IC Markets Global – Europe Fundamental Forecast | 01 December 2025
What happened in the Asia session?
During today’s Asia session, the main themes were a firmer Japanese yen on rising Bank of Japan (BOJ) tightening expectations, mixed but generally steady Asian equities, and markets positioning ahead of key China PMI and global manufacturing data later in the day. The instruments most directly impacted were JPY pairs (especially USD/JPY), Asian stock indices such as the Nikkei 225 and Hang Seng Index, industrial and precious metals, and, to a lesser extent, regional bond yields and oil.
What does it mean for the Europe & US sessions?
Today marks a pivotal trading day with several high-impact events scheduled. BOJ Governor Ueda delivered hawkish remarks signaling a potential December rate hike, sending the yen higher, while markets are pricing in an 87% probability of a Fed rate cut on December 10. Key releases today include the US ISM Manufacturing PMI (forecast 49.0 vs. previous 48.7) and ISM Manufacturing Prices (forecast 59.5 vs. previous 58.0), which will provide fresh signals on US economic conditions and inflation pressures.
The Dollar Index (DXY)
Key news events today
ISM Manufacturing PMI (3:00 pm GMT)
ISM Manufacturing Prices (3:00 pm GMT)
What can we expect from DXY today?
The dollar enters December under significant pressure as traders focus on the high likelihood of a Fed rate cut, uncertainty around Fed leadership succession, and diverging monetary policy from Japan. The key near-term catalyst is today’s ISM Manufacturing data, which could either reinforce or challenge the current dovish narrative. A sustained break below 99.00 on the DXY would signal further dollar weakness, while any upside surprises in economic data could provide temporary support.
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 3.75% — 4.00% at its October 28–29, 2025, meeting, marking the second consecutive cut following the 25 basis points reduction in September.
- The Committee maintained its long-term objectives of maximum employment and 2% inflation, noting that the labor market continues to soften, with modest job creation and an unemployment rate edging higher. In comparison, inflation remains above target at around 3.0%.
- Policymakers highlighted ongoing downside risks to economic growth, tempered by signs of resilient economic activity. September’s consumer price index (CPI) came in slightly lower than expected at 3.0% year-over-year, easing inflation pressure but still warranting vigilance given tariff-driven price effects.
- Economic activity expanded modestly in the third quarter, with GDP growth estimates around 1.0% annualized; however, uncertainty remains elevated amid persistent global trade tensions and the U.S. government shutdown, which is impacting data availability.
- The updated Summary of Economic Projections anticipates an unemployment rate averaging approximately 4.5% for 2025, with headline and core personal consumption expenditures (PCE) inflation projections remaining near 3.0%, indicating a slow easing path ahead.
- The Committee emphasized its flexible, data-dependent approach and underscored that future policy adjustments will be guided by incoming labor market and inflation data. As in prior meetings, there was dissent, including one member advocating a more aggressive 50-basis-point cut.
- The FOMC announced the planned conclusion of its balance sheet reduction (quantitative tightening) program, intending to cease runoff in the near term to maintain market stability. Treasury redemption caps will remain steady at $5 billion per month, and agency mortgage-backed securities caps will remain at $35 billion.
- The next meeting is scheduled for 9 to 10 December 2025.
Next 24 Hours Bias
Medium bearish
Gold (XAU)
Key news events today
ISM Manufacturing PMI (3:00 pm GMT)
ISM Manufacturing Prices (3:00 pm GMT)
What can we expect from Gold today?
Gold is trading near six-week highs above $4,250 per ounce to start December, positioning for a potential fourth consecutive monthly gain and what could be its strongest annual performance since 1979, with prices up approximately 60% year-to-date. The rally is underpinned by growing expectations of a Federal Reserve rate cut at the December 9-10 meeting, broad U.S. dollar weakness, persistent central bank buying, and ongoing geopolitical uncertainties.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
No major key news event
What can we expect from EUR today?
The Euro opens in December 2025 with cautious optimism, trading above the 1.1600 level against the US Dollar amid broad USD weakness driven by dovish Federal Reserve expectations. Key themes shaping the Euro today include the ECB’s firm stance on holding rates at 2.00%, tomorrow’s crucial Eurozone flash inflation data (expected at 2.1%), and today’s release of final Eurozone Manufacturing PMI figures. The short-term EUR/USD trend has shifted from downtrend to sideways, with the pair flirting with its 200-day SMA, a technically significant level.
Central Bank Notes:
- The Governing Council of the ECB kept the three key interest rates unchanged at its 30 October 2025 meeting. The main refinancing rate remains at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. This decision reflects policymakers’ assessment that the current monetary stance remains consistent with medium-term price stability, while incoming data confirm a gradual return of inflation towards the target.
