IC Markets – Europe Fundamental Forecast | 27 March 2026
What happened in the Asia session?
Geopolitical repricing around Trump’s 10‑day pause on Iran‑focused energy‑sector strikes, which trimmed the immediate oil‑supply‑shock premium and helped oil prices ease while supporting gold and modest risk‑on flows. Against that backdrop, China’s stronger‑than‑expected industrial profits reinforced a tentative cyclical‑recovery story even as input‑cost pressures and LNG‑demand weakness cloud the outlook.
What does it mean for the Europe & US sessions?
Mix of renewed trade‑policy risk, elevated bond yields, and lingering growth–inflation uncertainty. In the trans‑Atlantic complex, the European Parliament has conditionally approved the U.S.–EU trade deal, keeping the spotlight on tariffs and cross‑border flows; markets are scrutinizing how the 15% U.S. tariff floor on many EU goods and the reciprocal zero‑tariff treatment of U.S. industrial exports will reshape EUR/USD, equity sectors, and commodity‑linked flows.
The Dollar Index (DXY)
Key news events today
Revised UoM Consumer Sentiment (2:00 pm GMT)
What can we expect from DXY today?
The US dollar is trading firmly overall, drawing support from elevated US yields and a still‑hawkish‑leaning Fed stance, even as geopolitics and growth concerns keep risk‑off flows in focus. The greenback has pushed the Indian rupee to a record low past 94 per dollar while maintaining strength against the yen and several other EM currencies, even as it has given back a small fraction of gains versus the euro and Swiss franc.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate target range steady at 3.50%–3.75% at its March 17–18, 2026, meeting, amid rising oil prices from the US-Israel war against Iran and persistent inflation pressures, delaying any 2026 cuts potentially to September.
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market weakening further as nonfarm payrolls declined by 92,000 in February 2026 and the unemployment rate rose to 4.4% from 4.3% in January.
- Officials face tilted risks from geopolitical tensions, elevated oil prices, and sticky inflation, with CPI steady at 2.4% year-over-year in February 2026, headline PCE at 2.8% in January, and core PCE rising to 3.1%.
- Economic activity has cooled after robust Q4 2025 growth of nearly 5%, with the Atlanta Fed GDPNow now estimating Q1 2026 growth at around 2.1%–2.7% amid softer consumer spending and labour data.
- December 2025’s Summary of Economic Projections forecasts 2025 unemployment at a median of 4.5%, 2026 GDP growth at 2.3%, and core PCE at 2.5%, with the dot plot signalling one more cut in 2026 to a median 3.4% funds rate; March updates may reflect softer labor and inflation upticks.
- The Committee maintains its data-dependent stance amid a softening labor market, inflation above target, and new oil shocks, likely holding rates at 3.50%-3.75% with ongoing divisions and possible hawkish dissents on rate cuts.
- The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to ensure ample reserves post-2025 program adjustments.
- The next meeting is scheduled for 28 to 29 April 2026.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
Revised UoM Consumer Sentiment (2:00 pm GMT)
What can we expect from Gold today?
Gold has rebounded into the mid‑4,400s USD per ounce after a brutal mid‑month selloff, helped by a softer dollar and renewed rate‑cut expectations, even though it remains well below January’s all‑time highs near 5,600 USD/oz. The yellow metal has dropped roughly 15–20% in March from its peak, pressured by a stronger greenback, elevated inflation worries, and shifting risk sentiment, yet stays over 40% higher than a year ago.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
The euro today is caught in a tug‑of‑war between a slightly hawkish‑leaning ECB and a very dollar‑dominant global backdrop, with EUR/USD staying close to the 1.15–1.16 range as traders watch for any clearer guidance on the relative pace of rate‑cut cycles in Washington and Frankfurt.
Central Bank Notes:
- The Governing Council of the ECB is widely expected to keep the three key interest rates unchanged at its 18–19 March 2026 meeting, holding the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. This stance continues to support medium-term price stability, with inflation stabilizing near the 2% target amid resilient growth and balanced risks. Market odds show a 99% probability of no change, reflecting caution over global trade uncertainties and US policy under President Trump.
- Price dynamics remain stable close to the 2% target. Headline HICP inflation eased to around 1.7% in January 2026, with base effects and a strong euro supporting further moderation toward 1.9% for the year. Core and services inflation continue to moderate, bolstered by anchored expectations despite some sticky components.
