IC Markets Global – Europe Fundamental Forecast | 04 February 2026
What happened in the Asia session?
Upcoming U.S. indicators like the ADP Employment Report and ISM Non-Manufacturing Composite are influencing sentiment amid ongoing global volatility. Key headlines centred on persistent precious metals sell-offs, firmer USD from Trump’s Fed chair nomination of Kevin Warsh, and geopolitical oil dynamics involving U.S.-Iran tensions.
What does it mean for the Europe & US sessions?
Traders should monitor ongoing volatility in tech stocks and gold prices exceeding $5,000, alongside U.S. Treasury yields holding steady amid solid economic data, as European and U.S. sessions open today. Key developments include Federal Reserve Governor Stephen Miran’s resignation from his White House role,
The Dollar Index (DXY)
Key news events today
ADP Non-Farm Employment Change (1:15 pm GMT)
ISM Services PMI (3:00 pm GMT)
What can we expect from DXY today?
The US dollar maintains its recent upward momentum, with the DXY index hovering around 97.6-97.7 after a sharp rebound from four-year lows hit last month, propelled by unexpectedly strong US manufacturing figures, President Trump’s Fed Chair nomination of Kevin Warsh, and fading fears of currency debasement.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate target range steady at 3.50%–3.75% at its January 27–28, 2026, meeting, marking the second consecutive pause after three 25-basis-point cuts in late 2025.
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labour market remaining soft as the unemployment rate stood at 4.4% in December 2025 amid modest job gains of 50,000.
- Officials note balanced risks to growth and employment alongside sticky inflation, with CPI at 2.7% year-over-year in December 2025 and core PCE at 2.8% due to tariffs and housing pressures; headline PCE at 2.6%.
- Economic activity expanded robustly at 4.4% annualized in Q3 2025, with Q4 estimates around 5% per Atlanta Fed GDPNow, supported by consumer spending despite prior trade tensions and shutdown effects.
- December 2025’s Summary of Economic Projections forecasts 2025 unemployment at a median of 4.5%, 2026 GDP growth at 2.3%, and core PCE at 2.5% (down from prior 2.6%), with the dot plot signalling one more cut in 2026; January updates may reflect resilient Q4 growth.
- The Committee maintained its data-dependent approach, noting a stable but soft labour market and inflation above target, while holding rates steady at 3.50%-3.75%; dissents likely persist amid divisions on the pace of easing.
- The FOMC continues its adjusted quantitative tightening post-December 1, 2025, conclusion of the prior program, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to maintain ample reserves.
- The next meeting is scheduled for 17 to 18 March 2026.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
ADP Non-Farm Employment Change (1:15 pm GMT)
ISM Services PMI (3:00 pm GMT)
What can we expect from Gold today?
Gold stabilised near $5,008 per ounce following a turbulent week marked by profit-taking from January’s record highs above $5,600, exacerbated by a stronger dollar and investor caution ahead of U.S. economic data like jobless claims. Technical forecasts point to a possible bearish correction testing $4,575 support before resuming an uptrend toward $5,975, supported by bullish channels.
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?
The euro maintained upward traction versus the dollar at approximately 1.1822, buoyed by technical support and softer USD sentiment ahead of key eurozone CPI figures, while its recent surge raises ECB concerns over export competitiveness and disinflation risks that could accelerate monetary easing debates.
Central Bank Notes:
- The Governing Council of the ECB kept the three key interest rates unchanged at its 4–5 January 2026 meeting, maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.40% and the deposit facility at 2.00%. This decision aligns with the assessment that the current stance supports medium-term price stability, as inflation edges below the 2% target while growth shows resilience amid balanced risks. Markets and commentary indicate value in holding steady, with no fixed path ahead given uncertainties in data.
- Price dynamics remain stable near target levels. Headline HICP inflation stood at 2.1% in November 2025, with projections for 1.9% in 2026 driven by base effects from energy and easing non-energy components. Services inflation persists somewhat elevated but trends toward moderation, alongside contained food pressures.
- December 2025 Eurosystem staff projections confirm headline inflation at 2.1% for 2025, declining to 1.9% in 2026 and 1.8% in 2027 before nearing 2% in 2028. Downside risks from soft producer prices and anchored expectations offset potential upsides from geopolitics or fiscal measures.
