IC Markets – Europe Fundamental Forecast | 04 November 2026
What happened in the Asia session?
The US dollar and Treasury yields moved lower following early Democratic election victories, providing support for EUR/USD, GBP/USD, and gold. Meanwhile, Asian equities weakened, particularly Japanese and South Korean stocks, as concerns about technology valuations affected investor sentiment.
The Australian dollar received some support from stronger household spending, although the RBA’s cautious outlook and weaker Chinese services PMI created conflicting signals. Oil remained volatile as traders continued to assess geopolitical developments involving Iran and potential disruptions to global supply.
What does it mean for the European & US sessions?
The U.S. dollar is facing selling pressure following early Democratic gains in the midterm elections, providing some support for major currencies such as the euro and Japanese yen. Gold, however, remains vulnerable to elevated Treasury yields and expectations of tighter Federal Reserve policy.
Oil prices are moving lower as traders assess the possibility of progress in U.S.-Iran negotiations, although declining U.S. crude inventories could provide support.
The Dollar Index (DXY)
Key news events today
ISM Services PMI (3:00 pm GMT)
What can we expect from the DXY today?
The US dollar is facing renewed selling pressure on Wednesday following early US midterm election results that showed strong gains for Democrats. Although the dollar initially strengthened on Tuesday due to higher Treasury yields and solid economic data, election uncertainty has reversed some of those gains. Investors are now watching the election outcome, US employment figures, and ISM Services PMI for further direction.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) kept interest rates unchanged at 3.75%–4.00% at its October 27–28 meeting. The decision was approved by a 10–2 vote, following September’s 25-basis-point rate hike. Two members preferred another 25-basis-point increase.
- The labor market remains relatively stable. The Fed noted that job gains have kept pace with workforce growth and that the unemployment rate has changed little. Employment conditions remain an important factor in future policy decisions.
- Inflation remains above the Fed’s 2% target. Policymakers want more economic data to assess whether inflation is moving sustainably towards the target. Persistent inflation could increase the possibility of further rate hikes.
- The Fed upgraded its assessment of the U.S. economy from a solid pace of growth to a strong pace. Domestic spending remains resilient, productivity growth is strong, and business investment remains robust. However, geopolitical developments continue to create uncertainty.
- The Fed has kept the door open to further rate hikes if inflation remains elevated. The latest decision suggests policymakers want more evidence before making their next move. Markets are watching closely for signals about a possible rate increase in December.
- Chair Kevin Warsh continues to emphasize the importance of bringing inflation back to the 2% target. The October decision reflects a cautious approach, with the Fed waiting for more information before adjusting interest rates again.
- The Fed’s decision could influence the U.S. dollar, Treasury yields, gold, and other financial markets. Expectations of higher interest rates may support the dollar and pressure gold, while signs of easing inflation could weaken the dollar and support gold prices. Market reactions will depend on incoming economic data and expectations for future policy.
- The next meeting is scheduled for 8 to 9 December 2026.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
ISM Services PMI (3:00 pm GMT)
What can we expect from the Gold today?
Gold is attempting to recover on Wednesday after Tuesday’s decline, with prices trading around $3,931 per ounce. The main positive factors are a weaker US dollar, lower Treasury yields, and uncertainty surrounding the US midterm elections, which are encouraging some investors to seek safety in gold.
However, the upside remains limited by expectations of another Federal Reserve interest-rate increase in December. Strong US employment data and the possibility of higher interest rates continue to present risks for bullion.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
Core CPI Flash Estimate y/y (10:00 am GMT)
CPI Flash Estimate y/y (10:00 am GMT)
What can we expect from the EUR today?
The euro enters Wednesday facing an important session, with Eurozone inflation and business activity figures likely to determine its near-term direction. Higher inflation could strengthen the euro by increasing expectations of another ECB rate hike in December, while weaker inflation or disappointing PMI figures could create selling pressure.
Central Bank Notes:
- At its 29 October meeting, the ECB kept all three key interest rates unchanged. The deposit facility rate remains at 2.50%, the main refinancing operations rate at 2.65%, and the marginal lending facility rate at 2.90%. The ECB maintained its data-dependent, meeting-by-meeting approach, with no commitment to future rate changes.
