IC Markets – Europe Fundamental Forecast | 31 March 2026

IC Markets – Europe Fundamental Forecast | 31 March 2026

What happened in the Asia session?

Risk-off backdrop tied to the broader Middle‑East conflict and elevated oil prices, overlaid with softer‑than‑expected Tokyo CPI (which capped the yen rally) and mildly constructive but still vulnerable Chinese PMI prints, leading to a clear underperformance in JPY‑crosses such as USD/JPY near intervention‑watch levels, pressure on commodity‑linked AUD, and downside bias in regional equities, especially Japan and Korea, while oil and energy‑linked instruments remained well bid.

What does it mean for the Europe & US sessions?

Persistent growth fears and elevated oil prices are anchoring global risk‑off positioning, with the S&P 500 and Nasdaq near seven‑month lows and bond yields under pressure ahead of key U.S. labor and consumer‑confidence data. In Europe, traders are watching early‑session macro prints and EUR‑denominated bond flows for signals on how the ECB’s policy stance is balancing inflation control against slowing growth, all within a broader environment of heightened geopolitical risk.

​
The Dollar Index (DXY)

Key news events today

JOLTS Job Openings(2:00 pm GMT)

CB Consumer Confidence (2:00 pm GMT)

What can we expect from DXY today?

The US dollar is trading near multi‑month highs versus most major currencies, buoyed by month‑ and quarter‑end portfolio rebalancing, elevated Middle East war risk, and diminished hopes for early Fed rate cuts. The greenback is on track for its largest monthly gain since July, outperforming the yen, euro, and several commodity‑linked currencies, while gold and other risk‑sensitive assets struggle under the same higher‑for‑longer US rate backdrop.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate target range steady at 3.50%–3.75% at its March 17–18, 2026, meeting, amid rising oil prices from the US-Israel war against Iran and persistent inflation pressures, delaying any 2026 cuts potentially to September.
• The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market weakening further as nonfarm payrolls declined by 92,000 in February 2026 and the unemployment rate rose to 4.4% from 4.3% in January.
• Officials face tilted risks from geopolitical tensions, elevated oil prices, and sticky inflation, with CPI steady at 2.4% year-over-year in February 2026, headline PCE at 2.8% in January, and core PCE rising to 3.1%.
• Economic activity has cooled after robust Q4 2025 growth of nearly 5%, with the Atlanta Fed GDPNow now estimating Q1 2026 growth at around 2.1%–2.7% amid softer consumer spending and labour data.
• December 2025’s Summary of Economic Projections forecasts 2025 unemployment at a median of 4.5%, 2026 GDP growth at 2.3%, and core PCE at 2.5%, with the dot plot signalling one more cut in 2026 to a median 3.4% funds rate; March updates may reflect softer labor and inflation upticks.
• The Committee maintains its data-dependent stance amid a softening labor market, inflation above target, and new oil shocks, likely holding rates at 3.50%-3.75% with ongoing divisions and possible hawkish dissents on rate cuts.
• The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to ensure ample reserves post-2025 program adjustments.
• The next meeting is scheduled for 28 to 29  April 2026.

Next 24 Hours Bias
Weak Bullish

Gold (XAU)

Key news events today

JOLTS Job Openings(2:00 pm GMT)

CB Consumer Confidence (2:00 pm GMT)

What can we expect from Gold today?

Gold prices are up about 1–1.5% day‑on‑day, trading near 4,570–4,580 USD per troy ounce as investors seek safe‑haven exposure amid renewed Middle East tensions, even though the strong U.S. dollar and dwindling hopes for near‑term Fed rate cuts have kept the metal in a volatile, correction‑heavy environment over March. Despite this bounce, gold is on track for its worst monthly performance in over 17 years, with prices down roughly 13–15% in March even though they remain well above year‑ago levels, while silver and some regional benchmarks show more mixed or modestly positive moves.

Next 24 Hours Bias   
Weak Bearish

The Euro (EUR)

Key news events today

Core CPI Flash Estimate y/y (9:00 am GMT)

CPI Flash Estimate y/y (9:00 am GMT)

What can we expect from EUR today?

Today, the euro remains under pressure around 1.15 versus the dollar, heading for a more than 2% monthly loss as Middle‑East‑driven risk‑aversion and a hawkish tilt in ECB‑rate‑hike expectations keep the single currency weak, despite some technical signs of a looming corrective bounce within a broader uptrend.