- Updated Eurosystem staff projections for March 2026 are expected to show headline inflation at 1.9% in 2026, 1.8% in 2027, and stabilizing at 2% by 2028, with balanced risks from trade tensions offset by fiscal support. Recent data revisions have slightly raised prior forecasts, but a stronger euro imports deflationary pressures.
- Euro area GDP growth remains resilient, with Q1 2026 surveys pointing to a 0.3-0.4% qoq expansion, aligning with annual forecasts of 1.2-1.4% through 2027. Public investment in defence and infrastructure, alongside low unemployment, underpins activity despite softer consumption and trade headwinds.
- The labour market stays robust, with unemployment holding near 6.4% at historic lows into early 2026, supported by rising participation and real wage growth. Credit conditions remain supportive for household spending and business investment.
- Business sentiment reflects caution from US tariffs and geopolitical risks, tempered by easing supply chains, a weaker euro aiding exports, and fiscal measures boosting domestic investment.
- The Governing Council will continue its data-dependent, meeting-by-meeting approach, closely monitoring inflation trends, transmission, and external uncertainties without signalling a preset path.
- Balance sheet normalization proceeds steadily, with APP and PEPP reinvestments ended and portfolios reducing at a controlled pace, showing no liquidity strains.
The next meeting is on 30 to 31 March 2026
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The Swiss franc is holding close to its recent multi‑year highs versus the US dollar (around 0.7949 USD/CHF), supported by safe‑haven flows and a neutral SNB policy stance, while having eased only slightly over the past month. The Swiss National Bank has maintained its 0% policy rate and clearly signaled that it will step into FX markets if the franc appreciates too rapidly.
Central Bank Notes:
- At its monetary policy assessment on 19 March 2026, the Swiss National Bank (SNB) is widely expected to leave the policy rate unchanged at 0%, continuing the extended pause since September 2025, as the Governing Board assesses current settings as adequate to maintain inflation near the target without resorting to negative rates.
- Inflation data since December indicate persistent weakness, with headline CPI hovering around 0% year-on-year through early 2026 and core measures subdued at roughly 0.4%, underscoring limited price pressures and lingering, though contained, deflation risks.
- The SNB’s updated conditional inflation forecast shows minimal change from December, with averages of about 0.2% in 2025 (now complete), 0.3% in 2026, and 0.6% in 2027 under a steady 0% policy rate. However, recent flat CPI readings may slightly lower near-term expectations, preserving scope for further easing if needed.
- Global conditions remain challenging, marked by U.S. tariff escalations under President Trump, subdued external demand, and uncertainties in major export markets such as Europe and the U.S., prompting the SNB to exercise caution despite resilient Swiss domestic activity.
- Sentiment in manufacturing and export sectors stays soft amid franc appreciation and weaker foreign orders, squeezing margins. Yet, overall GDP growth is expected to be around 1.5% in 2026, with unemployment edging up modestly from historic lows.
- The SNB reaffirms its readiness to intervene via rate cuts or FX operations should deflationary pressures intensify, while emphasizing clear communication through detailed meeting minutes and coordination with global partners on currency matters.
The next meeting is on 18 June 2026.
Next 24 Hours Bias
Medium Bearish
The Pound (GBP)
Key news events today
Retail Sales m/m (7:00 am GMT)
What can we expect from GBP today?
Today, the pound is trading in a tight band, recovering marginally to around 1.3340 against the dollar after a recent three‑day fall, as safe‑haven demand for the greenback eases slightly ahead of key US labor data. Despite this intraday lift and a modest 12‑month gain, sterling remains vulnerable to political uncertainty, higher oil prices, and hawkish‑leaning BoE rhetoric, which together are keeping the pound range‑bound and preventing a sustained breakout.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 19 March 2026, maintaining the Bank Rate at 3.75 per cent in a unanimous decision, following the prior narrow 5–4 vote to hold at the 5 February 2026 meeting. This pause reflects a sharp reversal from earlier market expectations of a 25-basis-point cut, driven by a Middle East conflict sparking global energy and commodity price surges. The March meeting did not include a Monetary Policy Report, with the next one due in April.
- Quantitative tightening (QT) proceeds unchanged at the 2025 pace of gilt holdings reductions, maintaining gradual balance-sheet normalization attuned to liquidity conditions and supportive of a restrictive stance amid new shocks.
