IC Trading Europe Fundamental Forecast | 18 August 2025

IC Trading Europe Fundamental Forecast | 18 August 2025

What happened in the Asia session?

The Asia session opened with a cautious risk-on bias: stocks nudged higher, oil eased, US yields edged down, and FX was steady as traders focused on geopolitics normalizing and a pivotal US policy week ahead; the most impacted instruments were oil (lower on reduced supply-risk premium and China storage dynamics), regional equities (modestly higher), and US duration (slightly bid), while FX stayed largely range-bound pending later-week catalysts. The session tone was influenced by anticipation around Donald Trump–Volodymyr Zelenskiy talks, keeping risk appetite modest and directionally positive across regional stocks and US/EU equity futures.

What does it mean for the Europe & US sessions?

The Europe session sets initial bias and direction based on overnight news and data digestion. London–New York overlap is most decisive for volatility, confirmation, or reversal.US. The US session drives sustained momentum and trend validation through closing flows and late-day risk management. European liquidity ramps up. Major FX pairs (EUR/USD, GBP/USD) and European equities (DAX, STOXX) are often the first to adjust. Interest rate products, such as Bunds and Gilts, shift quickly in response to macroeconomic surprises, particularly those with a European-centric focus (e.g., UK CPI, ECB comments).

The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

The US dollar is stable as markets await pivotal geopolitical talks and Fed guidance. Short-term rate expectations have shifted toward a single smaller cut, leaving the dollar supported after last week’s loss. Geopolitical headlines and Powell’s Jackson Hole speech may trigger volatility for USD pairs in the days ahead. The DXY hovered around 97.85, showing little change from the previous session after dropping 0.4% last week. The dollar is down roughly 3.94% year-on-year but has been stable this month.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at the July 29–30, 2025, meeting, keeping policy unchanged for the fifth consecutive meeting.
• The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.
• Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.
• The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.
• In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.
• The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.
• As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.
• The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Key news events today

No major news event

What can we expect from Gold today?

Gold advanced to $3,349.55/oz today, supported by expectations of dovish monetary policy and ongoing geopolitical tensions. Short-term, a bullish technical setup suggests room for further gains unless key support breaks. Investors remain focused on upcoming central bank signals and midweek geopolitical events, which could drive substantial volatility in gold for both European and US trading sessions. Markets await remarks this week from Fed Chair Jerome Powell at the Jackson Hole Symposium, as well as the release of the latest FOMC meeting minutes. There is increasing speculation about a possible Federal Reserve interest rate cut in September, which historically supports gold if real yields drop.

Next 24 Hours Bias

Medium Bullish

The Euro (EUR)

Key news events today

No major news event

What can we expect from EUR today?

The Euro’s policy landscape is one of cautious stability, underpinned by controlled inflation and paused rate cuts while closely monitoring evolving US-Europe trade disputes. Investors should focus on policy signals from the ECB, trade negotiations, regulatory changes affecting market liquidity (such as CCP credit facility access), and infrastructure updates like ECMS and TARGET operating hours for operational impacts on Euro-area assets. These developments suggest a period of steady policy, with the ECB ready to react if economic conditions shift but currently prioritizing stability and risk management in light of ongoing geopolitical and trade risks.

Central Bank Notes:

• The Governing Council kept the three key ECB interest rates unchanged at its July 24 meeting, maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%, following eight consecutive cuts preceding this decision.
• The decision to hold rates steady was driven by evidence that inflation is stabilizing near the Governing Council’s medium-term target of 2%. Policymakers communicated that further moves on rates would be data-dependent, explicitly refraining from pre-committing to any future path amid persistent global and domestic uncertainties.
• According to the latest Eurosystem staff projections, headline inflation is expected to remain around 2.0% for 2025, with projections indicating 1.6% for 2026 and a rebound to 2.0% in 2027. Downward revisions from previous forecasts primarily reflect lower energy price assumptions and a stronger euro. Inflation excluding energy and food is seen averaging 2.4% in 2025 and 1.9% in 2026–2027, little changed from prior projections.
• Real GDP growth for the Eurozone is forecast at 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. The projections note that a strong first quarter offsets a weaker outlook for the rest of 2025. While business investment and exports are dampened by ongoing trade policy uncertainties—including recent U.S. tariff measures—rising government investment, particularly in defense and infrastructure, is expected to progressively underpin growth.
• Household spending should be supported by firm real income gains and a still-solid labour market. More favorable financing conditions are expected to help strengthen the economy’s resilience to further global shocks. Wage growth, although still elevated, continues to moderate, with profit margins partially absorbing cost pressures.
• Amid significant geopolitical and economic uncertainty, the Governing Council underscored its commitment to ensuring inflation stabilises sustainably at the 2% target. The ECB reiterated it would pursue a meeting-by-meeting, data-dependent approach to its monetary policy stance.
• Future rate decisions will be guided by the assessment of incoming economic and financial data, the outlook for inflation and underlying inflation dynamics, and the effectiveness of monetary policy transmission. The Council continues to stress that it is not pre-committed to any specific rate trajectory.
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are continuing to decline in an orderly and predictable way, as the Eurosystem has ceased reinvesting principal payments from maturing securities.
• The next meeting is on 11 September 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 maintaining overall stability at current levels but faces mild selling pressure, with key technical levels to watch for potential rebounds or breakdowns. Geopolitical negotiations around the F-35 deal may spark volatility if there are additional announcements. Traders should monitor the 0.7905 support and 0.8265 resistance on USD/CHF as session triggers. The Swiss franc (CHF) is trading at approximately 1.241 USD/CHF as of today. This reflects a 0.069% increase from yesterday and shows relative stability over the past week, with a high of 1.246 and a low of 1.230 over the past seven days.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.25% to 0% on 19 June 2025, marking the sixth consecutive reduction.
• Inflationary pressure has decreased further as compared to the previous quarter, decreasing from 0.3% in February to -0.1% in May, mainly attributable to lower prices in tourism and oil products.
• Compared to March, the new conditional inflation forecast is lower in the short term. In the medium term, there is hardly any change from March, putting the average annual inflation at 0.2% for 2025, 0.5% for 2026, and 0.7% for 2027.
• The global economy continued to grow at a moderate pace in the first quarter of 2025, but the global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions.
• Swiss GDP growth was strong in the first quarter of 2025, but this development was largely because, as in other countries, exports to the U.S. were brought forward.
• Following the strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year; the SNB expects GDP growth of 1% to 1.5% for 2025 as a whole, while also anticipating GDP growth of 1% to 1.5% for 2026.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 25 September 2025.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

No major news event

What can we expect from GBP today?

The Pound’s rally is supported by resilient UK economic data and easing expectations for aggressive Bank of England rate cuts. GBP/USD is closely watched for a challenge of key technical resistance, with a bullish correction possible but susceptible to profit-taking and volatility as the week progresses.