Central Bank Notes:

• The Governing Council of the ECB is expected to keep the three key interest rates unchanged at its 29–30 April 2026 meeting, with the main refinancing rate at 2.15%, marginal lending facility at 2.40%, and deposit facility at 2.00%. This reflects an ongoing commitment to 2% inflation stability amid heightened uncertainties from Middle East tensions and US trade policies under President Trump. Market probabilities indicate around 58% odds of no change, though some banks now price in potential hikes due to rising inflation risks.
• Price dynamics show increasing upside pressures, with headline HICP inflation likely around 2.0-2.2% in early 2026, driven by energy costs from Middle East conflicts offsetting euro strength. Core inflation remains sticky but moderating slowly, with projections revised upward to 2.6% for 2026 overall amid hawkish signals from ECB leadership.
• Updated Eurosystem staff projections for April 2026 may forecast headline inflation at 2.1-2.2% in 2026, 1.9% in 2027, and 2.0% in 2028, with upside risks from energy and trade dominating balanced prior views. A stronger euro provides some counterbalance, but recent data revisions highlight persistent pressures.
• Euro area GDP growth holds steady, with Q2 2026 surveys suggesting 0.2-0.3% qoq growth, in line with 1.1-1.3% annual forecasts through 2027. Defence spending, infrastructure, and low unemployment support resilience against trade headwinds and softer external demand.
• The labour market remains tight, with unemployment steady near 6.4%, bolstered by wage growth and participation gains. Supportive credit conditions continue aiding investment and consumption despite global risks.
• Business sentiment is cautious amid US tariffs, geopolitical flare-ups, and supply chain easing; a somewhat weaker euro boosts exports, while fiscal measures aid domestic activity.
• The Governing Council maintains its data-dependent, meeting-by-meeting stance, scrutinizing inflation, transmission, and external shocks without pre-committing to rate paths.
• Balance sheet normalization advances smoothly, with APP/PEPP wind-downs complete and no liquidity issues; banks show ample reserves and stable funding access.

​The next meeting is on 29 April 2026

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 trading in a tight, risk‑off environment where its safe‑haven status keeps it relatively strong, especially versus the euro and dollar, even as the SNB hints at expanded FX intervention and keeps rates at 0% to protect exporters and financial stability through 2026. The combination of low yields, geopolitical frictions, and corporate worry about over‑valuation is keeping the franc in focus as a “collateral” beneficiary of market stress, but also one that domestic authorities are prepared to actively manage.

Central Bank Notes:

• At its monetary policy assessment on 19 March 2026, the Swiss National Bank (SNB) is widely expected to leave the policy rate unchanged at 0%, continuing the extended pause since September 2025, as the Governing Board assesses current settings as adequate to maintain inflation near the target without resorting to negative rates.
• Inflation data since December indicate persistent weakness, with headline CPI hovering around 0% year-on-year through early 2026 and core measures subdued at roughly 0.4%, underscoring limited price pressures and lingering, though contained, deflation risks.
• The SNB’s updated conditional inflation forecast shows minimal change from December, with averages of about 0.2% in 2025 (now complete), 0.3% in 2026, and 0.6% in 2027 under a steady 0% policy rate. However, recent flat CPI readings may slightly lower near-term expectations, preserving scope for further easing if needed.
• Global conditions remain challenging, marked by U.S. tariff escalations under President Trump, subdued external demand, and uncertainties in major export markets such as Europe and the U.S., prompting the SNB to exercise caution despite resilient Swiss domestic activity.
• Sentiment in manufacturing and export sectors stays soft amid franc appreciation and weaker foreign orders, squeezing margins. Yet, overall GDP growth is expected to be around 1.5% in 2026, with unemployment edging up modestly from historic lows.
• The SNB reaffirms its readiness to intervene via rate cuts or FX operations should deflationary pressures intensify, while emphasizing clear communication through detailed meeting minutes and coordination with global partners on currency matters.

The next meeting is on 18 June 2026.

Next 24 Hours Bias
Medium Bearish

The Pound (GBP)

Key news events today

No major news event

What can we expect from GBP today?

