IC Markets – Europe Fundamental Forecast | 18 December 2025

IC Markets – Europe Fundamental Forecast | 18 December 2025

What happened in the Asia session?
During the Asia session, New Zealand’s robust Q3 GDP print of +1.1% q/q led the macroeconomic releases, outshining minor events like Japan’s bill auction, but failed to lift NZD/USD amid USD strength and global caution from Wall Street tech declines. Markets saw broad equity slips in Nikkei (-1.56%), Hang Seng, and Shanghai, with banks like DBS/OCBC bucking the trend on positive news, while Korea Zinc tanked 14%; forex pairs like NZD/USD and JPY yields reflected tempered reactions ahead of central bank moves.​

What does it mean for the Europe & US sessions?
Traders should monitor key U.S. jobless claims data and regional manufacturing indexes releasing at 13:30 GMT, alongside the ECB’s interest rate decision at 14:15 GMT and press conference at 14:45 GMT, as European and U.S. sessions open amid recent market volatility from tech selloffs and Fed hawkishness. Asian stocks fell overnight due to tech pullbacks, with U.S. futures little changed ahead of inflation concerns, while European tariffs from U.S. policy strain growth forecasts.

The Dollar Index (DXY)

Key news events today

President Trump Speaks (2:00 am GMT)

CPI y/y (1:30 pm GMT)

Unemployment Claims (1:30 pm GMT

Philly Fed Manufacturing Index (1:30 pm GMT)

What can we expect from DXY today?

The US Dollar showed resilience in early trading, holding gains versus the yen and sterling amid positioning for central bank meetings, though it remained pressured by a year-long downtrend of over 9%, dovish Fed outlooks signalling more 2026 rate cuts, and anticipation of US inflation data alongside ECB and BOJ decisions.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) is widely expected to lower the federal funds rate target range by 25 basis points to 3.50%–3.75% at its December 9–10, 2025, meeting, marking the third consecutive cut after the October reduction to 3.75%–4.00%
• The Committee continues to pursue maximum employment and 2% inflation goals, with the labour market showing further softening as the unemployment rate rose to 4.4% in September 2025 amid modest job gains.
• Officials note persistent downside risks to growth alongside resilient activity, with inflation easing to 3.0% year-over-year CPI in September but remaining elevated due to tariff effects; core PCE stands at around 2.8% as of October.
• Economic activity grew at a 3.8% annualised pace in Q2 2025 per revised estimates, though Q3 and Q4 face headwinds from trade tensions, fiscal restraint, and data disruptions like the government shutdown.
• September’s Summary of Economic Projections forecasts 2025 unemployment at a median 4.5%, with PCE inflation near 3.0% and core PCE at 3.1%, signalling a gradual disinflation path; updates expected on December 10 may adjust for higher unemployment and lower growth.
• The Committee maintained its data-dependent approach, noting a softening labour market and inflation above the 2% target, while deciding to lower the federal funds rate target range by 25 basis points to 3.50%-3.75%. Dissent persisted, with multiple members opposing the cut or advocating for a hold, reflecting divisions similar to recent meetings.​
• The FOMC confirmed the conclusion of its quantitative tightening program effective December 1, 2025, with Treasury rolloff caps at $5 billion per month and agency MBS caps at $35 billion per month to ensure ample reserves and market stability.
• The next meeting is scheduled for  27 to 28 January 2026.

Next 24 Hours Bias
Medium Bearish

Gold (XAU)

Key news events today

President Trump Speaks (2:00 am GMT)

CPI y/y (1:30 pm GMT)

Unemployment Claims (1:30 pm GMT

Philly Fed Manufacturing Index (1:30 pm GMT)

What can we expect from Gold today?

Gold maintains upward momentum near $4,333, driven by investment flows, a softer dollar, and economic signals like US job data hinting at Fed easing, though technical overbought levels and post-festive import drops in key markets like India temper gains, positioning it for potential consolidation before further advances.

Next 24 Hours Bias   
Medium Bullish

The Euro (EUR)

Key news events today

Main Refinancing Rate (1:15 pm GMT)

Monetary Policy Statement (1:15 pm GMT)

ECB Press Conference (1:45 pm GMT)

What can we expect from EUR today?

