IC Markets Global – Europe Fundamental Forecast | 08 January 2026
What happened in the Asia session?
The Asia session featured disappointing Australian trade data and sharp Japanese real wage declines as primary macro releases, alongside hawkish RBA comments and PBOC liquidity measures, fostering cautious sentiment with fragmented equity moves, declines in Japan and Hong Kong offsetting minor mainland China and Australian gains, while FX volatility stayed low but spotlighted JPY strength and AUD resilience amid policy signals.
What does it mean for the Europe & US sessions?
US labor data like Initial Jobless Claims and Trade Balance releases today, alongside European indicators such as Germany Manufacturing Orders and Euro Area Economic Sentiment, amid mixed Wall Street closes and commodity volatility. Gold trades near $4,462/oz after profit-taking, while oil dips with Brent at $59.96/bbl due to US-Venezuela import deals. Currency pairs show EUR/USD at 1.1676 and USD/JPY at 156.78, reflecting broader market caution.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (1:30 pm GMT)
What can we expect from DXY today?
The dollar today is in a wait‑and‑see stance: still underpinned by relatively high U.S. yields and delayed Fed‑cut expectations, but drifting slightly lower as traders await U.S. unemployment claims and other data for confirmation of the U.S. growth and inflation picture, with price action likely choppy and headline‑driven rather than strongly directional.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) is widely expected to lower the federal funds rate target range by 25 basis points to 3.50%–3.75% at its December 9–10, 2025, meeting, marking the third consecutive cut after the October reduction to 3.75%–4.00%
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labour market showing further softening as the unemployment rate rose to 4.4% in September 2025 amid modest job gains.
- Officials note persistent downside risks to growth alongside resilient activity, with inflation easing to 3.0% year-over-year CPI in September but remaining elevated due to tariff effects; core PCE stands at around 2.8% as of October.
- Economic activity grew at a 3.8% annualised pace in Q2 2025, according to revised estimates. However, Q3 and Q4 are expected to face headwinds from trade tensions, fiscal restraint, and data disruptions, such as the government shutdown.
- September’s Summary of Economic Projections forecasts 2025 unemployment at a median of 4.5%, with PCE inflation near 3.0% and core PCE at 3.1%, signalling a gradual disinflation path. Updates expected on December 10 may adjust for higher unemployment and lower growth.
- The Committee maintained its data-dependent approach, noting a softening labour market and inflation above the 2% target, while deciding to lower the federal funds rate target range by 25 basis points to 3.50%-3.75%. Dissent persisted, with multiple members opposing the cut or advocating for a hold, reflecting divisions similar to recent meetings.
- The FOMC confirmed the conclusion of its quantitative tightening program effective December 1, 2025, with Treasury rolloff caps at $5 billion per month and agency MBS caps at $35 billion per month to ensure ample reserves and market stability.
- The next meeting is scheduled for 27 to 28 January 2026.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
Unemployment Claims (1:30 pm GMT)
What can we expect from Gold today?
Gold is starting the day in a cautious, range‑bound mode, with prices holding steady as traders balance firm U.S. yields and a resilient dollar against safe‑haven demand and expectations of eventual Fed easing. The main catalyst for a decisive move today is likely to be the U.S. unemployment‑claims data; a stronger‑than‑expected labour signal could pressure gold lower intraday, while any signs of cooling would likely weaken the dollar and give bullion a modest boost.
Next 24 Hours Bias
Strong Bullish
The Euro (EUR)
Key news events today
No major news event
What can we expect from EUR today?
The Euro traded steadily near 1.1680 against the USD amid softer-than-expected German and French inflation data that dimmed ECB rate hike prospects, with markets eyeing full Eurozone figures this week. European stocks cooled slightly on Venezuela-related U.S. policy noise, while structural positives like Bulgaria’s euro adoption and rising global euro bond issuance underscored the currency’s strengthening appeal despite growth forecasts dipping to 1.2% for the year.
Central Bank Notes:
- The Governing Council of the ECB kept the three key interest rates unchanged at its 4–5 January 2026 meeting, maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.40% and the deposit facility at 2.00%. This decision aligns with the assessment that the current stance supports medium-term price stability, as inflation edges below the 2% target while growth shows resilience amid balanced risks. Markets and commentary indicate value in holding steady, with no fixed path ahead given uncertainties in data.
- Price dynamics remain stable near target levels. Headline HICP inflation stood at 2.1% in November 2025, with projections for 1.9% in 2026 driven by base effects from energy and easing non-energy components. Services inflation persists somewhat elevated but trends toward moderation, alongside contained food pressures.
- December 2025 Eurosystem staff projections confirm headline inflation at 2.1% for 2025, declining to 1.9% in 2026 and 1.8% in 2027 before nearing 2% in 2028. Downside risks from soft producer prices and anchored expectations offset potential upsides from geopolitics or fiscal measures.
