IC Markets Europe Fundamental Forecast | 17 September 2025

IC Markets Europe Fundamental Forecast | 17 September 2025

What happened in the Asia session?

The Asia session was dominated by pre-Fed positioning, with major asset classes (especially forex pairs and gold) showing heightened sensitivity to shifting US rate expectations. UK CPI provided stability for the pound, but overall trading was muted ahead of major North American central bank announcements later in the day. Asian equity indices tracked global caution, while gold and the yen benefited from broad risk aversion and a weak USD heading into this critical policy window.

What does it mean for the Europe & US sessions?
Today’s convergence of Fed and Bank of Canada decisions, alongside critical inflation data from the UK and economic releases from New Zealand, creates a pivotal moment for global markets. The Fed’s first rate cut of 2025 and accompanying economic projections will likely set the tone for risk sentiment through the remainder of the year, while ongoing geopolitical tensions in energy markets and persistent inflation in major economies continue to present challenges for policymakers and traders alike.

The Dollar Index (DXY)

Key news events today

Federal Funds Rate (6:00 pm GMT)

FOMC Economic Projections (6:00 pm GMT)

FOMC Statement (6:00 pm GMT)

FOMC Press Conference (6:30 pm GMT)

What can we expect from DXY today?

September 17, 2025 marked a pivotal day for the US dollar as the Federal Reserve delivered its first rate cut of the year amid significant political pressure and economic uncertainty. The 25 basis point reduction drove the dollar to multi-month lows against major currencies, with the DXY falling below 97.00. While the Fed cited labor market weakness as justification for easing, persistent inflation concerns and tariff-driven price pressures create a complex backdrop for future policy decisions. Market expectations for additional cuts through year-end suggest continued headwinds for dollar strength, though the central bank’s commitment to data-dependent policy adjustments leaves room for potential shifts in monetary policy direction.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) voted, by majority, to lower the federal funds rate target range by 25 basis points to 4.00%–4.25% at its September 16–17, 2025, meeting, marking the first policy rate adjustment since December 2024 after five consecutive holds.
• The Committee maintained its long-term objective of achieving maximum employment and 2% inflation, acknowledging recent labor market softening and continued tariff-driven price pressures.
• Policymakers expressed elevated concern about downside risks to growth, citing a stalling labor market, modest job creation, and an unemployment rate drifting up toward 4.4%. At the same time, inflation remains above target, with CPI at 3.2% and core inflation at 3.1% as of August 2025; higher energy and food prices, largely attributable to tariffs, continue to weigh on headline measures.
• Although economic activity expanded at a moderate pace in the third quarter, the growth outlook has weakened. Q3 GDP growth is estimated near 1.0% (annualized), with full-year 2025 GDP growth guidance revised to 1.2%, reflecting slowing household consumption and tighter financial conditions.
• In the updated Summary of Economic Projections, the unemployment rate is projected to average 4.5% for the year, with headline PCE inflation revised up slightly to 3.1% for 2025. The Committee anticipates core PCE inflation to remain stubborn, requiring sustained vigilance and a flexible approach to risk management.
• The Committee reiterated its data-dependent approach and openness to further adjustments should employment or inflation deviate meaningfully from current forecasts. Several members dissented, either advocating a larger 50 basis point cut or preferring no adjustment at this meeting, revealing heightened divergence within the Committee.
• Balance sheet reduction continues at a measured pace. The monthly Treasury redemption cap remains at $5B and the agency MBS cap at $35B, as the Board aims to support orderly market conditions in the face of evolving global and domestic uncertainty
• The next meeting is scheduled for 28 to 29 October 2025.

Next 24 Hours Bias
Weak Bearish

Gold (XAU)
Key news events today

Federal Funds Rate (6:00 pm GMT)

FOMC Economic Projections (6:00 pm GMT)

FOMC Statement (6:00 pm GMT)

FOMC Press Conference (6:30 pm GMT)

What can we expect from Gold today?

Gold’s performance on Wednesday, September 17, 2025, exemplified its role as the ultimate safe-haven asset in an environment of monetary policy transition and geopolitical uncertainty. The combination of Fed rate cut expectations, sustained central bank buying, robust ETF inflows, and broader economic concerns propelled the precious metal to unprecedented levels above $3,700 per ounce.

Next 24 Hours Bias   
Strong Bullish

The Euro (EUR)

Key news events today

ECB President Lagarde speaks(7:30 am GMT)

What can we expect from EUR today?

The Euro is supported by steady ECB policy and cautious optimism about inflation, but faces headwinds from proposed U.S. tariffs, Russian energy sanctions, and heightened geopolitical instability. EUR/USD is on an upward trajectory but remains vulnerable to corrections driven by U.S. data releases and global events. Lagarde’s commentary and the ECB’s conference today will be critical for traders and policymakers assessing the next moves for the Euro.

