{"id":80536,"date":"2026-05-18T15:52:27","date_gmt":"2026-05-18T05:52:27","guid":{"rendered":"https:\/\/www.icmarkets.com.au\/blog\/?p=80536"},"modified":"2026-05-18T15:52:28","modified_gmt":"2026-05-18T05:52:28","slug":"ic-markets-europe-fundamental-forecast-18-may-2026","status":"publish","type":"post","link":"https:\/\/www.icmarkets.com.au\/blog\/ic-markets-europe-fundamental-forecast-18-may-2026\/","title":{"rendered":"IC Markets &#8211; Europe Fundamental Forecast | 18 May 2026"},"content":{"rendered":"\n<p><strong>IC Markets &#8211; Europe Fundamental Forecast | 18 May 2026<\/strong><strong><br \/><\/strong><\/p>\n\n\n\n<p><strong>What happened in the Asia session?<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>Weaker-than-expected China April activity data and a fresh surge in geopolitical risk, producing a clear split between pressure on Chinese and Hong Kong equities and strength in oil. The headline losers were growth-sensitive equities and risk assets, while the headline beneficiaries were crude futures and related energy exposures.<br \/><br \/><strong>What does it mean for the Europe &amp; US sessions?<\/strong><strong><br \/><\/strong><br \/>Geopolitical news (notably U.S.\u2013Iran tensions) and rising oil prices are the immediate risk drivers this morning, while a packed economic calendar features flash PMIs across Europe and the U.S., Germany\u2019s Ifo and GfK consumer gauges, UK activity and inflation signals, and U.S. regional Fed indexes plus housing and consumer-sentiment reads will provide fresh directional cues for equities, FX, and rates.<br \/>\u200b<br \/><strong>The Dollar Index (DXY)<\/strong><\/p>\n\n\n\n<p><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>No major news event<br \/><br \/><strong>What can we expect from DXY today?<\/strong><\/p>\n\n\n\n<p>The U.S. dollar is strengthening broadly amid rising Treasury yields and fading Federal Reserve rate-cut expectations, continuing a five-day winning streak that positions it for its largest weekly rise in two months. Technical analysis indicates a bearish outlook for the pound versus the dollar, with a projection to fall toward 1.320.<br \/><br \/><em>Central Bank Notes:<\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate target range steady at 3.50%\u20133.75% at its April 28\u201329, 2026, meeting, as oil prices remain elevated around $108 per barrel for Brent crude amid ongoing US-Israel tensions with Iran, alongside surging inflation from energy shocks, further delaying any 2026 rate cuts potentially beyond September.<\/li>\n\n\n\n<li>The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market showing mixed signals as nonfarm payrolls rose by 178,000 in March 2026\u2014beating lowered expectations but driven partly by strike reversals\u2014and the unemployment rate edged down to 4.3% from 4.4% in February.<\/li>\n\n\n\n<li>Officials face heightened risks from geopolitical tensions, soaring oil prices, and accelerating inflation, with CPI jumping to 3.3% year-over-year in March 2026 from 2.4% in February due to a 10.9% monthly energy surge, headline PCE pressured higher, and core PCE estimates around 3.1% or more.<\/li>\n\n\n\n<li>Economic activity continues to cool after robust Q4 2025 growth near 5%, with the Atlanta Fed GDPNow estimating Q1 2026 growth at 1.3% amid softer consumer spending, strike impacts, and labor data despite some resilience.<\/li>\n\n\n\n<li>March 2026&#8217;s Summary of Economic Projections forecasts 2026 unemployment at a median around 4.4%, GDP growth revised higher, and core PCE up to 2.7%, with the dot plot still signaling one cut in 2026 to a median 3.25%\u20133.50% funds rate amid softer labor but inflation upticks.<\/li>\n\n\n\n<li>The Committee maintains its data-dependent stance amid a mixed labor market, inflation well above target from oil shocks, and geopolitical risks, likely holding rates at 3.50%-3.75% with persistent divisions and hawkish tones on cuts.<\/li>\n\n\n\n<li>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 manage reserves amid post-2025 balance sheet adjustments.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>The next meeting is scheduled for 16 to 17\u00a0 June 2026.