IC Markets – Europe Fundamental Forecast | 04 November 2025

IC Markets – Europe Fundamental Forecast | 04 November 2025

What happened in the Asia session?
The RBA’s hawkish hold on rates at 3.6% amid higher-than-expected inflation created volatility in AUD pairs, with the currency showing resilience despite Fed headwinds. Traded near two-week lows ahead of critical Q3 employment data, with expectations of rising unemployment reinforcing dovish RBNZ expectations. Weaker manufacturing PMI data weighed on sentiment, though markets remained relatively stable above key support levels . Gold Fell below $4,000/oz on a stronger US dollar and reduced Fed easing expectations, compounded by China’s tax policy changes. 

What does it mean for the Europe & US sessions?
Today’s key developments center on diverging central bank policies, with the RBA holding rates amid sticky inflation while the RBNZ continues aggressive easing in response to economic weakness. The ECB maintains its pause after substantial 2024-2025 rate cuts, while the Fed signals caution on future reductions despite recent easing. Currency markets reflect these divergences, with the dollar approaching key resistance and commodity currencies adjusting to policy shifts. Oil prices are supported by OPEC+ production discipline and supply risks, while gold consolidates after recent record highs. Equity markets show continued strength driven by AI optimism, though concentration risks and weak breadth raise concerns about sustainability heading into year-end.

The Dollar Index (DXY)

Key news events today

JOLTS Job Openings (Tentative)

What can we expect from DXY today?

The US dollar is at a three-month high on November 4, 2025, supported by reduced Federal Reserve rate cut expectations following Chair Powell’s hawkish October 29 press conference. Market odds of a December cut have fallen to 63-70% from over 90%, strengthening the dollar across major pairs. A month-long government shutdown has created an unprecedented economic data blackout, forcing investors to rely on private sector indicators like Wednesday’s ADP employment report. The US-China trade truce announced last week has stabilized sentiment, with fentanyl tariffs cut from 20% to 10%, though the overall tariff rate remains elevated at 47%.

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 Bullish

Gold (XAU)

Key news events today

JOLTS Job Openings (Tentative)

What can we expect from Gold today?

Gold’s performance on Tuesday reflects a market in transition. The precious metal is consolidating around $4,000 after a sharp correction from record highs, caught between hawkish Federal Reserve policy, reduced safe-haven demand following US-China trade progress, and China’s tax policy changes that may dampen retail demand. However, structural support remains robust through sustained central bank buying, positive ETF inflows reversing multi-year trends, and persistent global uncertainties. The metal has gained 45-46% year-to-date, demonstrating remarkable strength despite the recent pullback, representing a healthy 5.8-10% correction.​

Next 24 Hours Bias   
Weak bearish

The Euro (EUR)

Key news events today

ECB President Lagarde speaks (7:40 am GMT)

ECB President Lagarde speaks (10:00 am GMT)

What can we expect from EUR today?

The euro faces headwinds entering November as dollar strength drives EUR/USD to three-month lows near 1.1500, despite relatively constructive eurozone fundamentals. The ECB’s steady policy stance at 2% reflects confidence in inflation convergence and economic resilience, with third-quarter GDP beating expectations at 0.2% growth. Manufacturing has stabilized at the 50.0 threshold while services expansion accelerated to 52.6, though structural challenges persist with stagnant new orders and continued job cuts.

Central Bank Notes:

• The Governing Council of the ECB kept the three key interest rates unchanged at its meeting on 30 October 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 in the face of 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
Medium Bearish

The Swiss Franc (CHF)

Key news events today

CPI m/m (7:00 am GMT)

What can we expect from CHF today?

The Swiss Franc has eased from its 2025 highs but remains among the stronger G10 currencies year-to-date, mostly due to its safe-haven status and the SNB’s prudent stance. However, persistent low inflation may prompt further policy accommodation, and the SNB’s recent profit results highlight financial stability advantages. The currency’s performance remains sensitive to global risk appetite, SNB signals, and evolving macroeconomic data.

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
Weak Bearish

The Pound (GBP)

Key news events today

No major event

What can we expect from GBP today?

The British pound faces a challenging environment heading into mid-week, pressured by expectations for more aggressive BoE rate cuts, deteriorating UK fiscal fundamentals, and a stronger US dollar. While some analysts see temporary relief if the BoE holds rates on Thursday, the broader outlook remains bearish with key support levels at risk. The November 26 Budget represents the next major event risk, with fiscal tightening measures likely to further dampen economic sentiment and weigh on sterling. Technical indicators and momentum suggest GBP/USD could test the 1.30-1.31 range in the near term, with recovery attempts likely to face strong resistance around 1.33-1.34.

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 Gov Macklem speaks (6:30 pm GMT)

What can we expect from CAD today?

The Canadian Dollar faces a pivotal day, as the Carney government’s first budget promises transformational fiscal expansion aimed at boosting long-term growth and productivity. While Bank of America analysts view the fiscal stimulus as potentially bullish for CAD, the currency remains under pressure at 1.4067 against the USD amid weak economic data, including August’s 0.3% GDP contraction and a record-wide trade deficit. The Bank of Canada’s signal that its rate-cutting cycle may be complete provides some support, but ongoing U.S. trade tensions, stalled negotiations with the Trump administration, and oil prices hovering around $61 per barrel continue to limit upside potential.

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. Higher energy prices and a modest uptick in food and shelter costs drove the increase. 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
Medium Bearish

Oil

Key news events today

API crude oil stock (8:30 pm GMT)

What can we expect from Oil today?

Tuesday’s oil market reflects a complex interplay of bearish and bullish factors. While OPEC+’s production pause and ongoing Russian supply disruptions provide near-term price support, overwhelming concerns about a 2026 supply glut continue to pressure prices toward multi-month lows. The record 1.4 billion barrels floating at sea underscores the market’s structural oversupply, even as geopolitical risks from Ukraine’s infrastructure attacks and potential Venezuela tensions create unpredictable supply wildcards. With WTI and Brent trading near $61 and $65, respectively, markets appear to be pricing in an extended period of abundant supply, despite OPEC+’s cautious approach and the uncertainties surrounding Russian oil flows under new sanctions.

Next 24 Hours Bias
Medium Bearish