IC Markets Europe Fundamental Forecast | 13 October 2025
What happened in the Asia session?
Today’s Asian trading session was dominated by a confluence of factors creating significant market volatility. China’s unexpectedly strong trade data provided some support for risk assets and commodity currencies, particularly the Australian dollar. However, this was overshadowed by escalating U.S.-China trade tensions, Japan’s political uncertainty, and broad safe-haven flows into precious metals.
What does it mean for the Europe & US sessions?
Monday’s trading session is characterized by heightened volatility stemming from renewed U.S.-China trade tensions, though markets have found some stability following Trump’s softened rhetoric. The precious metals rally to record highs reflects safe-haven demand, while currency markets show mixed reactions, with the yuan surprisingly resilient. Critical U.S. economic data remains delayed due to the government shutdown, creating additional uncertainty for monetary policy planning.
The Dollar Index (DXY)
Key news events today
No major news event
What can we expect from DXY today?
Monday’s dollar performance reflected the complex interplay between trade policy uncertainty, global political instability, and domestic economic conditions. While Trump’s softer stance on China provided some relief to markets, ongoing political turmoil in Japan and France continued to support dollar safe-haven demand. The combination of delayed U.S. economic data due to the government shutdown and expectations for continued Fed easing creates a mixed outlook for the dollar in the near term. The DXY’s decline to 98.92 suggests markets are cautiously optimistic about trade tensions while remaining alert to broader political and economic uncertainties.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) voted, by majority, to lower the federal funds rate target range by 25 basis points to 4.00%–4.25% at its September 16–17, 2025, meeting, marking the first policy rate adjustment since December 2024 after five consecutive holds.
- The Committee maintained its long-term objective of achieving maximum employment and 2% inflation, acknowledging recent labor market softening and continued tariff-driven price pressures.
- Policymakers expressed elevated concern about downside risks to growth, citing a stalling labor market, modest job creation, and an unemployment rate drifting up toward 4.4%. At the same time, inflation remains above target, with CPI at 3.2% and core inflation at 3.1% as of August 2025; higher energy and food prices, largely attributable to tariffs, continue to weigh on headline measures.
- Although economic activity expanded at a moderate pace in the third quarter, the growth outlook has weakened. Q3 GDP growth is estimated near 1.0% (annualized), with full-year 2025 GDP growth guidance revised to 1.2%, reflecting slowing household consumption and tighter financial conditions.
- In the updated Summary of Economic Projections, the unemployment rate is projected to average 4.5% for the year, with headline PCE inflation revised up slightly to 3.1% for 2025. The Committee anticipates core PCE inflation to remain stubborn, requiring sustained vigilance and a flexible approach to risk management.
- The Committee reiterated its data-dependent approach and openness to further adjustments should employment or inflation deviate meaningfully from current forecasts. Several members dissented, either advocating a larger 50-basis-point cut or preferring no adjustment at this meeting, revealing heightened divergence within the Committee.
- Balance sheet reduction continues at a measured pace. The monthly Treasury redemption cap remains at $5B and the agency MBS cap at $35B, as the Board aims to support orderly market conditions in the face of evolving global and domestic uncertainty
- The next meeting is scheduled for 28 to 29 October 2025.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
No major news event
What can we expect from Gold today?
Gold hit record highs driven by escalating global risks, U.S.–China tariff threats, and robust demand from investors and central banks. While technicals show overbought signs and hint at short-term volatility or consolidation, the medium-term outlook remains positive, targeting further gains if macro pressures persist and monetary easing continues.
Next 24 Hours Bias
Strong Bullish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
Euro starts Monday steady around 1.162 versus USD, firmer versus JPY/CHF, with no major Euro data due today; focus turns to ZEW, industrial production, and dense ECB speak later in the week. External risk headlines from EU policy moves to Ukraine developments—continue to shape intraday EUR sentiment; the Oct 30 ECB meeting remains the next key policy anchor for traders.
