IC Markets – Europe Fundamental Forecast | 25 September 2026

IC Markets – Europe Fundamental Forecast | 25 September 2026

What happened in the Asia session?

The Asian trading session is being influenced by expectations surrounding U.S.–China trade relations, monetary policy divergence, and ongoing geopolitical risks affecting energy markets.

Recent market developments include continued pressure on the Japanese yen following the Bank of Japan’s interest-rate increase to 1.25%, while concerns about potential currency intervention from Japanese authorities remain relevant for USD/JPY traders. The Chinese yuan has also attracted attention after the People’s Bank of China adopted a less restrictive approach toward yuan appreciation ahead of the U.S.–China summit.

What does it mean for the Europe & US sessions?

As the European and U.S. trading sessions get underway, traders should focus on Bank of England Governor Andrew Bailey’s speech, the revised U.S. University of Michigan Consumer Sentiment data, and inflation expectations. The dollar remains supported by expectations of further Federal Reserve tightening, while elevated bond yields and geopolitical developments surrounding Iran and Middle East energy supplies continue to influence market sentiment.

The Dollar Index (DXY)

Key news events today

Revised UoM Consumer Sentiment (2:00 pm GMT)

Revised UoM Inflation Expectations (2:00 pm GMT)

What can we expect from DXY today?

The U.S. dollar is supported by hawkish Federal Reserve expectations, elevated Treasury yields, and persistent inflation concerns. Recent U.S. economic data, including a strong Composite PMI reading of 58.4, has increased expectations of further Fed tightening, while the 10-year Treasury yield has moved above 5%, supporting demand for the dollar. At the same time, elevated oil prices and geopolitical tensions surrounding the Strait of Hormuz continue to create inflationary pressures, which could influence the Fed’s future policy decisions.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) raised the federal funds target range by 25 basis points to 3.75%–4.00% at its September 15–16, 2026 meeting. The decision was approved unanimously by a 12–0 vote, marking a shift from the July meeting, when rates were held at 3.50%–3.75%. The Fed said the move was intended to support its dual mandate and promote a more timely return of inflation toward its 2% objective.
• The labor market remains relatively resilient. The September FOMC statement said job gains have kept pace with workforce growth and that the unemployment rate has changed little. The Fed continues to monitor employment conditions closely alongside inflation when determining the appropriate path for monetary policy.
• Inflation remains above the Federal Reserve’s 2% target and continues to be a key policy concern. The September decision explicitly noted that inflation remains elevated. The latest projections put median headline PCE inflation at 3.7% for 2026, before falling to 2.3% in 2027, 2.1% in 2028, and 2.0% in 2029. Core PCE inflation is projected at 3.4% in 2026, declining to 2.5% in 2027 and 2.2% in 2028.
• Economic activity continues to expand at a solid pace. The Fed highlighted resilient domestic spending, strong productivity growth and robust capital investment, although uncertainty remains elevated partly because of geopolitical developments. The September projections raised the median 2026 GDP-growth forecast to 2.3%, compared with 2.2% in the June projections.
• The September projections show a higher expected policy-rate path than in June. The median projection for the federal funds rate is now 4.1% at the end of 2026, compared with 3.8% in the June projections. The median is projected at 4.1% in 2027, 3.9% in 2028, and 3.6% in 2029. This indicates that policymakers’ projected rate path remains relatively restrictive while inflation is expected to move gradually toward the target.
• Chair Kevin Warsh continues to emphasize the importance of returning inflation to 2%. Ahead of the September meeting, Warsh indicated that the Fed would have further work to do if policymakers could not gain sufficient confidence that inflation was moving toward the 2% objective. The September decision subsequently delivered a 25-basis-point hike, while the Committee continued to emphasize its assessment of incoming economic data and risks.
• The September economic projections show a more balanced growth outlook but continued inflation risks. The median unemployment forecast is 4.1% for 2026 and 2027, while the Fed projects GDP growth of 2.3% in 2026 and 2.4% in 2027. At the same time, PCE inflation is expected to remain substantially above target through 2026 before moving closer to 2% over subsequent years.
• The next meeting is scheduled for 27 to 28  October 2026.

