IC Markets Europe Fundamental Forecast | 23 September 2025

IC Markets Europe Fundamental Forecast | 23 September 2025

What happened in the Asia session?

Tuesday’s Asia session was characterized by continued technology sector leadership driven by AI optimism, while traditional economic indicators showed mixed signals. The session highlighted the divergence between high-growth tech sectors and broader economic fundamentals, with investors closely monitoring upcoming PMI data and central bank communications for future market direction.

What does it mean for the Europe & US sessions?
Today’s trading sessions feature a critical confluence of economic data and central bank communications. European markets await Flash PMI readings that will provide the first major snapshots of September economic trends, while U.S. traders focus on Fed Chair Powell’s speech and Current Account data. The backdrop includes record-high gold prices, pressured oil markets, and continued currency volatility as central banks navigate the complex balance between growth support and inflation control. Market participants should monitor PMI data for signs of economic resilience or weakness, while Fed communications may provide crucial insights into the pace of future rate cuts.

The Dollar Index (DXY)

Key news events today

Flash manufacturing PMI (1:45 pm GMT)

Flash services PMI (1:45 pm GMT)

Richmond manufacturing index (2:00 pm GMT)

Fed Chair Powell speaks (4:35 pm GMT)

What can we expect from DXY today?

The US Dollar is facing a complex set of cross-currents. While Fed officials are adopting a more cautious tone on rate cuts and Treasury yields are rising, the dollar remains under pressure from policy uncertainties, including the risk of a government shutdown, immigration policy changes, and ongoing tariff impacts. Chair Powell’s speech today will be critical in clarifying the Fed’s policy trajectory, while the upcoming PMI data will provide insights into economic momentum. Together, these factors suggest continued volatility for the dollar in the near term.

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 Bearish

Gold (XAU)

Key news events today

Flash manufacturing PMI (1:45 pm GMT)

Flash services PMI (1:45 pm GMT)

Richmond manufacturing index (2:00 pm GMT)

Fed Chair Powell speaks (4:35 pm GMT)

What can we expect from Gold today?

Gold’s record-breaking rally on September 23, 2025, reflects a convergence of supportive factors, including Federal Reserve policy expectations, persistent central bank buying, escalating geopolitical tensions, and structural shifts in global monetary systems. With Chair Powell’s speech today and Friday’s critical PCE inflation data, the precious metal faces near-term volatility while maintaining strong fundamental support from both institutional and safe-haven demand.

Next 24 Hours Bias   
Medium Bullish

The Euro (EUR)

Key news events today

French flash manufacturing PMI (7:15 am GMT)

French flash services PMI (7:15 am GMT)

German flash manufacturing PMI (7:30 am GMT)

German flash services PMI (7:30 am GMT)

Flash manufacturing PMI (8:00 am GMT)

Flash services PMI (8:00 am GMT)

What can we expect from EUR today?

The Euro enters the final quarter of 2025 from a position of relative strength, buoyed by dollar weakness and Fed easing expectations. However, domestic challenges, including French political paralysis, slowing economic momentum, and stalled reforms to enhance the currency’s global status, present significant headwinds. While the technical outlook remains constructive with EUR/USD trading near multi-year highs, the currency’s medium-term trajectory will largely depend on Europe’s ability to address its political divisions and economic challenges while capitalizing on the ongoing shift in global monetary policy dynamics.

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..
• Rising real incomes and continued strength in the labor market back 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 back 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 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
Medium Bullish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from CHF today?

The Swiss franc enters the SNB’s September 25 policy meeting from a position of considerable strength, trading near multi-year highs against the dollar. While the central bank is widely expected to pause its easing cycle at 0%, the franc’s resilience reflects both traditional safe-haven demand and structural factors, including Switzerland’s fiscal discipline and monetary policy credibility. The currency’s strength continues to create deflationary pressures domestically while supporting its role as a hedge against global economic uncertainty and currency debasement concerns.

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

Flash manufacturing PMI (8:30 am GMT)

Flash services PMI (8:30 am GMT)

What can we expect from GBP today?

The British pound faces a challenging environment as fiscal concerns overshadow modest economic improvements. While the currency showed resilience on Monday, the combination of elevated borrowing figures, speculation about significant tax rises in November, and cautious Bank of England policy stance continues to weigh on sterling. Market focus remains firmly fixed on the November Budget, with analysts suggesting limited appetite for trading UK macro news until fiscal clarity emerges. The pound’s near-term trajectory will likely depend heavily on today’s PMI data and any signals from policymakers about the government’s fiscal strategy.

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
  Medium Bullish

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 balancing between economic recovery signs (retail sales rebound) and persistent challenges (manufacturing contraction, labour market weakness). While the Bank of Canada’s dovish stance and ongoing trade uncertainties weigh on the currency, improving consumer spending and potential Fed rate cuts provide some support. Governor Macklem’s speech today will be crucial for providing direction on how the central bank plans to navigate current trade and economic challenges, potentially influencing CAD volatility in the near term.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate to 2.50% at its September 17 meeting, with the Bank Rate at 2.75% and the deposit rate at 2.25%. This marks the first rate cut since early 2025, as the Bank responded to a string of softer inflation prints and persistent economic headwinds.
• 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

API crude oil stock (8:30 pm GMT)

What can we expect from Oil today?

The oil market on September 23, 2025, was characterized by persistent bearish sentiment driven primarily by oversupply concerns outweighing geopolitical risks. The key developments include the Iraq-Kurdistan pipeline restart agreement, adding 230,000 bpd to global supply, continued OPEC+ production increases, and new EU sanctions on Russian energy, effective in 2027. Despite ongoing tensions in the Middle East and Europe, these geopolitical factors have failed to provide sustainable price support as markets focus on the anticipated global oil surplus in late 2025 and 2026.

Next 24 Hours Bias
Weak Bearish