IC Markets – Europe Fundamental Forecast | 29 October 2025

IC Markets – Europe Fundamental Forecast | 29 October 2025

What happened in the Asia session?
Today’s Asia session was driven by upbeat market sentiment on progress in US–China trade negotiations, hotter-than-expected Australian inflation data, and anticipation of major central bank rate decisions. Risk assets outperformed, Asian currencies firmed, and technology stocks led rallies across the region, while the US dollar softened ahead of the Federal Reserve meeting.

What does it mean for the Europe & US sessions?
October 29, 2025, brings critical central bank decisions from the Federal Reserve (2:00 PM ET) and Bank of Canada (1:45 PM UTC), with both expected to deliver 25 basis point rate cuts. Australia’s inflation surged to 3.2% annually, the highest since June 2024, driven by a 9% jump in electricity costs, effectively ruling out near-term RBA rate cuts. U.S. stock indices hit fresh records on Tuesday, led by Nvidia, while Asian markets rallied ahead of the Fed decision.

The Dollar Index (DXY)

Key news events today

Federal funds rate (6:00 pm GMT)

FOMC statement (6:00 pm GMT)

FOMC Press Conference (6:30 pm GMT)

What can we expect from DXY today?

The US Dollar faces pressure from the anticipated Federal Reserve rate cut, government-induced data blackout, and global policy divergence. Today’s FOMC decision is critical—while markets expect a 0.25% rate cut, any unexpected forward guidance from Chair Powell could trigger volatility. The dollar remains soft against major peers, with eyes on how policy changes and risk sentiment interplay in the coming days.

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
Medium Bearish

Gold (XAU)

Key news events today

Federal funds rate (6:00 pm GMT)

FOMC statement (6:00 pm GMT)

FOMC Press Conference (6:30 pm GMT)

What can we expect from Gold today?

Gold prices rebounded on Wednesday, as traders returned for bargain hunting after the precious metal dropped to a three-week low earlier in the week. Spot gold traded around $3,975-$3,978 per ounce, up approximately 0.60-0.66% from the previous day. After surging more than 60% year-to-date and reaching an all-time high of $4,382 per ounce on October 20, gold has experienced significant volatility, pulling back over 7% in just five trading sessions.

Next 24 Hours Bias   
Weak Bearish

The Euro (EUR)

Key news events today

No major news event

What can we expect from EUR today?

The Euro enters the final days of October on a relatively firm footing, supported by stronger-than-expected economic growth data, stabilizing inflation near target, and an ECB that has successfully concluded its easing cycle. Germany’s surprisingly robust PMI performance has boosted confidence in the eurozone’s growth trajectory for Q4 2025, while the resolution of some US tariff uncertainties has reduced external headwinds.

Central Bank Notes:

• The Governing Council kept the three key ECB interest rates unchanged at its meeting on October 30, 2025. 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 Bullish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from CHF today?

The Swiss Franc’s strength stems from a confluence of factors: elevated global uncertainty driving safe-haven demand, the SNB’s decision to hold rates steady while dismissing further easing, and the Federal Reserve’s continued dovish stance. While punitive US tariffs weighing on the Swiss economy have prompted growth downgrades, strong pharmaceutical exports and the franc’s safe-haven status continue supporting the currency.

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
Medium Bullish

The Pound (GBP)

Key news events today

No major event

What can we expect from GBP today?

Sterling is under pressure from mounting fiscal challenges and budget uncertainty as the UK faces a potential £20-30 billion fiscal shortfall ahead of the November 26 Autumn Budget. While retail price deflation offers some relief, inflation remains well above the Bank of England’s 2% target at 3.8%, limiting the central bank’s ability to cut rates in the near term. The pound has weakened to two-month lows against the euro and faces technical pressure, with Brexit’s ongoing economic impact continuing to constrain productivity and growth prospects.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted on 18 September 2025 by a majority (expected split likely 7–2 or 6–3) to hold the Bank Rate steady at 4.00%, following the rate cut in August. Most members cited persistent inflation and mixed indicators on growth and employment, while a minority favored further easing due to the cooling labor market and subdued GDP growth.
• The Committee decided to decrease the pace of quantitative tightening, planning to reduce the stock of UK government bond purchases by £67.5 billion over the next 12 months, instead of the prior £100 billion pace, with the gilt balance now standing at nearly £558 billion. This reflects increased volatility in bond markets and a shift to a more gradual approach.
• Headline inflation rose unexpectedly to 3.8% in July and is projected at 4% for September, above the Bank’s 2% target. Price pressures are driven by regulated energy costs and ongoing food price increases. While previous disinflation has been substantial, core inflation remains elevated and sticky.
• The MPC expects headline inflation to remain above target through Q4, with a resumption of the downward trend projected for early 2026 as energy and regulated price pressures abate. The Committee remains watchful for signs of persistent inflation despite previous policy tightening.
• UK GDP growth is stagnant, with business and consumer activity subdued. Recent labor market data show rising unemployment rates (now at 4.7%) and stabilizing wage growth (holding near 5%), indicating slack but continued wage price pressure. The Committee remains cautious amid lackluster demand and soft survey sentiment.
• Pay growth and employment indicators have moderated further, alongside confirmation from business surveys that pay settlements are slowing. The Committee expects wage growth to decelerate significantly through Q4 and the rest of 2025.
• Global uncertainty persists due to volatile energy prices, supply chain disruptions linked to Middle East conflicts, and renewed trade tensions. The MPC remains vigilant in tracking transmission of external cost/wage shocks to UK inflation.
• Risks to inflation are considered two-sided. While subdued domestic growth and softening labor activity suggest scope for easing, persistent inflation requires caution. The MPC anticipates a slow, gradual reduction path in rates, continuing its data-dependent approach with careful adjustment as warranted by economic developments.
• The Committee’s bias remains toward maintaining a restrictive monetary policy stance until firmer evidence emerges that inflation will return sustainably to the 2% target. All future decisions will remain highly data dependent, with a strong emphasis on evolving demand, inflation expectations, costs, and labor market conditions.
• The next meeting is on 6 November 2025.
  
  Next 24 Hours Bias
  Medium Bearish 

The Canadian Dollar (CAD)

Key news events today

BOC monetary policy report (1:45 pm GMT)

BOC rate statement (1:45 pm GMT)

Overnight rate (1:45 pm GMT)

Pending Home Sales m/m (2:00 pm GMT)

What can we expect from CAD today?

The BoC is widely expected to cut rates by 25 basis points to 2.25%, marking the ninth cut since last summer and bringing the overnight rate to the lower bound of its neutral range. Despite September inflation accelerating to 2.4%, economic weakness—including a 1.6% Q2 GDP contraction, elevated 7.1% unemployment, and deteriorating business confidence—justifies continued easing.

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. The increase was driven by higher energy prices and a modest uptick in food and shelter costs. 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
Weak Bearish

Oil

Key news events today

EIA crude oil inventories (2:30 pm GMT)

What can we expect from Oil today?

Oil markets are navigating a complex landscape of competing pressures. Prices have stabilized around $60/barrel for WTI and $65/barrel for Brent after a three-day decline, as bearish fundamentals from OPEC+ production increases clash with supportive factors, including US-China trade progress and Russian sanctions.​The dominant concern remains oversupply, with OPEC+ poised to approve another 137,000 bpd production increase for December at its November 2 meeting.

Next 24 Hours Bias
Weak Bearish