Next 24 Hours Bias
Strong Bullish

Gold (XAU)

Key news events today

Revised UoM Consumer Sentiment (2:00 pm GMT)

Revised UoM Inflation Expectations (2:00 pm GMT)

What can we expect from Gold today?

Gold is facing bearish pressure today as a stronger U.S. dollar, rising Treasury yields, and expectations of further Federal Reserve interest-rate hikes weigh on the precious metal. As of the latest reports, spot gold was trading around $4,267–$4,288 per ounce, with the metal on track for a weekly decline of more than 2%. Higher yields increase the opportunity cost of holding non-interest-bearing gold, while a stronger dollar makes gold more expensive for international buyers.

Next 24 Hours Bias   
Medium Bearish

The Euro (EUR)

Key news events today

No major news event

What can we expect from EUR today?

The euro is being influenced by persistent inflationary pressures, elevated energy prices, and expectations surrounding the European Central Bank’s (ECB) monetary policy. The ECB raised its deposit rate to 2.50% on September 10, its second rate hike of the year, as eurozone inflation exceeded 3% due largely to higher oil and natural gas prices. Recent ECB research indicates that rising gas prices may pass through to consumer inflation more quickly than in previous years, increasing concerns about further price pressures.

Central Bank Notes:

• The ECB enters October with its policy outlook dependent on the outcome of the 10 September meeting. The latest confirmed decision, from 23 July, kept the deposit facility at 2.25%, the main refinancing operations rate at 2.40%, and the marginal lending facility at 2.65%. The ECB continued to emphasise a meeting-by-meeting and data-dependent approach, with no commitment to a predetermined rate path.
• The euro-area economy remains resilient, but growth is still relatively modest. The latest ECB data show euro-area GDP at €4.1185 trillion in Q2 2026, up 1.2% quarter-on-quarter and 3.6% year-on-year in the latest reported data. However, the economic outlook remains vulnerable to elevated energy costs, geopolitical uncertainty and weaker external demand.
• Inflation remains the key issue for ECB policy. The ECB’s July assessment highlighted that energy prices remained highly volatile and significantly above pre-conflict levels, with the full inflationary impact of the energy shock still uncertain. The ECB is therefore closely monitoring direct energy effects as well as possible second-round effects through wages and broader price-setting behaviour.
• Professional forecasters continue to expect inflation to remain above target in 2026. The ECB’s Q3 Survey of Professional Forecasters projected headline HICP inflation at 2.7% for 2026, falling to 2.2% in 2027 and 2.0% in 2028. Core inflation, excluding energy, food, alcohol and tobacco, was projected at 2.4% in 2026 and 2.2% in 2027.
• Growth expectations have softened. The same ECB survey projects real GDP growth of only 0.6% in 2026, followed by 1.2% in 2027 and 1.3% in 2028. This combination of relatively weak growth and above-target inflation leaves the ECB facing a difficult policy trade-off heading into October.
• The ECB’s balance-sheet normalisation is expected to continue. The APP and PEPP portfolios continue to decline in a measured and predictable manner because the Eurosystem is no longer reinvesting principal payments from maturing securities. This gradual quantitative tightening is expected to continue unless financial-market conditions require the ECB to adjust its approach.
• The main risk for October is the combination of persistent inflation and weak growth. Higher oil and natural-gas prices could keep inflation above the ECB’s 2% target while simultaneously reducing household purchasing power and business activity. This could make the ECB more cautious about easing policy even if economic growth remains weak.

​The next meeting is on 29 October 2026

Next 24 Hours Bias
Medium Bearish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from CHF today?

