IC Markets Europe Fundamental Forecast | 25 September 2025
What happened in the Asia session?
The market mood in Asia was one of caution, with investors partially locking in profits after a strong rally and bracing for key U.S. macroeconomic data later in the week. The Japanese yen and oil remained the most sensitive assets to headline risk, while equities broadly paused ahead of scheduled data and global policy developments. The session was relatively quiet for major economic data releases, but market movements were still significant due to positioning ahead of quarter-end and anticipation of U.S. Federal Reserve policy updates.
What does it mean for the Europe & US sessions?
Today’s trading sessions are driven by the release of critical U.S. economic data, especially GDP, jobless claims, and durable goods orders, which are likely to set the tone for risk assets and FX. Central bank projections and inflation metrics remain at the forefront, with Friday’s PCE release expected to be pivotal. Tech, auto, and financial sectors present opportunities and volatility, while oil prices and geopolitics add further complexity for traders.
The Dollar Index (DXY)
Key news events today
Final GDP q/q (12:30 pm GMT)
Core Durable Goods Orders m/m (12:30 pm GMT)
Durable Goods Orders m/m (12:30 pm GMT)
Final GDP Price Index q/q (12:30 pm GMT)
Existing Home Sales (2:00 pm GMT)
What can we expect from DXY today?
The U.S. dollar remains firm, holding onto recent gains as traders respond to Federal Reserve signals and await key economic data releases. The dollar has shown significant strength against major currencies, particularly the Japanese yen, amid shifting interest rate expectations and broad positioning flows. Market participants have priced in about 43 basis points of Fed easing for the rest of 2025, but statements from Fed officials, including Chair Powell, suggest that future policy shifts will depend heavily on upcoming inflation and labor market data
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 4.00%–4.25% at its September 16–17, 2025, meeting, marking the first policy rate adjustment since December 2024 after five consecutive holds.
- The Committee maintained its long-term objective of achieving maximum employment and 2% inflation, acknowledging recent labor market softening and continued tariff-driven price pressures.
- Policymakers expressed elevated concern about downside risks to growth, citing a stalling labor market, modest job creation, and an unemployment rate drifting up toward 4.4%. At the same time, inflation remains above target, with CPI at 3.2% and core inflation at 3.1% as of August 2025; higher energy and food prices, largely attributable to tariffs, continue to weigh on headline measures.
- Although economic activity expanded at a moderate pace in the third quarter, the growth outlook has weakened. Q3 GDP growth is estimated near 1.0% (annualized), with full-year 2025 GDP growth guidance revised to 1.2%, reflecting slowing household consumption and tighter financial conditions.
- In the updated Summary of Economic Projections, the unemployment rate is projected to average 4.5% for the year, with headline PCE inflation revised up slightly to 3.1% for 2025. The Committee anticipates core PCE inflation to remain stubborn, requiring sustained vigilance and a flexible approach to risk management.
- The Committee reiterated its data-dependent approach and openness to further adjustments should employment or inflation deviate meaningfully from current forecasts. Several members dissented, either advocating a larger 50-basis-point cut or preferring no adjustment at this meeting, revealing heightened divergence within the Committee.
- Balance sheet reduction continues at a measured pace. The monthly Treasury redemption cap remains at $5B and the agency MBS cap at $35B, as the Board aims to support orderly market conditions in the face of evolving global and domestic uncertainty
- The next meeting is scheduled for 28 to 29 October 2025.
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
Final GDP q/q (12:30 pm GMT)
Core Durable Goods Orders m/m (12:30 pm GMT)
Durable Goods Orders m/m (12:30 pm GMT)
Final GDP Price Index q/q (12:30 pm GMT)
Existing Home Sales (2:00 pm GMT)
What can we expect from Gold today?
Gold prices today are holding near recent all-time highs after a period of bullish momentum, supported by expectations of further U.S. rate cuts, geopolitical tensions, and strong demand from ETF inflows and central banks. Spot gold traded around $3,736-3,740 per ounce, virtually unchanged from the previous session and up roughly 10% for the month. The market remains cautious as traders await key U.S. economic data and further guidance from Federal Reserve officials.
Next 24 Hours Bias
Strong Bullish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
The Euro faces headwinds from deteriorating German business sentiment and mixed economic signals across the eurozone. While the ECB maintains a steady policy stance with inflation near target, concerns about trade redirection from China and political uncertainties in major economies like France continue to weigh on the currency. The technical outlook suggests further downside potential unless key resistance levels are broken convincingly.
Central Bank Notes:
- The Governing Council kept the three key ECB interest rates unchanged at its September 11, 2025, meeting. The main refinancing rate remains at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. These levels have been maintained after the cuts earlier in 2025, reflecting the Council’s confidence that the current stance is consistent with the price stability mandate.
- Evidence that inflation is running close to the ECB’s medium-term target of 2% supported the decision to hold rates steady. Domestic price pressures are easing as wage growth continues to moderate, and financing conditions remain accommodative. Policymakers reaffirmed a data-dependent, meeting-by-meeting approach to further policy moves, with no pre-commitment to a predetermined path amid ongoing global and domestic risks.
- Eurosystem staff projections foresee headline inflation averaging 2.0% for 2025, 1.8% for 2026, and 2.0% in 2027. The 2025 and 2026 forecasts reflect a downward revision, primarily on lower energy costs and exchange rate effects, even as food inflation remains persistent. Core inflation (excluding energy and food) is expected at 2.0% for both 2026 and 2027, with only minor changes since prior rounds.