Central Bank Notes:

• The Governing Council kept the three key ECB interest rates unchanged at its September 11, 2025, meeting. The main refinancing rate remains at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. These levels have been maintained after the cuts earlier in 2025, reflecting the Council’s confidence that the current stance is consistent with the price stability mandate.
• Evidence that inflation is running close to the ECB’s medium-term target of 2% supported the decision to hold rates steady. Domestic price pressures are easing as wage growth continues to moderate, and financing conditions remain accommodative. Policymakers reaffirmed a data-dependent, meeting-by-meeting approach to further policy moves, with no pre-commitment to a predetermined path amid ongoing global and domestic risks.
• Eurosystem staff projections foresee headline inflation averaging 2.0% for 2025, 1.8% for 2026, and 2.0% in 2027. The 2025 and 2026 forecasts reflect a downward revision, primarily on lower energy costs and exchange rate effects, even as food inflation remains persistent. Core inflation (excluding energy and food) is expected at 2.0% for both 2026 and 2027, with only minor changes since prior rounds.
• Real GDP growth in the euro area is projected at 1.1% for 2025, 1.1% for 2026, and 1.4% for 2027. A robust first quarter—partly due to firms accelerating exports ahead of anticipated tariff hikes—cushioned a weaker outlook for the remainder of 2025. While business investment continues to face uncertainty from ongoing global trade disputes, especially with the US, government investment and infrastructure spending are expected to provide some support to the outlook..
• Household spending is backed by rising real incomes and continued strength in the labor market. Despite some fading tailwind from previous rate cuts, financing conditions remain broadly favorable and are expected to underpin the resilience of private consumption and investment against outside shocks. Moderating wage growth and profit margin adjustments are helping to absorb residual cost pressures.
• Household spending is backed by rising real incomes and continued strength in the labor market. Despite some fading tailwind from previous rate cuts, financing conditions remain broadly favorable and are expected to underpin the resilience of private consumption and investment against outside shocks. Moderating wage growth and profit margin adjustments are helping to absorb residual cost pressures.
• All future interest rate decisions will continue to be guided by the integrated assessment of economic and financial data, the inflation outlook, and underlying inflation dynamics, and the effectiveness of monetary policy transmission—without any pre-commitment to a specific future rate path.
• The ECB’s Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are declining predictably, as reinvestment of maturities has ceased. Balance-sheet normalization continues in line with the ECB’s previously communicated schedule.
• The next meeting is on 29 to 30 October 2025

Next 24 Hours Bias
Medium Bullish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from CHF today?

The Swiss Franc’s performance on September 17, 2025, reflects its enduring role as the premier global safe-haven currency. While facing significant headwinds from US trade policy with punitive 39% tariffs, the currency benefits from Fed uncertainty, global political instability, and Switzerland’s reputation for financial stability. The SNB’s cautious approach to monetary policy, combined with inflation within target ranges, supports expectations for policy stability at the September 25 meeting. Technical indicators suggest continued strength, with major financial institutions positioning the franc as their preferred defensive play in an uncertain global environment.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.25% to 0% on 19 June 2025, marking the sixth consecutive reduction.
• Inflationary pressure has decreased further as compared to the previous quarter, decreasing from 0.3% in February to -0.1% in May, mainly attributable to lower prices in tourism and oil products.
• Compared to March, the new conditional inflation forecast is lower in the short term. In the medium term, there is hardly any change from March, putting the average annual inflation at 0.2% for 2025, 0.5% for 2026, and 0.7% for 2027.
• The global economy continued to grow at a moderate pace in the first quarter of 2025, but the global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions.
• Swiss GDP growth was strong in the first quarter of 2025, but this development was largely because, as in other countries, exports to the U.S. were brought forward.
• Following the strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year; the SNB expects GDP growth of 1% to 1.5% for 2025 as a whole, while also anticipating GDP growth of 1% to 1.5% for 2026.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 25 September 2025.

Next 24 Hours Bias
Medium Bullish

The Pound (GBP)

Key news events today

CPI y/y (6:00 am GMT)

What can we expect from GBP today?

