Week Ahead FX outlook:

Key FX views:

It is a huge week ahead in Asia. Markets will be keenly focused first and foremost on whether the Trump-Xi Summit will happen in the upcoming APEC meeting in Gyeongju, South Korea, and in the lead-up to that any hints on the progress from ongoing trade talks in Malaysia between US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng. Just as important beyond whether a meeting actually happens are the details around a trade deal and possibility of de-escalation between the two superpowers, coupled with parallel discussions around China’s purchases of Russian oil. Given the huge gulf in expectations between the two sides, our sense is that the proverbial kicking the can down the road and another extended trade pause is probably most likely, even as we cannot rule out a tactical escalation in tensions at least in the near-term.

Meanwhile, the upcoming ASEAN Summit from 26 to 28 October with Malaysia as the host and Chair will be much more important than usual. This will be US President Trump’s second attendance at the ASEAN Summit – the earlier being 2017 in the Philippines during his first term. Part of this may well be more symbolic than strategic, with an expected presiding over a Thailand-Cambodia peace declaration. More importantly, markets will be focused on any signing of meaningful trade deals between the US and individual ASEAN countries, with Malaysia’s Prime Minister mentioning this week a deal is probably “99.9%” done.

The Federal Reserve and Bank of Japan policy meetings will also be key for Asia’s markets this week, beyond the ASEAN and APEC Summits. We expect the Fed to cut rates by another 25bps although Fed Chair Powell should likely stick to his reasonably cautious tone on the longer-term trajectory for Fed rate cuts, given the uncertainty around tariff impacts. The Bank of Japan is expected to keep rates on hold in its October meeting, but could signal an increased possibility of nearing another policy rate hike – so in short BOJ rate hikes are delayed but not denied.