- Headline CPI inflation faces near-term upside from the energy shock, reversing prior disinflation trends in domestic prices and wages; pre-shock services inflation had eased but now contends with higher utility and input costs, keeping pressures above the 2 per cent target. MPC projections will update in April, but analysts see inflation at 3-4 per cent by the end of 2026.
- UK growth softens further into Q2 2026, with unemployment risks rising amid potential confidence drops, higher precautionary saving, and widening output gaps; regular pay growth had cooled pre-shock but now faces business cost pass-through.
- Global headwinds intensify via Middle East conflict, driving volatile energy/commodity prices and sterling/gilt swings; MPC deems direct shocks manageable if demand weakens sufficiently to limit second-round effects.
- Inflation risks now tilt upside from energy persistence and potential wage/cost embedding, offset by downside from demand slack and job losses; prior balance has shifted amid uncertainty on shock duration.
- The MPC adopts a wait-and-see posture post-shock, with policy deemed somewhat restrictive pre-event; all members are ready to act data-dependently for 2 per cent sustainability, eyeing April for fuller impact analysis and possible easing if disinflation resumes. Governor Bailey’s guidance stresses close monitoring without firm-cut commitments.
- The next meeting is on 30 April 2026.
Next 24 Hours Bias
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from GBP today?
The Canadian dollar (CAD) is trading slightly stronger versus the U.S. dollar, with USD/CAD hovering around the mid‑1.38 zone after edging lower from recent levels, as the loonie benefits from cautious risk‑on sentiment and expectations around upcoming Canadian economic data. Traders are closely watching domestic GDP figures and Bank of Canada (BoC)‑relevant data, which could influence the timing and pace of future rate‑cut expectations, tempering more aggressive moves in the pair.
Central Bank Notes:
- The Governing Council held the overnight rate target steady at 2.25% at its 25 March 2026 meeting, aligning with consensus forecasts and extending the pause in policy adjustments amid balanced risks. The Bank emphasized persistent global uncertainties from Middle East conflicts and U.S. trade policies under President Trump, but affirmed the current stance supports ongoing disinflation without immediate shifts despite elevated energy price volatility.
- U.S. tariff threats and regional geopolitical tensions continue weighing on business sentiment, though Canadian manufacturing PMI has edged higher into expansion territory, with export orders firming on energy demand. Goods exports, led by crude oil, sustained momentum into February, offsetting cautious capex as firms prioritize resilience over aggressive growth.
- Economic growth carried into Q1 2026 at an annualized pace of around 2.2%, building on Q4 2025’s solid performance, fueled by resource exports, government outlays, and manufacturing rebound. February preliminary data points to steady expansion, though winter weather and supply chain frictions modestly curbed potential upside.
- Services sector PMI climbed further above 50, with broad gains in tech, hospitality, and business services; consumer-facing areas showed tentative improvement as real wages rose, though high service costs still restrain discretionary outlays. The Bank sees this diffusion as evidence of rebalancing toward sustainable activity.
- National housing resales ticked up in January-February alongside modest price gains, buoyed by stable rates and improved affordability in select regions, while inventory buildup in urban centers prevents excessive tightening. Officials anticipate continued moderation, aided by prudent mortgage rules amid steady household formation.
- Headline CPI eased to about 2.1% year-over-year in February 2026 estimates, staying within the control band, as core gauges like CPI-trim and median dipped to near 2.7% on softer food and durable goods pressures—despite sticky shelter costs. This reinforces the Bank’s view of inflation sustainably approaching the target.
- Policymakers reiterated that 2.25% remains well-calibrated to anchor 2% inflation and foster adjustment, with no cuts signaled barring downside surprises in growth or prices. Attention now turns to Q2 durability, core inflation persistence, and evolving trade/geopolitical clarity.
- The next meeting is on 23 April 2026.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil prices are trading near $100 per barrel for Brent and in the low‑$90s for WTI after a sharp rally earlier this week fueled by Middle East hostilities and the effective closure of the Strait of Hormuz. The latest downward move reflects relief from a 10‑day pause in planned U.S. strikes on Iranian energy facilities and more positive comments about Iran–U.S. talks, but the market remains anchored by a strong geopolitical risk premium, tight refining margins, and constrained global supply flows, keeping crude materially above pre‑war levels.
Next 24 Hours Bias
Medium Bullish
