IC Markets – Europe Fundamental Forecast | 25 March 2026
What happened in the Asia session?
China’s medium-term lending facility (MLF) operation stands out as a key event for gauging liquidity and interest rate signals amid ongoing regional tensions. Broader headlines were dominated by lingering effects of the Middle East conflict, including President Trump’s prior threats over the Strait of Hormuz and Iran’s denial of de-escalation talks, which continued to fuel oil price volatility and inflation fears, alongside a cautious rebound in equities tracking Wall Street’s mixed close.
What does it mean for the Europe & US sessions?
Oil prices are dropping over 5% amid uncertainty over U.S.-Iran talks and President Trump’s signals on negotiations, despite Tehran’s denials, alongside a Moody’s downgrade of a KKR private credit fund to junk status, signalling distress in that sector. Barclays has raised its 2026 S&P 500 year-end target to 7,650, citing robust tech earnings and economic resilience outweighing Middle East tensions, AI disruptions, and private credit stress, while the prior day’s S&P 500 surge was fueled by Nvidia and Tesla gains on softer tariff expectations from the Trump administration.
The Dollar Index (DXY)
Key news events today
President Trump Speaks (11:20 pm GMT)
What can we expect from DXY today?
The US Dollar showed resilience today amid ongoing Middle East tensions, particularly the Iran conflict, which continues to bolster its safe-haven appeal while pushing oil prices higher around $108 per barrel. Trading in tight ranges, the Dollar Index (DXY) hovered near 99.65-99.90, supported by firm US yields and limited Federal Reserve rate-cut expectations (just one projected for late 2026).
Central Bank Notes:
- The Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate target range steady at 3.50%–3.75% at its March 17–18, 2026, meeting, amid rising oil prices from the US-Israel war against Iran and persistent inflation pressures, delaying any 2026 cuts potentially to September.
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market weakening further as nonfarm payrolls declined by 92,000 in February 2026 and the unemployment rate rose to 4.4% from 4.3% in January.
- Officials face tilted risks from geopolitical tensions, elevated oil prices, and sticky inflation, with CPI steady at 2.4% year-over-year in February 2026, headline PCE at 2.8% in January, and core PCE rising to 3.1%.
- Economic activity has cooled after robust Q4 2025 growth of nearly 5%, with the Atlanta Fed GDPNow now estimating Q1 2026 growth at around 2.1%–2.7% amid softer consumer spending and labour data.
- December 2025’s Summary of Economic Projections forecasts 2025 unemployment at a median of 4.5%, 2026 GDP growth at 2.3%, and core PCE at 2.5%, with the dot plot signalling one more cut in 2026 to a median 3.4% funds rate; March updates may reflect softer labor and inflation upticks.
- The Committee maintains its data-dependent stance amid a softening labor market, inflation above target, and new oil shocks, likely holding rates at 3.50%-3.75% with ongoing divisions and possible hawkish dissents on rate cuts.
- The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to ensure ample reserves post-2025 program adjustments.
- The next meeting is scheduled for 28 to 29 April 2026.
Next 24 Hours Bias
WeakBullish
Gold (XAU)
Key news events today
President Trump Speaks (11:20 pm GMT)
What can we expect from Gold today?
Gold prices are experiencing significant downward pressure today, amid a stronger US dollar, rising bond yields, and ongoing geopolitical tensions in the Middle East, including US-Iran conflicts that have already triggered sharp corrections. Spot gold is trading around $4,470 per ounce, down about 0.4% on the day after a recent free-fall that erased over 20% from its January peak of $5,594, with the metal now stalling near $4,400 as war risks balance safe-haven demand against profit-taking.
Next 24 Hours Bias
Medium Bearish
The Euro (EUR)
Key news events today
CB President Lagarde Speaks (8:45 am GMT)
What can we expect from EUR today?
The Euro remains on the defensive today amid geopolitical risks from Iran driving oil higher and dampening eurozone confidence, with EUR/USD testing supports near 1.1578 as traders eye US jobs data; political developments like the EU-US trade deal vote offer some long-term optimism, but near-term bias stays bearish without stronger ECB signals or regional stabilization.
Central Bank Notes:
- The Governing Council of the ECB is widely expected to keep the three key interest rates unchanged at its 18–19 March 2026 meeting, holding the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. This stance continues to support medium-term price stability, with inflation stabilizing near the 2% target amid resilient growth and balanced risks. Market odds show a 99% probability of no change, reflecting caution over global trade uncertainties and US policy under President Trump.
