IC Markets – Europe Fundamental Forecast | 07 July 2026

IC Markets – Europe Fundamental Forecast | 07 July 2026

What happened in the Asia session?

Markets were driven more by corporate news and broader macro themes than by major tier-one economic data releases. Asian equities traded cautiously despite a stronger-than-expected earnings outlook from Samsung, while investors continued to assess the implications of OPEC+’s planned production increase, lingering Middle East geopolitical risks, and expectations that the U.S. Federal Reserve will keep interest rates unchanged ahead of this week’s FOMC minutes. The Japanese yen remained under pressure near multi-decade lows as the U.S. dollar stabilized, while crude oil held modest gains after recent volatility, reflecting the balance between higher expected supply and ongoing geopolitical uncertainty.

What does it mean for the Europe & US sessions?

Markets are focused on a combination of key macroeconomic releases, central bank expectations, and geopolitical developments that could drive volatility across currencies, commodities, and equities. In Europe, traders are watching Germany’s Industrial Production data for fresh insight into the strength of the eurozone’s largest economy, while any comments from policymakers at the Bank of England could influence sterling. In the U.S. session, attention turns to the Trade Balance, Wholesale Inventories, the Federal Reserve Bank of New York one-year inflation expectations survey, and the latest short-term energy outlook from the U.S. Energy Information Administration, all of which may affect the U.S. dollar, Treasury yields, and crude oil prices.
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The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

The U.S. dollar is stable with the DXY index near 100.88, but sentiment has turned less bullish after weak U.S. jobs data sharply reduced expectations for further Federal Reserve rate hikes this year. The euro is holding near $1.144 and sterling near $1.34, while the dollar remains notably strong against the Japanese yen, which is trading near a 40-year low above ¥162 per dollar amid ongoing speculation of Japanese government intervention. Traders are now focused on the upcoming FOMC minutes and future inflation data for clearer guidance on U.S. monetary policy.

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
Weak Bearish

Gold (XAU)

Key news events today

No major news event

What can we expect from Gold today?

Gold prices edged lower during Tuesday’s Asian session, after reaching a two-week high in the previous session, as investors turned cautious ahead of the release of the U.S. Federal Reserve’s June meeting minutes. Spot gold traded around $4,140 per ounce, with a firmer U.S. dollar and stable Treasury yields weighing on the precious metal. Despite today’s pullback, gold continues to find underlying support from weaker-than-expected U.S. June employment data, which has reduced expectations of further Fed tightening and strengthened the case for lower interest rates later this year a backdrop that is generally favorable for non-yielding assets like gold.

Next 24 Hours Bias   
Strong Bullish

The Euro (EUR)

Key news events today

No major news event

What can we expect from EUR today?

The euro traded cautiously as investors weighed the outlook for the European Central Bank (ECB) against renewed U.S. dollar strength ahead of the release of the latest Federal Reserve meeting minutes. Market sentiment remains focused on whether the ECB will pause at its 22–23 July policy meeting after last month’s rate increase, especially as eurozone inflation has eased in recent data. However, ECB Executive Board member Isabel Schnabel reiterated that inflation risks have not fully disappeared, warning that lingering effects from higher energy costs, supply chain disruptions, and elevated food prices mean policymakers should remain vigilant.

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 the EUR if euro‑area data surprise to the upside or if US data weaken relative to the 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 (CHF) is trading with a mildly defensive tone on Tuesday, as markets continue to assess the divergence between the Swiss National Bank and the Federal Reserve. The SNB kept its policy rate unchanged at 0.00% in June, citing subdued inflation and expectations that price growth will remain comfortably within its target range, while projecting Swiss economic growth of around 1% this year. Recent data also showed Swiss inflation easing to 0.5% in June, reinforcing expectations that the SNB is unlikely to tighten policy anytime soon.

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 Bullish

The Pound (GBP)

Key news events today

BOE Gov Bailey Speaks (10:30 am GMT)

What can we expect from GBP today?

The British pound (GBP) is trading with a slightly softer tone after giving back some of last week’s strong gains. Sterling eased against the U.S. dollar as the greenback stabilized following the recent U.S. employment report, while traders shifted their attention to this week’s release of the FOMC meeting minutes and other major U.S. economic data. Despite the modest pullback, sentiment toward the pound remains relatively constructive because the Bank of England continues to maintain a cautious, inflation-focused stance, with policymakers signaling that interest rates are likely to stay restrictive until inflation shows clearer signs of easing.

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 offset this 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
  Medium Bullish

The Canadian Dollar (CAD)

Key news events today

Ivey PMI (2:00 pm GMT)    

What can we expect from CAD today?

The Canadian dollar (CAD) is trading with a mildly bearish tone as markets continue to weigh mixed domestic fundamentals against a resilient U.S. dollar. The latest Bank of Canada Business Outlook Survey showed that business confidence softened for the first time in three quarters, with firms reporting weaker hiring intentions and slower sales expectations despite easing inflation concerns following the recent U.S.-Iran ceasefire. Markets still expect the Bank of Canada to keep its policy rate at 2.25% for the remainder of the year, limiting support for the loonie.
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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

API Crude Oil Stock (8:30 pm GMT)

What can we expect from Oil today?

Oil prices are trading modestly higher after recovering from Monday’s decline, as traders weigh the impact of increased supply against lingering geopolitical risks. The market continues to digest the weekend decision by OPEC+ to raise August production quotas by another 188,000 barrels per day, marking the fifth consecutive monthly output increase aimed at regaining market share. At the same time, Saudi Arabia has sharply reduced its August official selling prices for Asian customers, reinforcing expectations of a more competitive and well-supplied crude market.

Next 24 Hours Bias
Weak Bearish