IC Markets – Europe Fundamental Forecast | 22 June 2026

IC Markets – Europe Fundamental Forecast | 22 June 2026

What happened in the Asia session?

China’s decision to keep its Loan Prime Rates unchanged and ongoing developments in U.S.-Iran negotiations. The unchanged Chinese rates signaled a cautious policy stance amid uneven economic recovery, while Middle East headlines drove broad risk sentiment across markets. Asian stock indices generally advanced, led by Japan and South Korea, while oil prices remained highly sensitive to Strait of Hormuz developments. Gold attracted safe-haven flows, the Japanese yen stayed under pressure from strong U.S. yield differentials, and commodity-linked currencies such as the Australian dollar traded defensively as investors balanced geopolitical optimism against concerns over global growth and central bank tightening expectations.

What does it mean for the Europe & US sessions?

Shift in central-bank expectations following last week’s Federal Reserve meeting, upcoming flash PMI surveys, and inflation-related data due later this week. The Fed left rates unchanged but adopted a more hawkish tone under Chair Kevin Warsh, keeping markets sensitive to any signs of persistent inflation or slowing growth. Investors are also monitoring developments surrounding the U.S.-Iran agreement, which has helped ease energy-supply concerns and pressured oil prices lower, reducing some inflation fears.
​
The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

The U.S. Dollar is trading with a firmer tone supported by a combination of safe-haven demand, rising Treasury yields, and expectations that the Federal Reserve may still tighten policy later this year. The Dollar Index (DXY) has climbed above the 100 level and remains near its strongest levels in months after last week’s Fed meeting signaled a more hawkish outlook than markets had anticipated. Recent geopolitical uncertainty surrounding U.S.–Iran relations and concerns over potential disruptions to oil supply have also increased demand for the dollar as a defensive asset.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) left the federal funds rate unchanged at 3.50%–3.75% at its June 16–17, 2026, meeting, marking another pause in the policy cycle. Under new Fed Chair Kevin Warsh, policymakers signaled a more cautious and hawkish stance as inflation remains above target despite moderating energy prices.
• The Committee remains committed to achieving maximum employment and returning inflation to its 2% objective. Labor market conditions have remained relatively stable, with job gains continuing at a moderate pace and the unemployment rate projected to remain near 4.4% through 2026.
• Inflation continues to be the primary concern for policymakers. Headline inflation remains elevated, supported by earlier energy-related price pressures and persistent services inflation. The June projections showed higher inflation forecasts than previously expected, leading several officials to favor keeping policy restrictive for longer.
• Economic activity continues to expand at a moderate pace. Productivity growth, capital investment, and AI-related spending remain supportive of growth, while consumer spending and housing activity show signs of slowing compared with late 2025 and early 2026.
• The June 2026 Summary of Economic Projections (SEP) revealed a more divided Committee. Nine officials projected at least one rate hike during 2026, while others expected rates to remain unchanged or eventually decline. The median outlook shifted toward a higher-for-longer policy path compared with earlier projections.
• The Committee emphasized a data-dependent approach and noted that future decisions will depend on incoming inflation, employment, and economic growth data. Officials acknowledged that geopolitical developments and energy markets remain important upside risks to inflation.
• The FOMC continues its balance sheet normalization program, maintaining Treasury runoff caps at $5 billion per month and agency mortgage-backed securities (MBS) runoff caps at $35 billion per month, while ensuring ample reserves remain in the banking system.
• The next meeting is scheduled for 28 to 29  July 2026.

Next 24 Hours Bias
Strong Bullish

Gold (XAU)

Key news events today

No major news event

What can we expect from Gold today?

Gold is trading with a mixed but resilient tone today. Progress in Middle East diplomacy initially reduced safe-haven demand, but uncertainty surrounding the durability of any agreement, combined with continued central bank purchases, helped prices recover. The main headwind remains the market’s expectation of tighter U.S. monetary policy and higher interest rates, which are supporting the dollar and limiting stronger gains in gold. Traders are now focused on upcoming U.S. inflation and economic data for clues on the Federal Reserve’s next move.

Next 24 Hours Bias   
Strong Bearish

The Euro (EUR)

Key news events today                  

ECB President Lagarde Speaks (12:30 pm GMT)

What can we expect from EUR today?

The euro is receiving support from expectations that the European Central Bank (ECB) may keep a relatively hawkish stance after raising interest rates earlier this month. Several ECB officials, including Chief Economist Philip Lane and policymaker Pierre Wunsch, have indicated that further rate increases remain possible if inflation stays elevated above the ECB’s 2% target. While easing tensions in the Middle East have reduced oil prices, ECB policymakers continue to warn that inflation pressures remain persistent, particularly in the services sector. Markets are now closely watching upcoming ECB communications, including remarks from ECB President Christine Lagarde today, for clues on whether another rate hike could come as early as July.