- Inflation remains a major concern. Euro-area annual inflation rose to 3.8% in September, up from 3.2% in August. Higher energy prices were the main contributor, with energy inflation reaching 18.8%. This keeps inflation well above the ECB’s 2% target.
- Economic growth remains relatively modest. The ECB’s September projections expect GDP growth of 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028. Although the economy has shown resilience, higher energy costs and geopolitical uncertainty continue to threaten the outlook.
- Economic confidence weakened in October. The Euro-area Economic Sentiment Indicator declined by 0.6 points to 96.9, marking its second consecutive monthly decline. Consumer confidence also weakened, suggesting continued pressure on household spending and business activity.
- Energy prices remain a major risk to the inflation outlook. The ECB warned that prolonged increases in oil and natural gas prices could push inflation higher while weakening economic growth. The bank is also monitoring whether higher energy costs begin spreading into wages and broader consumer prices.
- The ECB’s balance-sheet reduction continues. The APP and PEPP portfolios are gradually declining as the central bank no longer reinvests principal payments from maturing bonds. This process represents continued quantitative tightening and a gradual withdrawal of monetary support.
- The main focus heading into November is whether persistent inflation will require further interest rate increases. The ECB remains cautious as rising energy costs create inflation risks, while weaker economic confidence and tighter financing conditions could weigh on growth. Upcoming inflation and economic activity data will be important in determining the bank’s next policy decision.
The next meeting is on 16-17 December 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 is showing strong performance, supported by better-than-expected Swiss inflation data and weakness in the US dollar following uncertainty surrounding the US midterm elections.
October inflation increased to 1.5% annually, exceeding expectations and raising the possibility that the SNB may eventually reconsider its current zero-interest-rate policy. Meanwhile, demand for safe-haven currencies is providing additional support to CHF.
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
Weak Bearish
The Pound (GBP)
Key news events today
No major news event
What can we expect from the GBP today?
The British pound is showing positive momentum, with GBP/USD trading around 1.3400, supported by expectations of a Bank of England interest-rate increase on Thursday. A weaker US dollar ahead of the American midterm elections has also helped sterling strengthen.
Today’s UK Services and Composite PMI releases are important because stronger readings could reinforce confidence in the UK economy and provide additional support for the pound.
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 is facing mixed conditions heading into Wednesday’s trading session. Although the Bank of Canada’s recent interest-rate increase and hawkish comments from Governor Tiff Macklem are providing some support, falling oil prices and concerns about slower Canadian economic growth are limiting its upside.
USD/CAD has recovered towards the 1.4000 level after the Canadian dollar retreated from a six-week high.
Central Bank Notes:
- On 28 October 2026, the Bank of Canada raised its overnight interest rate by 25 basis points to 2.50%, ending its extended period of holding rates steady. The bank cited persistent inflation risks and stronger economic activity. Further rate increases remain possible.
- Canada’s economy grew by an annualized 3.3% in Q2 2026, with growth estimated at around 2% in Q3. However, new US tariffs and trade uncertainty are expected to slow economic activity in Q4.
- Unemployment has remained around 6.5%, indicating continued spare capacity in the labor market. Although employment conditions have stabilized, uncertainty over trade and economic growth remains a concern.
- Canada’s annual inflation rate rose to 3.1% in September, up from 3.0% in August. Higher gasoline prices were the main driver, while inflation excluding gasoline remained at 2.2% and core inflation measures stayed close to 2%.
- Persistently high global oil prices and Middle East tensions continue to increase fuel and transportation costs. The bank warned that these pressures could spread to other goods and services, keeping inflation elevated for longer.
- Renewed US tariffs and uncertainty over trade relations remain significant risks to Canada’s economic outlook. These pressures could weaken exports, delay business investment, and slow growth, while also increasing business costs.
- The BoC has raised its policy rate to 2.50% to limit the risk of persistent inflation. The bank may raise rates further if price pressures continue, but future decisions will depend on economic data, energy prices, and trade developments.
- The next meeting is on 9 December 2026.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from the Oil today?
Oil prices are facing renewed downward pressure as traders become more optimistic about a possible diplomatic resolution to the U.S.–Iran conflict. Brent is trading around $103.34, while WTI is around $95.56. Expectations of improved supply conditions and uncertainty surrounding the U.S. midterm elections are weighing on market sentiment.
Next 24 Hours Bias
Medium Bullish
