IC Markets Europe Fundamental Forecast | 14 August 2025

IC Markets Europe Fundamental Forecast | 14 August 2025

What happened in the Asia session?

The Asia session on August 14, 2025, was dominated by Australian jobs data, expectations for imminent Federal Reserve rate cuts, and ongoing momentum in equities and cryptocurrencies. The AUD, Asian equities, and Bitcoin were the most sensitive to headlines and data releases, while oil rebounded on fresh geopolitical developments and risk premiums. Fed Rate Cut Bets: Investors widely expect a quarter-point cut at the next Federal Reserve meeting (probability near 100%), with the U.S. Treasury Secretary even suggesting a potential 50-basis-point reduction.

What does it mean for the Europe & US sessions?

Mixed data could lead to volatility, especially with lower employment change missing forecasts, but a stabilizing unemployment rate. Slight monthly growth but slower quarterly pace, watch for GBP reaction as macro environment is reassessed. Key inflation and labor figures, along with presidential remarks, may trigger moves in FX, stocks, and bonds. Traders should stay vigilant for market swings coinciding with these high-impact data releases and headline risks. Adjust risk management and positions as necessary.

The Dollar Index (DXY)

Key news events today

Core PPI m/m (12:30 pm GMT)

PPI m/m (12:30 pm GMT)

Unemployment claims (12:30)

What can we expect from DXY today?

The Dollar Index weakened into today as markets price a higher probability of a September Fed rate cut, with U.S. yields edging lower. Today’s key U.S. data at 8:30 am ET: PPI (Jul), Core PPI (Jul), Initial Jobless Claims, and Continuing Claims are all potential catalysts for USD, Treasurys, and risk assets. Market narrative centers on rising expectations for a September Fed cut amid softer inflation momentum and lower yields, keeping the dollar on the defensive into the data.

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 the July 29–30, 2025, meeting, 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

Weak Bearish

Gold (XAU)

Key news events today

Core PPI m/m (12:30 pm GMT)

PPI m/m (12:30 pm GMT)

Unemployment claims (12:30)

What can we expect from Gold today?

Gold’s current consolidation around $3,350-$3,370 reflects a market balancing between dovish Fed expectations supporting prices and reduced geopolitical tensions tempering safe-haven demand. The precious metal’s ability to break above the $3,400 resistance level will likely depend on either escalating geopolitical developments or stronger confirmation of aggressive Fed easing policies.

The primary catalyst driving gold’s rally is mounting speculation about a September Federal Reserve rate cut. Markets are now pricing in a 97% probability of at least a 25 basis point reduction, with some positioning for a 50 basis point cut. Treasury Secretary Scott Bessent has actively advocated for aggressive rate cuts, suggesting the Fed should begin with a half-point reduction to offset missed opportunities earlier this summer

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news event

The euro is trading higher amid dollar weakness, with positive economic data out of the euro area, historic ETF inflows, and persistent geopolitical and climate risks shaping sentiment for Thursday, August 14, 2025. The euro has gained momentum due to dollar weakness and growing expectations that the US Federal Reserve will cut interest rates in September, fueling a risk-on mood globally.

As of August 14, 2025, the euro is trading at $1.1704–$1.1713, its highest in nearly three weeks, following Wednesday’s high of $1.1730.The European Central Bank ended its easing cycle in July after eight consecutive rate cuts, leaving borrowing costs at their lowest since November 2022.

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 moves on rates 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 Bullish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from CHF today?

Today, the Swiss Franc is under pressure in global currency markets, driven by trade tensions (notably US tariffs on Swiss imports) and expectations of monetary policy moves in the US. The CHF remains stable against the USD and EUR, but technical signals and market forecasts suggest short-term volatility is possible if global risk sentiment shifts or trade headlines intensify. The CHF remains under pressure following US President Donald Trump’s announcement of a new 39% tariff on Swiss imports.

This announcement triggered concerns over Switzerland’s trade exposure, impacting safe-haven flows into the franc. The EUR/CHF exchange rate has held steady above 0.9400, consolidating recent gains after rebounding from its multi-month range’s lower boundary. Price action for EUR/CHF remains capped near a resistance zone at 0.9430, and a bullish breakout is possible if sustained buying continues.

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

Weak Bearish

The Pound (GBP)

Key news events today

GDP m/m (6:00 am GMT)

Prelim GDP q/q (6:00 am GMT)

What can we expect from GBP today?

The British pound remains strong heading into Thursday, August 14, 2025, buoyed by positive jobs data, resilient GDP figures, and the Bank of England’s less dovish tone. Early GDP releases for June and Q2 point to economic resilience, supporting sterling against major currencies like the US dollar and euro. The British Pound (GBP) opened at 1.3578 USD today, slightly lower (down 0.05%) compared to the previous session, but it has strengthened 1.38% over the past month and 5.59% year-on-year. Unemployment remains stable, wage growth is high compared to inflation, and job losses have been smaller than anticipated.

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 is softening due to weak domestic job data and ongoing trade tensions. Market watchers expect continued volatility as economic updates and US policy decisions unfold. The Canadian Dollar has weakened about 0.30% over the past month and by 0.17% over the last 12 months against the US Dollar. This softness comes after disappointing domestic employment data: Canada lost 41,000 jobs in July, while the unemployment rate held at 6.9%, both pressuring the Loonie. Weak employment figures have increased market expectations for a possible interest rate reduction at the Bank of Canada’s next meeting in September.

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 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

Weak Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

The oil market is showing slight price recovery today, but the broader picture is dominated by concerns over record global oversupply, rising inventories, and weak demand growth. Geopolitical factors, namely U.S.-Russia relations and Fed policy, are providing temporary support but are unlikely to overturn the bearish medium-term outlook. Analysts expect oil to remain volatile, with prices holding in the $60–$70 range short-term, but potentially slipping below $60 by year-end if supply continues to outpace demand.

Next 24 Hours Bias

Weak Bearish