IC Markets – Europe Fundamental Forecast | 28 October 2025
What happened in the Asia session?
Markets in Asia started the day jittery, focusing on diplomatic and monetary policy events, and were marked by selective risk-on sentiment supported by strong Chinese and South Korean data, though overall risk appetite was limited with declines in major indices and continued caution ahead of key central bank decisions. The most impacted instruments were regional equities, Asian FX (notably JPY and CNY), and key commodity benchmarks like gold and copper.
What does it mean for the Europe & US sessions?
Traders should closely monitor the Richmond Manufacturing Index, U.S. consumer confidence data, and potential headlines from central bank meetings and U.S.-China trade talks. Market sentiment remains risk-on, but upcoming Fed decisions and macro data could soon shift the tone. The U.S. dollar eased ahead of a busy week featuring expected rate cuts by the U.S. Federal Reserve, with the market watching President Trump’s ongoing Asia tour and anticipated talks with President Xi Jinping for a potential trade breakthrough with China
The Dollar Index (DXY)
Key news events today
Richmond manufacturing index (12:00 pm GMT)
CB consumer confidence (Tentative)
What can we expect from DXY today?
The US Dollar is currently trading softer on Tuesday, ahead of a key Federal Reserve meeting, with market sentiment also influenced by progress in US-China trade talks and expectations of an interest rate cut by the Fed. The Dollar Index (DXY) stands around 98.70, down about 0.12% from the previous session, and markets largely expect the Fed to announce a 25 basis point rate cut at its October policy meeting.
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 3.75%–4.00% at its October 28–29, 2025, meeting, marking the second consecutive cut following the 25 basis points reduction in September.
- The Committee maintained its long-term objectives of maximum employment and 2% inflation, noting that the labor market continues to soften, with modest job creation and an unemployment rate edging higher. In comparison, inflation remains above target at around 3.0%.
- Policymakers highlighted ongoing downside risks to economic growth, tempered by signs of resilient economic activity. September’s consumer price index (CPI) came in slightly lower than expected at 3.0% year-over-year, easing inflation pressure but still warranting vigilance given tariff-driven price effects.
- Economic activity expanded modestly in the third quarter, with GDP growth estimates around 1.0% annualized; however, uncertainty remains elevated amid persistent global trade tensions and the U.S. government shutdown, which is impacting data availability.
- The updated Summary of Economic Projections reflects an anticipated unemployment rate averaging approximately 4.5% for 2025, with headline and core personal consumption expenditures (PCE) inflation projections holding near 3.0%, indicating a slow easing path ahead.
- The Committee emphasized its flexible, data-dependent approach and underscored that future policy adjustments will be guided by incoming labor market and inflation data. As in prior meetings, there was dissent, including one member advocating a more aggressive 50-basis-point cut.
- The FOMC announced the planned conclusion of its balance sheet reduction (quantitative tightening) program, intending to cease runoff in the near term to maintain market stability, with Treasury redemption caps held steady at $5 billion per month and agency mortgage-backed securities caps at $35 billion.
- The next meeting is scheduled for 9 to 10 December 2025.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
Richmond manufacturing index (12:00 pm GMT)
CB consumer confidence (Tentative)
What can we expect from Gold today?
Gold prices have retreated below the $4,000 per ounce mark after a historic peak last week, driven down by a stronger US dollar and optimism surrounding US-China trade progress. The market is experiencing profit-taking and technical corrections, but gold remains well above 2024 levels and retains strong year-to-date gains. Investors should watch forthcoming central bank decisions for further direction, with technical indicators hinting at short-term downside but potential for rebounds near key resistance.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
Today, the Euro moved higher against the US dollar and benefited from broad optimism on European markets, underpinned by improved trade tensions and anticipation for central bank signals. Key policy debates within the EU and steady migration data also shaped sentiment, while technical indicators point to modest bullishness with limited trend strength.
Central Bank Notes:
- The Governing Council kept the three key ECB interest rates unchanged at its meeting on September 11, 2025. 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 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.
- Rising real incomes and continued strength in the labor market boost household spending. 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.
- Rising real incomes and continued strength in the labor market boost household spending. 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 Program (APP) and Pandemic Emergency Purchase Program (PEPP) portfolios are declining predictably, as maturities have ceased to be reinvested. 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 is trading with modest weakness against the US Dollar, reflecting short-term bearish technicals and global risk sentiment shifts. While medium-term EUR/CHF stability persists, further moves will likely hinge on USD strength and international developments, with today’s session expected to be relatively quiet until US data releases. The USD/CHF pair has been fluctuating near the 0.7960 level, experiencing a short-term bearish trend, with forecasts pointing to further potential declines unless resistance levels are broken.
Central Bank Notes:
- The SNB maintained its key policy rate at 0% during its meeting on 25 September 2025, pausing a sequence of six consecutive rate cuts as inflation stabilized and the Swiss franc remained firm.
