platinum rose above $1,400 its highest level in nearly a decade while silver and palladium saw slight declines. The Bloomberg Dollar Spot Index remained steady, suggesting that forex positioning is already largely adjusted to expected policy outcomes.

While gold's recent breakout has captured investor enthusiasm, analysts caution that any surprise hawkishness from the Fed or easing of geopolitical tensions particularly between the U.S. and China could slow its ascent. A second day of high-level U.S.–China talks in Madrid could offer such a moderating influence if progress is made on trade and security agreements.

Unusual Gold Export Surge in Asia Raises Red Flags

Meanwhile, in Southeast Asia, a 19% spike in Thai gold exports to Cambodia has prompted suspicions of illicit financial activity. The Federation of Thai Industries is investigating potential money laundering, underscoring how gold’s dual role as a safe-haven and monetary vehicle can invite regulatory scrutiny.

Such regional anomalies also highlight gold's persistent role in cross-border capital flows and the complex interplay between formal monetary policy and shadow financial networks.

Bullion's Rally Reflects Structural Shifts, Not Just Cyclical Fears

Gold's rise near record levels is no longer a short-term reaction to volatility it is a reflection of deeper shifts in the global economic order. With central banks increasingly prioritizing financial resilience over inflation targeting, and with geopolitical fractures redefining global trade dynamics, gold is regaining its prominence as a foundational asset in diversified portfolios.

If the Fed confirms a dovish path and global instability remains elevated, gold may break decisively above current resistance levels, entering a new super-cycle that redefines safe-haven investing for years to come.

Source: Bloomberg

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Economic

Tax Reversal Marks Early Political Test for President Lee

In a significant policy reversal, South Korea’s government has officially withdrawn a contentious proposal to lower the capital gains tax threshold on equity holdings from 5 billion won to 1 billion won ($717,535). This marks the first major retreat under President Lee Jae Myung since his inauguration in June 2025, and highlights both the strength of public opposition and the fragility of equity market sentiment in Asia’s fourth-largest economy.

The proposed measure framed as part of a broader effort to boost fiscal revenues amid U.S. tariff pressure sparked fears among retail investors and triggered a sharp selloff in August, wiping billions in market capitalization. As domestic equities reeled, pressure from individual investors, who account for roughly two-thirds of daily trading activity, forced the administration to reconsider.

Retail Investors Flex Political Muscle as Kospi Surges

Retail activism played a decisive role in the policy reversal. Groups like the Korea Stockholders Alliance warned that slashing the capital gains threshold would devastate investor sentiment and sabotage Korea’s capital market ambitions. Their outcry was not without consequence: President Lee, who campaigned on promises to elevate the Kospi index to 5,000 points, faced the risk of alienating his voter base early in his presidency.

The market responded favorably. On Monday, the Kospi gained as much as 0.7% hitting a record on expectations of the tax rollback. The index has surged roughly 42% year-to-date, making it one of the top-performing equity benchmarks globally, thanks to momentum in corporate reforms and strong foreign inflows driven by the global artificial intelligence boom. According to Goldman Sachs, net foreign buying last week reached 4 trillion won the largest weekly inflow since 2013, mostly concentrated in tech stocks.

Policy Tensions Between Growth and Fiscal Prudence

While the abandoned tax proposal alleviates market fears in the short term, it also leaves unresolved the fiscal pressures that motivated it. President Lee’s administration is actively seeking new revenue sources to fund campaign pledges amid a weakened economy and slower tax receipts. Scrapping the capital gains change leaves a revenue gap, further straining South Korea’s already-loose fiscal posture.

Hyosung Kwon, an economist at Bloomberg Economics, warned that the tax reversal “exposes flaws in the large shareholder gains tax,” and urged future reforms to avoid market distortions. Kwon noted that while satisfying retail investors may be politically expedient, repeated policy flip-flops risk weakening tax discipline and overall budget credibility.

History Repeats: Second Tax Retreat in Two Years

This is not the first time that organized retail voices have blocked capital taxation plans. Just last year, then-President Yoon Suk Yeol reversed a proposed financial investment tax following similar backlash. President Lee, despite initially backing higher taxation on investment income, now finds himself facing the same limits on fiscal policymaking.

