IC Markets Europe Fundamental Forecast | 29 September 2025
What happened in the Asia session?
The Asian session was characterized by cautious optimism in equity markets, offset by specific sectoral pressures. The US government shutdown risk emerged as the dominant theme affecting all asset classes, creating dollar weakness that benefited most Asian currencies. Oil markets faced the most significant pressure from OPEC+ production policies, while technology disruptions in South Korea highlighted infrastructure vulnerabilities without major market impact. The Japanese yen’s strength against a weaker dollar was the most notable currency movement, supported by reduced US rate cut expectations and potential BoJ policy adjustments ahead.
What does it mean for the Europe & US sessions?
Traders entering European and U.S. sessions today should prioritize monitoring developments around the U.S. government shutdown negotiations, as this poses the most immediate systemic risk. The combination of Fed speakers throughout the week, critical inflation data from Spain, and energy market pressures from resumed Kurdish oil exports and OPEC+ production plans creates a complex backdrop requiring careful attention to both political and economic developments. The potential delay in key U.S. economic data due to a shutdown adds a layer of uncertainty for Fed policy expectations heading into the October meeting.
The Dollar Index (DXY)
Key news events today
Pending Home Sales m/m (2:00 pm GMT)
What can we expect from DXY today?
Monday’s trading saw the US dollar on the defensive amid rising government shutdown risks that could delay crucial economic data releases, including Friday’s jobs report. While technical indicators show the dollar maintaining strength near three-week highs with DXY around 98.15, market uncertainty over potential data disruptions and Fed policy implications created cautious positioning. Key developments include USD/JPY approaching 150, moderating Fed rate cut expectations (90% October probability), and upcoming speeches from multiple Fed officials. The week’s critical test remains Friday’s nonfarm payrolls data, with forecasts ranging from 39k-85k jobs added, assuming the report proceeds despite shutdown concerns.
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
Pending Home Sales m/m (2:00 pm GMT)
What can we expect from Gold today?
Gold’s performance on September 29, 2025, reflects the confluence of multiple bullish factors: continued Federal Reserve accommodation expectations, persistent geopolitical tensions, record central bank buying, and China’s strategic push to become a global gold custodian. With technical indicators remaining overwhelmingly positive and institutional forecasts pointing toward $4,000+ levels, gold appears positioned to extend its historic rally despite short-term consolidation periods. The metal’s role as both a monetary asset and geopolitical hedge continues attracting diverse investor classes in an increasingly uncertain global environment.
Next 24 Hours Bias
Strong Bullish
The Euro (EUR)
Key news events today
Spanish Flash CPI y/y (7:00 am GMT)
What can we expect from EUR today?
Monday, September 29, 2025, presented a mixed picture for the Euro. While the currency showed intraday strength against the dollar and maintained levels near multi-month highs, underlying economic indicators revealed growing challenges. The return to manufacturing contraction, declining exports to the US, and anticipated uptick in inflation suggest the ECB may need to carefully balance its policy approach in the coming months. However, the resilient services sector, stable inflation near target, and improved growth projections provide some support for the single currency’s medium-term outlook.
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 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 boost 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 boost 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 maturities have ceased to be reinvested. 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
No major news event
What can we expect from CHF today?
The Swiss Franc remains remarkably resilient, supported by its safe-haven appeal and the SNB’s measured monetary policy approach. While U.S. tariffs pose significant challenges to the Swiss economy with projected GDP impacts and job losses, the currency continues to benefit from global risk-off sentiment and monetary policy divergence. The SNB’s decision to pause rate cuts at zero reflects a balanced approach between supporting the economy and maintaining currency stability, though the central bank remains prepared to intervene if necessary. Looking ahead, the franc’s performance will largely depend on the evolution of trade tensions, global economic conditions, and the SNB’s policy response to these challenges.
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?
The British pound faces a challenging environment as it contends with a strengthening US dollar, domestic economic slowdown, mounting fiscal concerns, and trade tensions. While Monday’s modest recovery provides some respite from last week’s sharp declines, the pound remains vulnerable to further weakness without significant improvement in UK economic fundamentals or resolution of fiscal uncertainties. The upcoming week will be crucial in determining whether sterling can establish a sustainable recovery or continue its downward trajectory toward multi-week lows.
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 multiple headwinds as it enters the final quarter of 2025. The Bank of Canada’s dovish pivot, evidenced by the September rate cut and signals of potential further easing, contrasts sharply with the Federal Reserve’s more cautious approach to monetary policy. This divergence has contributed to a widening interest rate differential that undermines CAD appeal.
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?
Monday’s oil market decline reflects growing concerns about an emerging supply glut as OPEC+ continues ramping up production while Kurdistan exports return to markets. Despite ongoing geopolitical supply disruptions from Ukraine’s strikes on Russian infrastructure, the market is increasingly focused on oversupply risks heading into late 2025 and 2026.
Next 24 Hours Bias
Weak Bullish