Central Bank Notes:

• The Governing Council is expected to maintain the three key rates unchanged at their June levels into July, with the main refinancing rate around 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. Policy remains on a meeting‑by‑meeting, data‑dependent footing.
• Real GDP growth is expected to be modest: around 0.9% for 2026, 1.3% for 2027, and 1.4% for 2028. Quarterly momentum implies roughly 0.2–0.3% q/q growth in Q2 2026, consistent with resilience seen late‑2025.
• Balance‑sheet normalization continues smoothly. APP and PEPP wind‑downs are effectively completed; the Eurosystem is allowing remaining longer‑dated holdings to run off. No material liquidity shortages are expected; the Governing Council will monitor transmission and market functioning closely.
• Upside risks: stronger‑than‑expected services inflation persistence, renewed energy or commodity price shocks, and tighter global financial conditions that transmit unevenly.
• The ECB is likely to keep policy rates on hold while emphasizing data dependence: future moves will be guided by incoming HICP prints, wage dynamics, and indicators of monetary transmission (credit, deposit flows, and market functioning).
• With rates expected to be on hold and inflation slightly above target for 2026, the EUR may trade with two‑way volatility; upside for EUR if euro‑area data surprise to the upside or if US data weaken relative to euro‑area, but limited unilateral appreciation given symmetric policy risks.
• Curve pricing should reflect a prolonged period of unchanged rates with modest probability of hikes if upside inflation surprises continue; front-end stays anchored, while longer‑dated yields respond to inflation‑expectation movements and global risk sentiment.

​The next meeting is on 22 to 23 July 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 currently benefiting from safe-haven flows and the SNB’s commitment to maintaining price stability. With rates unchanged at 0% and the central bank willing to intervene against excessive CHF strength, traders are focused on geopolitical developments and overall market risk appetite as the primary drivers of CHF direction in the near term.

Central Bank Notes:

• At its monetary policy assessment on 18 June 2026, the Swiss National Bank left the SNB policy rate unchanged at 0.00%, in line with market expectations. Policymakers maintained that the current policy setting remains appropriate given low inflation and ongoing global economic uncertainty.
• Inflation remains exceptionally subdued in Switzerland. Recent data show consumer price growth staying comfortably within the SNB’s price stability range, with headline inflation around 0.6% year-on-year in May 2026, while underlying inflation pressures remain limited despite higher global energy prices.
• The SNB continues to view medium-term inflation pressures as largely unchanged. While energy prices linked to Middle East tensions have temporarily lifted near-term inflation expectations, the stronger Swiss franc has helped offset imported inflation, supporting the central bank’s decision to maintain rates at current levels.
• External risks remain elevated. Policymakers highlighted ongoing geopolitical tensions, trade uncertainties, and slower global growth prospects, particularly in key export markets such as the Eurozone and the United States. These factors continue to warrant a cautious policy approach.
• Swiss economic activity remains resilient but modest. GDP growth is expected to remain around 1–1.5% in 2026, supported by domestic demand, although manufacturing and export-oriented sectors continue to face challenges from a strong franc and softer foreign demand.
• The SNB reiterated its readiness to act if necessary. The Governing Board emphasized that it remains willing to intervene in foreign exchange markets to counter excessive Swiss franc appreciation and stands prepared to adjust policy should inflation or economic conditions deviate materially from expectations.

The next meeting is on 24 September 2026.

Next 24 Hours Bias
Weak Bearish

The Pound (GBP)

Key news events today      

No major news event

What can we expect from GBP today?