The British pound remains well-positioned heading into today’s inflation data and tomorrow’s BoE decision. The combination of expected Fed dovishness and BoE hawkishness continues to support sterling, with GBP/USD trading at two-month highs. However, persistent inflation pressures and fiscal challenges create medium-term headwinds. Today’s CPI data will be crucial for shaping expectations around the BoE’s future policy path, particularly regarding the November meeting, where many economists expect the next rate cut.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted on 7 August 2025 by a majority (exact split likely 5–3–1 or similar, based on expectations) to cut the Bank Rate by 25 basis points to 4.00%. Multiple members supported the move, citing fragile economic growth and signs of disinflation, while others preferred a larger reduction, and at least one member voted to hold the rate steady due to concerns about persistent inflation.
• The Committee unanimously decided to continue reducing the stock of UK government bond purchases held for monetary policy purposes by £100 billion over the next 12 months, targeting a balance of £558 billion by October 2025. As of 7 August, the gilt stock stands at £590 billion.
• Disinflation has been substantial since 2023 owing to policy tightening and the fading of external shocks. However, an unexpected uptick in headline CPI inflation—to 3.6% in June—reflects pass-through from regulated prices and earlier energy price rises, as well as signs of sticky core inflation.
• Headline CPI inflation is now 3.6%, above the Bank’s 2% target, reflecting regulated and energy price effects. The Committee expects inflation to remain around this level through Q3 before resuming its downward trend into 2026.
• UK GDP growth remains weak. Business and consumer surveys point to lackluster activity, and the labor market continues to loosen, with increasing evidence of slack. Wage growth has softened but remains above pre-pandemic norms.
• Pay growth and employment indicators have moderated further, and the Committee expects a significant slowing in pay settlements over the rest of 2025.
• Global uncertainty remains elevated, especially with rising energy prices and supply disruptions linked to conflict in the Middle East and renewed trade tensions. These factors prompt the MPC to remain vigilant in monitoring cost and wage shocks.
• The risks to inflation are considered two-sided. With the outlook for growth subdued and inflation persistence less clear, the Committee argues that a gradual and careful approach to further easing is warranted, with future policy decisions highly data-dependent.
• The Committee’s bias is still towards maintaining monetary policy at a restrictive stance until there is firmer evidence that inflation will return sustainably to the 2% target over the medium term. Further adjustments to policy will be decided on a meeting-by-meeting basis, with scrutiny of developments in demand, costs, and inflation expectations.
• The next meeting is on 18 September 2025.
  
  Next 24 Hours Bias
  Medium Bullish

The Canadian Dollar (CAD)

Key news events today

BOC Rate Statement (1:45 pm GMT)

Overnight Rate (1:45 pm GMT)

BOC Press Conference (2:30 pm GMT)

What can we expect from CAD today?

The Canadian dollar faces a pivotal day with the Bank of Canada virtually certain to deliver its first rate cut since March 2025. While economic data supports easing – particularly the significant job losses and below-target inflation – the currency has strengthened recently due to oil price support and broad US dollar weakness. The timing coordination with Fed easing creates competing forces, but market positioning suggests the loonie could maintain relative stability if both central banks deliver expected 25 basis point cuts with measured forward guidance.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate to 2.50% at its September 17 meeting, with the Bank Rate at 2.75% and the deposit rate at 2.25%. This marks the first rate cut since early 2025, as the Bank responded to a string of softer inflation prints and persistent economic headwinds.
• The Council cited continued U.S. tariff volatility and slow progress on trade negotiations as major contributors to ongoing uncertainty. While headline tariffs have not escalated further, the unpredictability of U.S. policy remains a significant risk for Canadian exports and business confidence.
• Uncertainty about U.S. trade policy and recurring tariff threats continued to weigh on growth prospects. The Bank flagged downside risks to the export sector, with survey data indicating ongoing hesitancy among manufacturers and exporters.
• After modest growth in Q1, Canada’s economy slipped into contraction, with GDP shrinking by 0.8% in Q2 and forecast to decrease again by 0.8% in Q3. Economic weakness has been most pronounced in manufacturing and goods-producing sectors affected by trade frictions and softer U.S. demand.
• Early estimates show that growth stabilized in September but remained well below the Bank’s 2% forecast for Q4. Manufacturing output has improved slightly—supported by a modest rebound in petroleum and mining activity—while consumer spending and retail sales were largely flat.
• Consumer spending remained subdued as households continued to limit discretionary purchases amid uncertainty and a slower job market. Housing activity stayed weak, despite earlier government efforts to boost affordability and modest gains in some real estate segments.
• Headline CPI inflation edged up to 1.9% in August, undershooting economist expectations but still showing emerging pressures from shelter and imported goods costs. Core inflation metrics were mixed, though price growth remains just below the Bank’s 2% target.
• The Governing Council reaffirmed its cautious approach, emphasizing that while further rate cuts are possible, the pace will hinge on the path of U.S. tariffs, domestic inflation dynamics, and signs of a sustainable recovery. The Bank remains vigilant against the risk of inflation falling below target in the face of economic slack.
• The next meeting is on 29 October 2025.

Next 24 Hours Bias
Weak Bearish

Oil

Key news events today

EIA Crude Oil Inventories (2:30 pm GMT)

What can we expect from Oil today?

Oil markets on September 17, 2025, are navigating a complex environment characterized by immediate supply disruption concerns from Ukrainian attacks on Russian infrastructure, gradual OPEC+ production increases, and anticipation of Federal Reserve monetary easing. While current prices remain supported by geopolitical tensions and supply risks, medium-term forecasts point to significant downward pressure from expected inventory builds and increased production. The market’s direction will largely depend on the evolution of the Russia-Ukraine conflict’s impact on energy infrastructure, OPEC+’s production decisions, and global economic conditions influenced by central bank policies.

Next 24 Hours Bias
Medium Bearish