2025-10-31 12:01

Key takeaways The Fed cut rates by 25bp, with one member wanting a 50bp cut and another preferring no change. Fed announced an end to Quantitative Tightening (QT) from 1 December and that a December rate cut is not guaranteed. We continue to expect USD weakness into year-end 2025. The Federal Reserve (Fed) continued its policy easing, cutting the federal funds target range by 25bp to 3.75-4.00% at the Federal Open Market Committee’s (FOMC) meeting on 28-29 October – the second rate cut so far this year. The decision was voted on 10 to 2, with Fed Governor Stephen Miran favouring a 50bp reduction and Kansas City Fed President Jeffrey Schmid dissented in favour of no change in policy rates. The FOMC also announced an end to overall quantitative tightening (QT) from 1 December onwards. Our economists expect another 25bp rate cut at the 9-10 December meeting, which could take the range down to 3.50-3.75%. After that, they expect policy rates to stay on hold through 2026-27. However, Fed Chair Jerome Powel’s comments during the October press conference suggested that the Fed could delay a December cut, depending on how the economy performs. The ongoing US government shutdown, which began on 1 October, has also disrupted key economic data releases, adding to the uncertainty. Powell highlighted that a few pieces of economic data are still available, despite the government shutdown. One key source is state-level jobless claims. While the Department of Labor is not publishing national totals, most individual states continue to release their own data, which can be aggregated. Powell that noted these reports have not shown any rise in unemployment claims, offering a reassurance that labour market conditions remained stable recently. This supports the view of some FOMC members who believe the committee could pause or skip a December rate cut, while awaiting more information on economic activity, employment, and inflation before going any further. The meeting ultimately supported the USD after Powell’s comment that a December rate cut is not assured. We continue to expect USD weakness by year-end 2025, based on our base case of a December Fed cut, and we expect the USD to bottom by early 2026, as we expect no further Fed easing next year, despite what markets currently expect. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/usd-25bp-rate-cut-delivered-with-december-in-doubt/

2025-10-30 12:01

Key takeaways The Federal Reserve cut interest rates by 0.25% to the target range of 3.75%–4.00%, its second reduction of the year, while signalling a more balanced stance towards inflation and employment. The FOMC also confirmed plans to end Quantitative Tightening on 1 December, marking a key shift in liquidity management as it transitions towards a neutral policy stance. Fed Chair Powell emphasised that central bank policy isn’t on a preset course, describing another rate cut in December as “far from a foregone conclusion.” He noted that economic growth has moderated, with GDP expanding 1.6% in the first half of 2025, down from 2.4% last year, supported by resilient consumer spending and business investment, but offset by continued housing weakness. Mr Powell also mentioned that inflation has eased signficantly from its highs in mid-2022. We still expect a 0.25% rate cut in December but no additional reductions next year, bringing the target range down to 3.50-3.75% by end-2025. For US equities, lower policy rates should be accretive to earnings and help keep valuations in check. For fixed income investors, the Fed cut after a pause provides positive returns in the 12 months after the first cut. Typically, the yield curve follows the policy rates lower, but there may continue to be friction in the Treasury markets due to the government shutdown, federal fiscal issues, and long-term deficit reduction. We remain overweight on US equities and global investment grade bonds. History shows the USD typically weakens when the Fed is easing policy so long as the US economy isn’t in recession. Please refer to the full report for details about the event and our investment view. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/the-fed-reacts-to-economic-uncertainty-amidst-the-government-shutdown/

2025-10-29 08:05

Key takeaways While recent US-China trade tensions have triggered profit-taking, we continue to see further upside for risk assets. Our underweight on US Consumer Staples helps hedge downside risks, and we further add Energy to the underweight list. For bonds, we prefer investment grade and EM local currency government bonds over high yield. A multi-asset strategy helps diversify across asset classes, sectors and currencies, and gold remains a good diversifier. Rising US tech stock prices have raised AI bubble concerns, but we believe the rally is supported by solid earnings growth and substantial investments in AI infrastructure. However, given elevated US tech valuations, we diversify beyond IT and Communications into Financials and Industrials, and upgrade Utilities to overweight due to increasing electricity demand to support the cloud and AI. China’s 15th Five-Year Plan reinforces its strategic priorities in domestic demand and supply, technological innovation, household and consumer wellbeing, supporting our overweight on mainland China’s stocks. We upgrade Hong Kong equities to overweight due to a stabilising housing market, increased IPO and M&A activity, robust liquidity inflows and attractive valuations. While Japan’s new Prime Minister is expected to pursue expansionary fiscal policies, funding is challenging amid increasing costs in social security and debt servicing, so we remain neutral on Japanese stocks. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/bull-market-stays-on-course-despite-short-term-markets-dips/