- Price dynamics remain stable close to the 2% target. Headline HICP inflation eased to around 1.7% in January 2026, with base effects and a strong euro supporting further moderation toward 1.9% for the year. Core and services inflation continue to moderate, bolstered by anchored expectations despite some sticky components.
- Updated Eurosystem staff projections for March 2026 are expected to show headline inflation at 1.9% in 2026, 1.8% in 2027, and stabilizing at 2% by 2028, with balanced risks from trade tensions offset by fiscal support. Recent data revisions have slightly raised prior forecasts, but a stronger euro imports deflationary pressures.
- Euro area GDP growth remains resilient, with Q1 2026 surveys pointing to a 0.3-0.4% qoq expansion, aligning with annual forecasts of 1.2-1.4% through 2027. Public investment in defence and infrastructure, alongside low unemployment, underpins activity despite softer consumption and trade headwinds.
- The labour market stays robust, with unemployment holding near 6.4% at historic lows into early 2026, supported by rising participation and real wage growth. Credit conditions remain supportive for household spending and business investment.
- Business sentiment reflects caution from US tariffs and geopolitical risks, tempered by easing supply chains, a weaker euro aiding exports, and fiscal measures boosting domestic investment.
- The Governing Council will continue its data-dependent, meeting-by-meeting approach, closely monitoring inflation trends, transmission, and external uncertainties without signalling a preset path.
- Balance sheet normalization proceeds steadily, with APP and PEPP reinvestments ended and portfolios reducing at a controlled pace, showing no liquidity strains.
The next meeting is on 30 to 31 March 2026
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 held firm near recent highs, with USD/CHF at approximately 0.7874 amid safe-haven flows from global risks, as the SNB reiterated its 0% rate stance and intervention readiness to mitigate deflationary pressures from the currency’s strength; Swiss firms expect modest further appreciation against a weakening euro, though low inflation at 0.1% and uncertain growth temper aggressive moves.
Central Bank Notes:
- At its monetary policy assessment on 19 March 2026, the Swiss National Bank (SNB) is widely expected to leave the policy rate unchanged at 0%, continuing the extended pause since September 2025, as the Governing Board assesses current settings as adequate to maintain inflation near the target without resorting to negative rates.
- Inflation data since December indicate persistent weakness, with headline CPI hovering around 0% year-on-year through early 2026 and core measures subdued at roughly 0.4%, underscoring limited price pressures and lingering, though contained, deflation risks.
- The SNB’s updated conditional inflation forecast shows minimal change from December, with averages of about 0.2% in 2025 (now complete), 0.3% in 2026, and 0.6% in 2027 under a steady 0% policy rate. However, recent flat CPI readings may slightly lower near-term expectations, preserving scope for further easing if needed.
- Global conditions remain challenging, marked by U.S. tariff escalations under President Trump, subdued external demand, and uncertainties in major export markets such as Europe and the U.S., prompting the SNB to exercise caution despite resilient Swiss domestic activity.
- Sentiment in manufacturing and export sectors stays soft amid franc appreciation and weaker foreign orders, squeezing margins. Yet, overall GDP growth is expected to be around 1.5% in 2026, with unemployment edging up modestly from historic lows.
- The SNB reaffirms its readiness to intervene via rate cuts or FX operations should deflationary pressures intensify, while emphasizing clear communication through detailed meeting minutes and coordination with global partners on currency matters.
The next meeting is on 18 June 2026.
Next 24 Hours Bias
Medium Bearish
The Pound (GBP)
Key news events today
CPI y/y (7:00 am GMT)
What can we expect from GBP today?
The Pound Sterling edged higher to about $1.3426 versus the USD, buoyed by de-escalation in US-Iran tensions that curbed dollar strength and oil price surges, though persistent 3% UK inflation, Middle East risks, and BoE caution temper the upside amid a sideways-to-higher trading range. Weekly, GBP remains up around 1.2% despite Tuesday’s dip, with markets eyeing US NFP data and potential BoE rate cut bets..
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 19 March 2026, maintaining the Bank Rate at 3.75 per cent in a unanimous decision, following the prior narrow 5–4 vote to hold at the 5 February 2026 meeting. This pause reflects a sharp reversal from earlier market expectations of a 25-basis-point cut, driven by a Middle East conflict sparking global energy and commodity price surges. The March meeting did not include a Monetary Policy Report, with the next one due in April.