Central Bank Notes:
- The Governing Council kept the three key ECB interest rates unchanged at its meeting on September 11, 2025. 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 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.
- Rising real incomes and continued strength in the labor market boost household spending. 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.
- Rising real incomes and continued strength in the labor market boost household spending. 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 Program (APP) and Pandemic Emergency Purchase Program (PEPP) portfolios are declining predictably, as maturities have ceased to be reinvested. 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 faces a complex environment on October 13, 2025, balancing its traditional safe-haven status against significant economic headwinds from US trade policy. While the SNB maintains an accommodative monetary policy with zero interest rates, the central bank shows reluctance to return to negative territory despite persistent low inflation. The 39% US tariff regime represents the most significant threat to Switzerland’s economic outlook, with potential severe impacts if extended to the crucial pharmaceutical sector. Despite short-term volatility, the franc’s year-to-date performance against the dollar remains positive, reflecting underlying safe-haven demand amid global uncertainties and geopolitical tensions.
Central Bank Notes:
- The SNB maintained its key policy rate at 0% during its meeting on 25 September 2025, pausing a sequence of six consecutive rate cuts as inflation stabilized and the Swiss franc remained firm.
- Recent data showed a modest rebound in inflation, with Swiss consumer prices rising 0.2% year-on-year in August after staying above zero for three consecutive months; this helped alleviate fears of deflation that were mounting earlier in the year.
- The conditional inflation forecast remains broadly unchanged from June: headline inflation is expected to average 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027. The risk of a negative rate move has diminished for now, but the SNB retains flexibility should inflationary pressures weaken again.
- The global economic outlook has deteriorated further, weighed down by heightened trade tensions—especially with the U.S.—and ongoing uncertainty in key Swiss export markets.
- Swiss GDP growth moderated in Q2 after a strong Q1 boosted by front-loaded U.S. exports. The SNB expects growth to slow and remain subdued, with forecasted GDP expansion between 1% and 1.5% in both 2025 and 2026.
- Labor market sentiment in the Swiss industrial sector has softened on concerns over export competitiveness and potential adjustments to production, but the overall growth outlook stays broadly unchanged
- The SNB reiterated its readiness to respond as needed if deflation risks re-emerge, emphasizing its commitment to medium-term price stability and a robust, transparent communication policy, with the introduction of more detailed monetary policy minutes beginning in October.
- The next meeting is on 11 December 2025.
Next 24 Hours Bias
Weak Bearish
The Pound (GBP)
Key news events today
No major news event
What can we expect from GBP today?
The GBP/USD rate started this week around 1.33, coming off a recent 10-week low, pressured by a stronger US dollar and concerns about the UK’s fiscal outlook ahead of the government’s November budget. Over the past month, the Pound has weakened by about 1.8% against the dollar but still shows a moderate yearly gain. Upcoming UK economic releases: Markets are watching UK GDP and labor market data (unemployment, wage growth, claimant count due later in the week. These releases will shape expectations about the strength of the labor market and the degree of wage growth versus slack.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted on 18 September 2025 by a majority (expected split likely 7–2 or 6–3) to hold the Bank Rate steady at 4.00%, following the August rate cut. Most members cited persistent inflation and mixed indicators on growth and employment, while a minority favored further easing due to the cooling labor market and subdued GDP growth.
- The Committee decided to decrease the pace of quantitative tightening, planning to reduce the stock of UK government bond purchases by £67.5 billion over the next 12 months instead of the prior £100 billion pace, with the gilt balance now standing near £558 billion. This reflects increased volatility in bond markets and a shift to a more gradual approach.
- Headline inflation rose unexpectedly to 3.8% in July and is projected at 4% for September, above the Bank’s 2% target. Price pressures are driven by regulated energy costs and ongoing food price increases. While previous disinflation has been substantial, core inflation remains elevated and sticky.
