IC Markets Global – Europe Fundamental Forecast | 25 February 2026
What happened in the Asia session?
Japanese Prime Minister Sanae Takaichi’s reported reservations about future interest rate hikes kept the yen weak near two-week lows, while Australian January CPI data showed headline inflation steady at 3.8% YoY but monthly CPI rising 0.4% and core (trimmed mean) inflation climbing to 3.4% YoY—a 16-month high, fueling rate hike bets. Markets also rallied on improved AI sentiment ahead of U.S. President Trump’s State of the Union speech, with Korean chipmakers and tech stocks driving record highs in Seoul’s Kospi and Tokyo’s Nikkei.
What does it mean for the Europe & US sessions?
Asian markets rose, led by Korean chips and AI optimism, with Nikkei +1.40%; U.S. futures stable post yesterday’s gains (Dow +0.76%, S&P +0.77%). Commodities firm: crude up 0.75% to $71.30 (Brent), gold steady at $2,638/oz; Bitcoin surged above $66,000 ahead of policy focus.Echoes from Trump’s February 24 State of the Union on the economy, tariffs, and tax cuts may drive volatility in USD pairs, equities, and crypto. The dollar index dipped to 97, the euro at $1.0777; watch currency moves on inflation data and geopolitical cues like Japan’s liquidity plans.
The Dollar Index (DXY)
Key news events today
President Trump Speaks (2:00 am GMT)
What can we expect from DXY today?
The US Dollar showed modest strength, with the DXY index hovering near 97.85 amid ongoing reactions to President Trump’s tariff announcements following a Supreme Court ruling against prior levies, coupled with hawkish Federal Reserve comments emphasising inflation control before further rate cuts.
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 a 4.4% annualized rate in Q3 2025, with Q4 estimates around 5% per the 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
Weak Bearish
Gold (XAU)
Key news events today
President Trump Speaks (2:00 am GMT)
What can we expect from Gold today?
Gold prices showed mixed movements, with spot gold trading around $5,160-$5,200 per ounce amid forecasts of a short-term bearish correction to $5,095 support before potential upside to $5,425, influenced by a softening dollar and ongoing central bank demand.
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 trades stably near $1.177 amid US tariffs sparking trade tensions and EU responses, with EUR/USD eyeing support at 1.1765 and upside potential to 1.1975 per forecasts; ECB events like the non-monetary meeting and speeches underscore vigilance on inflation at 1.7% and steady 2.15% rates, while resilient growth and recent rebounds from lows highlight the currency’s strength despite monthly dips.
Central Bank Notes:
- The Governing Council of the ECB is widely expected to keep the three key interest rates unchanged at its 4–5 February 2026 meeting, holding the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. This reflects ongoing confidence that the stance supports medium-term price stability, with headline inflation projected below 2% through 2026-2027 amid balanced risks. Commentary emphasizes a data-dependent approach without pre-committing to any path, as uncertainties from US policy and trade persist.
- Price dynamics continue to stabilize near the 2% target. Headline HICP inflation held around 2.1-2.2% into late 2025, with December 2025 figures and early 2026 base effects expected to ease it toward 1.9% for the year ahead. Services and core inflation show moderation, though sticky elements remain, offset by anchored expectations and subdued producer prices.
- Eurosystem staff projections from December 2025 project headline inflation at 2.1% for 2025, falling to 1.9% in 2026, 1.8% in 2027, and approaching 2% by 2028. Risks are balanced, with downsides from weak external demand balanced by potential upsides from fiscal impulses or geopolitical flares.
- Euro area GDP growth shows resilience, with Q4 2025 estimates around 0.3-0.4% qoq following Q3’s 0.3%, supporting annual forecasts of 1.2-1.4% for 2025-2027. Surveys indicate stabilization via public investment and external demand, despite softer private consumption amid trade uncertainties.
- The labour market remains tight, with unemployment steady near 6.4% through late 2025 at historic lows, backed by rising participation and real wage gains as inflation eases. Credit conditions support moderate household spending and firm investment expansion.
