Asia Pacific mixed after Fed decision

David Morrison

SENIOR MARKET ANALYST

18 Sep 2025

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Asian Pacific stock indices were mixed on Thursday after the US Federal Reserve cut rates by 25 basis points, as expected. Japan’s Nikkei continued its impressive run, climbing 1.2% to a fresh record high above 45,000. The Bank of Japan (BOJ) begins a two-day monetary policy meeting, where the consensus expectation is that they will leave interest rates unchanged.

Despite this, most observers expect the BOJ to raise rates before year-end. Australia’s ASX 200 slipped 0.8%, dragged lower by the energy sector. Santos, the major Australian gas producer, fell more than 11% after the Abu Dhabi National Oil Company (ADNOC) scrapped its $18.7 billion takeover bid. Chinese equities also took a hit. Hong Kong’s Hang Seng dropped 1.4%, while the Shanghai Composite lost 1.2%.

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Wall Street soars to record highs

US stock indices had a mixed close on Thursday, with modest losses for the S&P and NASDAQ, and gains for the Dow and Russell 2000. Equities sold off initially after the Fed’s FOMC announced its expected 25 basis point rate cut. There was only one dissenter, and that was President Trump’s new pick for Fed governor, Stephen Miran, who voted for a 50-basis-point cut.

Source: TN Trader

Investors paid close attention to the concurrent release of the FOMC’s quarterly Summary of Economic Projections. This showed that the majority of the 19 members of the FOMC favoured two more 25 basis point rate cuts before the year-end. But then went on to forecast one cut in 2026 and a final one in 2027, taking the Fed Funds down to 3.00-3.25%.

This outlook fell short of market hopes for a deeper easing cycle. But equities then bounced off their lows as investors interpreted these forecasts as a vote of confidence in the US economy.

The FOMC raised its predictions for GDP growth and kept its inflation estimates unchanged from June. However, as Fed Chair Jerome Powell stated in his subsequent press conference, labour market risks have increased, which helped to justify yesterday’s cut, even if the effects of President Trump’s tariffs remain unclear. Mr Powell described the move as “a risk management cut,” a new phrase that differed from previous meetings.

Despite last night’s muted close, US stock index futures soared in early trade this morning. The move has taken the Dow, S&P 500 and NASDAQ to fresh all-time highs. And in contrast to last year’s rate cuts, the 10-year Treasury yield hasn’t, counterintuitively, surged higher. Instead, it appears to be well-anchored just above 4.0%, near the lows from last April.

Europe opens higher, focus on BOE

European stock indices also flew higher in early trade, following their US counterparts.  The German DAX, Euro Stoxx 50 and French CAC were soon up over 1.0%, while the UK’s FTSE 100 limped into positive territory.  The Bank of England will announce its own interest rate decision later this morning.

Source: TN Trader

The Bank finds itself in a dilemma, with slowing growth and a recent uptick in unemployment both suggesting that another rate cut should be forthcoming. But on the other hand, inflation is around double the Bank’s 2% target, while earnings continue to outpace inflation.

The mood wasn’t lifted by the release this morning of a Business Insights survey. This made for dismal reading and should be a cause for concern for policymakers and the Bank of England. But it is unlikely to persuade the Bank to loosen monetary policy at today’s meeting. Instead, the Bank is likely to sit on its hands until it sees the full horror of Chancellor Rachel Reeves’s budget on 26th November.

Dollar steadies

In FX, the US dollar steadied in early trade. Yesterday, following the Fed’s rate announcement, the Dollar Index slumped below 96.00, to hit its lowest level since February 2022. It subsequently recovered as this year’s projected easing of monetary policy slows down significantly in 2026 and 2027. Overnight, the Dollar Index came within a few ticks of 97.00 before pulling back.

