IC Markets – Europe Fundamental Forecast | 03 November 2025
What happened in the Asia session?
Today’s Asia session was characterized by a strong US dollar, oil market strength on OPEC+ cuts, and generally cautious risk sentiment in anticipation of major macroeconomic releases and central bank meetings. Currencies most impacted were USD/SGD, AUD/USD, and risk-linked FX, while crude oil and the ASX 200 led moves in commodities and equities. The US dollar extended its strength in Asia, especially against risk-sensitive currencies like the Singapore dollar (USD/SGD climbed past the 1.30 level), as investors responded to continued hawkish signals from the Federal Reserve.
What does it mean for the Europe & US sessions?
The ISM Manufacturing PMI at 3:00 PM ET is today’s headline event, with markets watching for any signs of improvement above the 50 threshold. Seven consecutive months of contraction have weighed on manufacturing sentiment, and today’s data will provide crucial insight into whether the sector is stabilizing. The RBA’s widely expected hold decision tonight will confirm that Australia’s rate-cutting cycle has paused due to sticky inflation. Markets have dramatically repriced expectations following the hot Q3 CPI data.
The Dollar Index (DXY)
Key news events today
ISM manufacturing PMI (3:00 pm GMT)
ISM manufacturing prices (3:00 pm GMT)
What can we expect from DXY today?
The DXY index holds near three-month highs around 99.8 following hawkish Fed rhetoric that reduced December rate cut odds to 63%Fed officials push back: Cleveland Fed’s Hammack and two other regional presidents publicly opposed further rate cuts, citing elevated inflation concerns. Manufacturing data in focus: S&P Global and ISM manufacturing PMIs were released Monday, with expectations of modest improvement, but ISM remaining in contraction territory.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) voted, by majority, to lower the federal funds rate target range by 25 basis points to 3.75%–4.00% at its October 28–29, 2025, meeting, marking the second consecutive cut following the 25 basis points reduction in September.
- The Committee maintained its long-term objectives of maximum employment and 2% inflation, noting that the labor market continues to soften, with modest job creation and an unemployment rate edging higher. In comparison, inflation remains above target at around 3.0%.
- Policymakers highlighted ongoing downside risks to economic growth, tempered by signs of resilient economic activity. September’s consumer price index (CPI) came in slightly lower than expected at 3.0% year-over-year, easing inflation pressure but still warranting vigilance given tariff-driven price effects.
- Economic activity expanded modestly in the third quarter, with GDP growth estimates around 1.0% annualized; however, uncertainty remains elevated amid persistent global trade tensions and the U.S. government shutdown, which is impacting data availability.
- The updated Summary of Economic Projections reflects an anticipated unemployment rate averaging approximately 4.5% for 2025, with headline and core personal consumption expenditures (PCE) inflation projections holding near 3.0%, indicating a slow easing path ahead.
- The Committee emphasized its flexible, data-dependent approach and underscored that future policy adjustments will be guided by incoming labor market and inflation data. As in prior meetings, there was dissent, including one member advocating a more aggressive 50-basis-point cut.
- The FOMC announced the planned conclusion of its balance sheet reduction (quantitative tightening) program, intending to cease runoff in the near term to maintain market stability, with Treasury redemption caps held steady at $5 billion per month and agency mortgage-backed securities caps at $35 billion.
- The next meeting is scheduled for 9 to 10 December 2025.
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
ISM manufacturing PMI (3:00 pm GMT)
ISM manufacturing prices (3:00 pm GMT)
What can we expect from Gold today?
Gold begins the week of November 3, 2025, in consolidation mode around $3,972 per ounce, approximately 9% below its October 20 all-time high of $4,381. The precious metal faces competing pressures: hawkish Federal Reserve commentary has reduced expectations for December rate cuts and strengthened the dollar, while improved US-China trade relations have dampened safe-haven demand. China’s elimination of its gold VAT rebate, effective November 1, adds another near-term headwind by potentially reducing retail buying in a major market.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
The euro faces multiple headwinds on Monday, November 3, 2025, as it trades near three-month lows around 1.1530-1.1537. Persistent US dollar strength, driven by the Federal Reserve’s hawkish stance and reduced expectations for near-term rate cuts, remains the primary pressure point. While the ECB has maintained rates at accommodative levels and eurozone economic data have modestly exceeded expectations, political uncertainty in France and ongoing trade tensions continue to weigh on sentiment.
Central Bank Notes:
- The Governing Council of the ECB kept the three key interest rates unchanged at its meeting on 30 October 2025. The main refinancing rate remains at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. This decision reflects policymakers’ assessment that the current monetary stance remains consistent with medium-term price stability, while incoming data confirm a gradual return of inflation towards the target.
- Recent indicators point to stable price dynamics. Headline inflation remains near the 2% mark, with energy prices contained and food inflation easing slightly after earlier supply bottlenecks. Wage growth continues to moderate, contributing to the slowdown in domestic cost pressures. The ECB reiterated its commitment to a data-driven, meeting-by-meeting approach and emphasized flexibility in the face of uncertain global financial conditions.
