IC Markets – Europe Fundamental Forecast | 13 October 2026
What happened in the Asia session?
Asia markets were mostly bearish on Tuesday, led by a sharp technology and semiconductor selloff. Geopolitical tensions kept oil elevated near $106 per barrel and supported the US dollar. Japan’s wholesale inflation slowed but remained high enough to keep BOJ rate hikes in focus. For traders, the main instruments to monitor are Asian stock indices, USD/JPY, AUD/USD, NZD/USD, gold and crude oil, with upcoming Chinese data and US inflation figures likely to drive the next major moves.
What does it mean for the European & US sessions?
European and U.S. traders should focus on the dollar, Treasury yields, German inflation, central bank speeches, and U.S. economic data. Oil remains important because supply disruptions can increase inflation concerns. Gold could benefit if the dollar and yields fall, while stocks will react to bank earnings and interest-rate expectations. The biggest upcoming event is Wednesday’s U.S. CPI report, which could influence the Federal Reserve’s next policy decision.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from the DXY today?
The US dollar is slightly weaker today as oil prices and Treasury yields decline. However, the Fed’s hawkish stance and persistent inflation concerns could limit further losses. For traders, Wednesday’s US CPI report is the main event to watch. Higher-than-expected inflation could strengthen the dollar, while softer inflation could put additional pressure on it.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) raised the federal funds target range by 25 basis points to 3.75%–4.00% at its September 15–16, 2026, meeting. The decision was approved unanimously by a 12–0 vote, marking a shift from the July meeting, when rates were held at 3.50%–3.75%. The Fed said the move was intended to support its dual mandate and promote a more timely return of inflation toward its 2% objective.
- The labor market remains relatively resilient. The September FOMC statement said job gains have kept pace with workforce growth and that the unemployment rate has changed little. The Fed continues to monitor employment conditions closely alongside inflation when determining the appropriate path for monetary policy.
- Inflation remains above the Federal Reserve’s 2% target and continues to be a key policy concern. The September decision explicitly noted that inflation remains elevated. The latest projections put median headline PCE inflation at 3.7% for 2026, before falling to 2.3% in 2027, 2.1% in 2028, and 2.0% in 2029. Core PCE inflation is projected at 3.4% in 2026, declining to 2.5% in 2027 and 2.2% in 2028.
- Economic activity continues to expand at a solid pace. The Fed highlighted resilient domestic spending, strong productivity growth, and robust capital investment, although uncertainty remains elevated partly because of geopolitical developments. The September projections raised the median 2026 GDP-growth forecast to 2.3%, compared with 2.2% in the June projections.
- The September projections show a higher expected policy-rate path than in June. The median projection for the federal funds rate is now 4.1% at the end of 2026, compared with 3.8% in the June projections. The median is projected at 4.1% in 2027, 3.9% in 2028, and 3.6% in 2029. This indicates that policymakers’ projected rate path remains relatively restrictive while inflation is expected to move gradually toward the target.
- Chair Kevin Warsh continues to emphasize the importance of returning inflation to 2%. Ahead of the September meeting, Warsh indicated that the Fed would have further work to do if policymakers could not gain sufficient confidence that inflation was moving toward the 2% objective. The September decision was subsequently delivered a 25-basis-point hike, while the Committee continued to emphasize its assessment of incoming economic data and risks.
- The September economic projections show a more balanced growth outlook but continued inflation risks. The median unemployment forecast is 4.1% for 2026 and 2027, while the Fed projects GDP growth of 2.3% in 2026 and 2.4% in 2027. At the same time, PCE inflation is expected to remain substantially above target through 2026 before moving closer to 2% over subsequent years.
- The next meeting is scheduled for 27-28 October 2026.
Next 24 Hours Bias
Strongly Bullish
Gold (XAU)
Key news events today
No major news event
What can we expect from the Gold today?
Gold is recovering on Tuesday as the U.S. dollar and Treasury yields ease. However, expectations of tighter Federal Reserve policy remain a risk. Traders should watch U.S. inflation data on Wednesday and Thursday, along with developments in the Middle East.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
No major news event
What can we expect from the EUR today?
The euro is recovering slightly against the dollar as U.S. yields ease, but its outlook remains uncertain. The ECB’s relatively firm stance may support the currency, while weak French growth and budget concerns are negative factors. For forex traders, the main focus is whether the dollar continues to weaken ahead of Wednesday’s U.S. inflation report. EUR/USD may find short-term support, but a stronger-than-expected U.S. CPI reading could reverse the gains.