<\/li>\n<\/ul>\n\n\n\n<p><strong>Next 24 Hours Bias<\/strong><br \/>Medium Bullish<\/p>\n\n\n\n<p><strong>Gold (XAU)<\/strong><strong><br \/><\/strong><strong><br \/><\/strong><strong>Key news events today<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from Gold today?<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>As of Monday, gold is trading in the mid\u20114,500s USD per ounce, consolidating after a strong early\u20112026 rally and a subsequent 2\u2011percent+ correction, as a firmer U.S. dollar and higher real yields cap gains while persistent geopolitical risk and central\u2011bank buying cap the downside; the market is currently in a containment phase, with traders awaiting U.S. macro data and Fed\u2011policy signals to decide whether renewed expectations for rate cuts will reignite a fresh leg higher for bullion later this year.<\/p>\n\n\n\n<p><br \/><strong>Next 24 Hours Bias&nbsp; &nbsp; <\/strong><strong><br \/><\/strong>Weak Bearish<\/p>\n\n\n\n<p><strong>The Euro (EUR)<\/strong><\/p>\n\n\n\n<p><strong>Key news events today<\/strong><br \/><br \/>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from EUR toda<\/strong>y?<br \/><br \/>The euro experienced modest weakness today as traders engaged in profit-taking following its recent three-month peak, pushing the EUR\/USD pair down to 1.1617 and extending its losing streak against the dollar to three sessions. While the monthly trend shows a 1.45% decline, the euro maintains a solid 3.35% gain year-over-year, suggesting the current pullback is a short-term correction rather than a fundamental shift.<\/p>\n\n\n\n<p><br \/><em>Central Bank Notes:<\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Governing Council of the ECB is expected to keep the three key interest rates unchanged at its 28\u201329 May 2026 meeting, with the main refinancing rate near 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%.<\/li>\n\n\n\n<li>Headline HICP inflation is likely to remain in the 2.0\u20132.3% range in the early months of 2026, with the March 2026 ECB staff baseline projecting an average of 2.6% for 2026, 2.0% for 2027, and 2.1% for 2028.<\/li>\n\n\n\n<li>The updated Eurosystem staff projections for 2026 paint a picture of persistent inflation overshoot, with headline inflation averages of around 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028, compared with about 1.9\u20132.1% earlier outlooks.<\/li>\n\n\n\n<li>Real GDP growth is projected at about 0.9% in 2026, 1.3% in 2027, and 1.4% in 2028, implying around 0.2\u20130.3% quarter\u2011on\u2011quarter expansion in Q2 2026, consistent with the resilience observed at the end of 2025.<\/li>\n\n\n\n<li>The euro area unemployment rate is expected to stay near 6.4%, with strong labour\u2011force participation and modest wage pressures underpinning consumption resilience.<\/li>\n\n\n\n<li>The Governing Council continues to stress a meeting\u2011by\u2011meeting, data\u2011dependent approach, focusing on the path of inflation, the functioning of monetary\u2011policy transmission, and the impact of external shocks (geopolitical, energy, and trade\u2011policy related).<\/li>\n\n\n\n<li>Balance\u2011sheet normalization proceeds smoothly, with the APP and PEPP wind\u2011downs completed and the remaining stock of longer\u2011dated assets being allowed to run off without significant liquidity shortages.<\/li>\n<\/ul>\n\n\n\n<p>\u200bThe next meeting is on 10 to 11 June 2026<\/p>\n\n\n\n<p><strong>Next 24 Hours Bias<\/strong><br \/>Weak Bearish<\/p>\n\n\n\n<p><strong>The Swiss Franc (CHF)<\/strong><strong><br \/><\/strong><\/p>\n\n\n\n<p><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from CHF today?<\/strong><strong><br \/><\/strong><br \/>The Swiss franc is currently strengthening amid heightened global uncertainty and rising inflation in Switzerland, which has pushed consumer prices to 0.6% year-on-year in April, exceeding the SNB\u2019s 0.5% forecast and prompting futures markets to price in a potential 25-basis-point rate hike by late 2026. Despite SNB Governor Martin Schlegel\u2019s hint at possible currency interventions or a return to negative rates, the franc\u2019s safe-haven appeal, bolstered by geopolitical tensions including US-Iran concerns, continues to support its value against the dollar and euro, with USD\/CHF hovering around 0.78.