IC Markets Global – Europe Fundamental Forecast | 02 December 2025
What happened in the Asia session?
Today’s Asia session was driven mainly by lingering Bank of Japan (BOJ) rate‑hike speculation, follow‑through from a global crypto sell‑off, and positioning ahead of key U.S. and euro area data later in the day. The biggest market moves were in JPY pairs, Asian equity indices (especially Nikkei futures), and safe‑haven assets like gold, while crypto‑linked assets and some high‑beta FX lagged.
What does it mean for the Europe & US sessions?
For today’s European and U.S. sessions, markets are focused on euro area flash CPI, Fed communication including Chair Powell’s remarks, and ongoing positioning around an expected Fed rate cut later in December. Risk sentiment is fragile after global equities softened and crypto saw heavy liquidations, while gold remains supported on rate‑cut expectations.
The Dollar Index (DXY)
Key news events today
Fed Chair Powell Speaks (1:00 am GMT)
What can we expect from DXY today?
The dollar is trading slightly softer today as the dollar index holds near a two‑week low, with markets focused on a likely Fed rate cut at next week’s FOMC and the broader shift toward a more dovish policy stance. Overall, sentiment around the greenback remains cautious, with investors fading rallies and watching Fed Chair Powell’s communications and upcoming U.S. data for confirmation of the easing path.
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 anticipates an unemployment rate averaging approximately 4.5% for 2025, with headline and core personal consumption expenditures (PCE) inflation projections remaining 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. Treasury redemption caps will remain steady at $5 billion per month, and agency mortgage-backed securities caps will remain 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
Fed Chair Powell Speaks (1:00 am GMT)
What can we expect from Gold today?
Gold is trading near six‑week highs, supported by expectations of a December Fed rate cut and a softer US dollar, with spot prices holding around the 4,230–4,260 USD/oz region in early trading. Overall bias intraday is still bullish but stretched, so many analysts are watching for a corrective pullback toward nearby support before any renewed push toward the October record highs above 4,350–4,380 USD/oz.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
Core CPI Flash Estimate y/y (10:00 am GMT)
CPI Flash Estimate y/y (10:00 am GMT)
What can we expect from EUR today?
Mildly constructive but still range‑bound, with markets waiting for today’s Eurozone flash CPI to confirm that inflation is anchored near target. Inflation close to 2% and slightly better recent GDP/employment data support the idea that the Eurozone is avoiding recession. Soft manufacturing and lingering global demand concerns limit upside and keep the EUR sensitive to any renewed risk‑off moves or a hawkish tilt from the Fed.
Central Bank Notes:
- The Governing Council of the ECB kept the three key interest rates unchanged at its 30 October 2025 meeting. 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, supported 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 Bullish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The franc’s multi‑month rally has been fuelled by safe‑haven demand, Switzerland’s low inflation, and earlier US‑Swiss trade tensions; even after some position‑unwinding in late November, CHF remains structurally strong. With the next major domestic catalyst being the SNB decision on 11 December, near‑term CHF moves are likely to react mainly to global risk sentiment, US rates (especially around Fed Chair Powell’s comments), and euro‑area data rather than to Swiss releases today.
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 news event
What can we expect from GBP today?
The Pound is trading slightly firmer but generally range‑bound today, supported by softer U.S. rate expectations while UK domestic data and surveys keep a cautious macro backdrop. GBP/USD is trading in the low‑1.32s today, marginally higher on the day but off recent intraday highs, with the pair up around 4% over the past year.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 6 November 2025 and voted 7–2 to keep the Bank Rate unchanged at 4.00 percent for a second consecutive meeting. The decision reflects the Committee’s cautious approach as inflation remains above target, but underlying economic momentum continues to weaken. Two members maintained their votes for a 25-basis-point cut, citing further signs of labor-market softening and weak business sentiment.
- The BOE adjusted its guidance on quantitative tightening (QT), maintaining the reduced pace established in September. The planned reduction of UK government bond holdings remains at £67.5 billion over the next 12 months, leaving the current gilt balance near £550 billion. Policymakers described the recalibrated QT path as “appropriate for current market conditions,” emphasizing the importance of liquidity management amid heightened volatility.
- Headline inflation moderated slightly to 3.6 percent in October from 3.8 percent previously, driven by easing food and transport prices. However, core inflation has shown only gradual progress, holding near 3.9 percent. The MPC noted that services inflation and administered energy costs continue to exert pressure, highlighting the challenge of achieving the 2 percent target sustainably. The Committee’s latest projections see inflation falling toward 3 percent by mid-2026, with further downside expected if energy and wage dynamics continue to normalize.
- Economic activity remains subdued. Estimates place Q3 GDP growth close to zero, with both business output and consumer spending restrained. The unemployment rate has edged up to 4.8 percent, while pay growth cooled to just under 5 percent year-on-year. MPC members acknowledged that pay settlements are weakening further, signaling an easing in labor cost pressures as demand softens. Surveys from the manufacturing and services sectors suggest muted hiring intentions through year-end.
- International factors continue to complicate the policy outlook. Fluctuating oil prices—partly linked to renewed Middle East tensions—alongside fragile global demand have contributed to higher market volatility. The MPC reiterated that external shocks, including global food and energy disruptions, could temporarily slow the disinflation path but remain unlikely to derail the medium-term moderation in prices.
- The Committee assessed risks around inflation as balanced. Downside risks arise from sluggish domestic growth and declining real income momentum, while upside risks remain tied to elevated inflation expectations and stubborn services inflation. Policymakers emphasized the need for patience, maintaining that any rate cuts ahead of clear inflation progress could undermine confidence in policy credibility.
- The MPC’s overall stance remains restrictive but increasingly balanced, with future moves expected to follow a cautious, data-driven trajectory. The Committee reaffirmed that monetary policy will stay tight until there is compelling evidence that inflation is returning to the 2 percent target on a durable basis.
- The next meeting is on 18 December 2025.
Next 24 Hours Bias
Medium Bullish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from CAD today?
Intraday is for a slightly weaker CAD while USD/CAD oscillates around the 1.39–1.40 area, with oil stability and soft Canadian manufacturing data capping CAD strength. For short‑term trading, markets are watching incoming U.S. data and any Bank of Canada commentary; surprises that shift rate‑cut expectations or a break in oil’s current range are the main catalysts that could push USD/CAD cleanly away from 1.40.
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 limit overall resale volumes, resulting in 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 Bullish
Oil
Key news events today
API Crude Oil Stock (8:30 pm GMT)
What can we expect from Oil today?
Oil is trading slightly firmer to flat today, with Brent around the low‑63s and WTI near the upper‑58s to low-59s per barrel, as the market weighs fresh supply disruptions in the Black Sea against ongoing concerns about global oversupply and soft demand. Price action is relatively contained, but geopolitical risks around Venezuela and Russia’s exports are keeping a modest bid under the market.
Next 24 Hours Bias
Medium Bearish