The euro experienced modest fluctuations against the US dollar, trading around the 1.1750 level amid anticipation for the European Central Bank’s monetary policy decision and upcoming US inflation data. ECB President Christine Lagarde has signalled potential upward revisions to Eurozone growth forecasts, reflecting economic resilience despite trade tensions, while investors scaled back expectations for further rate cuts in 2026.

Central Bank Notes:

• The Governing Council of the ECB is widely expected to keep the three key interest rates unchanged at its 17–18 December 2025 meeting, maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.40% and the deposit facility at 2.00%. This would reflect policymakers’ assessment that the current policy stance remains broadly consistent with medium‑term price stability, while inflation hovers close to the 2% target and the economy expands at a modest pace. Market pricing and recent ECB commentary suggest a high “option value” in staying on hold, with no clear pre‑set path for the next move amid two‑sided risks around growth and inflation.
• Recent indicators point to broadly stable price dynamics around the ECB’s target. Headline HICP inflation is projected to hover near 2% through late 2025, with earlier energy‑related disinflation largely behind and food price pressures contained compared with previous years. Services and wage inflation remain somewhat firmer than anticipated, but the trend is one of gradual moderation, consistent with a scenario in which inflation stabilises around but not persistently above 2% over the medium term.
• Eurosystem staff projections to be released in December are expected to show only small revisions from the September exercise, maintaining a profile of headline inflation close to 2% in 2025, dipping slightly below in 2026, and returning near target in 2027. Soft producer prices, fading pipeline cost pressures, and anchored long‑term inflation expectations limit upside risks, though officials continue to flag uncertainty from geopolitical tensions, commodity price shocks,s and fiscal policy choices.
• Euro area GDP growth remains subdued but resilient, with most forecasters and survey‑based indicators pointing to an expansion around 1 — 1.25% in 2025 and 2026, followed by a similar pace into 2027. PMIs and confidence surveys suggest activity has stabilised after earlier weakness, with modest support from public investment and improving external demand offsetting soft private consumption and investment.
• The labour market remains tight in aggregate, with unemployment rates close to multi‑decade lows and participation relatively high, even as job creation has slowed from its earlier peak. Real income growth has turned slightly positive again as inflation normalises, underpinning household spending, while financing conditions, though tighter than in the pre‑hiking era, remain consistent with a gradual expansion in credit to households and firms.
• Business sentiment is mixed, reflecting uncertainty around global trade, the policy outlook in the United States, and the potential impact of future tariff or industrial policy shifts. At the same time, easing supply‑chain costs and a relatively competitive euro exchange rate versus major trading partners provide support to manufacturing and export‑oriented sectors at the margin.​
• The Governing Council is expected to reiterate that future decisions will remain data-dependent and taken meeting by meeting, based on an integrated assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission. Officials have recently stressed that both further hikes and eventual cuts remain contingent on incoming data, implying no commitment to a particular path and a readiness to adjust if inflation or growth diverge materially from baseline projections.
• Balance sheet normalisation is set to continue gradually and predictably, with the stock of assets under the APP and PEPP declining as reinvestments have already been halted or scaled back in line with prior guidance. The ECB is expected to confirm that the current pace of portfolio runoff remains appropriate, supporting a slow withdrawal of monetary accommodation without disrupting market functioning.
• The next meeting is on 4 to 5 January 2026

Next 24 Hours Bias
Medium Bullish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from CHF today?

The Swiss franc (CHF) remains strong against major currencies today, Thursday, December 18, 2025, holding near multi-year highs amid safe-haven demand and anticipation of the Swiss National Bank’s (SNB) policy meeting concluding today. USD/CHF traded around 0.7946 yesterday, reflecting a slight dip but ongoing CHF appreciation of 0.62% over the past month and 11.82% year-over-year, driven by global uncertainties including US trade tensions and softer dollar sentiment post-Fed decisions.