- Business sentiment is cautious due to US tariffs, trade tensions, and policy shifts under President Trump, but easing supply chains and a weaker euro provide modest support for exports. Domestic investment gains traction from fiscal measures.
- The Governing Council will maintain its meeting-by-meeting, data-dependent decisions, monitoring inflation trends, transmission, and the broader outlook, with both hikes and cuts possible absent a fixed path.
- Balance sheet normalization advances smoothly, with APP and PEPP reinvestments halted and portfolios shrinking at a controlled pace without liquidity stress.
The next meeting is on 18 to 19 March 2026
Next 24 Hours Bias
Medium Bearish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The Swiss Franc maintains its strong position near record highs against the USD at around 0.776, bolstered by persistent safe-haven demand amid geopolitical risks like US-Iran tensions and tempered Fed rate-cut expectations, while domestic inflation holds steady at 0.1% within SNB targets, reinforcing policy stability with no immediate interventions anticipated.
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 Pound Sterling remains subdued near GBP/USD 1.3500, consolidating weekly losses as traders digest the BoE’s dovish February split, UK CPI at a 10-month low of 3.0%, fueling March rate cut bets (85% probability), and contrasting Fed steadiness amid US CPI at 2.4% and tariff uncertainties from President Trump’s policies potentially disrupting UK trade.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) meets on 5 February 2026, with the current Bank Rate at 3.75 per cent following a narrow 5–4 vote to cut by 25 basis points at the 17 December 2025 meeting. Markets now price in around a 70 per cent chance of another 25-basis-point cut to 3.50 per cent, though this hinges on fresh inflation prints and labour data ahead of the decision, positioning this note as pre-meeting guidance. The February meeting will include a Monetary Policy Report with updated forecasts.
- Quantitative tightening (QT) is likely to proceed unchanged, with gilt holdings reductions held at the slower 2025 pace amid ongoing emphasis on gradual balance-sheet normalization calibrated to liquidity conditions. Officials continue to frame the QT path as supportive of a restrictive overall stance.
- Headline CPI inflation stood at 3.6 per cent year-on-year in October 2025, with services pressures easing slowly toward mid-single digits, keeping it well above the 2 per cent target. The MPC’s projections point to inflation hovering near 3 per cent through much of 2026, assuming wage growth moderates further and energy prices stabilize.
- UK growth remains subdued into early 2026, with unemployment edging above 5 per cent on recent three-month averages and regular pay growth cooling to the mid-4 per cent range. These trends signal ongoing labour-market softening, aiding the case for domestic disinflation.
- Global headwinds persist, including tepid world growth and volatile commodities, which could amplify sterling and gilt market swings around the meeting. The MPC views upside shocks to energy or food prices as manageable absent a sustained demand rebound.
- Inflation risks are balanced but tilted: downside from feeble demand and job losses, upside from entrenched services inflation, wage stickiness, and potential labour slack underestimation.
- The MPC enters February with a restrictive but easing-ready posture, favouring data-dependent 25-basis-point steps if disinflation advances, while stressing sustained 2 per cent alignment before deeper cuts. Forward guidance will underscore gradualism, with Governor Bailey likely avoiding firm commitments on pace at the press conference.
- The next meeting is on 19 March 2026.
Next 24 Hours Bias
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from GBP today?
The Canadian Dollar (CAD) shows stability around USD/CAD 1.37 on February 25, 2026, with minimal daily change from the prior session’s close near 1.3699. Recent pressures include renewed US trade tariffs under President Trump and softening Canadian inflation at 2.3% for January, tempering Bank of Canada rate hike expectations amid its steady 2.25% policy.
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 stabilized 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 stabilization 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%, signalling 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
Weak Bearish
Oil
Key news events today
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from Oil today?
Oil prices edged higher with Brent at $71.08/bbl and WTI at $66.15/bbl, driven by traders balancing US-Iran nuclear talks risks ahead of Geneva meetings on the 26th, alongside a stronger dollar and easing geopolitical tensions from Trump’s preference for diplomacy over attack; upcoming US crude inventories and technical bullish signals added support, though new 2026 supply from Africa and South America looms longer-term.
Next 24 Hours Bias
Weak Bullish
