IC Markets Global – Europe Fundamental Forecast | 19 May 2026
What happened in the Asia session?
Today’s Asia session was dominated by weak Chinese economic data (industrial production and retail sales both missed sharply), Japan’s below-expected Q1 GDP, and escalating U.S.-Iran geopolitical tensions that sent oil prices surging over 7% and pushed the 10-year Treasury yield to 4.63%. The Australian dollar (AUD/USD) was hit hardest, falling on dovish RBA minutes and China’s slowdown, while the Chinese yuan (CNY/CNH) and Japanese yen (JPY) also weakened on growth concerns.
What does it mean for the Europe & US sessions?
Traders should start the European and U.S. sessions watching German PPI, UK employment and wage data, and euro‑area trade and inflation releases to gauge the inflation‑growth mix; in the U.S., the NAHB housing‑market index, mortgage‑related data, and Fed‑speaker commentary will be the primary drivers of intraday risk‑sentiment, and Treasury‑yield moves, all against a backdrop of elevated global inflation and G7‑level policy coordination chatter.
The Dollar Index (DXY)
Key news events today
Pending Home Sales m/m (2:00 pm GMT)
What can we expect from DXY today?
The US dollar is modestly weaker today, held back by softer US data and expectations that the Federal Reserve may limit further tightening, even as the currency stays relatively strong against many emerging‑market units. Ongoing inflation and geopolitical narratives are keeping the dollar sensitive to shifts in risk appetite and Fed communication.
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 April 28–29, 2026, meeting, as oil prices remain elevated around $108 per barrel for Brent crude amid ongoing US-Israel tensions with Iran, alongside surging inflation from energy shocks, further delaying any 2026 rate cuts potentially beyond September.
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market showing mixed signals as nonfarm payrolls rose by 178,000 in March 2026—beating lowered expectations but driven partly by strike reversals—and the unemployment rate edged down to 4.3% from 4.4% in February.
- Officials face heightened risks from geopolitical tensions, soaring oil prices, and accelerating inflation, with CPI jumping to 3.3% year-over-year in March 2026 from 2.4% in February due to a 10.9% monthly energy surge, headline PCE pressured higher, and core PCE estimates around 3.1% or more.
- Economic activity continues to cool after robust Q4 2025 growth near 5%, with the Atlanta Fed GDPNow estimating Q1 2026 growth at 1.3% amid softer consumer spending, strike impacts, and labor data despite some resilience.
- March 2026’s Summary of Economic Projections forecasts 2026 unemployment at a median around 4.4%, GDP growth revised higher, and core PCE up to 2.7%, with the dot plot still signaling one cut in 2026 to a median 3.25%–3.50% funds rate amid softer labor but inflation upticks.
- The Committee maintains its data-dependent stance amid a mixed labor market, inflation well above target from oil shocks, and geopolitical risks, likely holding rates at 3.50%-3.75% with persistent divisions and hawkish tones on cuts.
- The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to manage reserves amid post-2025 balance sheet adjustments.
- The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to ensure ample reserves post-2025 program adjustments.
- The next meeting is scheduled for 16 to 17 June 2026.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
Pending Home Sales m/m (2:00 pm GMT)
What can we expect from Gold today?
On Tuesday, global gold remained strong and mixed across venues as safe-haven buying from geopolitical and macro uncertainty continued to support prices, with spot levels trading in the mid-four-thousand-dollar-per-ounce area after recent record highs earlier in 2026. Market commentary noted some profit‑taking and intraday retracement from recent peaks while analysts continued to point to upside risks from ongoing geopolitical tensions, inflation concerns, and central‑bank policy uncertainty that could keep gold well bid through the near term.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
Today’s euro-related news is dominated less by a single currency-market shock and more by policy and political developments across the EU that could affect the euro area’s outlook. The most notable items are legislative progress in the European Parliament and ongoing external risks, especially geopolitical tensions that can influence energy, trade, and investor sentiment across Europe.
Central Bank Notes:
- The Governing Council of the ECB is expected to keep the three key interest rates unchanged at its 28–29 May 2026 meeting, with the main refinancing rate near 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%.
- Headline HICP inflation is likely to remain in the 2.0–2.3% range in the early months of 2026, with the March 2026 ECB staff baseline projecting an average of 2.6% for 2026, 2.0% for 2027, and 2.1% for 2028.
