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/

2025-10-21 12:02

Key takeaways China’s Golden Week showed muted spending: per-capita trip spend down 0.6% y-o-y and down 2.6% relative to 2019. Underlying pressures remain in the labour market and property sector. We expect policy support for consumption-driven growth to feature prominently in China’s 15th Five-Year Plan. China data review (September 2025 & Q3) GDP growth eased to 4.8% y-o-y in Q3 amidst trade headwinds and ongoing domestic challenges. September activity data showed a mixed performance in key categories, including Industrial Production, Fixed Asset Investment and retail sales. The strong H1 growth helped round out the first three quarters at 5.2%, suggesting that this year’s growth target of “around 5%” is in reach. Retail sales continued to grow at a more modest pace, up 3.0% y-o-y in September, dragged by tepid consumer confidence. The recent campaign to curb excessive spending by government officials on banquets likely continued to impact catering sales, which declined 1.6% y-o-y. Meanwhile, goods consumption may have been weighed down by a high base following the allocation of RMB150bn in subsidies for the trade-in programme initiated in August 2024. Fixed Asset Investment contracted by 7.1% y-o-y for the second consecutive month. Manufacturing investment was down 1.9% y-o-y as trade uncertainty weighed on investments in electrical machinery and computing. Property investment remained the primary drag, falling 21.3% y-o-y, while infrastructure investment dropped 4% on a lack of funding at the local government level. Industrial Production growth improved to 6.5% y-o-y in September, given better-than-expected exports growth, though we remain cautious that this outperformance can be sustained, given lingering US tariff impacts and potential trade payback. On a brighter note, key drivers will likely continue to stem from equipment and high-tech related manufacturing. CPI fell 0.3% y-o-y in September, dragged down by weaker pork and vegetable prices, while oil prices moved sideways, staying at a relatively low level. Core CPI rose 1.0% y-o-y, supported by ongoing consumption policies and tourism prices. PPI dropped by 2.3% y-o-y, narrowing its year-on-year losses, largely helped by base effects. Meanwhile, its m-o-m reading was flat at 0%. Exports accelerated to 8.3% y-o-y in September, continuing to benefit from trade restructuring. Even as exports to the US remain under pressure (-27% y-o-y in September), those to other markets have seen double-digit growth, e.g., EU +14.2%, ASEAN +15.6% and Africa +56.4%. Meanwhile, imports rose by 7.4%, helped largely by an increase in high-tech goods, which lifted 14.1% y-o-y. China consumption – Pulse check Muted Golden Week With the Golden Week (1-8 October) behind us, it is a fitting time to take stock of the latest trends in Chinese consumer behaviour. The data shows a mixed bag: domestic trips hit a record 888 million and tourism spending reached RMB809bn (Ministry of Culture and Tourism, 9 October), but we estimate the average daily growth was up only 1.6% y-o-y and 1% y-o-y, respectively. On a per-capita trip basis, spending slightly decreased by 0.6% y-o-y, or 2.6% relative to 2019. Tax revenue data showed that the services sector outperformed, helped in part by government support, although movie sales disappointed. Meanwhile, overseas travel picked up, with inbound foreign travel up 20% y-o-y, boosted by China’s visa-free entry programmes, while mainland Chinese residents saw increased international travel of 10% y-o-y. Consumption pressures have increased… The muted Golden Week performance carries on some of the recent trends as seen in softer consumption data. Retail sales, growing under 4% y-o-y in recent months, have faced some headwinds due to lingering labour market and property sector pressures. Wage growth is running below the pre-pandemic level at c5% y-o-y versus c9% in 2019. Consumer confidence has yet to pick up, while the youth unemployment rate reached 18.9% in August. On a brighter note, the government recently announced that the last batch of subsidies for goods trade-ins had been issued as of 29 September (NDRC, 29 September), involving RMB69bn of central government funds and c7bn of local government funds. This likely contributed to the outperformance in the Golden Week data in certain goods, such as consumer electronics, and means we should see some continued support in the rest of the year. Source: Wind, HSBC Source: Wind, HSBC …leading to more policy support for services The push for more services consumption has been clear in recent government policies, most recently with plans for services and sports consumption issued in September. Based on the retail sales breakdown, the increased focus on services consumption seems to be helping sectors, such as cultural goods, and sports and entertainment goods. The next steps are set to bring structural reforms aimed at enhancing social safety nets and urbanisation efforts. Recent policies to boost basic care subsidies, like childcare and elderly care, show a shift towards supporting a broader range of services. Additionally, there is a focus on providing social benefits tied to permanent residence and advancing new urbanisation plans. China’s 15th Five-Year Plan At the time of writing, China’s policymakers are convening for the Forth Plenum (20-23 October) where they will review the 15th Five-Year Plan, setting priorities from 2026 to 2030. We expect a strong emphasis on consumption-driven growth, supported by services consumption and structural reforms to expand social safety net coverage. Other key areas of focus may include fostering innovation, green development and opening-up reforms. Source: LSEG Eikon *Past performance is not an indication of future returns Source: LSEG Eikon. As of 20 October 2025, market close https://www.hsbc.com.my/wealth/insights/market-outlook/china-in-focus/china-consumption-pulse-check/