Analysts argue that with approximately one-third of Korean households invested in stocks, bonds, or mutual funds, public resistance to capital market taxation is now a structural constraint on policy. Any revenue-raising initiative must navigate a complex landscape where economic fragility, equity market reliance, and investor sentiment are closely intertwined.

Outlook: Balancing Growth, Governance, and Investor Sentiment

Lee’s retreat signals a pragmatic approach to governance but also raises questions about the sustainability of his fiscal roadmap. While short-term market confidence has been restored, the long-term need for a stable tax base remains unaddressed. The creation of a presidential committee tasked with lifting the Kospi to 5,000 points reflects the administration’s prioritization of capital market development but this comes at the cost of delaying key fiscal reforms.

The administration must now chart a path that sustains investor optimism without undermining South Korea’s fiscal foundation. This may involve redirecting reform efforts toward consumption taxes, public asset reallocation, or targeted levies that are less politically sensitive than investor-focused capital gains measures.

South Korea’s decision to withdraw its capital gains tax plan is a clear victory for retail investors and equity markets. However, the move reveals deeper tensions between political accountability, revenue generation, and market stability. As President Lee continues to navigate his first year in office, the capital gains tax reversal stands as both a cautionary tale and a litmus test for economic governance in an increasingly investor-driven democracy.

Source: Bloomberg

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Forex

Dollar Steadies as Fed Takes Center Stage

Ahead of what could be a pivotal week in global monetary policy, the U.S. dollar held steady in Monday’s early trading session, with investors awaiting critical central bank decisions. The dollar index hovered around 97.65, showing little movement as Asian markets opened quietly due to Japan’s holiday. Despite recent downward pressure driven by expectations of U.S. rate cuts, traders appeared cautious ahead of the Federal Reserve's decision due midweek.

Currency movements were mostly muted, with major pairs trading in narrow ranges. The euro dipped slightly by 0.09% to $1.1724, shrugging off a significant downgrade from Fitch Ratings, which stripped France of its AA- credit status the lowest on record citing political uncertainty and rising public debt. However, markets showed little concern, suggesting the downgrade had already been priced in or was not expected to have spillover effects on broader eurozone assets.

All Eyes on the Fed’s Guidance and Dot Plot

The spotlight remains firmly on the Federal Open Market Committee (FOMC), with expectations high for a 25-basis-point interest rate cut this week. Carol Kong, strategist at the Commonwealth Bank of Australia, noted that the rate cut is “more than fully priced in,” indicating limited market reaction unless the Fed surprises with an outsized move or dovish signals.

More crucial than the rate cut itself will be the Fed’s "dot plot" and Chair Jerome Powell’s tone. According to Kong, the Fed would need to “out-dove” market expectations perhaps by hinting at additional cuts in quick succession to exert further downward pressure on the dollar. If the Fed surprises with a 50-basis-point cut without hinting at further action, the dollar may find support again, balancing investor sentiment.

Global Central Banks Follow Suit Amid Diverging Growth Paths

The Bank of Japan (BOJ) will also meet this week, with expectations of a policy hold. However, the yen slightly strengthened to 147.56 per dollar, suggesting some positioning ahead of the meeting. Political instability in Japan, following the resignation of Prime Minister Ishiba, has recently weakened the yen, and analysts at MUFG argue that only a clear signal of an upcoming rate hike from the BOJ could spark a durable reversal in the yen’s performance.

Meanwhile, the British pound held firm at $1.3554, and the Australian dollar hovered near a 10-month high at $0.6652, buoyed by firm commodity demand and relative domestic stability.

The New Zealand dollar eased slightly to $0.5953, and the offshore Chinese yuan remained steady at 7.1230 per dollar. U.S. and Chinese trade officials held preliminary talks in Madrid over the weekend, focusing on strained trade ties and a looming decision over the future of Chinese-owned TikTok in the U.S.

France Downgrade Has Limited Market Impact

Despite Fitch cutting France’s sovereign credit rating amid growing fiscal stress and domestic political tensions, the euro's minimal reaction suggests broader European risks remain contained for now. Market participants appear more focused on monetary policy direction and data surprises than ratings headlines.