- Euro area GDP growth remains resilient at subdued levels, with Q3 2025 at 0.3% qoq and forecasts around 1.2-1.4% for 2025-2027. Surveys signal stabilization, bolstered by public investment and external demand against softer private spending.
- The labour market stays tight overall, with unemployment steady at 6.4% through October 2025, near historic lows and solid participation. Real incomes support consumption as inflation eases, with credit conditions aiding gradual household and firm expansion.
- Business sentiment reflects caution over US policy, trade tensions, and tariffs, tempered by easing supply chains and a competitive euro. Export sectors gain a modest lift, while domestic drivers like investment build momentum.
- The Governing Council will continue to make data-dependent decisions meeting by meeting, assessing inflation outlook, underlying trends, and transmission. Both hikes and cuts remain possible based on data, avoiding preset paths amid uncertainties.
- Balance sheet normalization proceeds steadily, with APP and PEPP portfolios shrinking post-reinvestment halts, at a pace deemed suitable without market strain.
The next meeting is on 4 to 5 February 2026
Next 24 Hours Bias
Medium Bullish
The Swiss Franc (CHF)
Key news events today
CPI m/m (7:30 am GMT)
What can we expect from CHF today?
The CHF benefits from subdued USD performance, linked to expectations of a Federal Reserve rate cut, heightened geopolitical tensions (e.g., Russia-Ukraine and US-Venezuela frictions), and a recent US-Switzerland trade deal that eases prior tariffs. Manufacturing PMI hit a seven-month low in December, signalling contraction, yet safe-haven demand persists with no anticipated SNB rate changes in 2026
Central Bank Notes:
- At its 11 December 2025 monetary policy assessment, the Swiss National Bank (SNB) is widely expected to leave the policy rate unchanged at 0%, extending the pause that began in September as the Governing Board judges that current settings are sufficient to keep inflation near, but still below, its target while avoiding an unnecessary move into negative rates.
- Recent data show that the tentative rebound in Swiss inflation has stalled, with headline CPI easing from 0.1% year‑on‑year in October to 0.0% in November and core inflation slipping to about 0.4%, reinforcing the view that underlying price pressures remain very weak and that deflation risks, while contained, have not fully disappeared.
- The SNB’s conditional inflation forecast is likely to remain close to the September projections, with inflation still seen averaging roughly 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027 under an unchanged policy rate path, though the latest CPI prints argue for a slightly lower near‑term profile and keep open the option of renewed easing if activity or prices weaken further.
- The global backdrop has deteriorated further, as continuing U.S. tariff actions and softer external demand weigh on world trade, while uncertainty in key European and U.S. markets for Swiss exports persists, leaving the SNB cautious about the growth outlook despite Switzerland’s relatively resilient domestic demand.
- Business and labour-market sentiment in export‑oriented manufacturing remains subdued, with firms reporting pressure on margins from the still‑strong franc and softer foreign orders, although the broader economy is still expected to grow at around 1–1.5% in 2025 and unemployment only drifting up gradually from low levels.
- The SNB continues to stress its willingness to act if deflation risks re‑emerge, reiterating that it can ease policy through renewed rate cuts or targeted foreign‑exchange intervention if necessary, while also highlighting its commitment to transparent communication, including the publication of detailed minutes from recent assessments and ongoing dialogue with international partners on FX policy
The next meeting is on 19 March 2026.
Next 24 Hours Bias
Medium Bullish
The Pound (GBP)
Key news events today
No major news event
What can we expect from GBP today?
The Pound trades steadily around $1.346 against the USD, consolidating above mid-1.3400s with bullish potential intact but facing resistance near 1.3535 amid thin trading and BoE caution on rate cuts. Stronger UK factory data and Fed dovishness support recent 1.2% monthly gains, though forecasts warn of a rebound lower to 1.3215 if resistance holds, influenced by labor market cooling and UK political volatility.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) will meet on 18 December 2025, with the current Bank Rate standing at 4.00 per cent after being held in a close 5–4 vote at the 5 November meeting. Market pricing and analyst commentary point to a high risk of a 25‑basis‑point cut to 3.75 per cent, but this remains conditional on incoming inflation and labour‑market data, so the December note should be treated as pre‑decision guidance rather than an ex‑post summary.
- The BoE is expected to leave its quantitative tightening (QT) framework broadly unchanged through year‑end, maintaining the lower reduction pace in gilt holdings that was set earlier in 2025. Official communications still characterise the existing QT path as consistent with a restrictive stance, with policymakers stressing that balance‑sheet reduction will remain gradual and sensitive to market‑liquidity conditions.
