Monthly Forex Outlook - September 2025

This outlook contains information correct as at 1400hr on 02 Sep 2025

September Volatility in Equities

September is historically the most volatile month for equities and by extension financial markets. This is probably due to funds maxing out their exposures and increasing riskier positioning to make up for losses or increase returns as Q4 approaches. Even small shocks could be amplified; corrections may be sharp but likely short-lived. However, the Fed is expected to be dovish and with corporate profits still positive, the overall picture may not necessarily be negative.

Political and Policy Uncertainty

Compounding the above will be weakened risk sentiment amid persistent uncertainty surrounding Federal Reserve leadership and President Trump’s trade policies, much of which was ruled illegal by a US appellate court on 30 August under the International Emergency Economic Powers Act.

Risks to Central Bank Independence

The other big risk appears to be President Trump’s actions. His attacks on the Federal Reserve from Chairman Powell to trying to fire Governor Cook are beginning to cast a pall over the Central Bank’s independence. The sacking of Erika McEntarfer, the Bureau of Labor Statistics’ commissioner over allegations of data manipulation is starting to erode investor confidence over the reliability and credibility of US official financial data.

Broader Political Challenges

Trump's aggressive strategic approach faces several significant challenges, including low approval ratings, renewed attention to the Epstein files, dissent at the CDC and the perception he was played by Putin in failed efforts to resolve the Russia-Ukraine conflict. These factors heighten the risk of policy or communication errors.

Fed Blackout Period and Monetary Policy Outlook

The Federal Open Market Committee (FOMC) blackout period begins on Saturday 6 Sep to 19 Sep, ending after the FOMC meeting. The Fed is still grappling with inflation stubbornly above its 2% goal, but Chairman Powell appears to be amenable to easing during his speech on 22 Aug at the Kansas City Jackson Hole Symposium. However, he did not commit to the size or a timeline. With employment weakening he warned “the shifting balance of risks” (to employment) may warrant adjusting the policy stance. Markets expect a 0.25% cut in September. Ahead of the blackout period, the Fed will release its latest Beige Book report on 3 Sep 7.00pm GMT.

Key Employment Data Releases

The August ADP Employment figure will be released on 4 Sep, Bloomberg estimates 60,000 from 104,000 in July. August Non-Farm Payrolls to be released on 5 Sep may show an increase by 75,000 jobs according to Bloomberg consensus (Jul 73,000). Unemployment rate is estimated at 4.3% (Jul 4.2%)

Non-Traditional Economic Indicator

An interesting non-traditional economic indicator, cardboard box sales are declining, this signal contracting retail demand across industries. Volumes of this empty packaging material sold which is used to ship orders to warehouses, storefronts and American consumers, fell to the lowest second quarter reading since 2015. This proxy to sales is flashing early warnings of weakening purchases.

Currency and Dollar Outlook

The USD index, DXY has weakened 2% over the last five weeks against a basket of currencies as the market prepares for the Fed’s expected 0.25% rate cut in September. This likely indicates the downside for the USD is limited in the coming weeks and we may see a rebound.

Commodity Markets

Oil prices remain soft as supply outweighs demand. WTI trades this morning around USD64.50(5 Aug USD65.60).

Bond Markets

Overnight US 10-Year Treasuries added 0.03% to 4.26% (5 Aug 4.19%), Australian 10-Year Govt Bonds were up 0.04% at 4.35% (5 Aug 4.20%) and Euro 10-Year Bonds closed up 0.02% at 2.75% (5 Aug 2.62%).

Sources: Bloomberg, MSNBC, Reuters, Morningstar, Business Times, 02 Sep 2025

AUDUSD

In August the RBA cut the OCR by 0.25% to 3.60%, marking the third rate cut this year, following reductions in Feb and May. The latest CPI (July) rose by 2.8% YoY a sharp increase from the 1.9% recorded in June and the highest rise since mid-2024. The Central Bank is expected to mark time before another cut. Market is pricing the OCR to gradually move down to around 3.0% – 3.35% by early 2026. AUDUSD continues to be weighed down by the weak China economy.