The Swiss franc is facing some downside pressure today following yesterday’s Swiss National Bank (SNB) decision to keep its policy rate unchanged at 0%. The SNB raised its inflation forecasts slightly, with inflation now projected at 0.7% for 2026 and 0.8% for both 2027 and 2028, while noting that August inflation increased to 0.8%, mainly because of higher energy and oil-product prices. The central bank also softened its previous emphasis on preventing franc appreciation, returning to broader language that it is willing to intervene in foreign-exchange markets when necessary. This comes as the franc has weakened in recent months.

Central Bank Notes:

• At its 24 September meeting, the SNB kept the policy rate unchanged at 0.00%, citing appropriate monetary conditions.
• Swiss inflation increased from 0.6% in May to 0.8% in August, mainly due to higher energy prices. The SNB expects inflation to rise somewhat in Q4 before easing during 2027.
• The SNB now projects average inflation of 0.7% in 2026, 0.8% in 2027 and 0.8% in 2028, assuming the policy rate remains at 0%.
• The SNB remains willing to intervene in the foreign-exchange market if necessary to maintain appropriate monetary conditions, particularly if exchange-rate movements become problematic.
• The SNB expects Swiss growth to remain moderate, forecasting 1.5–2% growth in 2026 and around 1.5% in 2027.
• The main risks remain Middle East tensions, elevated energy prices, global growth and trade-policy uncertainty. Higher energy prices could increase inflation while weakening economic growth.

The next meeting is on 10 December 2026.

Next 24 Hours Bias
Medium Bearish

The Pound (GBP)

Key news events today

BOE Gov Bailey Speaks (9:15 am GMT)

What can we expect from GBP today?

The British pound remains under pressure heading into Friday after GBP/USD fell to around 1.3200–1.3220, its lowest level since late June. Sterling has been weighed down by a stronger U.S. dollar following the Federal Reserve’s hawkish stance, while concerns over slowing UK business activity and the country’s fiscal outlook are also limiting demand for the pound. The Bank of England is maintaining the Bank Rate at 3.75%, although its September meeting was split 6–3, with three policymakers voting for a 25-basis-point hike to 4%. UK inflation rose to 3.1% in August, while elevated energy prices continue to create upside inflation risks.

Central Bank Notes:

• Interest-rate decision: The BoE held the Bank Rate at 3.75% at its 17 September 2026 meeting. The MPC voted 6–3, with three members supporting a 25-basis-point increase to 4.00%. The decision reflects a cautious approach as policymakers balance inflation risks against subdued economic activity.
• UK CPI inflation rose to 3.1% in August, up from 2.9% in July, remaining above the BoE’s 2% target. Core CPI remained at 2.6%, while services inflation was 3.4%, indicating that underlying price pressures are still present.
• The ongoing Middle East conflict has contributed to higher and more volatile energy prices. The BoE expects inflation to rise further over the coming quarters, although the eventual impact will depend on how long energy prices remain elevated.
• The UK economy remains subdued, while weaker demand and a cooling labour market create challenges for the MPC. Policymakers must balance the risk of persistent inflation against the possibility of further weakening economic activity.
• Wage growth and services inflation remain important areas of focus. Although core inflation has been relatively stable, the rise in headline inflation means the MPC is likely to remain cautious about easing policy.
• The BoE is reviewing the pace and structure of its balance-sheet reduction. Its latest plans include slowing the pace of gilt sales, reflecting concerns around market conditions and the impact of quantitative tightening.
• The BoE’s next decisions will remain data-dependent, with inflation, energy prices, wage growth and economic activity determining whether rates remain unchanged or increase.
• The next meeting is on 5 November 2026.
  
  Next 24 Hours Bias
  Medium Bearish

The Canadian Dollar (CAD)

Key news events today

No major news event

What can we expect from CAD today?