The dollar’s steadiness on Monday reflects a market in wait-and-see mode. With the Fed likely to initiate its rate-cutting cycle, and with Powell’s comments expected to set the tone for the remainder of 2025, global markets are bracing for potential volatility.

If Powell signals further easing amid global policy divergence, the dollar could weaken across the board, benefitting currencies like the yen, Aussie, and emerging market units. However, any indication of restraint or inflation vigilance could see the dollar regain upward momentum, particularly against the backdrop of France’s downgrade and Europe’s fiscal concerns. This week, monetary policy narrative not just rate numbers will drive currency markets.

Source: Reuters

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Economic

Persistent Decline Reflects Enduring Weakness in Housing Demand

China’s real estate sector remains entrenched in decline, as official data released Monday showed that new home prices fell by 0.3% in August from the previous month. This marks the fourth consecutive month of contraction and mirrors the decline recorded in July. On a year-on-year basis, prices dropped 2.5%, a slight improvement from the 2.8% fall in July but still reflective of a broader systemic weakness.

The data, derived from the National Bureau of Statistics and compiled by Reuters, confirms that housing remains a major impediment to growth in the world’s second-largest economy. The trend has persisted since May 2023, despite multiple policy interventions.

Nationwide Weakness Across Tiers and Regions

Among the 70 cities surveyed, 57 saw month-on-month price declines, and 65 recorded annual decreases. Notably, resale prices a key measure of real market sentiment fell sharply. Tier-one cities posted a 3.5% drop year-on-year, while tier-two cities fell 5.2% and tier-three cities, the most fragile segment, declined 6.0%.

This widespread weakness is partly a consequence of oversupply in lower-tier cities and depressed buyer confidence nationwide. As secondary-market listings remain high and household income expectations falter, even relaxed purchase restrictions have not reignited demand.

Investment and Sales Continue to Slide

Property investment fell 12.9% year-on-year in the first eight months of 2025, highlighting a severe contraction in developer activity. At the same time, floor space sales a proxy for transaction volume slid 4.7% over the same period.

These figures reveal a sector caught in a downward spiral. Developers are scaling back, new project launches are being delayed or shelved, and consumers are staying on the sidelines. The interplay of these dynamics is contributing to deflationary pressures and suppressing broader economic momentum.

Policy Easing Yet to Deliver Results

Local governments in cities like Shanghai and Shenzhen have responded by easing homebuying restrictions in selected districts for qualified buyers. These adjustments are part of broader efforts to support market stabilization through targeted deregulation.

However, the central government remains cautious. Premier Li Qiang reaffirmed in August that “forceful measures” are necessary to consolidate the market’s fragile stabilizing trend. Yet thus far, actions such as mortgage rate cuts and urban village renovation programs have failed to yield a sustained turnaround.

The lack of a coordinated national rescue package may reflect Beijing’s desire to avoid fueling speculative bubbles. However, the piecemeal nature of local easing policies has limited their effectiveness in reviving confidence or addressing inventory overhang.

Stabilization Expected in Late 2026 or Beyond

Most analysts surveyed by Reuters now believe that housing market stabilization will not occur before the second half of 2026 or even into 2027 a significant revision from expectations just three months earlier. This adjustment suggests growing pessimism about the pace of recovery and the structural nature of the property downturn.

Factors such as high youth unemployment, stagnant wage growth, and demographic shifts are dampening long-term demand. These are not merely cyclical pressures but reflect deeper transformations in China’s urban economy and household behavior.

A Sector in Need of Stronger Intervention

China’s housing market continues to be a drag on the country’s post-COVID economic rebound. Despite policy support and marginal easing in major cities, the August data shows no sign of meaningful recovery. With investment and sales still falling and sentiment weak across tiers, real estate remains a key macroeconomic risk.

Unless Beijing adopts a more unified and aggressive policy stance potentially including broader financing support, developer restructuring, or demand stimulation the sector could continue to weigh heavily on China’s broader growth trajectory well into 2026 and beyond.

Source: Reuters

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Commodity

Forex

Economic

What happened in the U.S. session?

The U.S. overnight session was characterized by mixed inflationary signals that reinforced Fed easing expectations while maintaining caution about the pace of cuts. The August CPI’s 0.4% monthly rise exceeded expectations but was offset by deteriorating labor market conditions, creating a complex environment for policymakers.

