IC Markets Europe Fundamental Forecast | 01 September 2025

IC Markets Europe Fundamental Forecast | 01 September 2025

What happened in the Asia session?

Today’s Asia session was marked by a mixed equity performance, led by pronounced weakness in tech-heavy markets (Japan, Korea, Australia), a sharp rebound in select Chinese tech stocks, and strong moves in precious metals as investors sought safety amid policy and trade uncertainty. Key macro data from China (better-than-expected PMI) and South Korea supported regional outlooks, while currencies traded cautiously ahead of global monetary policy updates.

What does it mean for the Europe & US sessions?

Global stocks, especially in Europe, are starting September on a positive footing amid cautious U.S. sentiment and ongoing volatility. Key inflation and jobs data will steer market expectations for central bank policy, while technical trends and macro flows point to defensive positioning. Economists and traders are watching Eurozone CPI, China PMI, and upcoming U.S. labor data for signals on growth and risk direction.

The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

The Dollar is currently under pressure with investors prioritizing US employment data and Federal Reserve decisions this week—signs point toward further weakening if rate cuts are confirmed. Currency movements have been somewhat subdued due to US markets being closed for Labor Day, with trading expected to resume tomorrow. Against the yen, the dollar rose slightly to 147.20 but had recorded a monthly decline of 2.5%. The euro strengthened to 1.1693 against the dollar, and the British pound ticked higher to 1.3510.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at its meeting on July 29–30, 2025, keeping policy unchanged for the fifth consecutive meeting.
• The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.
• Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.
• The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.
• In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.
• The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.
• As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.
• The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias
Medium Bullish


Gold (XAU)

Key news events today

No major news event

What can we expect from Gold today?

September 1, 2025, marks a watershed moment for gold markets with record-breaking prices across global and domestic exchanges. The convergence of dovish Federal Reserve policy expectations, unprecedented central bank accumulation, U.S. dollar weakness, and persistent geopolitical tensions has created ideal conditions for gold’s continued ascent. With an 87-89% probability of a September Fed rate cut and analysts projecting potential targets of $3,700+ per ounce, gold’s rally appears positioned to continue despite reaching historic levels. The precious metal’s role as both an inflation hedge and safe-haven asset remains firmly intact as global economic uncertainty persists.

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

No major news event

What can we expect from EUR today?

The Euro starts September 2025 stable and slightly stronger, as inflation drops and policy uncertainty fades. Economic growth remains modest, supported by EU investment and robust labor markets, while the political climate is increasingly reactive to populist movements and ongoing border and security issues. Eurozone GDP growth for 2025 is projected at about 0.9–1%, with inflation dropping to 2.1%—close to the European Central Bank’s target. Less restrictive monetary policies and increased EU public spending are improving economic confidence, even as trade policy uncertainty lingers.

Central Bank Notes:

• The Governing Council kept the three key ECB interest rates unchanged at its July 24 meeting, maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%, following eight consecutive cuts preceding this decision.
• The decision to hold rates steady was driven by evidence that inflation is stabilizing near the Governing Council’s medium-term target of 2%. Policymakers communicated that further rate moves would be data-dependent, explicitly refraining from pre-committing to any future path amid persistent global and domestic uncertainties.
• According to the latest Eurosystem staff projections, headline inflation is expected to remain around 2.0% for 2025, with projections indicating 1.6% for 2026 and a rebound to 2.0% in 2027. Downward revisions from previous forecasts primarily reflect lower energy price assumptions and a stronger euro. Inflation excluding energy and food is seen averaging 2.4% in 2025 and 1.9% in 2026–2027, little changed from prior projections.
• Real GDP growth for the Eurozone is forecast at 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. The projections note that a strong first quarter offsets a weaker outlook for the rest of 2025. While business investment and exports are dampened by ongoing trade policy uncertainties—including recent U.S. tariff measures—rising government investment, particularly in defense and infrastructure, is expected to progressively underpin growth.
• Household spending should be supported by firm real income gains and a still-solid labour market. More favorable financing conditions are expected to help strengthen the economy’s resilience to further global shocks. Wage growth, although still elevated, continues to moderate, with profit margins partially absorbing cost pressures.
• Amid significant geopolitical and economic uncertainty, the Governing Council underscored its commitment to ensuring inflation stabilises sustainably at the 2% target. The ECB reiterated it would pursue a meeting-by-meeting, data-dependent approach to its monetary policy stance.
• Future rate decisions will be guided by the assessment of incoming economic and financial data, the outlook for inflation and underlying inflation dynamics, and the effectiveness of monetary policy transmission. The Council continues to stress that it is not pre-committed to any specific rate trajectory.
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are continuing to decline in an orderly and predictable way, as the Eurosystem has ceased reinvesting principal payments from maturing securities.
• The next meeting is on 11 September 2025

