IC Markets Global – Europe Fundamental Forecast | 18 June 2026
What happened in the Asia session?
A clear risk-on tone as investors reacted positively to easing Middle East tensions and continued to digest this week’s major central bank decisions. Equity markets across the region moved higher, with Japan’s Nikkei reaching fresh record highs, while oil prices fell further on expectations of improving global supply conditions. Currency markets favored the U.S. dollar against the Japanese yen as traders balanced a hawkish Fed outlook against the BOJ’s gradual normalization path.
What does it mean for the Europe & US sessions?
Markets enter the European and U.S. sessions with a distinctly risk-sensitive tone after the Federal Reserve’s hawkish pivot. The stronger U.S. dollar, rising bond yields, and elevated oil prices are likely to remain dominant themes. Traders should closely monitor the Bank of England decision, U.S. inflation-related data, and any geopolitical developments, as these events could generate significant volatility across forex, commodities, indices, and bond markets throughout the day.
The Dollar Index (DXY)
Key news events today
Philly Fed Manufacturing Index (12:30 pm GMT)
Unemployment Claims (12:30 pm GMT)
What can we expect from DXY today?
The U.S. Dollar is trading with a bullish tone today after the Federal Reserve kept interest rates unchanged at 3.50%–3.75% but surprised markets with a more hawkish outlook, signaling that another rate hike later in 2026 remains possible. Fed projections showed growing concern about inflation, prompting traders to increase expectations for tighter monetary policy. As a result, the U.S. Dollar Index (DXY) climbed to its highest level in more than two months, hovering around the 100 level, while major currencies such as the euro and Japanese yen weakened against the greenback.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) left the federal funds rate unchanged at 3.50%–3.75% at its June 16–17, 2026, meeting, marking another pause in the policy cycle. Under new Fed Chair Kevin Warsh, policymakers signaled a more cautious and hawkish stance as inflation remains above target despite moderating energy prices.
- The Committee remains committed to achieving maximum employment and returning inflation to its 2% objective. Labor market conditions have remained relatively stable, with job gains continuing at a moderate pace and the unemployment rate projected to remain near 4.4% through 2026.
- Inflation continues to be the primary concern for policymakers. Headline inflation remains elevated, supported by earlier energy-related price pressures and persistent services inflation. The June projections showed higher inflation forecasts than previously expected, leading several officials to favor keeping policy restrictive for longer.
- Economic activity continues to expand at a moderate pace. Productivity growth, capital investment, and AI-related spending remain supportive of growth, while consumer spending and housing activity show signs of slowing compared with late 2025 and early 2026.
- The June 2026 Summary of Economic Projections (SEP) revealed a more divided Committee. Nine officials projected at least one rate hike during 2026, while others expected rates to remain unchanged or eventually decline. The median outlook shifted toward a higher-for-longer policy path compared with earlier projections.
- The Committee emphasized a data-dependent approach and noted that future decisions will depend on incoming inflation, employment, and economic growth data. Officials acknowledged that geopolitical developments and energy markets remain important upside risks to inflation.
- The FOMC continues its balance sheet normalization program, maintaining Treasury runoff caps at $5 billion per month and agency mortgage-backed securities (MBS) runoff caps at $35 billion per month, while ensuring ample reserves remain in the banking system.
- The next meeting is scheduled for 28 to 29 July 2026.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
Philly Fed Manufacturing Index (12:30 pm GMT)
Unemployment Claims (12:30 pm GMT)
What can we expect from Gold today?
Gold is trading higher today after recovering from Wednesday’s sharp selloff following the latest Federal Reserve meeting. The Fed kept interest rates unchanged at 3.50%-3.75%, but policymakers adopted a more hawkish tone, with a growing number of officials signaling the possibility of another rate hike later this year. The initial reaction strengthened the U.S. dollar and pushed Treasury yields higher, causing gold prices to fall. However, gold has since rebounded as traders reassessed the outlook and responded to easing geopolitical concerns after reports of a U.S.-Iran interim agreement that helped drive oil prices lower.