<br \/><br \/><em>Central Bank Notes:<\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>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 considers current settings adequate to keep inflation near the target without resorting to negative rates.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>The SNB\u2019s 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.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>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.<\/li>\n<\/ul>\n\n\n\n<p><br \/>The next meeting is on 18 June 2026.<\/p>\n\n\n\n<p><strong>Next 24 Hours Bias<\/strong><br \/>Weak Bearish<\/p>\n\n\n\n<p><strong>The Pound (GBP)<\/strong><strong><br \/><\/strong><strong><br \/><\/strong><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from GBP today?<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>The pound is trading modestly stronger versus the dollar and broadly stable against the euro, lifted by a weaker Greenback and lingering expectations that the Bank of England will keep rates relatively supportive rather than turning aggressively dovish. At the same time, the currency remains vulnerable to any downside surprises in UK growth or inflation data.<\/p>\n\n\n\n<p><em>Central Bank Notes:<\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Bank of England\u2019s Monetary Policy Committee (MPC) met on 29 April 2026, maintaining the Bank Rate at 3.75 per cent, with the decision details published on 30 April 2026 alongside the quarterly Monetary Policy Report. This hold follows the unanimous 9-0 vote at the prior 18 March 2026 meeting, amid persistent energy shocks from the Middle East conflict overriding earlier cut expectations. No specific vote split for April has been detailed yet, but consensus previews indicate a hold.<\/li>\n\n\n\n<li>Quantitative tightening (QT) continues unchanged at the 2025 pace for gilt holdings reductions, supporting balance-sheet normalization while monitoring liquidity and maintaining restrictiveness against ongoing shocks.<\/li>\n\n\n\n<li>Headline CPI inflation rose to 3.3% in March 2026 from energy and motor fuel surges due to Middle East tensions, expected to stay between 3% and 3.5% through the summer, well above the 2% target. The April Monetary Policy Report outlines scenarios in which inflation peaks above 3.5% by the end of 2026 in the baseline, then eases below 2% in three years, or reaches 6%+ in adverse cases requiring tighter policy.<\/li>\n\n\n\n<li>UK growth outlook weakens further into Q2-Q3 2026 amid energy-driven cost pressures, rising unemployment risks, and softening confidence, with prior pay growth cooling now vulnerable to business pass-throughs.<\/li>\n\n\n\n<li>Global risks from the Middle East conflict persist, fueling energy\/commodity volatility and sterling\/gilt fluctuations; MPC views direct impacts as containable if demand slackens to curb secondary inflation effects.<\/li>\n\n\n\n<li>Inflation risks remain upward-biased due to energy persistence, potential wage embedding, and shock duration uncertainty, balanced against downside from economic slack and labor market softening.<\/li>\n\n\n\n<li>The MPC maintains a data-dependent stance, with policy still restrictive; the April Report provides fuller shock analysis, but no easing is signaled, yet members monitor for 2% sustainability, with Governor Bailey emphasizing vigilance.<\/li>\n\n\n\n<li>The next meeting is on 18 June 2026.<br \/><br \/><strong>Next 24 Hours Bias<\/strong><strong><br \/><\/strong>Weak Bullish<\/li>\n<\/ul>\n\n\n\n<p><strong><br \/><\/strong><strong><br \/><\/strong><strong>The Canadian Dollar (CAD)<\/strong><strong><br \/><\/strong><strong><br \/><\/strong><strong>Key news events today<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from CAD today?<\/strong><\/p>\n\n\n\n<p>The Canadian dollar is trending weaker against the US dollar, with USD\/CAD anticipated to rally toward 1.3825 before potentially rebounding downward toward 1.3245 if the bearish trend persists. The loonie&#8217;s decline is driven by a combination of risk-averse market flows, falling oil prices, and a stronger US dollar fueled by rising Treasury yields and geopolitical tensions involving Iran and China.