IC Markets Europe Fundamental Forecast | 15 August 2025
What happened in the Asia session?
The Asia session was dominated by disappointing Chinese macro data, affecting the CNY, Asian equities, and commodity markets the most. Markets may remain sensitive to ripple effects from these developments as trading continues through the global session. Given China’s status as the world’s largest consumer of many commodities, disappointing industrial and retail numbers could fuel declines in industrial metals, energy, and raw materials linked to Chinese demand. Major indices with significant exposure to China (like the Shanghai Composite, Hang Seng, and regional indexes) tend to react negatively to signs of economic slowdown in China.
What does it mean for the Europe & US sessions?
Watch for reactions to the U.S. PPI shock, retail sales figures, Eurozone Q2 GDP, Japanese and Chinese growth data, and any developments from the Trump–Putin summit. Markets are highly sensitive to both macroeconomic surprises and headline risks in the current environment. The U.S. dollar is steady after hotter-than-expected U.S. producer price index (PPI) data for July.
The surprise increase in wholesale inflation has led traders to scale back expectations for imminent interest rate cuts from the Federal Reserve. Previously, markets were hoping for a larger rate cut in September, but now the possibility of a 50-basis-point move has vanished, and even a 25-basis-point cut appears less likely.
The Dollar Index (DXY)
Key news events today
Core retail sales m/m (12:30 pm GMT)
Retail sales m/m (12:30 pm GMT)
Empire State Manufacturing Index (12:30 pm GMT)
Prelim UoM consumer sentiment (2:30 pm GMT)
Prelim UoM inflation expectation (2:30 pm GMT)
What can we expect from DXY today?
The dollar remains firm today, benefiting from hotter U.S. inflation data that has cooled expectations for aggressive Fed rate cuts. However, traders are closely watching upcoming economic releases and policy events for additional direction. The surge in U.S. producer prices has fueled concerns over future inflation, making a large rate cut from the Fed less probable. Analysts now forecast a maximum of two 25bp cuts by year-end, and even that is in question if inflationary pressures persist. Market participants continue to adjust their expectations based on evolving Fed rhetoric and inflation data, while monitoring for changes stemming from global events and tariffs.
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
Medium Bearish
Gold (XAU)
Key news events today
Core retail sales m/m (12:30 pm GMT)
Retail sales m/m (12:30 pm GMT)
Empire State Manufacturing Index (12:30 pm GMT)
Prelim UoM consumer sentiment (2:30 pm GMT)
Prelim UoM inflation expectation (2:30 pm GMT)
What can we expect from Gold today?
Gold is currently in a state of balance, with bearish pressure from shifting Fed rate-cut expectations being countered by bullish sentiment from geopolitical uncertainty. The market is looking for a catalyst to break out of its recent trading range. Gold prices are being influenced by hotter-than-expected U.S. producer price data for July.
This has led investors to scale back expectations for a Federal Reserve interest rate cut in September, which in turn strengthens the U.S. dollar and puts pressure on non-yielding gold. The spot price for gold was trading at $3,338.57 per troy ounce, an increase of 0.09% from the previous session. This comes after gold was priced at $3,352 per ounce on Thursday, August 14. The metal continues to trade within a range of approximately $3,250 to $3,450, a channel it has been in for nearly twelve weeks.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
No major news event
The latest GDP data suggests a cooling of the Eurozone economy, with some major economies facing contractions. The slowdown, despite better-than-expected overall figures, points to underlying concerns about trade uncertainties and their impact on business and consumer sentiment. This economic data will likely influence the European Central Bank’s future monetary policy decisions, potentially affecting the Euro’s performance in the trading sessions ahead.
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
Medium Bullish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The Swiss Franc is currently influenced by a tug-of-war between its safe-haven appeal and active efforts by the SNB to weaken it through dovish monetary policy and potential market interventions. The recently imposed U.S. tariffs add another layer of complexity and are a key factor to watch. The Swiss Franc is trading around 0.8072 per U.S. dollar, marking a slight decline of 0.05% in the session. Despite this, the franc has weakened by approximately 0.78% against the dollar over the past month. However, looking at the longer-term trend, it remains up by 6.79% over the last 12 months, highlighting its underlying 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
Weak Bearish
The Pound (GBP)
Key news events today
No major news event
What can we expect from GBP today?
The pound’s upward momentum on August 15 is tied to strong domestic economic performance and constructive policy divergence with the US, positioning it well for further appreciation if current trends persist. The UK economy reported a better-than-expected growth rate of 0.3% in the second quarter of 2025, prompting upward revisions to annual economic forecasts. This outperformed analyst expectations and has contributed significantly to the pound’s gains against major currencies.
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 Bullish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from CAD today?
On August 15, 2025, the Canadian Dollar is trading within its recent ranges, showing resilience but no major appreciation or depreciation against the USD and other major currencies. The outlook remains cautiously stable, barring unexpected macroeconomic events. The CAD remained steady with only marginal weakness, in part due to stable energy prices and moderate inflation data. Major economic surprises were reported in recent days, with market participants watching for upcoming inflation and central bank signals.
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
Medium Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Today’s oil market is marked by steady prices after a recent rally, high geopolitical stakes, a large forecast supply increase, and a persistent mood of caution as traders await the outcome of the Trump–Putin summit. The market’s near-term direction will hinge on both geopolitical headlines and data on global oil inventories and demand growth.
Markets are focused on the much-anticipated meeting between U.S. President Donald Trump and Russian President Vladimir Putin. Trump has warned of “very severe consequences” if Russia does not move to resolve the Ukraine conflict, with sanctions (including secondary tariffs on major oil buyers) being considered. This meeting is cast as a pivotal moment for oil market direction.
Next 24 Hours Bias
Medium Bearish