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 remains supported today, following last week’s hawkish policy shift by the European Central Bank. The ECB raised its key interest rates by 25 basis points, citing rising inflation pressures driven largely by higher energy prices and geopolitical tensions. Policymakers now expect eurozone inflation to average around 3.0% in 2026, while growth forecasts have been revised lower to approximately 0.8%, highlighting concerns about slower economic activity.
Central Bank Notes:
- The Governing Council is expected to maintain the three key rates unchanged at their June levels into July, with the main refinancing rate around 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. Policy remains on a meeting‑by‑meeting, data‑dependent footing.
- Real GDP growth is expected to be modest: around 0.9% for 2026, 1.3% for 2027, and 1.4% for 2028. Quarterly momentum implies roughly 0.2–0.3% q/q growth in Q2 2026, consistent with resilience seen late‑2025.
- Balance‑sheet normalization continues smoothly. APP and PEPP wind‑downs are effectively completed; the Eurosystem is allowing remaining longer‑dated holdings to run off. No material liquidity shortages are expected; the Governing Council will monitor transmission and market functioning closely.
- Upside risks: stronger‑than‑expected services inflation persistence, renewed energy or commodity price shocks, and tighter global financial conditions that transmit unevenly.
- The ECB is likely to keep policy rates on hold while emphasizing data dependence: future moves will be guided by incoming HICP prints, wage dynamics, and indicators of monetary transmission (credit, deposit flows, and market functioning).
- With rates expected to be on hold and inflation slightly above target for 2026, the EUR may trade with two‑way volatility; upside for EUR if euro‑area data surprise to the upside or if US data weaken relative to euro‑area, but limited unilateral appreciation given symmetric policy risks.
- Curve pricing should reflect a prolonged period of unchanged rates with modest probability of hikes if upside inflation surprises continue; front-end stays anchored, while longer‑dated yields respond to inflation‑expectation movements and global risk sentiment.
The next meeting is on 22 to 23 July 2026
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
SNB Monetary Policy Assessment (7:30 am GMT)
SNB Policy Rate (7:30 am GMT)
SNB Press Conference (8:00 am GMT)
What can we expect from CHF today?
The Swiss franc is trading with a cautious tone ahead of today’s SNB policy announcement. Markets widely expect the central bank to leave rates unchanged at 0.00%, reflecting low inflation and a still-strong currency. While recent risk-on sentiment and U.S. dollar strength have weighed on CHF demand, the franc remains supported by its safe-haven status and Switzerland’s stable economic backdrop. For forex traders, today’s SNB communication is the key event that could drive volatility across CHF pairs.
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 considers current settings adequate to keep 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 Bullish
The Pound (GBP)
Key news events today
Claimant Count Change (6:00 am GMT)
Average Earnings Index 3m/y (6:00 am GMT)
Monetary Policy Summary (11:00 am GMT)
MPC Official Bank Rate Votes (11:00 am GMT)
Official Bank Rate (11:00 am GMT)
What can we expect from GBP today?
The pound remains broadly supported but is trading cautiously ahead of the Bank of England’s decision. Softer-than-expected inflation has reduced expectations for immediate rate hikes, while stable risk sentiment and a weaker U.S. dollar backdrop are helping GBP hold its ground. The BoE’s tone today will likely determine the pound’s next major move, particularly against the U.S. dollar and euro.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 29 April 2026, maintaining the Bank Rate at 3.75 per cent, with the decision details published on 30 April 2026 alongside the quarterly Monetary Policy Report. This hold follows the unanimous 9-0 vote at the prior 18 March 2026 meeting, amid persistent energy shocks from the Middle East conflict overriding earlier cut expectations. No specific vote split for April has been detailed yet, but consensus previews indicate a hold.