Central Bank Notes:
- The ECB enters October with its policy outlook dependent on the outcome of its 10 September meeting. The latest confirmed decision, from 23 July, kept the deposit facility at 2.25%, the main refinancing operations rate at 2.40%, and the marginal lending facility at 2.65%. The ECB continued to emphasize a meeting-by-meeting and data-dependent approach, with no commitment to a predetermined rate path.
- The euro-area economy remains resilient, but growth is still relatively modest. The latest ECB data show euro-area GDP at €4.1185 trillion in Q2 2026, up 1.2% quarter-on-quarter and 3.6% year-on-year in the latest reported data. However, the economic outlook remains vulnerable to elevated energy costs, geopolitical uncertainty, and weaker external demand.
- Inflation remains the key issue for ECB policy. The ECB’s July assessment highlighted that energy prices remained highly volatile and significantly above pre-conflict levels, with the full inflationary impact of the energy shock still uncertain. The ECB is therefore closely monitoring direct energy effects as well as possible second-round effects through wages and broader price-setting behavior.
- Professional forecasters continue to expect inflation to remain above target in 2026. The ECB’s Q3 Survey of Professional Forecasters projected headline HICP inflation at 2.7% for 2026, falling to 2.2% in 2027 and 2.0% in 2028. Core inflation, excluding energy, food, alcohol, and tobacco, was projected at 2.4% in 2026 and 2.2% in 2027.
- Growth expectations have softened. The same ECB survey projects real GDP growth of only 0.6% in 2026, followed by 1.2% in 2027 and 1.3% in 2028. This combination of relatively weak growth and above-target inflation leaves the ECB facing a difficult policy trade-off heading into October.
- The ECB’s balance-sheet normalization is expected to continue. The APP and PEPP portfolios continue to decline in a measured and predictable manner because the Eurosystem is no longer reinvesting principal payments from maturing securities. This gradual quantitative tightening is expected to continue unless financial-market conditions require the ECB to adjust its approach.
- The main risk for October is the combination of persistent inflation and weak growth. Higher oil and natural-gas prices could keep inflation above the ECB’s 2% target while simultaneously reducing household purchasing power and business activity. This could make the ECB more cautious about easing policy even if economic growth remains weak.
The next meeting is on 29 October 2026.
Next 24 Hours Bias
Medium Bearish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from the CHF today?
The Swiss franc has support from its safe-haven status and concerns over France’s financial outlook. However, the SNB’s 0% interest rate and the stronger US dollar are limiting its upside, especially against the dollar. For traders, EUR/CHF may remain vulnerable to further declines, while USD/CHF could move higher if the dollar strengthens. US inflation expectations and geopolitical developments are the key drivers to monitor today.
Central Bank Notes:
- At its 24 September meeting, the SNB kept the policy rate unchanged at 0.00%, citing appropriate monetary conditions.
- Swiss inflation increased from 0.6% in May to 0.8% in August, mainly due to higher energy prices. The SNB expects inflation to rise somewhat in Q4 before easing during 2027.
- The SNB now projects average inflation of 0.7% in 2026, 0.8% in 2027, and 0.8% in 2028, assuming the policy rate remains at 0%.
- The SNB remains willing to intervene in the foreign-exchange market if necessary to maintain appropriate monetary conditions, particularly if exchange-rate movements become problematic.
- The SNB expects Swiss growth to remain moderate, forecasting 1.5–2% growth in 2026 and around 1.5% in 2027.
- The main risks remain Middle East tensions, elevated energy prices, global growth, and trade-policy uncertainty. Higher energy prices could increase inflation while weakening economic growth.
The next meeting is on 10 December 2026.
Next 24 Hours Bias
Medium Bullish
The Pound (GBP)
Key news events today
No major news event
What can we expect from the GBP today?
The pound is edging higher as the US dollar weakens, while the IMF’s improved UK growth forecast provides some support. However, high energy costs, uncertainty over interest rates, and global market risks could limit gains. For traders, GBP/USD will depend heavily on dollar movements and BoE rate expectations, while EUR/GBP may also be influenced by concerns about the eurozone.
Central Bank Notes:
- Interest-rate decision: The BoE held the Bank Rate at 3.75% at its 17 September 2026 meeting. The MPC voted 6–3, with three members supporting a 25-basis-point increase to 4.00%. The decision reflects a cautious approach as policymakers balance inflation risks against subdued economic activity.
- UK CPI inflation rose to 3.1% in August, up from 2.9% in July, remaining above the BoE’s 2% target. Core CPI remained at 2.6%, while services inflation was 3.4%, indicating that underlying price pressures are still present.
- The ongoing Middle East conflict has contributed to higher and more volatile energy prices. The BoE expects inflation to rise further over the coming quarters, although the eventual impact will depend on how long energy prices remain elevated.