- Recent data showed a modest rebound in inflation, with Swiss consumer prices rising 0.2% year-on-year in August after staying above zero for three consecutive months; this helped alleviate fears of deflation that were mounting earlier in the year.
- The conditional inflation forecast remains broadly unchanged from June: headline inflation is expected to average 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027. The risk of a negative rate move has diminished for now, but the SNB retains flexibility should inflationary pressures weaken again.
- The global economic outlook has deteriorated further, weighed down by heightened trade tensions—especially with the U.S.—and ongoing uncertainty in key Swiss export markets.
- Swiss GDP growth moderated in Q2 after a strong Q1 boosted by front-loaded U.S. exports. The SNB expects growth to slow and remain subdued, with forecasted GDP expansion between 1% and 1.5% in both 2025 and 2026.
- Labor market sentiment in the Swiss industrial sector has softened on concerns over export competitiveness and potential adjustments to production, but the overall growth outlook stays broadly unchanged
- The SNB reiterated its readiness to respond as needed if deflation risks re-emerge, emphasizing its commitment to medium-term price stability and a robust, transparent communication policy, with the introduction of more detailed monetary policy minutes beginning in October.
- The next meeting is on 11 December 2025.
Next 24 Hours Bias
Medium Bullish
The Pound (GBP)
Key news events today
No major event
What can we expect from GBP today?
Sterling’s outlook today remains cautiously bearish, supported by easing inflation and a dip in shop prices, but offset by fiscal concerns and persistent rate-cut expectations. Markets are closely monitoring fiscal statements, BoE policy signals, and US economic events for the next catalyst. The GBP/USD pair traded around 1.3335, with a slight rebound but an underlying bearish tone due to ongoing market corrections and technical signals indicating continued downside risk.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted on 18 September 2025 by a majority (expected split likely 7–2 or 6–3) to hold the Bank Rate steady at 4.00%, following the rate cut in August. Most members cited persistent inflation and mixed indicators on growth and employment, while a minority favored further easing due to the cooling labor market and subdued GDP growth.
- The Committee decided to decrease the pace of quantitative tightening, planning to reduce the stock of UK government bond purchases by £67.5 billion over the next 12 months, instead of the prior £100 billion pace, with the gilt balance now standing at nearly £558 billion. This reflects increased volatility in bond markets and a shift to a more gradual approach.
- Headline inflation rose unexpectedly to 3.8% in July and is projected at 4% for September, above the Bank’s 2% target. Price pressures are driven by regulated energy costs and ongoing food price increases. While previous disinflation has been substantial, core inflation remains elevated and sticky.
- The MPC expects headline inflation to remain above target through Q4, with a resumption of the downward trend projected for early 2026 as energy and regulated price pressures abate. The Committee remains watchful for signs of persistent inflation despite previous policy tightening.
- UK GDP growth is stagnant, with business and consumer activity subdued. Recent labor market data show rising unemployment rates (now at 4.7%) and stabilizing wage growth (holding near 5%), indicating slack but continued wage price pressure. The Committee remains cautious amid lackluster demand and soft survey sentiment.
- Pay growth and employment indicators have moderated further, alongside confirmation from business surveys that pay settlements are slowing. The Committee expects wage growth to decelerate significantly through Q4 and the rest of 2025.
- Global uncertainty persists due to volatile energy prices, supply chain disruptions linked to Middle East conflicts, and renewed trade tensions. The MPC remains vigilant in tracking transmission of external cost/wage shocks to UK inflation.
- Risks to inflation are considered two-sided. While subdued domestic growth and softening labor activity suggest scope for easing, persistent inflation requires caution. The MPC anticipates a slow, gradual reduction path in rates, continuing its data-dependent approach with careful adjustment as warranted by economic developments.
- The Committee’s bias remains toward maintaining a restrictive monetary policy stance until firmer evidence emerges that inflation will return sustainably to the 2% target. All future decisions will remain highly data dependent, with a strong emphasis on evolving demand, inflation expectations, costs, and labor market conditions.
- The next meeting is on 6 November 2025.
Next 24 Hours Bias
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from CAD today?
The Canadian dollar faces a complex environment on October 28, 2025, with conflicting forces at play. While dovish Fed expectations are providing temporary support, the loonie confronts significant headwinds from anticipated Bank of Canada rate cuts, weakening oil prices amid OPEC+ production increases, escalating Trump tariff threats following the Ontario ad controversy, and deteriorating economic fundamentals, including Q2 GDP contraction and stalled employment growth.
Central Bank Notes:
- 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
Medium Bearish
Oil
Key news events today
API crude oil stock (8:30 pm GMT)
What can we expect from Oil today?
Oil markets on Tuesday face downward pressure from OPEC+’s planned production increases and a looming global supply glut, projected to reach 4 million barrels per day in 2026. While WTI and Brent trade around $61 and $66 per barrel, respectively, the market remains caught between bearish fundamentals, including weak demand growth and rising non-OPEC supply, and supportive factors such as the emerging US-China trade framework and recent Russian sanctions.
Next 24 Hours Bias
Weak Bearish