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 enters September 2025 from a position of considerable strength, having appreciated significantly against major currencies over the past year. Key developments include the SNB’s maintenance of zero interest rates with potential for negative territory, escalated US trade tensions with 39% tariffs on Swiss goods, and weakening economic growth momentum. The combination of safe-haven demand, deflationary pressures, and trade uncertainties continues to present challenges for Swiss policymakers, with markets anticipating potential further monetary easing at the September 25 SNB meeting. The franc’s strength, while reflecting its safe-haven status, poses ongoing concerns for Switzerland’s export-dependent economy amid deteriorating global trade conditions.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.25% to 0% on 19 June 2025, marking the sixth consecutive reduction.
• Inflationary pressure has decreased further as compared to the previous quarter, decreasing from 0.3% in February to -0.1% in May, mainly attributable to lower prices in tourism and oil products.
• Compared to March, the new conditional inflation forecast is lower in the short term. In the medium term, there is hardly any change from March, putting the average annual inflation at 0.2% for 2025, 0.5% for 2026, and 0.7% for 2027.
• The global economy continued to grow at a moderate pace in the first quarter of 2025, but the global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions.
• Swiss GDP growth was strong in the first quarter of 2025, but this development was largely because, as in other countries, exports to the U.S. were brought forward.
• Following the strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year; the SNB expects GDP growth of 1% to 1.5% for 2025 as a whole, while also anticipating GDP growth of 1% to 1.5% for 2026.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 25 September 2025.

Next 24 Hours Bias

Medium Bearish

The Pound (GBP)

Key news events today

No major news event

What can we expect from CHF today?

The British Pound on September 1, 2025, demonstrates resilience despite fiscal headwinds, supported by strong business activity data and reduced expectations of aggressive Bank of England rate cuts. While Sterling has gained nearly 2% monthly against the Dollar and sits at $1.3520, it faces ongoing challenges from elevated inflation (expected to peak at 4% in September), fiscal policy uncertainties, and the lasting structural impact of Brexit.

The currency’s performance reflects a delicate balance between improving economic indicators and persistent inflationary pressures that limit monetary policy flexibility. Market analysts maintain cautiously optimistic outlooks with 12-month targets around $1.32-1.34, though pre-Brexit strength levels remain elusive.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted on 7 August 2025 by a majority (exact split likely 5–3–1 or similar, based on expectations) to cut the Bank Rate by 25 basis points to 4.00%. Multiple members supported the move, citing fragile economic growth and signs of disinflation, while others preferred a larger reduction, and at least one member voted to hold the rate steady due to concerns about persistent inflation.
• The Committee unanimously decided to continue reducing the stock of UK government bond purchases held for monetary policy purposes by £100 billion over the next 12 months, targeting a balance of £558 billion by October 2025. As of 7 August, the gilt stock stands at £590 billion.
• Disinflation has been substantial since 2023 owing to policy tightening and the fading of external shocks. However, an unexpected uptick in headline CPI inflation—to 3.6% in June—reflects pass-through from regulated prices and earlier energy price rises, as well as signs of sticky core inflation.
• Headline CPI inflation is now 3.6%, above the Bank’s 2% target, reflecting regulated and energy price effects. The Committee expects inflation to remain around this level through Q3 before resuming its downward trend into 2026.
• UK GDP growth remains weak. Business and consumer surveys point to lacklustre activity, and the labour market continues to loosen, with increasing evidence of slack. Wage growth has softened but remains above pre-pandemic norms.
• Pay growth and employment indicators have moderated further, and the Committee expects a significant slowing in pay settlements over the rest of 2025.
• Global uncertainty remains elevated, especially with rising energy prices and supply disruptions linked to conflict in the Middle East and renewed trade tensions. These factors prompt the MPC to remain vigilant in monitoring cost and wage shocks.
• The risks to inflation are considered two-sided. With the outlook for growth subdued and inflation persistence less clear, the Committee argues that a gradual and careful approach to further easing is warranted, with future policy decisions highly data-dependent.
• The Committee’s bias is still towards maintaining monetary policy at a restrictive stance until there is firmer evidence that inflation will return sustainably to the 2% target over the medium term. Further adjustments to policy will be decided on a meeting-by-meeting basis, with scrutiny of developments in demand, costs, and inflation expectations.
• The next meeting is on 18 September 2025.
  
