IC Markets Europe Fundamental Forecast | 19 August 2025
What happened in the Asia session?
Asian equities, oil, and key currencies showed muted or negative moves as traders reassessed risk. At the same time, macro data reinforced the view of subdued regional growth, persistent inflation concerns in Australia, and cautious optimism in China and Japan. Market participants are largely in a holding pattern, awaiting critical signals from the Federal Reserve’s Jackson Hole Symposium later in the week. The pre-Fed risk-off mood put pressure across Asia-Pacific equity indices, particularly in markets highly sensitive to U.S. rate policy (e.g., Japan, Australia, South Korea, Hong Kong).
What does it mean for the Europe & US sessions?
U.S. major indexes closed nearly flat on Monday as traders waited for new signals from retail earnings and the upcoming Fed symposium. Dow Jones -0.08% at 44,911.82, S&P 500 -0.01% at 6,449.15, Nasdaq +0.03% at 21,629.77.Positioning ahead of Jackson Hole (volatility risk).Monitoring geopolitical updates from the U.S., Russia, and Ukraine.Watching Eurozone inflation and U.S. PMI data midweek for direction.Sector rotation toward consumer, auto, and realty on positive reforms and sentiment.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
The dollar is broadly stronger, driven by geopolitical events and anticipation of major economic policy developments. FX markets remain cautious ahead of the White House summit and next steps in the Ukraine conflict, while traders are closely watching Fed signals for further guidance on interest rates. The US Dollar Index (DXY) rose 0.31% to 98.122, with some sources reporting it slightly higher at 98.1742, reflecting a small gain from the previous session. Over the last month, the dollar has strengthened by 0.33%, but it’s down 3.17% over the past 12 months.
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 its meeting on July 29–30, 2025, 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
Medium Bearish
Gold (XAU)
Key news events today
No major news event
What can we expect from Gold today?
Gold held steady today around $3,330–$3,340/oz, amid ongoing geopolitical talks, anticipation of Fed decisions, and technical signals suggesting the possibility of a near-term rally if key resistance levels are breached. However, downside risks remain if peace negotiations fail and US economic data surprises to the upside.
Investors closely monitor ongoing peace talks between US President Donald Trump, Ukrainian President Zelensky, and European leaders regarding the ongoing Ukraine-Russia war. Hopes for a ceasefire or peace deal persist, though skepticism remains about an imminent breakthrough.
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 movement today is shaped by geopolitical events, central bank actions, and global market sentiment, with mild short-term volatility expected in response to major European and international developments. The Euro weakened slightly against the US dollar, with the EUR/USD exchange rate falling to about 1.1655, down 0.11% from the previous session. Factors influencing the Euro include a key summit involving US President Trump, Ukrainian President Zelenskyy, and EU leaders focusing on the Russia-Ukraine conflict and potential US-European security guarantees for Ukraine.
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
Medium Bullish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The Swiss Franc is marginally weaker against the US Dollar today, extending a modest month-long downtrend but retaining strength compared to August 2024. Technical analysis points to volatility, with potential for both further correction and upward rebound, depending on support and resistance levels. Trade tensions (notably US tariffs targeting Swiss exports) and international market factors remain the dominant narratives for CHF short-term direction. The USD/CHF pair is moving within a bullish channel but is currently in the framework of a bearish correction.
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
No major news event
What can we expect from GBP today?
The Pound is trading cautiously, consolidating near 1.35 against the US Dollar as markets await UK inflation data and global risks persist. Technicals and fundamentals both suggest limited room for near-term upside, with a bearish bias prevailing among traders. The Bank of England’s recent hawkish tone was offset by weaker July GDP growth and softening economic data, which have fueled policy uncertainty and moved rate expectations away from the GBP.
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 Bullish
The Canadian Dollar (CAD)
Key news events today
CPI m/m (12:30 pm GMT)
Median CPI y/y (12:30 pm GMT)
Trimmed CPI y/y (12:30 pm GMT)
Common CPI y/y (12:30 pm GMT)
What can we expect from CAD today?
The Canadian Dollar is trading softly, moving in line with expectations after July’s key inflation print. Macro headwinds, sluggish job growth, trade tensions, oil price pressures, and a softer monetary outlook keep the CAD under pressure. Markets are watching the BoC’s next moves and Fed policy signals closely. USD/CAD remains in an upward trend, with technical resistance and support levels closely watched by traders. The major focus today is on the release of Canadian inflation figures for July at 12:30 pm UTC. These will be closely watched by markets for signals on Bank of Canada (BoC) monetary policy.
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
Medium Bearish
Oil
Key news events today
API Crude Oil Stock (8:30 pm GMT)
What can we expect from Oil today?
Oil prices are slightly down today, consolidating near multi-month lows as traders monitor geopolitical negotiations and rising supply. Potential easing of sanctions and weak seasonal demand could bring further price softness into Q4 2025. Prices are consolidating after a near-1% gain on Monday, buoyed by diplomatic optimism regarding Russia-Ukraine-U.S. talks. The market is reacting to potential ceasefire agreements and discussions about lifting sanctions on Russian crude — a move that could increase global supply and pressure prices downward.
Next 24 Hours Bias
Medium Bearish