Central Bank Notes:

• At its 11 December 2025 monetary policy assessment, the Swiss National Bank (SNB) is widely expected to leave the policy rate unchanged at 0%, extending the pause that began in September as the Governing Board judges that current settings are sufficient to keep inflation near, but still below, its target while avoiding an unnecessary move into negative rates.
• Recent data show that the tentative rebound in Swiss inflation has stalled, with headline CPI easing from 0.1% year‑on‑year in October to 0.0% in November and core inflation slipping to about 0.4%, reinforcing the view that underlying price pressures remain very weak and that deflation risks, while contained, have not fully disappeared.
• The SNB’s conditional inflation forecast is likely to remain close to the September projections, with inflation still seen averaging roughly 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027 under an unchanged policy rate path, though the latest CPI prints argue for a slightly lower near‑term profile and keep open the option of renewed easing if activity or prices weaken further.
• The global backdrop has deteriorated further, as continuing U.S. tariff actions and softer external demand weigh on world trade, while uncertainty in key European and U.S. markets for Swiss exports persists, leaving the SNB cautious about the growth outlook despite Switzerland’s relatively resilient domestic demand.
• Business and labour-market sentiment in export‑oriented manufacturing remains subdued, with firms reporting pressure on margins from the still‑strong franc and softer foreign orders, although the broader economy is still expected to grow at around 1–1.5% in 2025 and unemployment only drifting up gradually from low levels.
• The SNB continues to stress its willingness to act if deflation risks re‑emerge, reiterating that it can ease policy through renewed rate cuts or targeted foreign‑exchange intervention if necessary, while also highlighting its commitment to transparent communication, including the publication of detailed minutes from recent assessments and ongoing dialogue with international partners on FX policy

The next meeting is on 19 March 2026.

Next 24 Hours Bias
Medium Bullish

The Pound (GBP)

Key news events today

ECB Press Conference (12:00 pm GMT)

ECB Press Conference (12:00 pm GMT)

Official Bank Rate (12:00 pm GMT)

BOE Gov Bailey Speaks (12:30 pm GMT)

What can we expect from GBP today?

The pound sterling weakened against the dollar to about 1.3398, driven by yesterday’s softer-than-expected UK inflation at 3.2% cementing bets for a Bank of England rate cut to 3.75% today amid stagnant growth and rising unemployment, yet showed signs of intraday resilience with limited selling pressure and forecasts holding steady near 1.34 short-term.​

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) will meet on 18 December 2025, with the current Bank Rate standing at 4.00 per cent after being held in a close 5–4 vote at the 5 November meeting. Market pricing and analyst commentary point to a high risk of a 25‑basis‑point cut to 3.75 per cent, but this remains conditional on incoming inflation and labour‑market data, so the December note should be treated as pre‑decision guidance rather than an ex‑post summary.
• The BoE is expected to leave its quantitative tightening (QT) framework broadly unchanged through year‑end, maintaining the lower reduction pace in gilt holdings that was set earlier in 2025. Official communications still characterise the existing QT path as consistent with a restrictive stance, with policymakers stressing that balance‑sheet reduction will remain gradual and sensitive to market‑liquidity conditions.
• Headline CPI inflation eased to 3.6 per cent year‑on‑year in October 2025, down from 3.8 per cent in September, helped by softer energy and goods prices, though it remains almost twice the 2 per cent target. Underlying inflation pressures, particularly in services, have continued to moderate only slowly, so the MPC’s central projection still envisages inflation moving closer to, but not yet reaching, 3 per cent over the course of 2026, contingent on further normalisation in energy and wage dynamics.
• UK economic activity remains weak heading into the December meeting, with the labour market showing further signs of slackening. The unemployment rate has risen toward just above 5 per cent on the latest three‑month figures to October, while overall regular pay growth has slowed to around the mid‑4 per cent range, reinforcing the view that domestic cost pressures are gradually easing.
• External conditions continue to cloud the outlook, with fragile global growth and fluctuating commodity prices contributing to bouts of financial‑market volatility. The MPC has highlighted that renewed global energy or food price shocks could temporarily slow the pace of disinflation, but such risks are currently judged unlikely to derail the medium‑term downward trajectory for inflation if domestic demand stays subdued.
• The balance of risks around the inflation outlook remains finely poised. Downside risks are linked to persistently weak domestic demand and rising unemployment, while upside risks come from still‑elevated inflation expectations, sticky services inflation, and the possibility that structural changes in the labour market leave less slack than conventional indicators suggest.
• Overall, the MPC’s stance going into December is restrictive but increasingly open to a gradual easing cycle, with any rate cuts expected to be measured and data‑dependent. Policymakers have reiterated that the Bank Rate will need to stay in restrictive territory until they are confident inflation is on a sustainable path back to the 2 per cent target, and they have signalled that the profile of cuts, once started, is likely to be shallow rather than rapid.
• The next meeting is on 5 February 2026.
  
