IC Markets Europe Fundamental Forecast | 12 September 2025
What happened in the Asia session?
The Asia trading session on September 12, 2025, was dominated by the continued market reaction to the US inflation data and employment figures released on Wednesday, reinforcing expectations for aggressive Federal Reserve easing. Asian equities extended their rally for a seventh consecutive day, with broad-based gains across major indices driven by improved risk sentiment.
What does it mean for the Europe & US sessions?
Friday’s trading sessions will focus on finalizing economic assessments before the Fed’s pivotal rate decision next week. While inflation remains above target levels, the dramatic deterioration in labor market conditions has shifted the policy narrative toward supporting employment. The combination of record-high equity valuations, mixed inflation signals, and weakening labor data creates a delicate balance for markets as they position for the Fed’s first rate cut of 2025.
The Dollar Index (DXY)
Key news events today
Prelim UoM Consumer Sentiment (2:00 pm GMT)
Prelim UoM Inflation Expectations (2:00 pm GMT)
What can we expect from DXY today?
Friday, September 12, 2025, finds the US dollar under sustained pressure as a confluence of factors, from deteriorating employment conditions to solidifying Fed easing expectations, weighs on the greenback. While the dollar managed modest gains today, the broader trend remains bearish with the DXY testing critical support levels. The combination of the highest jobless claims in nearly four years, upward revisions to inflation data, and virtual certainty of Fed rate cuts next week continues to undermine dollar strength across major currency pairs.
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 remains somewhat elevated, with the PCE price index at 2.6% and a core inflation forecast of 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 Bearish
Gold (XAU)
Key news events today
Prelim UoM Consumer Sentiment (2:00 pm GMT)
Prelim UoM Inflation Expectations (2:00 pm GMT)
What can we expect from Gold today?
Gold’s position near record highs reflects a confluence of supportive factors: dovish Federal Reserve expectations, persistent geopolitical risks, ongoing central bank diversification away from dollar reserves, and underlying concerns about global economic stability. The precious metal’s inflation-adjusted price has reached levels not seen since the 1980s, highlighting its renewed relevance as a macro hedge in an increasingly uncertain global environment.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
Friday, September 12, 2025, represents a period of relative stability and cautious optimism for the euro. The ECB’s decision to maintain rates while projecting steady inflation and improved growth, combined with a recovering manufacturing sector and strong EUR/USD performance, positions the euro favorably. Key factors to watch include upcoming US economic data, potential Federal Reserve policy changes, and continued eurozone economic resilience.
Central Bank Notes:
- The Governing Council kept the three key ECB interest rates unchanged at its September 11, 2025, meeting. The main refinancing rate remains at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. These levels have been maintained after the cuts earlier in 2025, reflecting the Council’s confidence that the current stance is consistent with the price stability mandate.
- Evidence that inflation is running close to the ECB’s medium-term target of 2% supported the decision to hold rates steady. Domestic price pressures are easing as wage growth continues to moderate, and financing conditions remain accommodative. Policymakers reaffirmed a data-dependent, meeting-by-meeting approach to further policy moves, with no pre-commitment to a predetermined path amid ongoing global and domestic risks.
- Eurosystem staff projections foresee headline inflation averaging 2.0% for 2025, 1.8% for 2026, and 2.0% in 2027. The 2025 and 2026 forecasts reflect a downward revision, primarily on lower energy costs and exchange rate effects, even as food inflation remains persistent. Core inflation (excluding energy and food) is expected at 2.0% for both 2026 and 2027, with only minor changes since prior rounds.
- Real GDP growth in the euro area is projected at 1.1% for 2025, 1.1% for 2026, and 1.4% for 2027. A robust first quarter—partly due to firms accelerating exports ahead of anticipated tariff hikes—cushioned a weaker outlook for the remainder of 2025. While business investment continues to face uncertainty from ongoing global trade disputes, especially with the US, government investment and infrastructure spending are expected to provide some support to the outlook..
- Household spending is backed by rising real incomes and continued strength in the labor market. Despite some fading tailwind from previous rate cuts, financing conditions remain broadly favorable and are expected to underpin the resilience of private consumption and investment against outside shocks. Moderating wage growth and profit margin adjustments are helping to absorb residual cost pressures.
- Household spending is backed by rising real incomes and continued strength in the labor market. Despite some fading tailwind from previous rate cuts, financing conditions remain broadly favorable and are expected to underpin the resilience of private consumption and investment against outside shocks. Moderating wage growth and profit margin adjustments are helping to absorb residual cost pressures.
- All future interest rate decisions will continue to be guided by the integrated assessment of economic and financial data, the inflation outlook, and underlying inflation dynamics, and the effectiveness of monetary policy transmission—without any pre-commitment to a specific future rate path.
- The ECB’s Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are declining predictably, as reinvestment of maturities has ceased. Balance-sheet normalization continues in line with the ECB’s previously communicated schedule.
- The next meeting is on 29 to 30 October 2025
Next 24 Hours Bias
Weak Bullish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The Swiss Franc remains one of the world’s strongest currencies, supported by its safe-haven status, the SNB’s measured policy approach, and relative economic stability despite US trade pressures. While inflation has stabilized within target ranges, the central bank maintains flexibility to act if conditions deteriorate, though negative rates appear unlikely in the immediate term. The September 25 policy meeting will be closely watched for any shifts in the SNB’s assessment of economic conditions and currency strength.
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 Bullish
The Pound (GBP)
Key news events today
GDP m/m (6:00 am GMT)
What can we expect from GBP today?
The British pound faces a challenging environment as it navigates between persistent inflation pressures, fiscal uncertainty, and economic growth concerns. While recent retail sales data provided some encouragement, rising inflation has complicated the Bank of England’s rate-cutting cycle, and mounting fiscal pressures ahead of the November budget continue to weigh on sterling sentiment. The pound’s near-term outlook remains dependent on upcoming inflation data, the BoE’s September 18 policy decision, and clarity on the government’s fiscal plans.
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 lackluster activity, and the labor 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
Medium Bullish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from CAD today?
The Canadian Dollar is under significant pressure on Friday, September 12, 2025, with market expectations heavily favoring a Bank of Canada rate cut on September 17. The loonie has weakened to multi-week lows against major currencies, driven by deteriorating labor market conditions, trade uncertainty, and lower oil prices. Key developments include unemployment rising to 7.1% in August, widespread job losses across multiple sectors, and mounting concerns about the economic impact of U.S. tariffs.
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?
Friday’s oil market reflects a convergence of bearish factors: unexpected US inventory builds signaling demand weakness, continued OPEC+ supply increases despite market surplus concerns, and aggressive Saudi pricing strategies prioritizing market share over price support. While geopolitical tensions provide some price floor, the fundamental oversupply dynamics are driving oil toward significantly lower price levels, with forecasts suggesting Brent could fall below $60 per barrel by late 2025. The market appears to be in a supply-driven downturn that could persist well into 2026 as inventory builds accelerate.
Next 24 Hours Bias
Weak Bearish