- Recent indicators point to stable price dynamics. Headline inflation remains near the 2% mark, with energy prices contained and food inflation easing slightly after earlier supply bottlenecks. Wage growth continues to moderate, contributing to the slowdown in domestic cost pressures. The ECB reiterated its commitment to a data-driven, meeting-by-meeting approach and emphasized flexibility amid uncertain global financial conditions.
- Eurosystem staff projections have not been materially altered since September. Headline inflation averages remain at 2.0% for 2025, 1.8% for 2026, and 2.0% for 2027. Recent softening in producer prices and subdued pipeline pressures suggest limited upside risks to inflation, though geopolitical tensions and potential commodity shocks continue to pose uncertainties to the outlook.
- Euro area GDP growth remains on track with earlier forecasts, projected at 1.1% for 2025, 1.1% for 2026, and 1.4% for 2027. Forward-looking indicators, including PMIs and industrial sentiment surveys, signal some stabilization in activity following weakness in the third quarter. Public investment and recovering export activity are expected to offset softer private sector demand in the near term.
- The labor market remains resilient, with unemployment rates at multi-decade lows and participation rates strong. Real income growth continues to support household spending, even as consumption growth normalizes from earlier highs. Financing conditions remain favorable, supported by stable banking-sector liquidity and improved credit demand among small and medium-sized firms.
- Business sentiment remains mixed, reflecting lingering uncertainty over global trade policy and the path of US tariffs. However, easing supply chain costs and improved export competitiveness due to softer exchange rates are providing some relief to manufacturing and external-oriented sectors.
- The Governing Council reaffirmed that future decisions will depend on an integrated assessment of incoming data—covering inflation trends, financial conditions, and the state of policy transmission. The Council emphasized that no pre-set path for rates exists; keeping all options open should the economic outlook shift markedly.
- Balance sheet reduction continues smoothly, with holdings under the APP and PEPP declining as reinvestments have ceased. The ECB confirmed that the pace of portfolio runoff remains in line with its previously communicated normalization plan, supporting a gradual withdrawal of monetary accommodation in a predictable manner.
- The next meeting is on 17 to 18 December 2025
Next 24 Hours Bias
Medium Bearish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The Swiss franc remains well-supported by its safe-haven status, low inflation, and the positive impact of the US tariff reduction. While the economy contracted in Q3, the outlook is improving with the tariff relief now in place. Traders should watch the December 11 SNB meeting for any policy signals, though rate changes appear unlikely in the near term.
Central Bank Notes:
- The SNB maintained its key policy rate at 0% during its meeting on 25 September 2025, pausing a sequence of six consecutive rate cuts as inflation stabilized and the Swiss franc remained firm.
- Recent data showed a modest rebound in inflation, with Swiss consumer prices rising 0.2% year-on-year in August after staying above zero for three consecutive months; this helped alleviate fears of deflation that were mounting earlier in the year.
- The conditional inflation forecast remains broadly unchanged from June: headline inflation is expected to average 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027. The risk of a negative rate move has diminished for now, but the SNB retains flexibility should inflationary pressures weaken again.
- The global economic outlook has deteriorated further, weighed down by heightened trade tensions—especially with the U.S.—and ongoing uncertainty in key Swiss export markets.
- Swiss GDP growth moderated in Q2 after a strong Q1 boosted by front-loaded U.S. exports. The SNB expects growth to slow and remain subdued, with forecasted GDP expansion between 1% and 1.5% in both 2025 and 2026.
- Labor market sentiment in the Swiss industrial sector has softened on concerns over export competitiveness and potential adjustments to production, but the overall growth outlook stays broadly unchanged
- The SNB reiterated its readiness to respond as needed if deflation risks re-emerge, emphasizing its commitment to medium-term price stability and a robust, transparent communication policy, with the introduction of more detailed monetary policy minutes beginning in October.
- The next meeting is on 11 December 2025.
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 enters December on firmer footing after its strongest weekly performance in four months, supported by post-Budget relief and growing expectations of divergent central bank policies favoring GBP. However, upside may be limited as the BoE’s own rate cut expectations and concerns about UK productivity and growth weigh on the outlook. The immediate focus is on US manufacturing data today and the December 18 BoE rate decision. Key technical levels to watch are 1.3200 support and 1.3300 resistance (200-day SMA).
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 6 November 2025 and voted 7–2 to keep the Bank Rate unchanged at 4.00 percent for a second consecutive meeting. The decision reflects the Committee’s cautious approach as inflation remains above target, but underlying economic momentum continues to weaken. Two members maintained their votes for a 25-basis-point cut, citing further signs of labor-market softening and weak business sentiment.