The 61.8% Fibonacci Resistance Zone at 0.6460 – 0.6600 is proving to be a very tough barrier.  We maintain a bearish view for the next move to be down to the 0.6200 – 0.6300 Support Zone.

Image Source: Bloomberg 02 Sep 2025

EURUSD

EURUSD suffers from weak fundamentals. The German economy is forecasted for near zero growth in 2025, ranging from 0.0% to 0.3%. The economy contracted by 0.3% in Q2 2025.

Elsewhere, political uncertainty in France is another negative as Prime Minister Bayrou battles to save his minority government ahead of an 8 September confidence vote. Opinion polls show a majority of French people want new parliamentary and presidential elections.

EURUSD has not been able to break strong Resistance at 1.1820. EURUSD should range between 1.1500 – 1.1820 in the next few weeks. We maintain a view for a correction lower to around 1.1150 Support.

Image Source: Bloomberg 02 Sep 2025

GBPUSD

After cutting its Bank Rate by 0.25% to 4.00% in August, BoE is expected to hold at its next MPC on 18 Sep. July inflation unexpectedly rose to 3.8% YoY from 3.6% YoY in June, the highest reading since Jan 2024. BoE forecast inflation should peak at 4.0% in September before beginning to fall back towards its 2.0% target. Markets expect the next 0.25% rate cut to be at the Central Bank’s 6 Nov meeting. Meanwhile UK economy is expected to remain weak giving GBPUSD lukewarm support.

Against expectation GBPUSD was able to hold above the Support Zone at 1.3200 – 1.3400 but the challenge of Resistance at 1.3650 was unsuccessful. We maintain a view for consolidation around 1.3400 before another push down to the 1.3000 area.

Image Source: Bloomberg 02 Sep 2025

USDJPY

Japan's Q2 GDP growth came in at 1.0% YoY beating the median market forecast of 0.4% and stronger than expected. Growth was led by solid domestic demand, boosting the case for the Bank of Japan to raise its benchmark rate again this year. This has supported the JPY and kept USDJPY upside capped which should be the case in the coming months.

As expected for August, USDJPY range traded within 145.00 – 150.00, pivoting around 147.00.

This may be the likely scenario for the next few weeks with a bias lower to 145.00.

Image Source: Bloomberg 02 Sep 2025

USDSGD

Singapore's headline July CPI rose 0.6% YoY, the slowest since January 2021, while core inflation increased 0.5% YoY, matching its lowest level since March. Both headline and core inflation came in below Bloomberg consensus estimates.

The Government raised its 2025 GDP growth forecast to 1.5% – 2.5%, up from 0.0% – 2.0%, after stronger than expected first half results and milder effects from US trade tensions. However, the Ministry of Trade and Industry warns the economic outlook remains uncertain, with risks skewed to the downside.

The range trading for USDSGD was within a narrower band than expected, just below 1.2800 – 1.2900. USDSGD has broken out sideways from the downtrend channel. In the next few weeks, we are likely to see range trading between 1.2700 – 1.2900.

Image Source: Bloomberg 02 Sep 2025

AUDSGD

AUDSGD has been trading with a bearish bias over the last few weeks. The Resistance Zone at 0.8400 – 0.8500 is very strong as we maintain a bearish view for a drop down to the 0.8100 – 0.8200 area.

Image Source: Bloomberg 02 Sep 2025

XAUUSD

Gold reached a new high at USD3,508.73 before pulling back slightly. Technically XAUUSD is overbought with both the RSI and Stochastics indicators operating in overbought zones. Demand appears robust in anticipation of resumption of the Fed’s rate cutting cycle at the September FOMC meeting which further reinforces the weak USD scenario.

Gold’s cousin, Silver is also on a uptrend, trading above USD40 an ounce for the first time since 2011.

Gold has remained above the 50-Days Moving Average and broken above Resistance at USD3,440. It is possible for XAUUSD to head to the psychological Round Figure target of USD3,550 before any significant pull back.

Image Source: Bloomberg 02 Sep 2025