IC Markets Europe Fundamental Forecast | 12 August 2025

IC Markets Europe Fundamental Forecast | 12 August 2025

What happened in the Asia session?

Japanese and Australian equities, Asian currencies (CNY, AUD), select commodity assets (gold), and regional FX pairs sensitive to central bank and trade headlines.

Major movements were driven by the US-China trade truce extension, the RBA’s rate cut, upbeat Singapore GDP, and the PBOC’s CNY fix. Markets remain highly sensitive to macro developments, headline risk, and upcoming data from the US and China. Asian financial markets rallied on positive trade and central bank news, with Japanese stocks, Australian equities, the AUD, CNY, and gold among the most impacted instruments.

What does it mean for the Europe & US sessions?

Today’s trading hinges on U.S. inflation data, key European earnings, and major policy/geopolitical headlines. Expect volatility in stocks, FX, and commodities as investors digest these releases and position for further moves. Traders are watching for updates on GDP and employment following last week’s 25bp BoE rate cut to 4%. The GBP and FTSE100 are sensitive to growth and labor surprises, with additional trade and tariff uncertainty impacting the outlook.

The Dollar Index (DXY)

Key news events today

Core CPI m/m (12:30 pm GMT)

CPI m/m (12:30 pm GMT)

CPI y/y (12:30 pm GMT)

What can we expect from DXY today?

The Dollar is stable and slightly firmer ahead of today’s key U.S. inflation report, with expectations that CPI results will heavily influence both USD value and Fed rate cut probabilities. Geopolitical developments, trade deadlines, and dovish Fed signals are contributing to a cautious yet expectant market tone. High volatility is likely once CPI figures are released, so FX traders are watching dollar pairs closely for breakout or reversal setups. The U.S. Dollar Index (DXY) is hovering around 98.5, unchanged on the day after a recent 0.5% rise over the previous two trading sessions. It’s up 0.42% for the past month, but still down about 4% over the last year.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at the July 29–30, 2025, meeting, keeping policy unchanged for the fifth consecutive meeting.
• The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.
• Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.
• The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.
• In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.
• The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.
• As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.
• The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

Core CPI m/m (12:30 pm GMT)

CPI m/m (12:30 pm GMT)

CPI y/y (12:30 pm GMT)

What can we expect from Gold today?

Gold started Tuesday on a firmer footing after a tariff-driven correction, as traders eye US inflation data and upcoming geopolitical events. Volatility remains high, but the trend is supported by bullish expectations for rate cuts and continued investor demand. Global gold prices edged higher today, recovering some ground after a sharp drop in the previous session. Spot gold was last seen around $3,350 per ounce, up roughly 0.2% from Monday. Monday’s sell-off (down 1.6%) was triggered by President Trump’s assurance that imported gold bars would not face tariffs, easing investor jitters and prompting some profit-taking.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

German ZEW economic sentiment (9:00 am GMT)

What can we expect from EUR today?

The euro is trading with a slightly firmer tone today, supported by stable inflation and cautious optimism in economic sentiment, but faces downward pressure from weaker growth, policy uncertainty, and ongoing trade/tariff issues. ECB policy is steady, with focus shifting to upcoming guidance and macro events. European equities and key eurozone financial instruments remain sensitive to today’s economic releases, while FX traders eye further headlines for short-term direction.

Central Bank Notes:

• The Governing Council kept the three key ECB interest rates unchanged at its July 24 meeting, maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%, following eight consecutive cuts preceding this decision.
• The decision to hold rates steady was driven by evidence that inflation is stabilizing near the Governing Council’s medium-term target of 2%. Policymakers communicated that further moves on rates would be data-dependent, explicitly refraining from pre-committing to any future path amid persistent global and domestic uncertainties.
• According to the latest Eurosystem staff projections, headline inflation is expected to remain around 2.0% for 2025, with projections indicating 1.6% for 2026 and a rebound to 2.0% in 2027. Downward revisions from previous forecasts primarily reflect lower energy price assumptions and a stronger euro. Inflation excluding energy and food is seen averaging 2.4% in 2025 and 1.9% in 2026–2027, little changed from prior projections.
• Real GDP growth for the Eurozone is forecast at 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. The projections note that a strong first quarter offsets a weaker outlook for the rest of 2025. While business investment and exports are dampened by ongoing trade policy uncertainties—including recent U.S. tariff measures—rising government investment, particularly in defense and infrastructure, is expected to progressively underpin growth.
• Household spending should be supported by firm real income gains and a still-solid labour market. More favorable financing conditions are expected to help strengthen the economy’s resilience to further global shocks. Wage growth, although still elevated, continues to moderate, with profit margins partially absorbing cost pressures.
• Amid significant geopolitical and economic uncertainty, the Governing Council underscored its commitment to ensuring inflation stabilises sustainably at the 2% target. The ECB reiterated it would pursue a meeting-by-meeting, data-dependent approach to its monetary policy stance.
• Future rate decisions will be guided by the assessment of incoming economic and financial data, the outlook for inflation and underlying inflation dynamics, and the effectiveness of monetary policy transmission. The Council continues to stress that it is not pre-committed to any specific rate trajectory.
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are continuing to decline in an orderly and predictable way, as the Eurosystem has ceased reinvesting principal payments from maturing securities.
• The next meeting is on 11 September 2025

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from CHF today?

The Swiss franc is under pressure today due to aggressive new U.S. tariffs and global market trends favoring risk assets. The currency is holding near multi-month lows against the dollar and euro, with volatility likely as traders await major U.S. inflation data and further developments in Swiss-U.S. trade talks. Corporate earnings reflect currency headwinds, and Swiss policymakers are actively seeking to mitigate trade disruption risks.

The Swiss franc (CHF) hovered around 0.8111 per USD, down 0.12% from the previous session after a one-month slide of 1.63%, reflecting recent pressure from new 39% U.S. tariffs on Swiss exports—especially gold bars and watches. These tariffs affect about 60% of Swiss exports to the U.S., threatening Switzerland’s largest trade partner for high-value goods. Swiss officials made a last-minute diplomatic trip to Washington, but talks to avert the tariffs failed.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.25% to 0% on 19 June 2025, marking the sixth consecutive reduction.
• Inflationary pressure has decreased further as compared to the previous quarter, decreasing from 0.3% in February to -0.1% in May, mainly attributable to lower prices in tourism and oil products.
• Compared to March, the new conditional inflation forecast is lower in the short term. In the medium term, there is hardly any change from March, putting the average annual inflation at 0.2% for 2025, 0.5% for 2026, and 0.7% for 2027.
• The global economy continued to grow at a moderate pace in the first quarter of 2025, but the global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions.
• Swiss GDP growth was strong in the first quarter of 2025, but this development was largely because, as in other countries, exports to the U.S. were brought forward.
• Following the strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year; the SNB expects GDP growth of 1% to 1.5% for 2025 as a whole, while also anticipating GDP growth of 1% to 1.5% for 2026.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 25 September 2025.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

Average earning index 3m/y (6:00 am GMT)

Climate count change (6:00 am GMT)

What can we expect from GBP today?