What does it mean for the Asia Session?

Asian traders should prepare for a potentially volatile but opportunity-rich session driven primarily by Fed rate cut expectations. The anticipated dollar weakness creates favorable conditions for Asian assets, while divergent regional central bank policies offer tactical trading opportunities. Key focus areas include Japanese trade data, currency positioning ahead of the Fed meeting, and continued monitoring of China’s economic trajectory. Geopolitical developments remain a wildcard that could override fundamental factors, particularly in commodity markets.

The Dollar Index (DXY)

The US Dollar enters the week of September 16, 2025, facing its most significant policy inflection point since late 2024. With the Fed widely expected to begin its easing cycle amid clear labor market deterioration, the dollar confronts both cyclical and structural headwinds. Technical indicators suggest further weakness ahead, with key support levels now in focus. While short-term positioning has stabilized, the fundamental backdrop of diverging global monetary policies and domestic political pressures points to continued dollar vulnerability in the near term.

Central Bank Notes:

● The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at its meeting on July 29–30, 2025, keeping policy unchanged for the fifth consecutive meeting.

● The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.

● Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation remains somewhat elevated, with the PCE price index at 2.6% and a core inflation forecast of 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.

● The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters

● In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.

● The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.

● As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.

● The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Gold enters Monday, September 15, 2025, in a strong fundamental position, supported by imminent Federal Reserve rate cuts, robust central bank demand, and ongoing geopolitical uncertainties. The combination of technical momentum near record highs and favorable macroeconomic conditions suggests continued bullish sentiment, with key resistance at $3,675 representing the next major hurdle. China’s regulatory streamlining adds another positive catalyst for medium-term demand, while the Fed’s decision on Wednesday will likely determine whether gold can sustain its breakout to new all-time highs above $3,700.

Next 24 Hours Bias

Strong Bullish

The Australian Dollar (AUD)

The Australian Dollar is experiencing its strongest period in nearly a year, driven primarily by expectations of aggressive Federal Reserve easing rather than purely domestic factors. While technical indicators suggest continued upward momentum, the currency faces potential headwinds from China’s economic challenges and upcoming domestic employment data. The RBA’s September meeting is expected to maintain the status quo, with officials taking a data-dependent approach to future policy decisions.

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)

The New Zealand Dollar remains under pressure from dovish domestic monetary policy, with the RBNZ signaling further rate cuts to support the struggling economy. While global factors such as US Dollar weakness and positive China trade data have provided some support, the fundamental outlook for New Zealand continues to show economic weakness with declining GDP, rising unemployment, and contracting manufacturing activity. The currency’s trajectory will largely depend on the pace of the RBNZ’s easing cycle and broader global monetary policy developments, particularly from the Federal Reserve. Market participants should monitor upcoming GDP data and employment figures, which will be critical in determining whether the central bank delivers the expected additional 50 basis points of cuts by year-end.

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

Medium Bearish

The Japanese Yen (JPY)

The Japanese yen faces a complex environment on September 15, 2025, with political uncertainty from Prime Minister Ishiba’s resignation creating short-term headwinds despite improving economic fundamentals. Manufacturing sentiment has reached three-year highs following the US-Japan tariff deal, and business confidence is turning positive across major firms. However, the upcoming BoJ meeting on September 18-19 will be crucial for determining the central bank’s policy direction amid persistent inflation above the 2% target and ongoing global trade uncertainties.Central Bank Notes:

● The Policy Board of the Bank of Japan decided on 31 July, 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 maintain its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases will, in principle, continue to decrease by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, targeting a purchase level near ¥2 trillion in January to March 2027.

● Japan’s economy is experiencing a moderate recovery overall, though some sectors remain sluggish. Overseas economies are generally growing moderately, but recent trade policies in major economies have introduced pockets of weakness. Exports and industrial production in Japan are essentially flat, with any uptick largely driven by front-loaded demand ahead of U.S. tariff increases.

● On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. This reflects continued wage pass-through, previous import cost surges, and further increases in food prices, particularly rice. Expectations for future inflation have begun to rise moderately.

● The effects of the earlier import price and food cost increases are expected to fade during the outlook period. There may be a temporary stagnation in core inflation as overall growth momentum softens.