- Quantitative tightening (QT) proceeds unchanged at the 2025 pace of gilt holdings reductions, maintaining gradual balance-sheet normalization attuned to liquidity conditions and supportive of a restrictive stance amid new shocks.
- Headline CPI inflation faces near-term upside from the energy shock, reversing prior disinflation trends in domestic prices and wages; pre-shock services inflation had eased but now contends with higher utility and input costs, keeping pressures above the 2 per cent target. MPC projections will update in April, but analysts see inflation at 3-4 per cent by the end of 2026.
- UK growth softens further into Q2 2026, with unemployment risks rising amid potential confidence drops, higher precautionary saving, and widening output gaps; regular pay growth had cooled pre-shock but now faces business cost pass-through.
- Global headwinds intensify via Middle East conflict, driving volatile energy/commodity prices and sterling/gilt swings; MPC deems direct shocks manageable if demand weakens sufficiently to limit second-round effects.
- Inflation risks now tilt upside from energy persistence and potential wage/cost embedding, offset by downside from demand slack and job losses; prior balance has shifted amid uncertainty on shock duration.
- The MPC adopts a wait-and-see posture post-shock, with policy deemed somewhat restrictive pre-event; all members are ready to act data-dependently for 2 per cent sustainability, eyeing April for fuller impact analysis and possible easing if disinflation resumes. Governor Bailey’s guidance stresses close monitoring without firm-cut commitments.
- The next meeting is on 30 April 2026.
Next 24 Hours Bias
Medium Bearish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from GBP today?
The Canadian Dollar weakened against the USD, with USD/CAD trading near recent highs (1.37+ range), driven by declining oil prices as Middle East tensions eased and ongoing U.S.-Canada trade risks, including tariff threats, weighed on sentiment despite constructive bank outlooks for a gradual CAD recovery later in the year amid stabilizing commodities and policy caution.
Central Bank Notes:
- The Governing Council left the overnight rate target unchanged at 2.25% at its 28 January 2026 meeting, consistent with market expectations and reinforcing the pause in easing after the December hold. The Bank highlighted ongoing global trade uncertainties, including U.S. policy risks, but noted a steadier external environment with no immediate need for policy shifts amid fragile world demand.
- Uncertainty from U.S. tariffs continues to cloud business confidence, yet Canadian manufacturing PMI and export orders have stabilized further, with backlogs modestly increasing despite restrained investment. Recent data indicate that goods exports, particularly energy, have provided ongoing support, though firms remain selective in their expansion plans.
- Canada’s economy maintained momentum into late 2025 and early 2026, with Q4 GDP estimates around 2.0-2.5% annualized following Q3’s 2.6% rebound, driven by crude oil exports, public spending, and a partial service-sector recovery. January flash indicators suggest a balanced start to Q1, though weather disruptions slightly tempered output gains.
- Services activity strengthened, with PMI remaining above 50 and gains spreading to tech, tourism, and professional sectors; however, consumer services remained uneven due to persistent high prices, which curbed non-essential spending despite wage growth. The Bank views this broadening as a sign of structural adjustment progressing.
- Housing markets edged firmer nationally, with resales and prices up modestly in December-January on lower rates and steady demand, though major cities face renewed pressures tempered by strict lending rules and affordability hurdles. The Bank expects this stabilization to persist without overheating.
- CPI inflation held near 2.2% year-over-year in December 2025 and into January 2026 estimates, within the 1-3% band, while core metrics like CPI-median and trim eased toward 2.8%, signalling waning underlying pressures despite shelter and energy volatility. This supports the Bank’s confidence in target convergence.
- Officials reaffirmed the 2.25% rate as appropriate for sustaining 2% inflation and economic adjustment, with no near-term cuts anticipated absent growth or inflation shocks. Focus shifts to Q1 data durability, core trend sustainability, and trade policy clarity.
- The next meeting is on 25 March 2026.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
API Crude Oil Stock (every Tuesday 8:30 pm GMT)
What can we expect from Oil today?
Oil prices experienced a sharp decline today, amid growing hopes for a ceasefire in the ongoing Iran conflict that’s been disrupting Middle East supplies. Brent crude fell around 6% to $98.28 per barrel, while WTI dropped over 5% to about $87.68, retreating from recent highs above $100 driven by Strait of Hormuz tensions.
Next 24 Hours Bias
Strong Bullish