- Eurosystem staff projections have not been materially altered since September. Headline inflation averages remain at 2.0% for 2025, 1.8% for 2026, and 2.0% for 2027. Recent softening in producer prices and subdued pipeline pressures suggest limited upside risks to inflation, though geopolitical tensions and potential commodity shocks continue to pose uncertainties to the outlook.
- Euro area GDP growth remains on track with earlier forecasts, projected at 1.1% for 2025, 1.1% for 2026, and 1.4% for 2027. Forward-looking indicators, including PMIs and industrial sentiment surveys, signal some stabilization in activity following weakness in the third quarter. Public investment and recovering export activity are expected to offset softer private sector demand in the near term.
- The labor market remains resilient, with unemployment rates at multi-decade lows and participation rates strong. Real income growth continues to support household spending, even as consumption growth normalizes from earlier highs. Financing conditions remain favorable, aided by stable banking sector liquidity and improved credit demand among small and medium-sized firms.
- Business sentiment remains mixed, reflecting lingering uncertainty over global trade policy and the path of US tariffs. However, easing supply chain costs and improved export competitiveness due to softer exchange rates are providing some relief to manufacturing and external-oriented sectors.
- The Governing Council reaffirmed that future decisions will depend on an integrated assessment of incoming data—covering inflation trends, financial conditions, and the state of policy transmission. The Council emphasized that no pre-set path for rates exists; keeping all options open should the economic outlook shift markedly.
- Balance sheet reduction continues smoothly, with holdings under the APP and PEPP declining as reinvestments have ceased. The ECB confirmed that the pace of portfolio runoff remains in line with its previously communicated normalization plan, supporting a gradual withdrawal of monetary accommodation in a predictable manner.
- The next meeting is on 17 to 18 December 2025
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
CPI m/m (7:00 am GMT)
What can we expect from CHF today?
The Swiss franc showed short-term weakness, declining against major currencies over the past week, though it maintains substantial year-to-date gains exceeding 12%. Switzerland’s inflation remains subdued at 0.2% year-on-year, with the SNB holding rates at 0% and projecting continued low inflation. The franc continues to benefit from safe-haven demand driven by geopolitical tensions and global uncertainty, while the SNB’s gold reserves have generated significant profits amid soaring gold prices.
Central Bank Notes:
- The SNB maintained its key policy rate at 0% during its meeting on 25 September 2025, pausing a sequence of six consecutive rate cuts as inflation stabilized and the Swiss franc remained firm.
- Recent data showed a modest rebound in inflation, with Swiss consumer prices rising 0.2% year-on-year in August after staying above zero for three consecutive months; this helped alleviate fears of deflation that were mounting earlier in the year.
- The conditional inflation forecast remains broadly unchanged from June: headline inflation is expected to average 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027. The risk of a negative rate move has diminished for now, but the SNB retains flexibility should inflationary pressures weaken again.
- The global economic outlook has deteriorated further, weighed down by heightened trade tensions—especially with the U.S.—and ongoing uncertainty in key Swiss export markets.
- Swiss GDP growth moderated in Q2 after a strong Q1 boosted by front-loaded U.S. exports. The SNB expects growth to slow and remain subdued, with forecasted GDP expansion between 1% and 1.5% in both 2025 and 2026.
- Labor market sentiment in the Swiss industrial sector has softened on concerns over export competitiveness and potential adjustments to production, but the overall growth outlook stays broadly unchanged
- The SNB reiterated its readiness to respond as needed if deflation risks re-emerge, emphasizing its commitment to medium-term price stability and a robust, transparent communication policy, with the introduction of more detailed monetary policy minutes beginning in October.
- The next meeting is on 11 December 2025.
Next 24 Hours Bias
Weak Bullish
The Pound (GBP)
Key news events today
No major event
What can we expect from GBP today?
The British pound enters this critical week facing multiple headwinds that have pushed it to seven-month lows. A toxic combination of fiscal uncertainty stemming from the upcoming budget, expectations of additional Bank of England rate cuts, deteriorating productivity forecasts adding £20 billion to the fiscal hole, and a strengthening US dollar has created substantial downward pressure on sterling. While recent retail sales data showed unexpected resilience, and inflation has begun to ease slightly, the overall fundamental backdrop remains bearish for the pound in the near term.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted on 18 September 2025 by a majority (expected split likely 7–2 or 6–3) to hold the Bank Rate steady at 4.00%, following the rate cut in August. Most members cited persistent inflation and mixed indicators on growth and employment, while a minority favored further easing due to the cooling labor market and subdued GDP growth.
- The Committee decided to decrease the pace of quantitative tightening, planning to reduce the stock of UK government bond purchases by £67.5 billion over the next 12 months, instead of the prior £100 billion pace, with the gilt balance now standing at nearly £558 billion. This reflects increased volatility in bond markets and a shift to a more gradual approach.
