IC Markets Global – Europe Fundamental Forecast | 12 December 2025
What happened in the Asia session?
Markets continued to digest a Fed cut that was accompanied by cautious guidance, leaving the U.S. dollar weaker but risk sentiment mixed rather than decisively positive. A firmer‑than‑expected Australian unemployment print and lingering disinflation signals from U.S. wage data added nuance, supporting AUD domestically but not enough to prevent it from underperforming in a risk‑off FX mix dominated by stronger EUR and JPY, softer equities, and a powerful silver rally to fresh record highs.
What does it mean for the Europe & US sessions?
As European and U.S. trading get underway, the focus is on eurozone flash November CPI, U.K. growth and production data, and Canadian releases, all arriving against a backdrop of a dovish Fed cut that has weakened the dollar and buoyed risk appetite. With the SNB having just held rates at 0% and investors already looking ahead to late‑December ECB and BoE meetings, today’s numbers will be scrutinised for confirmation that inflation is converging on targets without a sharp growth hit.
The Dollar Index (DXY)
Key news events today
President Trump Speaks (11:15 am GMT)
What can we expect from DXY today?
The US dollar is trading weak today, hovering near multi‑week lows against major currencies as markets continue to react to this week’s Federal Reserve rate cut and dovish outlook, with the dollar index (DXY) around the high‑98 area and down notably over the past month and year.
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 labor 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% annualized pace in Q2 2025 per revised estimates, though Q3 and Q4 face headwinds from trade tensions, fiscal restraint, and data disruptions like the government shutdown.
- September’s Summary of Economic Projections forecasts 2025 unemployment at a median 4.5%, with PCE inflation near 3.0% and core PCE at 3.1%, signaling 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 labor 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
President Trump Speaks (11:15 am GMT)
What can we expect from Gold today?
Gold remains close to record territory today around the mid‑4,200 USD per ounce level, supported by expectations of further U.S. rate cuts, subdued real yields, and a softer dollar, even as short‑term traders occasionally take profits. Retail prices in key markets like India and U.S.-linked benchmarks (quoted in rupees) are slightly higher than yesterday, confirming the strength of the underlying trend.
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 is trading near a seven‑week high against the US dollar, hovering close to 1.17 after steadily strengthening from early December and November lows. This advance reflects a combination of broad dollar softness following the Federal Reserve’s latest rate cut and relatively stable expectations for European Central Bank policy, with officials signaling resilience in the eurozone economy and little urgency to change rates.
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 Bullish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The Swiss franc is trading strongly today, holding near multi‑year highs against the US dollar and remaining firm versus the euro, supported by a steady Swiss National Bank (SNB) policy rate at 0% and a softer US dollar following the latest Federal Reserve meeting.
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 labor‑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
GDP m/m (7:00 am GMT)
What can we expect from GBP today?
The Pound is consolidating near recent multi‑week highs against the dollar around the mid‑1.33 to 1.34 region, supported by a weaker dollar after the latest Federal Reserve rate cut and expectations that US policy will continue to ease. However, sterling’s momentum has cooled slightly, particularly versus the euro, as traders turn their attention to a busy run of UK data starting with monthly GDP on Friday and then labour and inflation figures, all feeding into a Bank of England meeting where markets almost fully price in another small rate cut.
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?
The Pound is consolidating near recent multi‑week highs against the dollar around the mid‑1.33 to 1.34 region, supported by a weaker dollar after the latest Federal Reserve rate cut and expectations that US policy will continue to ease. However, sterling’s momentum has cooled slightly, particularly versus the euro, as traders turn their attention to a busy run of UK data starting with monthly GDP on Friday and then labour and inflation figures, all feeding into a Bank of England meeting where markets almost fully price in another small rate cut.
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
Medium Bullish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil markets are trading slightly lower, with WTI in the high‑50s and Brent a little above 62 USD per barrel, extending a recent downtrend that has left both benchmarks well below year‑ago levels. OPEC and OPEC+ have left their 2025–2026 demand growth forecasts unchanged while production from core members and US producers stays high, reinforcing fears of a mild surplus. Geopolitical tensions from US actions against sanctioned Venezuelan barrels to disruptions involving Russian‑linked tankers have injected brief support, but risk‑off sentiment in broader markets and concerns about oversupply continue to outweigh these factors, keeping crude under pressure.
Next 24 Hours Bias
Medium Bearish
