IC Markets – Europe Fundamental Forecast | 12 November 2025
What happened in the Asia session?
Today’s Asian session was characterized by cautiously optimistic sentiment driven primarily by the impending end to the US government shutdown, which lifted risk appetite across equity markets. However, gains were uneven, with sector-specific stories dominating individual market movements. The standout Japanese business confidence data suggests resilience in the world’s third-largest economy, supporting the case for BOJ policy normalization.
What does it mean for the Europe & US sessions?
The US Senate passed a funding bill on November 11 in a 60-40 vote, potentially ending the longest government shutdown in US history after 41 days. The House is expected to vote on the legislation as early as Wednesday afternoon, November 13, before sending it to President Trump for signing. The bill extends funding for most agencies until January 30, 2026, while including full-year funding bills for some parts of the government. This development has boosted market optimism, with equity futures rising and the US dollar weakening.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
The US dollar is under pressure as deteriorating labor market conditions, collapsing consumer sentiment, and rising expectations of a Fed rate cut weigh on the currency. The DXY trades around 99.46-99.55, near multi-week lows, down 6.05% over the past year. Private-sector job losses averaged 11,250 per week through late October, while consumer sentiment fell to a 3.5-year low of 50.3. Markets now price in a 68% chance of a 25-basis-point Fed rate cut in December, up from 62% a day earlier.
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
No major news event
What can we expect from Gold today?
Gold’s performance reflects a confluence of supportive factors positioning the precious metal for continued strength. The convergence of mounting Federal Reserve rate cut expectations (64-67% probability for December), dollar weakness, resolution of the U.S. government shutdown, and robust central bank buying (634 tonnes through September) has propelled gold to four consecutive sessions of gains around $4,130 per ounce.
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 is consolidating near two-week highs around $1.1575 on November 12, 2025, supported by diverging monetary policy paths between the ECB and Federal Reserve. While the ECB maintains its cautious “data-dependent” stance with rates on hold and only a 40% chance of cuts by September 2026, the Fed continues easing amid weakening US labor market data. Eurozone economic fundamentals remain mixed: Q3 GDP growth of 0.2% meets expectations, inflation has eased to 2.1% (close to the ECB’s 2% target), and economic sentiment improved to 25.0 in November.
Central Bank Notes:
- The Governing Council of the ECB kept the three key interest rates unchanged at its 30 October 2025 meeting. 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 amid 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
No major news event
What can we expect from CHF today?
The Swiss franc strengthened significantly, driven primarily by optimism that Switzerland will secure a trade deal reducing US tariffs from 39% to 15% within the next two weeks. This news lifted Swiss watchmaker stocks and provided relief to an export-oriented economy that has seen its GDP growth forecasts slashed due to tariff impacts. The SNB maintains its policy rate at 0% with Chairman Schlegel indicating rates will remain on hold for an extended period, as inflation remains subdued at 0.1% in October.
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 news event
What can we expect from GBP today?
The pound faces mounting pressure from weak labour market data that has shifted expectations sharply toward a December rate cut by the Bank of England. With unemployment at a four-year high and wage growth slowing to multi-year lows, markets now see a three-in-four chance of rates being reduced to 3.75% next month. The currency traded around 1.3166 against the dollar, with technical resistance at 1.3200 and support at 1.3100.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 6 November 2025 and voted by a majority of 7–2 to keep the Bank Rate unchanged at 4.00 percent for a second consecutive meeting. The decision reflects the Committee’s cautious approach as inflation remains above target, but underlying economic momentum continues to weaken. Two members maintained their vote for a 25-basis-point cut, citing further signs of labor market softening and weak business sentiment.
- The BOE adjusted its guidance on quantitative tightening (QT), maintaining the reduced pace established in September. The planned reduction of UK government bond holdings remains at £67.5 billion over the next 12 months, leaving the current gilt balance near £550 billion. Policymakers described the recalibrated QT path as “appropriate for current market conditions,” emphasizing the importance of liquidity management amid heightened volatility.
- Headline inflation moderated slightly to 3.6 percent in October from 3.8 percent previously, driven by easing food and transport prices. However, core inflation has shown only gradual progress, holding near 3.9 percent. The MPC noted that services inflation and administered energy costs continue to exert pressure, highlighting the challenge of achieving the 2 percent target sustainably. The Committee’s latest projections see inflation falling toward 3 percent by mid-2026, with further downside expected if energy and wage dynamics continue to normalize.
- Economic activity remains subdued. Estimates place Q3 GDP growth close to zero, with both business output and consumer spending restrained. The unemployment rate has edged up to 4.8 percent, while pay growth cooled to just under 5 percent year-on-year. MPC members acknowledged that pay settlements are weakening further, signaling an easing in labor cost pressures as demand softens. Surveys from the manufacturing and services sectors suggest muted hiring intentions through year-end.
- International factors continue to complicate the policy outlook. Fluctuating oil prices—partly linked to renewed Middle East tensions—alongside fragile global demand have contributed to higher market volatility. The MPC reiterated that external shocks, including global food and energy disruptions, could temporarily slow the disinflation path but remain unlikely to derail the medium-term moderation in prices.
- The Committee assessed risks around inflation as balanced. Downside risks arise from sluggish domestic growth and declining real income momentum, while upside risks remain tied to elevated inflation expectations and stubborn services inflation. Policymakers emphasized the need for patience, maintaining that any rate cuts ahead of clear inflation progress could undermine confidence in policy credibility.
- The MPC’s overall stance remains restrictive but increasingly balanced, with future moves expected to follow a cautious, data-driven trajectory. The Committee reaffirmed that monetary policy will stay tight until there is compelling evidence that inflation is returning to the 2 percent target on a durable basis.
- The next meeting is on 18 December 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 is showing resilience, rebounding from recent seven-month lows as strong domestic labor data and rising oil prices provide fundamental support, though ongoing US trade tensions and recession concerns continue to weigh on the currency’s outlook. Inflation is sticky at 2.4% with core measures at 3%, ongoing US tariff uncertainty with rates up to 35%, 35% recession probability within six months, massive budget deficit of C$78 billion, and suspended trade negotiations with the US.
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. Higher energy prices and a modest uptick in food and shelter costs drove the increase. 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
Medium Bullish
Oil
Key news events today
EIA crude oil inventories (2:30 pm GMT)
What can we expect from Oil today?
The oil market remains cautious and range-bound today, with prices leveling off below recent highs as the industry awaits fresh supply/demand forecasts from OPEC and the IEA. Key market forces include a potential global supply glut, ongoing OPEC+ production increases, the effects of US sanctions on Russian flows, and demand shifts in major consuming countries. Expect continued volatility and headline-driven moves until new supply and demand data clarify the near-term trend.
Next 24 Hours Bias
Weak Bearish