- Headline inflation rose unexpectedly to 3.8% in July and is projected at 4% for September, above the Bank’s 2% target. Price pressures are driven by regulated energy costs and ongoing food price increases. While previous disinflation has been substantial, core inflation remains elevated and sticky.
- The MPC expects headline inflation to remain above target through Q4, with a resumption of the downward trend projected for early 2026 as energy and regulated price pressures abate. The Committee remains watchful for signs of persistent inflation despite previous policy tightening.
- UK GDP growth is stagnant, with business and consumer activity subdued. Recent labor market data show rising unemployment rates (now at 4.7%) and stabilizing wage growth (holding near 5%), indicating slack but continued wage price pressure. The Committee remains cautious amid lackluster demand and soft survey sentiment.
- Pay growth and employment indicators have moderated further, alongside confirmation from business surveys that pay settlements are slowing. The Committee expects wage growth to decelerate significantly through Q4 and the rest of 2025.
- Global uncertainty persists due to volatile energy prices, supply chain disruptions linked to Middle East conflicts, and renewed trade tensions. The MPC remains vigilant in tracking transmission of external cost/wage shocks to UK inflation.
- Risks to inflation are considered two-sided. While subdued domestic growth and softening labor activity suggest scope for easing, persistent inflation requires caution. The MPC anticipates a slow, gradual reduction path in rates, continuing its data-dependent approach with careful adjustment as warranted by economic developments.
- The Committee’s bias remains toward maintaining a restrictive monetary policy stance until firmer evidence emerges that inflation will return sustainably to the 2% target. All future decisions will remain highly data dependent, with a strong emphasis on evolving demand, inflation expectations, costs, and labor market conditions.
- The next meeting is on 6 November 2025.
Next 24 Hours Bias
Medium Bearish
The Canadian Dollar (CAD)
Key news events today
BOC Gov Macklem speaks (6:30 pm GMT)
What can we expect from CAD today?
The Canadian Dollar entered November 3, 2025, facing significant headwinds from diverging monetary policies between the Bank of Canada and the Federal Reserve, persistent economic weakness driven by U.S. trade tensions, and structural challenges that limit policy support. While higher oil prices provided some cushion, the USD/CAD pair remained elevated near 1.40, reflecting the CAD’s vulnerability to external shocks and the U.S. dollar’s relative strength. With the BoC signaling a pause in rate cuts and weak economic data continuing to emerge, the Canadian Dollar’s near-term outlook remains cautious, dependent largely on trade policy developments and global commodity price stability
Central Bank Notes:
- The Council noted that U.S. tariff tensions have eased slightly following early progress in bilateral discussions, though the external trade environment remains fragile. Businesses continue to hold back on long-term investment, with the Bank highlighting that sustained clarity on U.S. trade policy is needed to restore confidence.
- The Bank acknowledged that uncertainty persists despite the softer U.S. tone, as incoming data show limited improvement in export orders. The manufacturing sector has stabilized but remains below pre-2024 output levels, reflecting weak global demand and cautious corporate spending.
- Canada’s economy showed tentative signs of recovery in early Q4, with GDP estimated to expand by 0.3% in October after two quarters of contraction. Mining and energy activity strengthened modestly, aided by steady crude demand, while goods exports posted a fractional gain.
- Service sector growth remained uneven, supported mainly by tourism-related and technology services. However, retail spending and household consumption were subdued, constrained by slower job creation and lingering consumer caution. The Bank judged overall momentum as fragile but improving marginally.
- Housing activity showed modest reacceleration in major urban markets as mortgage rates stabilized near record lows. Nonetheless, affordability pressures and stricter lending standards continue to cap overall resale volumes, leading to only a gradual recovery in the housing sector.
- Headline CPI inflation rose to 2.1% in October, reaching the Bank’s target for the first time in six months. The increase was driven by higher energy prices and a modest uptick in food and shelter costs. Core inflation measures remained stable, suggesting underlying price pressures are contained.
- The Governing Council reiterated its data-dependent stance, indicating that the current policy rate remains appropriate amid tentative growth and balanced inflation risks. Officials noted that while additional stimulus is not ruled out, the emphasis has shifted toward monitoring the sustainability of the recovery rather than immediate rate adjustments.
- The next meeting is on 17 to 18 December 2025.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major new event
What can we expect from Oil today?
Oil prices rose on Monday, with WTI at $61.34/bbl and Brent at $65.01/bbl, following OPEC+’s decision to increase December production by just 137,000 bpd while pausing all output hikes for Q1 2026. This strategic freeze aims to prevent oversupply during weak seasonal demand, even as global oil inventories swell with a record 1.4 billion barrels at sea. Key developments include US production hitting record highs of 13.644 million bpd, Ukrainian drone strikes damaging Russia’s Tuapse oil terminal, new US sanctions on Rosneft and Lukoil, and potential US-China energy deals involving Alaskan oil and gas. Despite short-term price support from OPEC+ discipline and geopolitical risks, the market faces persistent oversupply concerns with forecasts projecting potential surpluses of up to 4 million bpd in 2026.
Next 24 Hours Bias
Medium Bearish