- The MPC expects headline inflation to remain above target through Q4, with a resumption of the downward trend projected for early 2026 as energy and regulated price pressures abate. The Committee remains watchful for signs of persistent inflation despite previous policy tightening.
- UK GDP growth is stagnant, with business and consumer activity subdued. Recent labor market data show rising unemployment rates (now at 4.7%) and stabilizing wage growth (holding near 5%), indicating slack but continued wage price pressure. The Committee remains cautious amid lackluster demand and soft survey sentiment.
- Pay growth and employment indicators have moderated further, alongside confirmation from business surveys that pay settlements are slowing. The Committee expects wage growth to decelerate significantly through Q4 and the rest of 2025.
- Global uncertainty persists due to volatile energy prices, supply chain disruptions linked to Middle East conflicts, and renewed trade tensions. The MPC remains vigilant in tracking transmission of external cost/wage shocks to UK inflation.
- Risks to inflation are considered two-sided. While subdued domestic growth and softening labor activity suggest scope for easing, persistent inflation requires caution. The MPC anticipates a slow, gradual reduction path in rates, continuing its data-dependent approach with careful adjustment as warranted by economic developments.
- The Committee’s bias remains toward maintaining a restrictive monetary policy stance until firmer evidence emerges that inflation will return sustainably to the 2% target. All future decisions will remain highly data dependent, with a strong emphasis on evolving demand, inflation expectations, costs, and labor market conditions.
- The next meeting is on 6 November 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 multiple headwinds despite a surprise employment gain in September. While the 60,000 job increase exceeded expectations and temporarily reduced rate cut expectations, broader economic challenges persist. Trade uncertainty, manufacturing weakness, and declining oil prices continue to pressure the loonie. The Bank of Canada remains in an easing cycle, with markets still expecting potential rate cuts despite the employment surprise.
Central Bank Notes:
- The Council cited continued U.S. tariff volatility and slow progress on trade negotiations as major contributors to ongoing uncertainty. While headline tariffs have not escalated further, the unpredictability of U.S. policy remains a significant risk for Canadian exports and business confidence.
- Uncertainty about U.S. trade policy and recurring tariff threats continued to weigh on growth prospects. The Bank flagged downside risks to the export sector, with survey data indicating ongoing hesitancy among manufacturers and exporters.
- After modest growth in Q1, Canada’s economy slipped into contraction, with GDP shrinking by 0.8% in Q2 and forecast to decrease again by 0.8% in Q3. Economic weakness has been most pronounced in manufacturing and goods-producing sectors affected by trade frictions and softer U.S. demand.
- Early estimates show that growth stabilized in September but remained well below the Bank’s 2% forecast for Q4. Manufacturing output has improved slightly—supported by a modest rebound in petroleum and mining activity—while consumer spending and retail sales were largely flat.
- Consumer spending remained subdued as households continued to limit discretionary purchases amid uncertainty and a slower job market. Housing activity stayed weak, despite earlier government efforts to boost affordability and modest gains in some real estate segments.
- Headline CPI inflation edged up to 1.9% in August, undershooting economist expectations but still showing emerging pressures from shelter and imported goods costs. Core inflation metrics were mixed, though price growth remains just below the Bank’s 2% target.
- The Governing Council reaffirmed its cautious approach, emphasizing that while further rate cuts are possible, the pace will hinge on the path of U.S. tariffs, domestic inflation dynamics, and signs of a sustainable recovery. The Bank remains vigilant against the risk of inflation falling below target in the face of economic slack.
- The next meeting is on 29 October 2025.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil prices recovered strongly on Monday, October 13, 2025, with Brent and WTI crude gaining approximately 1.4-1.5% after hitting five-month lows on Friday. The rebound was primarily driven by improved U.S.-China diplomatic relations and progress on the Gaza ceasefire, though underlying concerns about supply surplus and slowing demand growth continue to weigh on the market outlook.
Next 24 Hours Bias
Weak Bearish