- Real GDP growth in the euro area is projected at 1.1% for 2025, 1.1% for 2026, and 1.4% for 2027. A robust first quarter—partly due to firms accelerating exports ahead of anticipated tariff hikes—cushioned a weaker outlook for the remainder of 2025. While business investment continues to face uncertainty from ongoing global trade disputes, especially with the US, government investment and infrastructure spending are expected to provide some support to the outlook..
- Rising real incomes and continued strength in the labor market back household spending. Despite some fading tailwind from previous rate cuts, financing conditions remain broadly favorable and are expected to underpin the resilience of private consumption and investment against outside shocks. Moderating wage growth and profit margin adjustments are helping to absorb residual cost pressures.
- Rising real incomes and continued strength in the labor market back household spending. Despite some fading tailwind from previous rate cuts, financing conditions remain broadly favorable and are expected to underpin the resilience of private consumption and investment against outside shocks. Moderating wage growth and profit margin adjustments are helping to absorb residual cost pressures.
- All future interest rate decisions will continue to be guided by the integrated assessment of economic and financial data, the inflation outlook, and underlying inflation dynamics, and the effectiveness of monetary policy transmission—without any pre-commitment to a specific future rate path.
- The ECB’s Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are declining predictably, as reinvestment of maturities has ceased. Balance-sheet normalization continues in line with the ECB’s previously communicated schedule.
- The next meeting is on 29 to 30 October 2025
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
SNB Monetary Policy Assessment (7:30 am GMT)
SNB Policy Rate (7:30 am GMT)
SNB Press Conference (8:00 am GMT)
What can we expect from CHF today?
Today’s expected SNB decision to maintain rates at 0% underscores the central bank’s constrained position – unable to significantly weaken the currency through conventional monetary policy while facing limited intervention options. The franc’s strength appears likely to persist as long as global uncertainties remain elevated and Switzerland maintains its reputation for fiscal stability relative to other major economies.
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.
- Labour 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 news event
What can we expect from GBP today?
Thursday’s pound developments reflect a currency under pressure from multiple fronts: hawkish BoE rhetoric limiting rate cut expectations, disappointing economic data suggesting growth momentum is stalling, persistently high inflation constraining policy flexibility, and renewed dollar strength. While the pound showed modest gains today, the overall trajectory remains challenging, with technical indicators suggesting further downside risks if key support levels are breached. Market participants are likely to remain cautious ahead of upcoming economic releases and the November budget announcement.
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 August rate cut. 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 near £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
Weak Bullish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from CAD today?
The Canadian dollar faces mounting challenges on September 25, 2025, trading at four-month lows against the US dollar amid a confluence of negative factors. The Bank of Canada’s recent rate cut to 2.50%, combined with Governor Macklem’s urgent calls for trade diversification and structural economic reforms, underscores the severity of current economic headwinds.
Central Bank Notes:
- The Bank of Canada reduced its target for the overnight rate to 2.50% at its September 17 meeting, with the Bank Rate at 2.75% and the deposit rate at 2.25%. This marks the first rate cut since early 2025, as the Bank responded to a string of softer inflation prints and persistent economic headwinds.
- The Council cited continued U.S. tariff volatility and slow progress on trade negotiations as major contributors to ongoing uncertainty. While headline tariffs have not escalated further, the unpredictability of U.S. policy remains a significant risk for Canadian exports and business confidence.
- Uncertainty about U.S. trade policy and recurring tariff threats continued to weigh on growth prospects. The Bank flagged downside risks to the export sector, with survey data indicating ongoing hesitancy among manufacturers and exporters.
- After modest growth in Q1, Canada’s economy slipped into contraction, with GDP shrinking by 0.8% in Q2 and forecast to decrease again by 0.8% in Q3. Economic weakness has been most pronounced in manufacturing and goods-producing sectors affected by trade frictions and softer U.S. demand.
- Early estimates show that growth stabilized in September but remained well below the Bank’s 2% forecast for Q4. Manufacturing output has improved slightly—supported by a modest rebound in petroleum and mining activity—while consumer spending and retail sales were largely flat.
- Consumer spending remained subdued as households continued to limit discretionary purchases amid uncertainty and a slower job market. Housing activity stayed weak, despite earlier government efforts to boost affordability and modest gains in some real estate segments.
- Headline CPI inflation edged up to 1.9% in August, undershooting economist expectations but still showing emerging pressures from shelter and imported goods costs. Core inflation metrics were mixed, though price growth remains just below the Bank’s 2% target.
- The Governing Council reaffirmed its cautious approach, emphasizing that while further rate cuts are possible, the pace will hinge on the path of U.S. tariffs, domestic inflation dynamics, and signs of a sustainable recovery. The Bank remains vigilant against the risk of inflation falling below target in the face of economic slack.
- The next meeting is on 29 October 2025.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil markets on September 25, 2025, experienced a modest pullback following Wednesday’s surge to seven-week highs. The complex interplay between bullish factors (unexpected U.S. inventory draws, Ukrainian attacks on Russian refineries, escalating geopolitical tensions) and bearish elements (approaching demand seasonality, OPEC+ production increases, potential Kurdish export resumption) continues to drive volatility.
Next 24 Hours Bias
Weak Bullish
