Asia week ahead: RBA decision, key data on China, Japan, Korea, Indonesia
The upcoming week in Asia will focus on significant monetary policy actions and key economic data releases that could shape the FX landscape. The Reserve Bank of Australia's anticipated 25 basis point rate hike signals continued strength in the Australian economy, reflecting robust labor market conditions and surging inflation, as articulated in the recent analysis . This decision, coupled with releases from China and other Asian economies, will be pivotal factors for traders considering their positioning ahead of the new quarter.
What the desk is arguing
The desk sees the RBA's expected 25bp interest rate hike as a critical indicator of the Australian economy's resilience, which may strengthen the AUD against other currencies. Per the full note , the tight labor market and surprising GDP growth highlight that risks remain skewed towards further tightening, with August CPI projected to rise to 4.1%, driven by increased diesel and food prices.
This projected rate hike reflects a broader commitment to managing inflation and stabilizing the economy, setting the stage for overseas investors to reassess their allocations. Additionally, the RBA’s decision to hike amid a cooling housing market demonstrates a proactive stance against inflationary pressures.
Where it sits in our coverage
Our current consensus for AUD/USD stands at a target of 1.075, with ranges noted from 1.04 to 1.12 based on firm outlooks. Notably, the aligned targets from several firms are: - jpmorgan: 1.10 (Mar26) - deutschebank: 1.08 (Dec26) - citi: 1.07 (Mar26)
The desk's view aligns with jpmorgan’s projected target, reflecting confidence in continued AUD strength following the rate adjustment. The sentiment diverges from bofa, which sees potential weakness, aiming for a target of 1.04 by Mar26, suggesting caution among different market views.
How other firms see it
Market sentiment is polarized, with firms like jpmorgan and deutschebank aligned towards a more bullish outlook on AUD, driven by expected rate hikes and economic resilience. Conversely, firms such as bofa maintain a contrarian view, forecasting a drop in the currency based on their analysis of broader economic conditions and potential external shocks.
As traders monitor developments, keep an eye on the AUD/NZD pair alongside the upcoming RBA decision and China's PMI data for further volatility signals. These indicators will be crucial in framing the overall sentiment for the Australian dollar in the weeks ahead.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01RBA expected to raise interest rates by 25bp, indicating economic strength.
- 02China's PMI data will be critical to assess recovery trajectories.
- 03Inflation in Australia is likely to accelerate, influencing further monetary policy decisions.
- 04Market sentiment is mixed, with some firms projecting AUD strength while others foresee weakness.
Market implications
Traders should watch for the RBA's rate decision and August CPI release as potential catalysts that could propel AUD/USD towards our upper range. Additionally, the outcome of China's PMI data could influence market sentiment and provide clues for broader regional dynamics in Asian currencies.
Risks to this view
A reversal in the RBA's hawkish stance due to weaker-than-expected economic data, or external shocks affecting global risk sentiment could dramatically alter the AUD’s outlook. Should inflation trends moderate unexpectedly or recession concerns in major economies rise, the projected bullish moves in the AUD could face significant headwinds.
Articles Asia week ahead: RBA decision, key data on China, Japan, Korea, Indonesia Published 07:52 Asia week ahead Australia China Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The Reserve Bank of Australia is expected to raise interest rates by 25bp, while investors will also be closely watching China’s PMI data, activity and inflation readings from Japan and South Korea, and Indonesia’s latest CPI report Deepali Bhargava and Lynn Song Asia Research highlights of the week Xi-Trump summit: Pandas and positive vibes but limited progress Bank Indonesia holds, but the hiking cycle may not be over Oil, not El Niño, is driving Singapore inflation Australia: RBA expected to hike rates by 25bp We expect the Reserve Bank of Australia RBA to deliver a decisive 25bp rate hike on Tuesday, reflecting an economy that continues to run hot across multiple fronts. Labour market conditions remain tight, second-quarter GDP growth surprised to the upside, and recent inflation readings came in stronger than expected. While the housing market shows signs of cooling, we expect the RBA to emphasise that risks remain tilted to the upside and further vigilance is required to ensure prices return sustainably to target.
Separately, August CPI data is likely to accelerate further to 4.1% year-on-year, driven primarily by higher diesel and food prices, alongside persistent underlying core inflation pressures. China: PMIs expected to slow a modest recovery China releases September purchasing managers’ index data on Wednesday. We look for the National Bureau of Statistics to report a slight recovery in its official manufacturing and non-manufacturing PMIs to 50.1 and 49.2, respectively.
The RatingDog PMI, which has generally outperformed lately because of its more export-oriented sample, is out the same day. Industrial profits data is out Monday. Growth in the series has been moderating over the past 3 months, even as overall profits have improved from previous years.
Japan: Activity and inflation data in focus Japan releases its August services PPI on Monday. Market consensus is for services inflation to remain unchanged at 3.6% YoY, indicating that price pressures in the sector remain firm. Retail sales growth is expected to moderate to 3.2% YoY, from 4.0% in July.
Sales are forecast to decline 0.9% month-on-month after the previous month’s 2.4% increase. Industrial production is expected to rebound 1.4% MoM, lifting annual growth to 7.0% YoY from 3.9%. The quarterly Tankan survey is expected to show improvement in business sentiment among large manufacturers.
The index is expected to rise to 25 from 22, while the outlook is seen rising to 22 from 17. Tokyo inflation data will be released on Friday. Market consensus is for headline inflation to accelerate to 2.5% YoY, from 1.9%, while core prices rise to 2.4%, from 1.8%.
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