- Euro area GDP growth remains resilient at subdued levels, with Q3 2025 at 0.3% qoq and forecasts around 1.2-1.4% for 2025-2027. Surveys signal stabilization, bolstered by public investment and external demand against softer private spending.
- The labour market stays tight overall, with unemployment steady at 6.4% through October 2025, near historic lows and solid participation. Real incomes support consumption as inflation eases, with credit conditions aiding gradual household and firm expansion.
- Business sentiment reflects caution over US policy, trade tensions, and tariffs, tempered by easing supply chains and a competitive euro. Export sectors gain a modest lift, while domestic drivers like investment build momentum.
- The Governing Council will continue to make data-dependent decisions meeting by meeting, assessing inflation outlook, underlying trends, and transmission. Both hikes and cuts remain possible based on data, avoiding preset paths amid uncertainties.
- Balance sheet normalisation proceeds steadily, with APP and PEPP portfolios shrinking post-reinvestment halts, at a pace deemed suitable without market strain.
The next meeting is on 4 to 5 February 2026
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 Swiss franc experienced a slight daily softening, trading near 0.7760 per USD due to dollar strength from anticipated Fed leadership shifts under Trump and declining gold prices, yet it maintained robust longer-term gains as a premier safe-haven currency amid global economic policy risks.
Central Bank Notes:
- At its 11 December 2025 monetary policy assessment, the Swiss National Bank (SNB) is widely expected to leave the policy rate unchanged at 0%, extending the pause that began in September as the Governing Board judges that current settings are sufficient to keep inflation near, but still below, its target while avoiding an unnecessary move into negative rates.
- Recent data show that the tentative rebound in Swiss inflation has stalled, with headline CPI easing from 0.1% year‑on‑year in October to 0.0% in November and core inflation slipping to about 0.4%, reinforcing the view that underlying price pressures remain very weak and that deflation risks, while contained, have not fully disappeared.
- The SNB’s conditional inflation forecast is likely to remain close to the September projections, with inflation still seen averaging roughly 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027 under an unchanged policy rate path, though the latest CPI prints argue for a slightly lower near‑term profile and keep open the option of renewed easing if activity or prices weaken further.
- The global backdrop has deteriorated further, as continuing U.S. tariff actions and softer external demand weigh on world trade, while uncertainty in key European and U.S. markets for Swiss exports persists, leaving the SNB cautious about the growth outlook despite Switzerland’s relatively resilient domestic demand.
- Business and labour-market sentiment in export‑oriented manufacturing remains subdued, with firms reporting pressure on margins from the still‑strong franc and softer foreign orders, although the broader economy is still expected to grow at around 1–1.5% in 2025 and unemployment only drifting up gradually from low levels.
- The SNB continues to stress its willingness to act if deflation risks re‑emerge, reiterating that it can ease policy through renewed rate cuts or targeted foreign‑exchange intervention if necessary, while also highlighting its commitment to transparent communication, including the publication of detailed minutes from recent assessments and ongoing dialogue with international partners on FX policy
The next meeting is on 19 March 2026.
Next 24 Hours Bias
Strong Bullish
The Pound (GBP)
Key news events today
No major news event
What can we expect from GBP today?
The British Pound (GBP) is experiencing mixed pressures today amid anticipation for the Bank of England’s (BoE) policy decision tomorrow. GBP/USD hovers around 1.3660, reflecting minor pullbacks from recent highs near 1.38, driven by profit-taking and technical corrections after a strong January rally fueled by USD weakness..
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) will meet on 18 December 2025, with the current Bank Rate standing at 4.00 per cent after being held in a close 5–4 vote at the 5 November meeting. Market pricing and analyst commentary point to a high risk of a 25‑basis‑point cut to 3.75 per cent, but this remains conditional on incoming inflation and labour‑market data, so the December note should be treated as pre‑decision guidance rather than an ex‑post summary.
- The BoE is expected to leave its quantitative tightening (QT) framework broadly unchanged through year‑end, maintaining the lower reduction pace in gilt holdings that was set earlier in 2025. Official communications still characterise the existing QT path as consistent with a restrictive stance, with policymakers stressing that balance‑sheet reduction will remain gradual and sensitive to market‑liquidity conditions.