- The BOE adjusted its guidance on quantitative tightening (QT), maintaining the reduced pace established in September. The planned reduction of UK government bond holdings remains at £67.5 billion over the next 12 months, leaving the current gilt balance near £550 billion. Policymakers described the recalibrated QT path as “appropriate for current market conditions,” emphasizing the importance of liquidity management amid heightened volatility.
- Headline inflation moderated slightly to 3.6 percent in October from 3.8 percent previously, driven by easing food and transport prices. However, core inflation has shown only gradual progress, holding near 3.9 percent. The MPC noted that services inflation and administered energy costs continue to exert pressure, highlighting the challenge of achieving the 2 percent target sustainably. The Committee’s latest projections see inflation falling toward 3 percent by mid-2026, with further downside expected if energy and wage dynamics continue to normalize.
- Economic activity remains subdued. Estimates place Q3 GDP growth close to zero, with both business output and consumer spending restrained. The unemployment rate has edged up to 4.8 percent, while pay growth cooled to just under 5 percent year-on-year. MPC members acknowledged that pay settlements are weakening further, signaling an easing in labor cost pressures as demand softens. Surveys from the manufacturing and services sectors suggest muted hiring intentions through year-end.
- International factors continue to complicate the policy outlook. Fluctuating oil prices—partly linked to renewed Middle East tensions—alongside fragile global demand have contributed to higher market volatility. The MPC reiterated that external shocks, including global food and energy disruptions, could temporarily slow the disinflation path but remain unlikely to derail the medium-term moderation in prices.
- The Committee assessed risks around inflation as balanced. Downside risks arise from sluggish domestic growth and declining real income momentum, while upside risks remain tied to elevated inflation expectations and stubborn services inflation. Policymakers emphasized the need for patience, maintaining that any rate cuts ahead of clear inflation progress could undermine confidence in policy credibility.
- The MPC’s overall stance remains restrictive but increasingly balanced, with future moves expected to follow a cautious, data-driven trajectory. The Committee reaffirmed that monetary policy will stay tight until there is compelling evidence that inflation is returning to the 2 percent target on a durable basis.
- The next meeting is on 18 December 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?
CAD strength may continue in the near term if the Fed cuts rates in December while the BoC holds steady, narrowing the rate differential. Watch Friday’s employment report and December 10’s BoC decision for potential volatility. The loonie remains structurally undervalued above 1.40 according to analysts, but requires trade stabilization or USMCA clarity to narrow the valuation gap. Risk factors include weak Q4 GDP indications (preliminary October GDP may decline 0.3%) and ongoing tariff uncertainty
Central Bank Notes:
- The Council noted that U.S. tariff tensions have eased slightly following early progress in bilateral discussions, though the external trade environment remains fragile. Businesses continue to hold back on long-term investment, with the Bank highlighting that sustained clarity on U.S. trade policy is needed to restore confidence.
- The Bank acknowledged that uncertainty persists despite the softer U.S. tone, as incoming data show limited improvement in export orders. The manufacturing sector has stabilized but remains below pre-2024 output levels, reflecting weak global demand and cautious corporate spending.
- Canada’s economy showed tentative signs of recovery in early Q4, with GDP estimated to expand by 0.3% in October after two quarters of contraction. Mining and energy activity strengthened modestly, aided by steady crude demand, while goods exports posted a fractional gain.
- Service sector growth remained uneven, supported mainly by tourism-related and technology services. However, retail spending and household consumption were subdued, constrained by slower job creation and lingering consumer caution. The Bank judged overall momentum as fragile but improving marginally.
- Housing activity showed modest reacceleration in major urban markets as mortgage rates stabilized near record lows. Nonetheless, affordability pressures and stricter lending standards continue to limit overall resale volumes, resulting in only a gradual recovery in the housing sector.
- Headline CPI inflation rose to 2.1% in October, reaching the Bank’s target for the first time in six months. Higher energy prices and a modest uptick in food and shelter costs drove the increase. Core inflation measures remained stable, suggesting underlying price pressures are contained.
- The Governing Council reiterated its data-dependent stance, indicating that the current policy rate remains appropriate amid tentative growth and balanced inflation risks. Officials noted that while additional stimulus is not ruled out, the emphasis has shifted toward monitoring the sustainability of the recovery rather than immediate rate adjustments.
- The next meeting is on 17 to 18 December 2025.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil prices opened the week higher, with WTI crude trading around $59.45/barrel and Brent at approximately $63.20/barrel, rising over 1% following OPEC+’s confirmation on Sunday that it will pause production increases through Q1 2026. However, significant headwinds remain from an anticipated global supply surplus of 2-4 million barrels per day in 2026, geopolitical tensions around Venezuela, and potential easing of Russian oil sanctions amid Ukraine peace negotiations.
Next 24 Hours Bias
Medium Bullish