The Canadian dollar is under pressure today, with USD/CAD around 1.4140 and extending its recent advance as the loonie faces several headwinds. The main driver is a stronger U.S. dollar and widening U.S.–Canada yield differentials, as markets increasingly expect the Federal Reserve to maintain a tighter policy stance. Meanwhile, Canada’s latest July retail sales fell 0.7%, pointing to softer domestic consumer demand, while uncertainty surrounding U.S.–Canada trade negotiations continues to weigh on the Canadian economic outlook.
​
Central Bank Notes:

• At its 2 September 2026 meeting, the Bank of Canada maintained the overnight rate target at 2.25%, keeping the Bank Rate at 2.50% and the deposit rate at 2.20%. This marks the seventh consecutive decision at 2.25%. While the decision was expected, the Bank’s communication became somewhat more cautious as inflation risks increased. Governor Tiff Macklem emphasized that the Bank remains prepared to adjust monetary policy if necessary to preserve price stability.
• The Canadian economy has strengthened significantly in the second quarter. GDP expanded at an annualized rate of 3.3% in Q2 2026, following very weak growth in Q1. The recovery was relatively broad-based, with consumer spending remaining resilient while housing activity, exports and business investment also improved. However, the Bank noted that some of the Q2 strength reflected temporary factors and that the sustainability of the recovery remains uncertain because of renewed trade tensions with the United States.
• The labour market has continued to improve, providing additional support for domestic demand. Employment increased by 75,000 in July, while the unemployment rate declined to 6.4%, its lowest level since July 2024. Wage growth, however, continued to moderate, with average hourly wages rising 2.8% year over year in July compared with 3.3% in June. The combination of stronger employment and moderating wages suggests that labour-market conditions are improving without generating an immediate resurgence in underlying inflation pressures.
• Inflation remains the key concern for the Bank. Headline CPI increased to 3.0% year over year in July, up from 2.8% in June. Much of the acceleration was driven by gasoline, with gasoline prices rising 25.7% year over year. Encouragingly, CPI excluding gasoline remained at 2.2%, while core inflation measures have stayed close to 2%. The Bank therefore continues to distinguish between temporary energy-driven inflation and more persistent underlying price pressures.
• Higher global oil prices have increased the upside risks to Canadian inflation. The continuing conflict in the Middle East, restrictions affecting shipments through the Strait of Hormuz, and elevated refinery margins have kept gasoline and other energy prices high. The Bank is currently looking through some of the direct impact of higher oil prices, but Governor Macklem warned that the longer energy prices remain elevated, the greater the risk that inflation becomes more persistent and spreads into other goods and services.
• US-Canada trade tensions have become a more significant downside risk to growth. New US tariffs on Canadian exports and Canada’s retaliatory measures are creating additional uncertainty for businesses. The Bank estimates that the products directly affected by the new tariffs account for around 5% of Canada’s exports to the United States, limiting the immediate economy-wide impact. Nevertheless, broader uncertainty could cause businesses to delay investment and hiring decisions, potentially slowing the recovery.
• The Bank’s policy stance remains data-dependent going into October. The BoC is balancing two opposing forces: stronger-than-expected economic activity and renewed inflation risks on one side, versus excess economic capacity and trade-related downside risks on the other. With inflation around 3% but underlying inflation closer to 2%, the Bank has so far chosen to remain on hold rather than immediately tighten policy.
• The next meeting is on 28 October 2026.

Next 24 Hours Bias
Medium Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Oil prices are highly volatile today as traders balance hopes of a possible U.S.–Iran truce against renewed attacks and supply risks in the Middle East. Brent crude is trading around $105–$106 per barrel, while WTI is around $93–$94, after both contracts jumped sharply on Thursday. The main bullish catalyst remains the threat to oil flows through the Strait of Hormuz, with continued Houthi attacks on Saudi-linked infrastructure adding to supply concerns. At the same time, reports of possible U.S.–Iran negotiations and a phased reopening of Hormuz are limiting further upside.

Next 24 Hours Bias
Medium Bullish