<br \/>\u200b<br \/>Central Bank Notes:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Governing Council held the overnight rate target steady at 2.25% at its 28-29 April 2026 meeting, matching consensus expectations and prolonging the policy pause as inflation trends firmer toward target. The Bank highlighted lingering global headwinds from Middle East tensions and U.S. tariff escalations under Trump, but confirmed the stance continues fostering disinflation amid moderating energy volatility.<\/li>\n\n\n\n<li>U.S. trade frictions and geopolitical strains persist in dampening sentiment, yet Canadian manufacturing PMI strengthened further in expansion, driven by robust export orders tied to sustained energy demand. Goods exports, anchored by crude oil, maintained strength through March, countering subdued capex as businesses emphasize operational buffers over expansion.<\/li>\n\n\n\n<li>Economic growth extended into Q2 2026 at roughly 2.1% annualized, sustaining Q1&#8217;s momentum via resource shipments, public spending, and industrial recovery. March preliminary figures suggest resilient expansion, tempered slightly by seasonal factors and lingering supply disruptions.<\/li>\n\n\n\n<li>Services PMI rose deeper into expansion territory, with gains across tech, leisure, and professional services; consumer segments showed firmer footing from wage gains, despite elevated prices curbing non-essentials. The Bank views this breadth as signaling a balanced, sustainable upturn.<\/li>\n\n\n\n<li>\u200bNational housing resales climbed modestly in March alongside stable prices, supported by steady rates and regional affordability pockets, as inventory accumulation in key markets avoids sharp imbalances. Policymakers expect gradual softening, underpinned by sound lending standards and consistent household dynamics.<\/li>\n\n\n\n<li>Headline CPI held near 2.0% year-over-year in March 2026 prints, within the target band, with core metrics like CPI-trim and median easing to around 2.5% on easing food, goods, and partial shelter relief. This bolsters confidence in inflation&#8217;s durable path to 2%.<\/li>\n\n\n\n<li>Officials affirmed 2.25% appropriately positions the economy for 2% inflation stability and orderly rebalancing, with cuts off the table absent growth or price setbacks. Focus shifts to Q2 momentum, core trends, and trade\/geopolitical developments ahead of June.<\/li>\n\n\n\n<li>The next meeting is on 10 June 2026.<\/li>\n<\/ul>\n\n\n\n<p><strong>Next 24 Hours Bias<\/strong><br \/>Medium Bullish<\/p>\n\n\n\n<p><strong>Oil<\/strong><strong><br \/><\/strong><strong><em><br \/><\/em><\/strong><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>No major news event<br \/><strong><br \/><\/strong><strong>What can we expect from Oil today?<\/strong><\/p>\n\n\n\n<p>Oil surged on 18 May 2026 as renewed Middle East tensions and concerns about shut-ins and restricted flows through the Strait of Hormuz pushed benchmark Brent above $110 and WTI above roughly $106, while regional crude grades and the OPEC basket also climbed; the U.S. EIA and market analysts say inventories remain tight and production outages are keeping a sustained risk premium on prices, leaving substantial upside risk if the geopolitical situation does not ease.<br \/><br \/><strong>Next 24 Hours Bias<\/strong><strong><br \/><\/strong>Strong Bullish<\/p>\n","protected":false},"excerpt":{"rendered":"<p>IC Markets &#8211; Europe Fundamental Forecast | 18 May 2026 What [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":79417,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[196,215,339],"tags":[],"class_list":["post-80536","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fundamental-analysis","category-market-analysis","category-recent-posts"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/posts\/80536","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/comments?post=80536"}],"version-history":[{"count":1,"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/posts\/80536\/revisions"}],"predecessor-version":[{"id":80537,"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/posts\/80536\/revisions\/80537"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/media\/79417"}],"wp:attachment":[{"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/media?parent=80536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/categories?post=80536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.icmarkets.com.au\/blog\/wp-json\/wp\/v2\/tags?post=80536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}