  Next 24 Hours Bias
  Weak Bearish

The Canadian Dollar (CAD)

Key news events today

No major news event

What can we expect from CAD today?

The Canadian dollar faces a complex environment on September 1, 2025, balancing between domestic economic weakness and potential US monetary policy easing. While the currency has shown modest strength today, underlying pressures from weak GDP growth, declining oil prices, and anticipated Bank of Canada rate cuts continue to weigh on medium-term prospects. The upcoming September 17 Bank of Canada meeting will be crucial in determining the currency’s near-term direction, with markets increasingly pricing in monetary policy easing to support the struggling economy.

Central Bank Notes:

• The Bank of Canada maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% as of July 30, marking the third consecutive meeting with rates on hold.
• The Council cited ongoing U.S. tariff adjustments and unresolved trade negotiations as driving factors for elevated economic uncertainty. The persistence of tariffs well above early-2025 levels continues to present downside risks for growth and keeps inflation expectations elevated, supporting a cautious approach to monetary easing.
• The lack of a clear U.S. policy path, plus frequent threats of additional tariffs, led the Bank to highlight risks to Canadian exports and broader demand, amplifying uncertainty about future growth.
• Canada’s economic growth in the first quarter came in at 2.2%, slightly stronger than the original forecast, while the composition of GDP growth was largely as expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence.
• Canadian GDP growth is expected to be near 0% in Q2 2025, closely aligned with the more optimistic scenario outlined earlier in the year. Weakness in manufacturing activity—driven by both U.S. trade disruptions and sector-specific challenges like wildfires—contributed to softer output. A partial recovery is anticipated in Q3 due to rebuilding efforts and stronger retail sales in June.
• Consumer spending slowed, especially as households front-loaded durable goods purchases ahead of tariffs. Housing activity remains subdued, with resales and construction still soft despite some government tax relief measures.
• Headline CPI inflation continued to ease, holding close to 1.7% in June, aided by declines in energy prices following the removal of the fuel charge. However, the Bank’s measures of core inflation and underlying price pressures moved up further due to higher import costs from tariffs and lingering supply disruptions.
• The Governing Council reiterated that it will carefully weigh ongoing upward inflation pressure from tariffs and cost shocks against the gradual downward pull from economic weakness. While additional rate cuts remain possible, timing and scale will depend on trade policy developments and inflation’s path.
• The next meeting is on 17 September 2025.

Next 24 Hours Bias

Medium Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Oil markets on September 1, 2025, reflect a fundamental shift toward oversupply concerns overwhelming geopolitical risk premiums. While Ukrainian attacks on Russian energy infrastructure and broader Middle East tensions continue to provide some price support, the combination of aggressive OPEC+ production increases, record U.S. output, and weakening Chinese demand is creating substantial downward pressure on prices.

The market faces a critical juncture as traders await the September 7 OPEC+ meeting, which could determine whether the cartel will pause its production increases or continue prioritizing market share over price support. With oil inventories building and demand growth slowing globally, the structural bear case for oil appears increasingly compelling, suggesting prices may continue trending lower through the remainder of 2025 unless significant supply disruptions occur or demand unexpectedly accelerates.
Next 24 Hours Bias
Weak Bullish