The pound’s near-term outlook is slightly bearish as traders balance a cautious Bank of England, cooling UK economic data, and rising geopolitical risks that are boosting demand for the U.S. dollar. However, expectations that UK rates will remain relatively high could help limit deeper losses if incoming economic data remains resilient.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) met on 17–18 June 2026 and voted 7–2 to maintain the Bank Rate at 3.75%. Two members, Megan Greene and Chief Economist Huw Pill, voted for a 25-basis-point increase to 4.00%, citing concerns about inflation expectations and the risk of persistent price pressures. The majority favored keeping policy unchanged while assessing the evolving impact of recent energy-market developments.
• Quantitative tightening (QT) continues as planned, with the Bank maintaining its balance-sheet reduction strategy through gilt runoff and sales. The MPC considers QT an important part of policy normalization while preserving sufficient liquidity in financial markets.
• Inflation remains above target despite some easing in energy prices. The Bank expects CPI inflation to remain around or above 3% during the second half of 2026, compared with the 2% target. While recent declines in oil and gas prices have reduced the near-term inflation outlook, policymakers remain concerned about potential second-round effects through wages and services inflation.
• UK economic growth remains subdued. The MPC noted signs of weakening demand, falling vacancies, and a softer labor market, although recent wage growth data came in slightly stronger than expected. The Committee expects economic activity to remain modest as higher borrowing costs and uncertainty continue to weigh on business investment and consumer spending.
• Global risks remain elevated, particularly due to developments in the Middle East and their potential effects on energy markets, trade flows, and financial conditions. Although tensions have eased somewhat following diplomatic progress, policymakers continue to monitor commodity-price volatility and its implications for UK inflation.
• Inflation risks remain tilted to the upside. The MPC highlighted concerns that higher inflation expectations, resilient wage growth, and renewed energy-price shocks could require a more restrictive policy stance. However, downside risks from weaker growth and increasing economic slack provide an offsetting influence.
• The MPC continues to emphasize a data-dependent and restrictive policy stance, with no commitment to either rate cuts or hikes in the near term. Governor Andrew Bailey stated that policymakers will remain vigilant and stand ready to respond if inflation proves more persistent than expected. The presence of two votes for a rate increase demonstrates that the Committee remains alert to upside inflation risks.
• The next meeting is on 30 July 2026.
  
  Next 24 Hours Bias
  Weak Bullish

The Canadian Dollar (CAD)

Key news events today

CPI m/m (12:30 pm GMT

Median CPI y/y (12:30 pm GMT)    

Trimmed CPI y/y (12:30 pm GMT)

Common CPI y/y (12:30 pm GMT)        

What can we expect from CAD today?

The Canadian dollar remains under pressure at the start of the week, trading near its weakest levels in more than a year against the U.S. dollar. Recent weakness has been driven by a combination of softer Canadian economic data, widening interest-rate differentials in favor of the United States, and persistent demand for the U.S. dollar following the Federal Reserve’s hawkish stance. The Bank of Canada kept its policy rate unchanged at 2.25% earlier this month, signaling caution amid elevated global uncertainty and inflation risks.
​
Central Bank Notes:

• At its 10 June 2026 meeting, the Governing Council maintained the overnight rate target at 2.25%, continuing the policy pause begun earlier in the year. The decision matched market expectations and reflected the Committee’s assessment that the current stance remains appropriately restrictive to secure 2% inflation over the policy horizon.
• The Bank noted persistent global headwinds: geopolitical tensions in the Middle East and renewed U.S. trade friction continue to weigh on sentiment and supply chains. These risks are asymmetric and could slow foreign demand or push commodity price volatility higher.
• Real GDP growth is estimated to have continued into Q2 at roughly a 2.0–2.3% annualized pace, broadly consistent with the Bank’s April projection of sustained momentum. Strength remained concentrated in resource shipments and exports, supported by robust global energy demand, while business investment showed only tentative improvement.
• The labour market remains tight but is showing early signs of rebalancing: employment growth continued, and the unemployment rate stayed near recent lows, but wage growth has moderated from its peak. Participation edged up modestly in some regions, consistent with slower wage pressure ahead.
• ​Headline CPI remained close to 2.0% year-over-year in April–May prints, within the inflation target band. Core indicators—CPI-trim, CPI-median, and a trimmed mean—tracked around 2.3–2.6%, showing modest further easing compared with earlier in the year.
• Manufacturing PMI remained in expansionary territory into May, supported by export orders and healthy energy-sector activity. Firms reported steady demand for intermediate goods, though capex intentions remain cautious.
• Credit growth continued at a moderate pace. Bank lending spreads and deposit dynamics showed limited pass-through from global tightening episodes. Mortgage rates remain somewhat elevated but stable, underpinning the observed moderation in housing activity.
• The next meeting is on 16 July 2026.

Next 24 Hours Bias
Weak Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Oil remains supported by geopolitical risk, but today’s price action shows that traders are balancing supply disruption fears against the possibility of a diplomatic breakthrough between the U.S. and Iran. While crude initially rallied sharply, gains were partially reversed as negotiations progressed. The market is likely to remain extremely volatile this week, with any news regarding the Strait of Hormuz, Middle East security, or U.S.-Iran talks capable of causing significant swings in oil prices.

Next 24 Hours Bias
Weak Bearish