- Quantitative tightening (QT) continues unchanged at the 2025 pace for gilt holdings reductions, supporting balance-sheet normalization while monitoring liquidity and maintaining restrictiveness against ongoing shocks.
- Headline CPI inflation rose to 3.3% in March 2026 from energy and motor fuel surges due to Middle East tensions, expected to stay between 3% and 3.5% through the summer, well above the 2% target. The April Monetary Policy Report outlines scenarios in which inflation peaks above 3.5% by the end of 2026 in the baseline, then eases below 2% in three years, or reaches 6%+ in adverse cases requiring tighter policy.
- UK growth outlook weakens further into Q2-Q3 2026 amid energy-driven cost pressures, rising unemployment risks, and softening confidence, with prior pay growth cooling now vulnerable to business pass-throughs.
- Global risks from the Middle East conflict persist, fueling energy/commodity volatility and sterling/gilt fluctuations; MPC views direct impacts as containable if demand slackens to curb secondary inflation effects.
- Inflation risks remain upward-biased due to energy persistence, potential wage embedding, and shock duration uncertainty, balanced against downside from economic slack and labor market softening.
- The MPC maintains a data-dependent stance, with policy still restrictive; the April Report provides fuller shock analysis, but no easing is signaled, yet members monitor for 2% sustainability, with Governor Bailey emphasizing vigilance.
- The next meeting is on 18 June 2026.
Next 24 Hours Bias
Medium Bearish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from CAD today?
The Canadian dollar remains under pressure today after the U.S. Federal Reserve delivered a more hawkish-than-expected message, boosting demand for the U.S. dollar and pushing the loonie near a seven-month low. USD/CAD recently climbed above the 1.40 level as traders favored the greenback following the Fed decision. At the same time, softer oil prices have reduced one of the Canadian dollar’s traditional sources of support, since Canada is a major oil exporter.
Central Bank Notes:
- At its 10 June 2026 meeting, the Governing Council maintained the overnight rate target at 2.25%, continuing the policy pause begun earlier in the year. The decision matched market expectations and reflected the Committee’s assessment that the current stance remains appropriately restrictive to secure 2% inflation over the policy horizon.
- The Bank noted persistent global headwinds: geopolitical tensions in the Middle East and renewed U.S. trade friction continue to weigh on sentiment and supply chains. These risks are asymmetric and could slow foreign demand or push commodity price volatility higher.
- Real GDP growth is estimated to have continued into Q2 at roughly a 2.0–2.3% annualized pace, broadly consistent with the Bank’s April projection of sustained momentum. Strength remained concentrated in resource shipments and exports, supported by robust global energy demand, while business investment showed only tentative improvement.
- The labour market remains tight but is showing early signs of rebalancing: employment growth continued, and the unemployment rate stayed near recent lows, but wage growth has moderated from its peak. Participation edged up modestly in some regions, consistent with slower wage pressure ahead.
- Headline CPI remained close to 2.0% year-over-year in April–May prints, within the inflation target band. Core indicators—CPI-trim, CPI-median, and a trimmed mean—tracked around 2.3–2.6%, showing modest further easing compared with earlier in the year.
- Manufacturing PMI remained in expansionary territory into May, supported by export orders and healthy energy-sector activity. Firms reported steady demand for intermediate goods, though capex intentions remain cautious.
- Credit growth continued at a moderate pace. Bank lending spreads and deposit dynamics showed limited pass-through from global tightening episodes. Mortgage rates remain somewhat elevated but stable, underpinning the observed moderation in housing activity.
- The next meeting is on 16 July 2026.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil is trading lower today as easing geopolitical tensions and the U.S.-Iran peace agreement improve the outlook for global crude supply. The reopening of the Strait of Hormuz and the expected return of Iranian barrels are reducing the risk premium that supported prices earlier this year. While geopolitical uncertainties remain, the market is currently focused on increasing supply and the possibility of an oversupplied oil market in the coming quarters.
Next 24 Hours Bias
Medium Bearish
