IC Markets Global – Europe Fundamental Forecast | 20 May 2026
What happened in the Asia session?
A dovish‑but‑cautious tone from China’s hold on LPRs, while a soft India core‑sector print reinforced concerns about infrastructure‑linked activity, even as PMIs show improvement. Global bond‑yield pressures and ongoing Middle‑East tensions filtered into the region, keeping Asian equities and commodity‑linked assets in a tight, risk‑averse range.
What does it mean for the Europe & US sessions?
Traders should focus on euro‑area inflation data out of the ECB zone this morning, which will anchor positioning in European bonds, the euro, and the broader risk‑on/off balance, while the afternoon U.S. session brings pending‑home‑sales and Fed‑speaker commentary that could re-anchor the term‑structure of U.S. yields and sentiment around the Fed’s tolerance for persistently elevated inflation.
The Dollar Index (DXY)
Key news events today
FOMC Meeting Minutes(6:00 pm GMT)
What can we expect from DXY today?
The dollar is firmer today, with the DXY around 99.3 and the greenback extending the rebound it built over the past week. The main drivers are still the same: higher U.S. rate expectations, stronger Treasury yields, and a lingering safe-haven bid as markets watch the Middle East and trade headlines.
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
FOMC Meeting Minutes(6:00 pm GMT)
What can we expect from Gold today?
Gold prices are holding near historically high levels in the mid‑ to upper-four-thousand-dollar range per ounce, underpinned by geopolitical uncertainty, central‑bank buying, and strong investment demand, while short‑term technical pullbacks and episodes of stronger risk appetite keep the market range‑bound rather than in a clear new uptrend.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
Slightly weaker EUR/USD rate, with the pair at about 1.1606 on May 19, 2026, down 0.44% from the previous session, and on broader euro-area economic and policy news showing modest growth and active EU trade and security measures. Eurostat reported that GDP and employment in the euro area both rose 0.1%, suggesting a still-soft but positive economic backdrop. At the same time, the European Parliament reported progress on EU-US trade stabilization, new foreign investment screening rules, and measures aimed at steel market protection and critical medicine supply.
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 remained bid on Wednesday as investors sought a safe-haven amid mixed global growth signals and ongoing euro weakness; EUR/CHF traded near multi‑year lows around the low-0.90s while USD/CHF was in the mid-to-high 0.80s, and commentary from banks and analysts continued to expect structural franc strength even as the SNB has shown restraint about active intervention.
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
CPI y/y (6:00 am GMT)
Monetary Policy Report Hearings (1:15 pm GMT)
What can we expect from GBP today?
The pound is trading slightly weaker, extending a softening trend seen over the past few weeks amid modest risk‑off sentiment and lingering concerns about UK‑specific political and growth uncertainty. Against the dollar, GBP/USD has eased further from recent highs, with the pair hovering around 1.34–1.35 as safe‑haven demand for the US dollar remains supported by global geopolitical tensions and elevated oil prices.
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
No major news event
What can we expect from CAD today?
The Canadian dollar is weaker as a stronger US dollar, rising U.S. bond yields and reduced oil support press the loonie, while the Bank of Canada’s recent minutes showing a willingness to remain patient have tempered rate-differential expectations that would otherwise support CAD; USD/CAD is trading around the mid-1.36–1.38 range and markets are watching upcoming Canadian inflation and economic data plus global risk drivers for near-term direction.
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
EIA Crude Oil Inventories (2:30 pm GMT)
What can we expect from Oil today?
Global oil prices on Wednesday stay near the upper‑$100s for Brent and the mid‑$90s for WTI, reflecting continued risk‑on pricing due to the effectively closed Strait of Hormuz and the unresolved U.S.–Iran war, which has disrupted a major share of global seaborne flows. Recent comments from President Trump rejecting Iran’s peace proposals have briefly pushed Brent back above $105, underscoring how diplomatic and military signals are still the main drivers of volatility.
Next 24 Hours Bias
Strong Bullish
