IC Markets Europe Fundamental Forecast | 27 August 2025

IC Markets Europe Fundamental Forecast | 27 August 2025

What happened in the Asia session?

The Asian trading session was dominated by political news from the US, specifically the turmoil at the Federal Reserve. This led to a classic risk-off scenario, characterized by the US dollar weakening, the Treasury yield curve steepening, and a rise in precious metals. Asian equity markets were mixed but generally cautious. The lack of significant regional economic data meant that market participants were focused on external factors and are now looking ahead to key US inflation data and corporate earnings for further direction.

What does it mean for the Europe & US sessions?

Today’s trading is shaped by new U.S. tariffs on India, anticipation of Nvidia’s earnings, and lingering uncertainty surrounding the Federal Reserve’s leadership. Last week’s dovish signals from the Fed and the announcement of a new U.S.-EU trade agreement continue to influence the markets, although concerns about their long-term economic impact persist. Traders will be closely watching for a speech by a Fed official and key energy data later today.

The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

On Wednesday, August 27, 2025, the U.S. Dollar is experiencing a mixed session, strengthening slightly while facing significant headwinds from concerns over the independence of the Federal Reserve. The Dollar Index (DXY), which measures the greenback against a basket of major currencies, rose to approximately 98.38, recouping some losses from the previous day. The index rose about 0.15% to trade around 98.38. Despite the gain, the dollar has weakened by 0.25% over the past month.

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 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 Bullish

Gold (XAU)

Key news events today

No major news event

What can we expect from Gold today?

Gold is slightly lower today after a two-week high, as a firmer dollar trims gains; lingering concerns about U.S. Fed independence and rising rate-cut odds are cushioning downside into the PCE data later this week. Spot gold is around the mid-$3,370s/oz as of early Wednesday, with recent intraday prints cited near $3,378/oz; October/December futures are holding above $3,425/oz, and traders are watching the $3,405–$3,410 resistance area and $3,355–$3,370 support region intraday.

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

No major news event

What can we expect from EUR today?

The euro is slightly softer against the U.S. dollar in early Wednesday trade, with EUR/USD around the mid‑1.16s, as markets weigh a modest pickup in eurozone activity against lingering consumer caution in Germany and await Thursday’s ECB monetary statistics and next week’s flash HICP inflation print. Headline eurozone inflation held at 2.0% y/y in July with core at 2.3%, maintaining proximity to target but with services still comparatively firm; this keeps the ECB in data‑dependent mode after June’s 25 bp cut, with markets sensitive to any sign that price pressures from August PMIs broaden.

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 rate moves 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 Bearish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from CHF today?

The Swiss franc is slightly softer against the U.S. dollar today, with USD/CHF around 0.805, while the broader context shows CHF strength year-to-date amid trade headwinds and shifting SNB expectations. Overall tone: near-term consolidation in USD/CHF after a strong CHF year, with options positioning turning less CHF-bullish and Swiss exporters signaling pressure from tariffs and currency strength.Direction: Slight USD/CHF uptick today within an August range near 0.80–0.81; CHF still strong in the 2025 context. Drivers: U.S. tariffs on Switzerland, SNB at/near zero rates with optionality, and options markets less CHF-bullish near term.

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 Bearish

The Pound (GBP)

Key news events today

No major news event

What can we expect from CHF today?

Pound Sterling is trading around the mid-1.34s against the US Dollar in early Wednesday trade, with a slightly firmer tone into European hours as markets watch UK survey data and gilt auctions for direction. Near-term drivers include a UK gilt sale and the CBI retail survey today, with recent analysis flagging support in the 1.3430–1.3460 area and resistance near 1.3500–1.3540 on GBP/USD. BoE August MPR outlined modest growth, a tighter fiscal stance, and reliance on a lower household saving ratio for consumption pickup, underscoring a cautious medium-term outlook for the UK economy. Sell-side commentary notes GBP’s recovery back above 1.35 into late August as USD softness and a relatively hawkish BoE stance lent support; some houses see room for further gains over the next year if USD weakens, though the path remains choppy.

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 loonie is little changed around USD/CAD ~1.383 on Wednesday, Aug 27, moving within tight ranges across crosses while oil holds steady and traders look past a quiet domestic calendar toward the Sep 17 BoC decision and US data for cues; with policy paused at 2.75% and core inflation near ~3%, rate-differential dynamics keep USD/CAD anchored around 1.38–1.39, where prior technical commentary has highlighted resistance bands and consolidation, matching today’s subdued price action.

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

EIA Crude Oil Inventories (2:30 pm GMT)

What can we expect from Oil today?

Oil steadied today after Tuesday’s tariff‑driven drop, with Brent near $67 and WTI near $63 as traders weighed the launch of higher U.S. tariffs on India against ongoing OPEC+ supply restoration and macro demand risks; real‑time prints show marginal day‑on‑day gains but monthly and annual declines persist, and near‑term focus remains on Indian buying behavior, Russia‑Asia flows, and forthcoming OPEC+ guidance into September.

Next 24 Hours Bias
Weak Bullish