● Looking forward, the economy is likely to see a slower growth pace in the near term as overseas economies feel the pinch of ongoing global trade policies, putting downward pressure on Japanese corporate profits. Accommodative financial conditions are expected to buffer these headwinds somewhat. In the medium term, as global growth recovers, Japan’s growth rate is also expected to improve.

● With renewed economic expansion, intensifying labor shortages, and a steady rise in medium- to long-term expected inflation rates, core inflation is projected to gradually pick up. By the latter half of the BOJ’s projection period, inflation is forecast to move in line with the 2% price stability target.

● The next meeting is scheduled for 17 to 18 September 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Oil markets on Monday, September 15, 2025, face a challenging outlook characterized by modest OPEC+ production increases aimed at market share recovery, robust supply growth outpacing demand, and mixed inventory signals. While geopolitical tensions continue to provide price support, the underlying fundamentals suggest potential for further price weakness as anticipated supply surpluses materialize in 2026.Next 24 Hours Bias

Medium Bullish

Source: IC Markets

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Economic

[Quick Facts]

♦ Trump reiterates call for Cook's dismissal on eve of FOMC

♦ Blackstone star emerges as Fed-Chair dark horse in power play

♦ U.S.–U.K. tech accord targets AI, quantum, critical chips in strategic pact

♦ Trump demands NATO quit Russian oil, floats China tariff escalation

[News Details]

Trump Reiterates Call for Cook's Dismissal on Eve of FOMC

On Washington, Sept. 14 — President Donald Trump filed a final brief with the U.S. Court of Appeals on Monday, seeking leave to remove Fed Governor Lisa Cook for alleged mortgage fraud. The administration aims to complete the termination before next week's FOMC rate decision, reiterating that Governor Cook has failed to mount a credible defense against the charges.

Blackstone Star Emerges as Fed-Chair Dark Horse in Power Play

A senior U.S. administration official disclosed that Rick Rieder, senior executive at Blackstone Group, has been climbing steadily on the shortlist to succeed as Fed Chair. Earlier last week Rieder told CNBC that, based on his read of economic indicators, the Fed should cut rates by 50 bps—double the reduction markets widely expect to be announced at this week's FOMC meeting.

Additionally, U.S. Treasury Secretary Scott Bessent conducted a two-hour wide-ranging interview with Rieder in New York last Friday, covering monetary policy, the Fed's organizational structure, and supervisory policy. Bessent particularly valued Rieder's ability to assess the economy through a forward-looking framework rather than relying on lagging data. Rieder stated bluntly during the discussion that a 25 bps adjustment to the overnight funding rate lacks real impact. The Fed, he argued, should instead focus on how to deploy balance-sheet tools, liquidity-management instruments, and yield-curve positioning strategies.

U.S.–U.K. Tech Accord Targets AI, Quantum, Critical Chips in Strategic Pact

The British embassy in Washington said Saturday that London and Washington are poised to sign a landmark technology agreement in the coming days as part of President Trump's visit to the UK. The accord is designed to deepen collaboration between the two nations' multi-trillion-dollar tech sectors, unlocking opportunities for businesses and consumers on both sides of the Atlantic. The partnership will focus on critical technologies including artificial intelligence, semiconductors, telecommunications and quantum computing, according to the embassy.

President Trump is scheduled to depart for the U.K. on Tuesday for a three-day second state visit, accompanied by a delegation of senior U.S. executives that includes Nvidia CEO Jensen Huang and OpenAI's Sam Altman.

Trump demands NATO quit Russian oil, floats China tariff escalation

U.S. President Donald Trump, in a September 13 letter to NATO members, urged the alliance to halt all purchases of Russian crude and endorsed bloc-wide sanctions on Moscow to terminate the war in Ukraine. In a concurrent social-media post Trump stated: "When every NATO nation agrees and acts in concert—ceasing all Russian oil imports—I am ready to impose sweeping sanctions on Russia." He further proposed that NATO collectively levy 50%–100% tariffs on Chinese goods to dilute Beijing's economic leverage over Moscow.

[Today's Focus]

UTC+8 17:00 Eurozone July Trade Balance (s.a.)