Meanwhile, yesterday’s announcement saw the EUR/USD briefly break above 1.1900 to hit its highest level since February 2022. It, too, has since pulled back from its best levels. The question now for traders is whether yesterday's drop in the dollar is a precursor of further weakness, or if the new low marks a bottom? While the Fed has made it clear that it sees further rate cuts this year, the overall tone was not as dovish as many investors had anticipated.

Source: TN Trader

Nevertheless, the Trump administration has clarified that they favours a weaker dollar. Whether they get it is another matter.

Gold and silver retreat

In the immediate aftermath of the Fed’s announcement, the gold price surged above $3,700 to hit a fresh all-time high. But it was unable to hold on to these gains, particularly when traders saw the US dollar bounce off its lows. Gold pulled back overnight but has steadied this morning.

The daily MACD suggests that it is overbought at current levels, indicating that it may have further to fall. That has many analysts concluding that the top is in for gold, particularly if this year’s relentless sell-off in the US dollar is about to conclude. But it could be that gold requires more of a pullback, or a lengthy period of consolidation, which would help reset the MACD at lower levels.

If that were the case, and given that gold’s rally has largely taken place under the radar of the mainstream media and retail market, it remains a possibility that new records could be hit.

Source: TN Trader

The above analysis broadly holds for silver, too. On Tuesday, silver came within a few cents of $43 per ounce, its highest level since September 2011. But, like gold, it sold off yesterday as the US dollar recovered following the Fed’s rate decision and its quarterly Summary of Economic Projections. Much now depends on how it behaves going into the weekend, and to that end, investors will be keeping a very close eye on the US dollar.

Source: TN Trader

Oil drifts lower

Crude oil hit a two-week high on Tuesday, when front-month WTI came within a few cents of $64.50 per barrel. Much of this recent strength came as Ukraine ramped up its attacks on Russia’s energy infrastructure, using ordinance that can reach deep into Russian territory. This has raised concerns that repeated, successful attacks could lead to a crimp in supply.

Source: TN Trader

Prices also got a short-lived lift on Wednesday afternoon after the US Energy Information Administration announced a bigger-than-expected drawdown in crude inventories for last week. But the market’s muted reaction underscores a lack of buying conviction, with traders seemingly reluctant to push prices higher in the face of broader supply-and-demand concerns.

The bulk of the sell-off came after the Fed rate cut announcement. Prices bounced back in early trade this morning before reversing sharply. The oil market remains a tricky one to judge. But it will be of concern to the bulls that so far, rally attempts have been short-lived and relatively easy to reverse.

Natural Gas range-bound

Natural gas prices appear to be consolidating after their recent rally. But, as yesterday, momentum remains fragile as bulls and bears battle for control. Gas prices fell sharply last week, yet they remain well above their August lows, with gas having rallied around 45% over the last three weeks.

Crypto recovers modestly

Along with other risk assets, Bitcoin dropped sharply in the immediate aftermath of last night’s Federal Reserve announcement. But after briefly breaking below $115,000, it turned sharply higher. The rally continued this morning as Bitcoin went on to hit its highest level in over four weeks. Bitcoin has made steady upside progress this month, and its daily MACD suggests that upside momentum is building.

Meanwhile, Ether has spent the past month consolidating near all-time highs. This has helped its daily MACD pull back from overbought territory, suggesting that it is now in a better position than it was four weeks ago to try and push higher.

VIX settles after volatile session

Volatility cooled after the swings around Powell’s press conference. Yesterday, the VIX hit its highest level this month, before it reversed course sharply. The index had spiked higher during the Fed’s rate announcement but eased back once stock markets stabilised overnight. This morning, it dropped around 2% as US stock index futures soared to fresh record highs.

Market outlook

US stock index futures are trading higher in the aftermath of the Fed decision, but the sustainability of this move remains uncertain. The central bank’s message gave something to both bulls and bears: reassurance of near-term cuts but a less generous path ahead than markets had priced.

European stocks were also firmer this morning. Across asset classes, a tug of war has emerged as investors digest the Fed’s risk-management framing.


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