- The updated Eurosystem staff projections for 2026 paint a picture of persistent inflation overshoot, with headline inflation averages of around 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028, compared with about 1.9–2.1% earlier outlooks.
- Real GDP growth is projected at about 0.9% in 2026, 1.3% in 2027, and 1.4% in 2028, implying around 0.2–0.3% quarter‑on‑quarter expansion in Q2 2026, consistent with the resilience observed at the end of 2025.
- The euro area unemployment rate is expected to stay near 6.4%, with strong labour‑force participation and modest wage pressures underpinning consumption resilience.
- The Governing Council continues to stress a meeting‑by‑meeting, data‑dependent approach, focusing on the path of inflation, the functioning of monetary‑policy transmission, and the impact of external shocks (geopolitical, energy, and trade‑policy related).
- Balance‑sheet normalization proceeds smoothly, with the APP and PEPP wind‑downs completed and the remaining stock of longer‑dated assets being allowed to run off without significant liquidity shortages.
The next meeting is on 10 to 11 June 2026
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 the strongest performer among G10 currencies in 2026, reinforced by its role as the ultimate safe-haven asset amid geopolitical tensions and trade disruptions. Swiss companies expect the Franc to strengthen modestly further against the Euro (targeting ~0.91 by year-end) due to anticipated Euro weakness and global market volatility, though UBS economists project a slightly firmer Euro at 0.95.
Central Bank Notes:
- At its monetary policy assessment on 19 March 2026, the Swiss National Bank (SNB) is widely expected to leave the policy rate unchanged at 0%, continuing the extended pause since September 2025, as the Governing Board considers current settings adequate to keep inflation near the target without resorting to negative rates.
- Inflation data since December indicate persistent weakness, with headline CPI hovering around 0% year-on-year through early 2026 and core measures subdued at roughly 0.4%, underscoring limited price pressures and lingering, though contained, deflation risks.
- The SNB’s updated conditional inflation forecast shows minimal change from December, with averages of about 0.2% in 2025 (now complete), 0.3% in 2026, and 0.6% in 2027 under a steady 0% policy rate. However, recent flat CPI readings may slightly lower near-term expectations, preserving scope for further easing if needed.
- Global conditions remain challenging, marked by U.S. tariff escalations under President Trump, subdued external demand, and uncertainties in major export markets such as Europe and the U.S., prompting the SNB to exercise caution despite resilient Swiss domestic activity.
- Sentiment in manufacturing and export sectors stays soft amid franc appreciation and weaker foreign orders, squeezing margins. Yet, overall GDP growth is expected to be around 1.5% in 2026, with unemployment edging up modestly from historic lows.
- The SNB reaffirms its readiness to intervene via rate cuts or FX operations should deflationary pressures intensify, while emphasizing clear communication through detailed meeting minutes and coordination with global partners on currency matters.
The next meeting is on 18 June 2026.
Next 24 Hours Bias
Weak Bearish
The Pound (GBP)
Key news events today
Claimant Count Change (6:00 am GMT)
Average Earnings Index 3m/y (6:00 am GMT)
What can we expect from GBP today?
The British pound has been experiencing volatility in recent months, with sterling weakening in early April 2026 as the dollar stayed firm amid White House deadline concerns related to the U.S.-Iran conflict, with GBP/USD hovering near $1.3234. The pound has faced ongoing pressure from UK fiscal concerns, political uncertainty around Prime Minister Keir Starmer’s leadership, and doubts over labor market data showing unemployment rising to 5%.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 29 April 2026, maintaining the Bank Rate at 3.75 per cent, with the decision details published on 30 April 2026 alongside the quarterly Monetary Policy Report. This hold follows the unanimous 9-0 vote at the prior 18 March 2026 meeting, amid persistent energy shocks from the Middle East conflict overriding earlier cut expectations. No specific vote split for April has been detailed yet, but consensus previews indicate a hold.
- Quantitative tightening (QT) continues unchanged at the 2025 pace for gilt holdings reductions, supporting balance-sheet normalization while monitoring liquidity and maintaining restrictiveness against ongoing shocks.
