IC Markets – Europe Fundamental Forecast | 22 October 2026
What happened in the Asia session?
Asia-session trading on Thursday was driven mainly by rising oil prices, Middle East tensions, concerns over AI spending, and uncertainty about Federal Reserve policy. Brent crude was the clearest bullish mover, while Asian equities weakened. The yen remained caught between the negative effects of expensive oil imports and the potential support of tighter Bank of Japan policy.
What does it mean for the European & US sessions?
European and U.S. traders should focus on U.S. jobless claims, European consumer confidence, Treasury yields, central-bank expectations, and Middle East developments. The dollar is consolidating as markets await next week’s central-bank decisions, while gold remains sensitive to yields and safe-haven demand. Oil is the key geopolitical risk, with supply concerns supporting elevated prices.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (12:30 pm GMT)
What can we expect from the DXY today?
The U.S. dollar is showing signs of stabilization after recent weakness, but its overall direction remains uncertain. Lower Treasury yields and stronger competing currencies are creating pressure, while expectations of a cautious but potentially hawkish Federal Reserve are providing some support.
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
Medium Bullish
Gold (XAU)
Key news events today
Unemployment Claims (12:30 pm GMT)
What can we expect from the Gold today?
Gold is facing short-term bearish pressure as oil-driven inflation concerns and expectations of a possible December Fed rate hike weigh on prices. It recently traded near $4,121 per ounce after reaching a one-week low. However, falling Treasury yields and geopolitical tensions could help limit losses or trigger a rebound.
Next 24 Hours Bias
Medium Bearish
The Euro (EUR)
Key news events today
No major news event
What can we expect from the EUR today?
The euro faces a cautious outlook on Thursday. Expectations of further ECB rate increases may offer support, but French debt concerns and uncertainty about economic growth remain obstacles. Traders should watch Panetta’s speech and today’s consumer-confidence release, followed by Friday’s eurozone PMIs and Moody’s review of France.
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 weaker Swiss trade surplus and low interest rates may limit its strength, while safe-haven demand could support the currency during periods of market uncertainty. Traders should pay particular attention to the SNB’s scheduled policy-discussion summary, movements in the U.S. dollar, and geopolitical developments.
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 has a moderately bullish fundamental outlook because UK inflation has risen more than expected, strengthening expectations of a Bank of England rate hike in November. Sterling has gained against both the US dollar and euro, but the positive inflation news may already be priced in. Today, watch UK business surveys, comments from Governor Bailey, and US jobless claims. Strong UK data and hawkish BoE comments could support GBP/USD and push EUR/GBP lower, while weaker economic signals or a stronger US dollar could reverse sterling’s gains.
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 Bullish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from the CAD today?
The Canadian dollar enters Thursday with a supportive backdrop, trading near a four-week high as markets anticipate the Bank of Canada’s October 28 decision. Oil prices and today’s Canadian producer-price data remain important drivers, while changes in U.S. dollar sentiment could create volatility.
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 Bullish
Oil
Key news events today
No major news event
What can we expect from the Oil today?
Oil prices are moving higher on Thursday, as escalating Middle East tensions and falling U.S. crude inventories support the market. Brent is trading around $110 per barrel, while WTI is near $98 in early trading. Although recovering Gulf exports could limit gains, the risk of further attacks and shipping disruptions remains the main bullish driver.
Next 24 Hours Bias
Strongly Bullish