- Headline CPI inflation eased to 3.6 per cent year‑on‑year in October 2025, down from 3.8 per cent in September, helped by softer energy and goods prices, though it remains almost twice the 2 per cent target. Underlying inflation pressures, particularly in services, have continued to moderate only slowly, so the MPC’s central projection still envisages inflation moving closer to, but not yet reaching, 3 per cent over the course of 2026, contingent on further normalisation in energy and wage dynamics.
- UK economic activity remains weak heading into the December meeting, with the labour market showing further signs of slackening. The unemployment rate has risen toward just above 5 per cent on the latest three‑month figures to October, while overall regular pay growth has slowed to around the mid‑4 per cent range, reinforcing the view that domestic cost pressures are gradually easing.
- External conditions continue to cloud the outlook, with fragile global growth and fluctuating commodity prices contributing to bouts of financial‑market volatility. The MPC has highlighted that renewed global energy or food price shocks could temporarily slow the pace of disinflation, but such risks are currently judged unlikely to derail the medium‑term downward trajectory for inflation if domestic demand stays subdued.
- The balance of risks around the inflation outlook remains finely poised. Downside risks are linked to persistently weak domestic demand and rising unemployment, while upside risks come from still‑elevated inflation expectations, sticky services inflation, and the possibility that structural changes in the labour market leave less slack than conventional indicators suggest.
- Overall, the MPC’s stance going into December is restrictive but increasingly open to a gradual easing cycle, with any rate cuts expected to be measured and data‑dependent. Policymakers have reiterated that the Bank Rate will need to stay in restrictive territory until they are confident inflation is on a sustainable path back to the 2 per cent target, and they have signalled that the profile of cuts, once started, is likely to be shallow rather than rapid.
- The next meeting is on 5 February 2026.
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?
The Canadian dollar faced downward pressure, easing to about 1.3674 per USD as weak November GDP data, manufacturing contraction, and falling oil prices offset earlier 16-month highs, while a stronger USD benefited from US policy shifts like the Fed chair nomination.
Central Bank Notes:
- The Governing Council left the target for the overnight rate unchanged at 2.25% at its 28 January 2026 meeting, consistent with market expectations and reinforcing the pause in easing after the December hold. The Bank highlighted ongoing global trade uncertainties, including U.S. policy risks, but noted a steadier external environment with no immediate need for policy shifts amid fragile world demand.
- Uncertainty from U.S. tariffs continues to cloud business confidence, yet Canadian manufacturing PMI and export orders have stabilised further, with backlogs modestly increasing despite restrained investment. Recent data indicate goods exports, particularly energy, provided ongoing support, though firms remain selective in expansion plans.
- Canada’s economy maintained momentum into late 2025 and early 2026, with Q4 GDP estimates around 2.0-2.5% annualised after Q3’s 2.6% rebound, driven by crude oil exports, public spending, and partial service sector recovery. January flash indicators suggest a balanced start to Q1, though weather disruptions slightly tempered output gains.
- Services activity strengthened, with PMI holding above 50 and gains spreading to tech, tourism, and professional sectors; however, consumer services stayed uneven due to persistent high prices curbing non-essential spending despite wage growth. The Bank views this broadening as a sign of structural adjustment progressing.
- Housing markets edged firmer nationally, with resales and prices up modestly in December-January on lower rates and steady demand, though major cities face renewed pressures tempered by strict lending rules and affordability hurdles. The Bank expects this stabilisation to persist without overheating.
- CPI inflation held near 2.2% year-over-year in December 2025 and into January 2026 estimates, within the 1-3% band, while core metrics like CPI-median and trim eased toward 2.8%, signaling waning underlying pressures despite shelter and energy volatility. This supports the Bank’s confidence in target convergence.
- Officials reaffirmed the 2.25% rate as appropriate for sustaining 2% inflation and economic adjustment, with no near-term cuts anticipated absent growth or inflation shocks. Focus shifts to Q1 data durability, core trend sustainability, and trade policy clarity.
- The next meeting is on 25 March 2026.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from Oil today?
Oil prices experienced sharp declines today amid easing US-Iran tensions and a broader commodities selloff. Brent crude traded near $66 per barrel after plummeting over 5% earlier, while WTI futures dropped more than 4.5% to around $62.2, marking the steepest one-day fall in months as President Donald Trump’s comments on ongoing talks with Iran reduced geopolitical risk premiums.
Next 24 Hours Bias
Medium Bearish