- Headline CPI inflation rose to 3.3% in March 2026 from energy and motor fuel surges due to Middle East tensions, expected to stay between 3% and 3.5% through the summer, well above the 2% target. The April Monetary Policy Report outlines scenarios in which inflation peaks above 3.5% by the end of 2026 in the baseline, then eases below 2% in three years, or reaches 6%+ in adverse cases requiring tighter policy.
- UK growth outlook weakens further into Q2-Q3 2026 amid energy-driven cost pressures, rising unemployment risks, and softening confidence, with prior pay growth cooling now vulnerable to business pass-throughs.
- Global risks from the Middle East conflict persist, fueling energy/commodity volatility and sterling/gilt fluctuations; MPC views direct impacts as containable if demand slackens to curb secondary inflation effects.
- Inflation risks remain upward-biased due to energy persistence, potential wage embedding, and shock duration uncertainty, balanced against downside from economic slack and labor market softening.
- The MPC maintains a data-dependent stance, with policy still restrictive; the April Report provides fuller shock analysis, but no easing is signaled, yet members monitor for 2% sustainability, with Governor Bailey emphasizing vigilance.
- The next meeting is on 18 June 2026.
Next 24 Hours Bias
Weak Bullish
The Canadian Dollar (CAD)
Key news events today
CPI m/m (12:30 pm GMT)
Common CPI y/y (12:30 pm GMT)
Median CPI y/y (12:30 pm GMT)
Trimmed CPI y/y (12:30 pm GMT)
What can we expect from CAD today?
The Canadian dollar is under renewed pressure on Tuesday, slipping close to a one‑month low against the U.S. dollar as the greenback strengthens amid higher global bond yields and weaker risk appetite. This has extended the loonie’s recent losing streak, with markets focused on U.S. monetary‑policy expectations and geopolitical tensions rather than any major Canadian‑specific data released today, leaving the currency range‑bound near the 1.37–1.38 USD/CAD area.
Central Bank Notes:
- The Governing Council held the overnight rate target steady at 2.25% at its 28-29 April 2026 meeting, matching consensus expectations and prolonging the policy pause as inflation trends firmer toward target. The Bank highlighted lingering global headwinds from Middle East tensions and U.S. tariff escalations under Trump, but confirmed the stance continues fostering disinflation amid moderating energy volatility.
- U.S. trade frictions and geopolitical strains persist in dampening sentiment, yet Canadian manufacturing PMI strengthened further in expansion, driven by robust export orders tied to sustained energy demand. Goods exports, anchored by crude oil, maintained strength through March, countering subdued capex as businesses emphasize operational buffers over expansion.
- Economic growth extended into Q2 2026 at roughly 2.1% annualized, sustaining Q1’s momentum via resource shipments, public spending, and industrial recovery. March preliminary figures suggest resilient expansion, tempered slightly by seasonal factors and lingering supply disruptions.
- Services PMI rose deeper into expansion territory, with gains across tech, leisure, and professional services; consumer segments showed firmer footing from wage gains, despite elevated prices curbing non-essentials. The Bank views this breadth as signaling a balanced, sustainable upturn.
- National housing resales climbed modestly in March alongside stable prices, supported by steady rates and regional affordability pockets, as inventory accumulation in key markets avoids sharp imbalances. Policymakers expect gradual softening, underpinned by sound lending standards and consistent household dynamics.
- Headline CPI held near 2.0% year-over-year in March 2026 prints, within the target band, with core metrics like CPI-trim and median easing to around 2.5% on easing food, goods, and partial shelter relief. This bolsters confidence in inflation’s durable path to 2%.
- Officials affirmed 2.25% appropriately positions the economy for 2% inflation stability and orderly rebalancing, with cuts off the table absent growth or price setbacks. Focus shifts to Q2 momentum, core trends, and trade/geopolitical developments ahead of June.
- The next meeting is on 10 June 2026.
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 prices fell today, with Brent crude dropping 2.63% to $109.15 per barrel after gaining ground earlier in the month amid Middle East tensions. This decline comes despite ongoing concerns about the prolonged closure of the Strait of Hormuz, which remains effectively shut and is severely disrupting global energy shipments. The broader market remains volatile as President Trump dismissed Iran’s latest peace proposal as “entirely unacceptable,” casting doubt on the ceasefire that has been on “life support” for ten weeks.
Next 24 Hours Bias
Strong Bullish
