Asia Fundamental Forecast | 05 November 2026 | IC
What happened in the U.S. session?
Wednesday’s U.S. session was dominated by political developments rather than economic data. The Democratic victory in both chambers of Congress encouraged investors to reduce geopolitical risk expectations, particularly surrounding the Iran conflict. This triggered a sharp decline in crude oil prices and weakened the U.S. dollar.
What does it mean for the Asia Session?
Thursday’s Asian session is likely to be influenced by the weaker US dollar, improving global risk appetite, and falling oil prices following the US midterm elections. The Japanese yen will depend on whether BOJ policymakers signal further interest rate increases. Meanwhile, gold could experience mixed trading, as dollar weakness provides support but improving investor confidence reduces safe-haven demand. Oil prices will remain sensitive to developments in the Middle East and expectations of a possible reduction in geopolitical risks.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (1:30 pm GMT)
What can we expect from the DXY today?
The U.S. dollar is facing downward pressure on Thursday following the Democratic Party’s decisive midterm election victory. The prospect of political gridlock in Washington has encouraged investors to move towards riskier assets, while falling U.S. Treasury yields have reduced demand for the dollar. At the same time, expectations of further Federal Reserve rate increases and relatively resilient employment figures could provide some support.
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
Unemployment Claims (1:30 pm GMT)
What can we expect from the Gold today?
Gold has started Thursday on a relatively positive footing after recovering strongly above $4,000 following the US midterm elections. The Democratic victories weakened the dollar and pushed Treasury yields lower, helping gold record its strongest daily advance in approximately three months. However, gold is now consolidating around $4,063 as investors assess whether the recovery can continue. Strong central-bank purchases also provide longer-term support, while today’s US economic data and movements in Treasury yields remain important market drivers.
Next 24 Hours Bias
Strongly 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 mixed trading conditions on Thursday. The RBA’s decision to increase interest rates to 4.85% provides underlying support, particularly because inflation remains elevated and policymakers are concerned about persistent price pressures. However, the divided decision and uncertainty about further rate increases have limited the currency’s gains.
Central Bank Notes:
- The RBA raised its cash rate by 25 basis points to 4.85% on 3 November 2026, marking its fifth rate hike of the year and the highest level in 18 years. The decision was split, with six members supporting the increase and three voting to hold. Policymakers remain concerned about persistent inflation.
- Inflation remains above the RBA’s 2–3% target. Headline inflation reached 3.9% in the September quarter, while trimmed-mean inflation increased to 3.7%. Higher fuel prices and persistent domestic cost pressures continue to make inflation difficult to control.
- Australia’s unemployment rate averaged 4.6% in the September quarter, showing signs of gradual labour-market cooling. However, employment growth has remained relatively resilient, suggesting that the economy continues to support jobs despite higher borrowing costs.
- Economic growth has slowed, with weaker household consumption and softer housing conditions. Housing prices were almost 5% below their March peak by September. However, investment in data centers has provided some support to economic activity.
- Wage growth remains a concern as businesses continue to face higher labor and operating costs. The RBA expects wage growth to remain relatively firm in the near term before gradually moderating as labor-market conditions ease.
- Higher global energy prices, driven partly by ongoing Middle East tensions, are adding to Australia’s inflation pressures. The RBA expects headline inflation to reach 4.5% in the December quarter of 2026, making further monetary policy easing difficult.
- Following November’s rate increase, the RBA may adopt a more cautious approach as it assesses the impact of higher interest rates on inflation, employment, and household spending. However, further tightening remains possible if inflation stays elevated. The next meeting is scheduled for 7–8 December 2026, with the decision due on 8 December.
- The next meeting is on 8 December 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 remains under pressure following disappointing employment figures, with unemployment rising to 5.7% and employment declining by 0.1% in the third quarter. The weak labour-market conditions have reduced expectations of further RBNZ interest-rate increases, creating a bearish domestic outlook for the Kiwi.
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
Medium 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 receiving support today from a weaker US dollar, improving global risk sentiment and renewed expectations of further Bank of Japan interest rate increases. The latest BOJ meeting minutes suggest policymakers remain concerned about inflation and are prepared to tighten monetary policy further if necessary. The yen has strengthened towards 158.25 against the dollar, while Japanese authorities continue warning against excessive currency weakness.
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
Medium Bullish
Oil
Key news events today
No major news event
What can we expect from the Oil today?
Oil markets remain volatile as traders weigh improving global supply against concerns about geopolitical disruptions. JPMorgan’s warning that the market returned to a surplus in October is a bearish development for crude oil, particularly as recovering Middle Eastern exports and rising production elsewhere increase supply. However, falling U.S. crude inventories for a fifth consecutive week, alongside significant declines in gasoline and diesel stocks, provide some support for prices.
Next 24 Hours Bias
Medium Bullish
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