2025-10-27 08:05

Key takeaways The NZD leads as the weakest G10 currency so far in 2H, closely followed by the JPY. But downward pressure on the JPY may ease with cautious fiscal expansion and potential shifts in BoJ. Rising risk appetite and broader USD weakness could counter domestic challenges, fostering NZD consolidation. As of the second half of 2025, the NZD is the worst-performing G10 currency, with the JPY following closely behind (Bloomberg, 23 October 2025). This situation prompts the question of whether this trend will persist or if a reversal is imminent. We believe the downward pressure on the JPY, arising from market concerns about fiscal loosening and the Bank of Japan’s (BoJ) dovish stance, may not be longlasting. The heightened political sensitivity to cost-of-living issues in Japan suggests that the new Finance Minister, Satsuki Katayama, is likely to adopt a cautious approach to fiscal expansion. Some degree of fiscal loosening could support the JPY by fostering a more optimistic growth outlook. Despite market scepticism about a BoJ rate hike on 30 October, there is a possibility that policymakers might signal a greater willingness to consider tightening on 18 December than currently anticipated by markets. This could present upside risks for the JPY. Additionally, with the Federal Reserve’s easing on the horizon, narrowing interest rate differentials could lead to a decline in USD-JPY over time (Chart 1). Overall, we expect the JPY to strengthen in the months ahead. Source: Bloomberg, HSBC Source: Bloomberg, HSBC As for the NZD, it has been facing significant domestic challenges. After the 50bp easing by the Reserve Bank of New Zealand (RBNZ) on 8 October, markets are fully priced for a further 25bp cut on 26 November (Bloomberg, 23 October). Our economists also expect this, given the combination of weak economic activity, easing underlying inflation, and a still-weak jobs market, which leaves little to prevent further RBNZ easing. But with a lot of domestic issues already in the price, alongside rising risk appetite (Chart 2), and if our expectation of broader USD weakness holds true, the NZD appears poised for consolidation in the coming weeks. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/jpy-and-nzd-time-for-a-turnaround/

2025-10-24 12:01

Key takeaways China’s Fourth Plenum outlined a clear demand-side-driven growth shift in the 15th Five-year Plan (FYP) and emphasised the need to focus on internal development and self-sufficiency amid heightened external uncertainty. With more assertive language used than in the 14th FYP, the latest communiqué stays on the strategic course of “China’s high-quality development”, with key strategic focuses on domestic demand and supply, technological innovation, household and consumer wellbeing. We maintain overweight on both Chinese onshore and offshore equities, with a barbell strategy to keep exposure to the tech sector and high dividend quality stocks. China’s innovation is driven by wider AI application and adoption, and an increasingly self-reliance-focused hardware and software ecosystems. Our strategy helps portfolios to weather uncertainties in Sino-US trade negotiations and volatility in cyclical Chinese data. Please refer to the full report for details about the event and our investment view. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/our-take-on-chinas-fourth-plenum-a-more-assertive-shift-to-domestic-demand/

2025-10-23 12:02

Key takeaways Table of tactical views where a currency pair is referenced (e.g. USD/JPY):An up (⬆) / down (⬇) / sideways (➡) arrow indicates that the first currency quotedin the pair is expected by HSBC Global Research to appreciate/depreciate/track sideways against the second currency quoted over the coming weeks. For example, an up arrow against EUR/USD means that the EUR is expected to appreciate against the USD over the coming weeks. The arrows under the “current” represent our current views, while those under “previous” represent our views in the last month’s report. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-trends/rangebound-dynamics-to-prevail/