- The UK economy remains subdued, while weaker demand and a cooling labor market create challenges for the MPC. Policymakers must balance the risk of persistent inflation against the possibility of further weakening economic activity.
- Wage growth and services inflation remain important areas of focus. Although core inflation has been relatively stable, the rise in headline inflation means the MPC is likely to remain cautious about easing policy.
- The BoE is reviewing the pace and structure of its balance-sheet reduction. Its latest plans include slowing the pace of gilt sales, reflecting concerns around market conditions and the impact of quantitative tightening.
- The BoE’s next decisions will remain data-dependent, with inflation, energy prices, wage growth, and economic activity determining whether rates remain unchanged or increase.
- The next meeting is on 5 November 2026.
Next 24 Hours Bias
Medium Bearish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from the CAD today?
The Canadian dollar remains under pressure as weak employment data and expectations of a less hawkish Bank of Canada weigh on sentiment. Lower oil prices are another concern, although easing U.S. dollar strength could provide some relief. For now, the outlook is bearish for CAD and supportive of USD/CAD, with oil prices, U.S. inflation data, and central-bank comments likely to drive the next move.
Central Bank Notes:
- At its 2 September 2026 meeting, the Bank of Canada maintained the overnight rate target at 2.25%, keeping the bank rate at 2.50% and the deposit rate at 2.20%. This marks the seventh consecutive decision at 2.25%. While the decision was expected, the bank’s communication became somewhat more cautious as inflation risks increased. Governor Tiff Macklem emphasized that the bank remains prepared to adjust monetary policy if necessary to preserve price stability.
- The Canadian economy has strengthened significantly in the second quarter. GDP expanded at an annualized rate of 3.3% in Q2 2026, following very weak growth in Q1. The recovery was relatively broad-based, with consumer spending remaining resilient while housing activity, exports, and business investment also improved. However, the bank noted that some of the Q2 strength reflected temporary factors and that the sustainability of the recovery remains uncertain because of renewed trade tensions with the United States.
- The labor market has continued to improve, providing additional support for domestic demand. Employment increased by 75,000 in July, while the unemployment rate declined to 6.4%, its lowest level since July 2024. Wage growth, however, continued to moderate, with average hourly wages rising 2.8% year over year in July compared with 3.3% in June. The combination of stronger employment and moderating wages suggests that labor-market conditions are improving without generating an immediate resurgence in underlying inflation pressures.
- Inflation remains the key concern for the Bank. Headline CPI increased to 3.0% year over year in July, up from 2.8% in June. Much of the acceleration was driven by gasoline, with gasoline prices rising 25.7% year over year. Encouragingly, CPI excluding gasoline remained at 2.2%, while core inflation measures have stayed close to 2%. The Bank therefore continues to distinguish between temporary energy-driven inflation and more persistent underlying price pressures.
- Higher global oil prices have increased the upside risks to Canadian inflation. The continuing conflict in the Middle East, restrictions affecting shipments through the Strait of Hormuz, and elevated refinery margins have kept gasoline and other energy prices high. The Bank is currently looking through some of the direct effects of higher oil prices, but Governor Macklem warned that the longer energy prices remain elevated, the greater the risk that inflation becomes more persistent and spreads into other goods and services.
- US-Canada trade tensions have become a more significant downside risk to growth. New US tariffs on Canadian exports and Canada’s retaliatory measures are creating additional uncertainty for businesses. The bank estimates that the products directly affected by the new tariffs account for around 5% of Canada’s exports to the United States, limiting the immediate economy-wide impact. Nevertheless, broader uncertainty could cause businesses to delay investment and hiring decisions, potentially slowing the recovery.
- The bank’s policy stance remains data-dependent going into October. The BoC is balancing two opposing forces: stronger-than-expected economic activity and renewed inflation risks on one side, versus excess economic capacity and trade-related downside risks on the other. With inflation around 3% but underlying inflation closer to 2%, the bank has so far chosen to remain on hold rather than immediately tighten policy.
- The next meeting is on 28 October 2026.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
API Crude Oil Stock (8:30 pm GMT)
What can we expect from the Oil today?
Oil prices are falling slightly today as traders weigh the possibility of more Russian diesel supplies against continuing Middle East tensions. Brent is trading around $105 and WTI around $92–93 per barrel in early trading. The short-term outlook remains volatile: additional supplies could push prices lower, while further attacks or shipping disruptions could quickly send them higher. Traders should focus on Middle East developments and upcoming U.S. inventory data.
Next 24 Hours Bias
Medium Bullish