- Headline CPI inflation eased to 3.6 per cent year‑on‑year in October 2025, down from 3.8 per cent in September, helped by softer energy and goods prices, though it remains almost twice the 2 per cent target. Underlying inflation pressures, particularly in services, have continued to moderate only slowly, so the MPC’s central projection still envisages inflation moving closer to, but not yet reaching, 3 per cent over the course of 2026, contingent on further normalisation in energy and wage dynamics.
- UK economic activity remains weak heading into the December meeting, with the labour market showing further signs of slackening. The unemployment rate has risen toward just above 5 per cent on the latest three‑month figures to October, while overall regular pay growth has slowed to around the mid‑4 per cent range, reinforcing the view that domestic cost pressures are gradually easing.
- External conditions continue to cloud the outlook, with fragile global growth and fluctuating commodity prices contributing to bouts of financial‑market volatility. The MPC has highlighted that renewed global energy or food price shocks could temporarily slow the pace of disinflation, but such risks are currently judged unlikely to derail the medium‑term downward trajectory for inflation if domestic demand stays subdued.
- The balance of risks around the inflation outlook remains finely poised. Downside risks are linked to persistently weak domestic demand and rising unemployment, while upside risks come from still‑elevated inflation expectations, sticky services inflation, and the possibility that structural changes in the labour market leave less slack than conventional indicators suggest.
- Overall, the MPC’s stance going into December is restrictive but increasingly open to a gradual easing cycle, with any rate cuts expected to be measured and data‑dependent. Policymakers have reiterated that the Bank Rate will need to stay in restrictive territory until they are confident inflation is on a sustainable path back to the 2 per cent target, and they have signalled that the profile of cuts, once started, is likely to be shallow rather than rapid.
- The next meeting is on 5 February 2026.
Next 24 Hours Bias
Strong Bullish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from CAD today?
The Canadian Dollar faced continued headwinds, weakening slightly to USD/CAD 1.3863 amid a prolonged losing streak tied to declining oil prices, Venezuelan geopolitical ripples strengthening the USD, and USMCA trade uncertainties, though analysts broadly forecast a rebound to 1.31-1.35 by year-end on Bank of Canada policy divergence and economic upticks.
Central Bank Notes:
- The Governing Council left the target for the overnight rate unchanged at 2.25% at its 10 December 2025 meeting, in line with market expectations and signalling that the earlier easing cycle has likely concluded. The Bank noted that while global tariff tensions and trade uncertainty persist, the external backdrop has stabilised somewhat, reducing the need for additional insurance cuts even as world trade remains fragile.
- The Council acknowledged that uncertainty around U.S. trade policy and tariffs continues to weigh on business sentiment, but recent data show Canadian manufacturing and goods exports holding up better than anticipated. Surveys cited by the Bank suggest export order books have stopped deteriorating, with firms reporting some rebuilding of backlogs despite still‑cautious capital spending plans.
- Canada’s economy rebounded more strongly than expected in the third quarter, with real GDP expanding at an annualised pace of about 2.6% after a 1.8% contraction in Q2, largely on the back of higher crude exports and government spending. Monthly data show output rising 0.2% in September, though flash estimates point to a softer start to Q4 as some sectors give back earlier gains.
- Service sector activity has firmed, with indicators showing the services PMI back above the 50 threshold and broadening gains in business and professional services. However, consumer-facing categories remain mixed, as still‑elevated price levels and only modest real income growth keep a lid on discretionary spending even as tourism and technology‑related services expand.
- Housing markets have continued to stabilise, with national resale activity and prices edging higher through the autumn alongside the earlier decline in borrowing costs. The Bank noted that while some major urban centres are seeing renewed price pressures, tighter underwriting standards and still‑high affordability constraints are expected to cap the pace of any rebound.
- Headline CPI inflation eased to 2.2% year over year in October and is estimated to have remained near that rate in November, keeping it slightly above the 2% target but comfortably within the 1%–3% control range. Core measures have drifted lower, with CPI‑median and CPI‑trim around 3% or below, reinforcing the assessment that underlying price pressures are gradually moderating even as gasoline and some shelter components remain volatile.
- The Governing Council reiterated that the current policy rate is “about the right level” to keep inflation close to target while supporting the economy through a period of structural adjustment, and it signalled a shift away from near‑term easing expectations. While the Bank did not rule out future adjustments, officials stressed that, barring a material downside surprise to growth or inflation, further rate cuts are unlikely before 2026, and attention is now focused on the durability of the recovery and the evolution of core inflation.
- The next meeting is on 28 January 2026.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil prices showed modest gains, with Brent trading above $60 per barrel and West Texas Intermediate around $56, rebounding from recent declines amid US actions on Venezuelan oil supplies. Key developments included US measures to control Venezuelan crude sales indefinitely, seize sanctioned tankers, and redirect 30-50 million barrels to American markets following the capture of Venezuelan President Nicolas Maduro, aiming to stabilize exports while benefiting US interests.
Next 24 Hours Bias
Medium Bearish