UTC+8 20:30 Canada July Wholesale Sales MoM

UTC+8 20:30 U.S. September Empire State Manufacturing Survey

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Economic

Manufacturing and Consumption Falter as Economic Pressures Mount

China’s $19 trillion economy showed further signs of strain in August 2025, with key indicators signaling a broad-based slowdown. Industrial output grew by just 5.2% year-on-year the slowest pace since August 2024 falling short of both July’s 5.7% expansion and market forecasts. At the same time, retail sales grew only 3.4%, the weakest performance in nine months, reflecting subdued consumer sentiment and financial caution.

These figures point to a deeper cooling in both manufacturing activity and domestic consumption, underscoring the challenges facing policymakers as they attempt to maintain economic stability amid external shocks and internal structural weaknesses.

Structural Drag from Property and Labor Markets

The property sector remains a major source of economic drag. Home prices fell 0.3% month-on-month in August and declined 2.5% year-on-year. These declines reflect not only weak demand but also a broader erosion of household wealth. As property is the largest asset class for Chinese households, its prolonged downturn has curbed consumer spending and led to a tightening of household budgets.

The job market is also weakening. Unemployment rose to 5.3% in August, up from 5.2% in July and 5.0% in June. The rise in joblessness is linked to slower business activity and a loss of confidence among employers, especially in sectors such as construction, retail, and manufacturing. Businesses facing lower demand and squeezed profit margins are cutting labor costs, further suppressing household consumption in a negative feedback loop.

Investment Momentum Weakens Despite Policy Rhetoric

Fixed asset investment, a key driver of long-term growth, rose only 0.5% in the first eight months of 2025, well below the expected 1.4% and sharply lower than the 1.6% gain recorded through July. This slowdown highlights caution among both public and private investors in the face of macroeconomic uncertainty, despite central government pledges to accelerate infrastructure and industrial investment.

Policymakers face the dilemma of balancing stimulus with long-term stability. Authorities have already deployed targeted fiscal support and modest rate cuts, but analysts argue that these measures have not been sufficient to offset the broad-based cooling.

Weather Shocks Compound Economic Challenges

Adding to economic pressure, extreme weather has disrupted manufacturing and logistics. China experienced its hottest summer since 1961 alongside the longest rainy season in the same period, negatively affecting production schedules and supply chains in key industrial regions.

These climate-related disruptions have exacerbated the cyclical and structural challenges already weighing on China’s economy, reducing output efficiency and compounding inflationary concerns in certain sectors while weakening profitability in others.

Global Trade Diversification Yields Mixed Results

In response to U.S. President Donald Trump’s unpredictable trade policies, Chinese manufacturers have increasingly shifted export flows toward Southeast Asia, Africa, and Latin America. While this redirection has offered some relief, it has not been enough to offset the persistent drag from subdued global demand and a declining property market at home.

China’s export diversification illustrates a strategic rebalancing, but it remains constrained by sluggish global growth and geopolitical friction. Export gains are further undermined by the strength of the dollar, supply chain instability, and localized competition in emerging markets.

Stimulus Expected, but Scope May Be Limited

Economists, including Lynn Song of ING, argue that while the strong start to 2025 gives Beijing some cushion, further fiscal and monetary easing will likely be required to meet the annual growth target of around 5%. Proposed measures include a possible 10 basis point interest rate cut and a 50 basis point reduction in the reserve requirement ratio (RRR) for banks.

Zheng Shanjie, head of China’s National Development and Reform Commission, emphasized last week that Beijing will "fully utilize" its policy tools in the second half of the year. He called for faster implementation of new financial instruments, greater flexibility in monetary policy, and more targeted stimulus to support infrastructure, innovation, and consumer lending.

Fragile Recovery at Risk Without Decisive Policy Action

China’s economic performance in August highlights a growing divergence between early-year momentum and mid-year fragility. Domestic demand remains tepid, employment conditions are worsening, and the once-reliable property sector continues to weigh on confidence and investment.

While modest gains in exports and industrial diversification provide some relief, they are insufficient to anchor growth without robust domestic consumption. Unless Beijing introduces stronger and more coordinated fiscal-monetary support in the coming weeks, the risk of missing the 2025 growth target will rise, potentially destabilizing broader regional recovery efforts and global trade flows.

Source: Reuters

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