2025-10-20 12:02

Key takeaways The discussion continues on whether the USD has hit its lowest point and is ready to begin an upward trajectory. We think there is still room for the USD to weaken further before bottoming out early next year. EUR-USD may have bottomed for now and could grind higher into 2026, but a longer-term rally seems unlikely. The US Dollar Index (DXY) has remained stable since July but recently surpassed the 99-mark due to heightened policy risks in France and Japan, coupled with escalating US-China trade tensions. However, as the US federal shutdown continues and with French politics stabilising, the DXY is now back to hovering around 98.5 (Bloomberg, 16 October). Markets are debating whether the USD has bottomed and is ready to begin an upward trajectory. We believe there is still room for the USD to fall gradually before bottoming out early next year, particularly given potential rate cuts by the Federal Reserve (Fed). Historical instances of Fed rate cuts without accompanying U.S. recessions (namely, 2002-03, 2H07, and 2H19) have typically resulted in a weaker USD (see chart below), offering insights into the current situation. In addition, US trade policy uncertainty and Fed independence could also weigh on the USD. Source: Bloomberg, HSBC As for EUR-USD, we think that it may have bottomed for now, given that the immediate French political and fiscal risks appear to have receded. On 16 October, French prime minister Sebastien Lecornu survived two no-confidence votes in the National Assembly, indicating that France has avoided the need for new National Assembly elections, at least for now. As the Fed is likely to ease and the European Central Bank is likely to be on hold, EUR-USD could benefit from narrowing rate differentials over the near term and into 2026. That being said, a longer-term rally seems unlikely, as headwinds, like weak domestic demand, could hold EUR-USD back. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/usd-poised-for-an-upswing/

2025-10-15 08:05

Key takeaways US-China trade relations suddenly deteriorated over the weekend… …weighing on Asian currencies, in particular the KRW. China’s FX policy remains steady, with the USD-CNY fixing rate hovering at c7.10, despite the tariffs threat. US-China trade tensions are taking a turn for the worse and are a reminder of the post ‘Liberation Day’ (2 April) blues. This is the latest in a series of US trade-related headwinds for Asian currencies in recent months – a rough doubling of ‘reciprocal’ tariffs compared to earlier for most economies, secondary tariffs for India, and disagreements over the USD350bn investment plan with Korea. But US-China trade tensions have the most potential for broader spillovers, seeing risk aversion in global markets. Apart from trade issues, Asian currencies have also been weighed down by a combination of low domestic yields, unexpected monetary easing, and idiosyncratic political unrest in some places. The immediate underperformers are those currencies which have a stronger link with foreign equity flows, like the KRW due to the sell-off in equities. In contrast, low-yield currencies, like the SGD and RMB, are holding up better for now. Source: Bloomberg, HSBC The USD-CNY fixing rate was at 7.1007 today (13 October), the lowest level since US elections last November. This indicates a steady FX policy, despite the tariffs threat. Ahead of the fourth plenum (20-23 October), the Chinese authorities are probably prioritising domestic market stability. That being said, the low-probability but high-impact risk is that we could see another round of tit-for-tat tariffs (not merely threats), like what happened in early April. Back then, the USD-CNY fixing rate increased from 7.17 to nearly 7.21, with the spot rate moving near the ceiling of the USD-CNY trading band. But on a positive note, US President Trump softened his tone this morning, with Vice President JD Vance casting it all as an ongoing negotiation (Bloomberg, 13 October 2025). https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/rmb-tariffs-again/