  Next 24 Hours Bias
  Medium Bullish

The Canadian Dollar (CAD)

Key news events today

What can we expect from CAD today?

The Canadian dollar (CAD) showed mild strength on December 18, 2025, with the USD/CAD exchange rate dipping slightly to 1.3784, reflecting a 0.01% decline from the prior session. This was built on recent gains amid mixed U.S. labour data and broader market dynamics, including steady oil prices that support the commodity-linked currency.
​
Central Bank Notes:

• The Governing Council left the target for the overnight rate unchanged at 2.25% at its 10 December 2025 meeting, in line with market expectations and signalling that the earlier easing cycle has likely concluded. The Bank noted that while global tariff tensions and trade uncertainty persist, the external backdrop has stabilised somewhat, reducing the need for additional insurance cuts even as world trade remains fragile.
• The Council acknowledged that uncertainty around U.S. trade policy and tariffs continues to weigh on business sentiment, but recent data show Canadian manufacturing and goods exports holding up better than anticipated. Surveys cited by the Bank suggest export order books have stopped deteriorating, with firms reporting some rebuilding of backlogs despite still‑cautious capital spending plans.
• Canada’s economy rebounded more strongly than expected in the third quarter, with real GDP expanding at an annualised pace of about 2.6% after a 1.8% contraction in Q2, largely on the back of higher crude exports and government spending. Monthly data show output rising 0.2% in September, though flash estimates point to a softer start to Q4 as some sectors give back earlier gains.
• Service sector activity has firmed, with indicators showing the services PMI back above the 50 threshold and broadening gains in business and professional services. However, consumer-facing categories remain mixed, as still‑elevated price levels and only modest real income growth keep a lid on discretionary spending even as tourism and technology‑related services expand.
• Housing markets have continued to stabilise, with national resale activity and prices edging higher through the autumn alongside the earlier decline in borrowing costs. The Bank noted that while some major urban centres are seeing renewed price pressures, tighter underwriting standards and still‑high affordability constraints are expected to cap the pace of any rebound.
• Headline CPI inflation eased to 2.2% year over year in October and is estimated to have remained near that rate in November, keeping it slightly above the 2% target but comfortably within the 1%–3% control range. Core measures have drifted lower, with CPI‑median and CPI‑trim around 3% or below, reinforcing the assessment that underlying price pressures are gradually moderating even as gasoline and some shelter components remain volatile.
• The Governing Council reiterated that the current policy rate is “about the right level” to keep inflation close to target while supporting the economy through a period of structural adjustment, and it signalled a shift away from near‑term easing expectations. While the Bank did not rule out future adjustments, officials stressed that, barring a material downside surprise to growth or inflation, further rate cuts are unlikely before 2026, and attention is now focused on the durability of the recovery and the evolution of core inflation.
• The next meeting is on 28 January 2026.

Next 24 Hours Bias
Medium Bullish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Oil prices experienced volatility amid geopolitical tensions overshadowing supply glut concerns. West Texas Intermediate (WTI) crude hovered around $56-$57 per barrel after climbing over 1% earlier in the week, while Brent traded above $60. President Donald Trump’s blockade of sanctioned Venezuelan oil tankers sparked a rally, with WTI rising 1.75% to $56.92 in Asian trading as markets reacted to restricted exports. Geopolitical risks extended to Russia, where stalled Ukraine peace talks limited potential supply increases from stored Russian oil.

Next 24 Hours Bias
Medium Bearish