Week Ahead FX outlook:
Key FX views:
As 2025 draws to a close, Asia’s economic outlook is shaped by a mix of cautious optimism and persistent challenges. In China, the latest data is expected to confirm ongoing softness: manufacturing and non-manufacturing PMIs are likely to remain in contraction territory, with industrial profits deepening their decline as output and prices weaken. The People’s Bank of China is set to keep loan prime rates unchanged for now, but hints of further monetary easing in early 2026 reflect policymakers’ concerns about growth momentum. Meanwhile, while the Bank of Japan hiked rates, the Japanese Yen weakened with no clearer guidance by Governor Ueda on the rate path ahead. South Korea stands out for its robust rebound in industrial output, driven by surging global demand for semiconductors and petroleum products, while inflation is expected to ease but stay above target, keeping the central bank’s policy rate steady.
Globally, the week ahead features several key data releases and central bank updates. In the US, the delayed third-quarter GDP report will offer fresh insight into the economy’s resilience, alongside figures on industrial production, durable goods, and consumer confidence. Europe’s calendar includes new car registrations and GDP data, while financial markets in the US and Europe will observe early closures for Christmas and Boxing Day. Australia’s housing market continues to show gains, especially in the lower and middle segments, supported by government initiatives for first-home buyers, though momentum is slowing amid subdued supply and rate uncertainty. Across Asia, the interplay of monetary policy, trade dynamics, and inflation trends will be closely watched, with China, Japan, and South Korea providing critical signals for the region’s economic trajectory as the new year approaches.
In summary, the coming week is marked by cautious central bank stances, subdued growth signals from China, resilient export performance in South Korea, and evolving inflation dynamics in Japan. The US and Europe remain focused on holiday-shortened trading and key economic indicators, while Australia’s property market navigates a tight supply-demand balance.
South Korean authorities are pushing back against KRW weakness, although part of this is related to JPY