The pound is trading on the softer side versus the dollar, slipping into the low‑1.32s after recent losses and sitting within a short‑term downtrend channel, even as the medium‑term outlook remains mildly constructive with analysts penciling in a gradual recovery back toward the low‑1.30s by quarter‑end and higher levels over the next year.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) met on 19 March 2026, maintaining the Bank Rate at 3.75 per cent in a unanimous decision, following the prior narrow 5–4 vote to hold at the 5 February 2026 meeting. This pause reflects a sharp reversal from earlier market expectations of a 25-basis-point cut, driven by a Middle East conflict sparking global energy and commodity price surges. The March meeting did not include a Monetary Policy Report, with the next one due in April.
• Quantitative tightening (QT) proceeds unchanged at the 2025 pace of gilt holdings reductions, maintaining gradual balance-sheet normalization attuned to liquidity conditions and supportive of a restrictive stance amid new shocks.
• Headline CPI inflation faces near-term upside from the energy shock, reversing prior disinflation trends in domestic prices and wages; pre-shock services inflation had eased but now contends with higher utility and input costs, keeping pressures above the 2 per cent target. MPC projections will update in April, but analysts see inflation at 3-4 per cent by the end of 2026.
• UK growth softens further into Q2 2026, with unemployment risks rising amid potential confidence drops, higher precautionary saving, and widening output gaps; regular pay growth had cooled pre-shock but now faces business cost pass-through.
• Global headwinds intensify via Middle East conflict, driving volatile energy/commodity prices and sterling/gilt swings; MPC deems direct shocks manageable if demand weakens sufficiently to limit second-round effects.
• Inflation risks now tilt upside from energy persistence and potential wage/cost embedding, offset by downside from demand slack and job losses; prior balance has shifted amid uncertainty on shock duration.
• The MPC adopts a wait-and-see posture post-shock, with policy deemed somewhat restrictive pre-event; all members are ready to act data-dependently for 2 per cent sustainability, eyeing April for fuller impact analysis and possible easing if disinflation resumes. Governor Bailey’s guidance stresses close monitoring without firm-cut commitments.
• The next meeting is on 30 April 2026.
  
  Next 24 Hours Bias
  Medium Bearish

The Canadian Dollar (CAD)

Key news events today

GDP m/m (12:30 pm GMT)

What can we expect from GBP today?

The Canadian dollar is trading slightly weaker against the U.S. dollar around USD/CAD 1.39, having given up recent gains after touching near two-month lows earlier in March amid Middle‑East‑related oil and risk‑sentiment swings. The loonie remains supported by relatively strong oil prices and expectations of a narrowing U.S.–Canada rate differential later in 2026.
​
Central Bank Notes:

• The Governing Council held the overnight rate target steady at 2.25% at its 25 March 2026 meeting, aligning with consensus forecasts and extending the pause in policy adjustments amid balanced risks. The Bank emphasized persistent global uncertainties from Middle East conflicts and U.S. trade policies under President Trump, but affirmed the current stance supports ongoing disinflation without immediate shifts despite elevated energy price volatility.
• U.S. tariff threats and regional geopolitical tensions continue weighing on business sentiment, though Canadian manufacturing PMI has edged higher into expansion territory, with export orders firming on energy demand. Goods exports, led by crude oil, sustained momentum into February, offsetting cautious capex as firms prioritize resilience over aggressive growth.
• Economic growth carried into Q1 2026 at an annualized pace of around 2.2%, building on Q4 2025’s solid performance, fueled by resource exports, government outlays, and manufacturing rebound. February preliminary data points to steady expansion, though winter weather and supply chain frictions modestly curbed potential upside.
• Services sector PMI climbed further above 50, with broad gains in tech, hospitality, and business services; consumer-facing areas showed tentative improvement as real wages rose, though high service costs still restrain discretionary outlays. The Bank sees this diffusion as evidence of rebalancing toward sustainable activity.
• ​National housing resales ticked up in January-February alongside modest price gains, buoyed by stable rates and improved affordability in select regions, while inventory buildup in urban centers prevents excessive tightening. Officials anticipate continued moderation, aided by prudent mortgage rules amid steady household formation.
• Headline CPI eased to about 2.1% year-over-year in February 2026 estimates, staying within the control band, as core gauges like CPI-trim and median dipped to near 2.7% on softer food and durable goods pressures—despite sticky shelter costs. This reinforces the Bank’s view of inflation sustainably approaching the target.
• Policymakers reiterated that 2.25% remains well-calibrated to anchor 2% inflation and foster adjustment, with no cuts signaled barring downside surprises in growth or prices. Attention now turns to Q2 durability, core inflation persistence, and evolving trade/geopolitical clarity.
• The next meeting is on 23 April 2026.

Next 24 Hours Bias
Weak Bearish

Oil

Key news events today

API Crude Oil Stock (8:30 pm GMT)

What can we expect from Oil today?

Oil prices jumped again on Tuesday, as renewed tanker attacks in the Persian Gulf and heightened U.S.–Iran tensions kept Brent crude above 110 dollars per barrel and WTI near 105 dollars, adding to a roughly 50 percent monthly surge in March. The spike reflects a large geopolitical risk premium and supply‑disruption fears centered on the Strait of Hormuz, with governments worldwide bracing for higher domestic fuel prices and markets watching closely for any shift in peace‑talk rhetoric from Washington and Tehran.

Next 24 Hours Bias
Strong Bullish