The Pound is stable near 1.3440 going into today’s European session, holding recent gains but trading cautiously ahead of crucial labor market data. The BoE rate cut and policy guidance anchor expectations, with macro data now playing a key role in shaping GBP direction. A resilient employment report could help the Pound hold or build on gains, but downside risks remain if UK jobs or wage growth surprise negatively. The Pound is trading around 1.3430–1.3448, just off a recent two-week high. It has slipped 0.01% from yesterday’s close but remains up 4.4% over the past year.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted on 7 August 2025 by a majority (exact split likely 5–3–1 or similar, based on expectations) to cut the Bank Rate by 25 basis points to 4.00%. Multiple members supported the move, citing fragile economic growth and signs of disinflation, while others preferred a larger reduction, and at least one member voted to hold the rate steady due to concerns about persistent inflation.
• The Committee unanimously decided to continue reducing the stock of UK government bond purchases held for monetary policy purposes by £100 billion over the next 12 months, targeting a balance of £558 billion by October 2025. As of 7 August, the gilt stock stands at £590 billion.
• Disinflation has been substantial since 2023 owing to policy tightening and the fading of external shocks. However, an unexpected uptick in headline CPI inflation—to 3.6% in June—reflects pass-through from regulated prices and earlier energy price rises, as well as signs of sticky core inflation.
• Headline CPI inflation is now 3.6%, above the Bank’s 2% target, reflecting regulated and energy price effects. The Committee expects inflation to remain around this level through Q3 before resuming its downward trend into 2026.
• UK GDP growth remains weak. Business and consumer surveys point to lacklustre activity, and the labour market continues to loosen, with increasing evidence of slack. Wage growth has softened but remains above pre-pandemic norms.
• Pay growth and employment indicators have moderated further, and the Committee expects a significant slowing in pay settlements over the rest of 2025.
• Global uncertainty remains elevated, especially with rising energy prices and supply disruptions linked to conflict in the Middle East and renewed trade tensions. These factors prompt the MPC to remain vigilant in monitoring cost and wage shocks.
• The risks to inflation are considered two-sided. With the outlook for growth subdued and inflation persistence less clear, the Committee argues that a gradual and careful approach to further easing is warranted, with future policy decisions highly data-dependent.
• The Committee’s bias is still towards maintaining monetary policy at a restrictive stance until there is firmer evidence that inflation will return sustainably to the 2% target over the medium term. Further adjustments to policy will be decided on a meeting-by-meeting basis, with scrutiny of developments in demand, costs, and inflation expectations.
• The next meeting is on 18 September 2025.
  
  Next 24 Hours Bias
  
  Weak Bearish

The Canadian Dollar (CAD)

Key news events today

No major news event

What can we expect from CAD today?

The Canadian dollar continues to slide as the US dollar rises ahead of critical CPI data. Local economic softness and new trade policy risks weigh on CAD, and most analysts expect the currency to remain under pressure pending both Canadian and US macroeconomic developments. Traders should watch for immediate moves in USD/CAD following the US inflation release and remain alert for headlines on tariffs and rate policies.

Central Bank Notes:

• The Bank of Canada maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% as of July 30, marking the third consecutive meeting with rates on hold.
• The Council cited ongoing U.S. tariff adjustments and unresolved trade negotiations as driving factors for elevated economic uncertainty. The persistence of tariffs well above early-2025 levels continues to present downside risks for growth and keeps inflation expectations elevated, supporting a cautious approach to monetary easing.
• The lack of a clear U.S. policy path, plus frequent threats of additional tariffs, led the Bank to highlight risks to Canadian exports and broader demand, amplifying uncertainty about future growth.
• Canada’s economic growth in the first quarter came in at 2.2%, slightly stronger than the original forecast, while the composition of GDP growth was largely as expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence.
• Canadian GDP growth is expected to be near 0% in Q2 2025, closely aligned with the more optimistic scenario outlined earlier in the year. Weakness in manufacturing activity—driven by both U.S. trade disruptions and sector-specific challenges like wildfires—contributed to softer output. A partial recovery is anticipated in Q3 due to rebuilding efforts and stronger retail sales in June.
• Consumer spending slowed, especially as households front-loaded durable goods purchases ahead of tariffs. Housing activity remains subdued, with resales and construction still soft despite some government tax relief measures.
• Headline CPI inflation continued to ease, holding close to 1.7% in June, aided by declines in energy prices following the removal of the fuel charge. However, the Bank’s measures of core inflation and underlying price pressures moved up further due to higher import costs from tariffs and lingering supply disruptions.
• The Governing Council reiterated it will carefully weigh ongoing upward inflation pressure from tariffs and cost shocks against the gradual downward pull from economic weakness. While additional rate cuts remain possible, timing and scale will depend on trade policy developments and inflation’s path..
• The next meeting is on 17 September 2025.

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 remains near multi-month lows despite today’s bounce, as oversupply concerns dominate the narrative. Geopolitical moves and OPEC+ production changes are the main drivers to watch for further volatility. West Texas Intermediate (WTI) traded around $64.11–$64.14 per barrel, seeing a modest gain of about 0.2–0.3% from the previous session. Brent crude rose to approximately $66.86–$66.99 per barrel, up about 0.3–0.5%. Despite today’s uptick, both benchmarks remain near two-month lows. Oil prices are down over 10% year-to-date and have retreated 3–4% in the last month, reflecting persistent bearish momentum.

Next 24 Hours Bias

Weak Bearish