The Pound reached its highest level in about five weeks, buoyed by stronger UK GDP data and a generally softer US Dollar.UK Economy Surprise: UK Q2 GDP rose 0.3% (vs 0.1% forecast); annual growth hit 1.2%. June GDP also beat expectations with a 0.4% print. These positive surprises are reducing the chances of further Bank of England rate cuts after last week’s narrow 25bps cut vote.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted on 7 August 2025 by a majority (exact split likely 5–3–1 or similar, based on expectations) to cut the Bank Rate by 25 basis points to 4.00%. Multiple members supported the move, citing fragile economic growth and signs of disinflation, while others preferred a larger reduction, and at least one member voted to hold the rate steady due to concerns about persistent inflation.
• The Committee unanimously decided to continue reducing the stock of UK government bond purchases held for monetary policy purposes by £100 billion over the next 12 months, targeting a balance of £558 billion by October 2025. As of 7 August, the gilt stock stands at £590 billion.
• Disinflation has been substantial since 2023 owing to policy tightening and the fading of external shocks. However, an unexpected uptick in headline CPI inflation—to 3.6% in June—reflects pass-through from regulated prices and earlier energy price rises, as well as signs of sticky core inflation.
• Headline CPI inflation is now 3.6%, above the Bank’s 2% target, reflecting regulated and energy price effects. The Committee expects inflation to remain around this level through Q3 before resuming its downward trend into 2026.
• UK GDP growth remains weak. Business and consumer surveys point to lacklustre activity, and the labour market continues to loosen, with increasing evidence of slack. Wage growth has softened but remains above pre-pandemic norms.
• Pay growth and employment indicators have moderated further, and the Committee expects a significant slowing in pay settlements over the rest of 2025.
• Global uncertainty remains elevated, especially with rising energy prices and supply disruptions linked to conflict in the Middle East and renewed trade tensions. These factors prompt the MPC to remain vigilant in monitoring cost and wage shocks.
• The risks to inflation are considered two-sided. With the outlook for growth subdued and inflation persistence less clear, the Committee argues that a gradual and careful approach to further easing is warranted, with future policy decisions highly data-dependent.
• The Committee’s bias is still towards maintaining monetary policy at a restrictive stance until there is firmer evidence that inflation will return sustainably to the 2% target over the medium term. Further adjustments to policy will be decided on a meeting-by-meeting basis, with scrutiny of developments in demand, costs, and inflation expectations.
• The next meeting is on 18 September 2025.
  
  Next 24 Hours Bias
  
  Weak Bullish

The Canadian Dollar (CAD)

Key news events today

No major news event

What can we expect from CAD today?

The Canadian Dollar is trading lower against major counterparts today, challenged by technical selling pressure and recurring macroeconomic headwinds such as trade barriers and declining travel sector profitability. Unless key supports are held in USD/CAD, further weakness is possible. However, watch for any rebound scenarios if oil markets stabilize or new positive catalysts emerge.

The exchange rate is currently around 0.724 USD per CAD, reflecting a muted tone for the day. The Canadian Dollar has been under pressure against the US Dollar. Today’s USD/CAD trading range is between support at 1.3745 and resistance at 1.4005, with technical forecasts suggesting a bearish correction might test the lower end, followed by potential rebounds above 1.4235 if buying resumes.

Central Bank Notes:

• The Bank of Canada maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% as of July 30, marking the third consecutive meeting with rates on hold.
• The Council cited ongoing U.S. tariff adjustments and unresolved trade negotiations as driving factors for elevated economic uncertainty. The persistence of tariffs well above early-2025 levels continues to present downside risks for growth and keeps inflation expectations elevated, supporting a cautious approach to monetary easing.
• The lack of a clear U.S. policy path, plus frequent threats of additional tariffs, led the Bank to highlight risks to Canadian exports and broader demand, amplifying uncertainty about future growth.
• Canada’s economic growth in the first quarter came in at 2.2%, slightly stronger than the original forecast, while the composition of GDP growth was largely as expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence.
• Canadian GDP growth is expected to be near 0% in Q2 2025, closely aligned with the more optimistic scenario outlined earlier in the year. Weakness in manufacturing activity—driven by both U.S. trade disruptions and sector-specific challenges like wildfires—contributed to softer output. A partial recovery is anticipated in Q3 due to rebuilding efforts and stronger retail sales in June.
• Consumer spending slowed, especially as households front-loaded durable goods purchases ahead of tariffs. Housing activity remains subdued, with resales and construction still soft despite some government tax relief measures.
• Headline CPI inflation continued to ease, holding close to 1.7% in June, aided by declines in energy prices following the removal of the fuel charge. However, the Bank’s measures of core inflation and underlying price pressures moved up further due to higher import costs from tariffs and lingering supply disruptions.
• The Governing Council reiterated it will carefully weigh ongoing upward inflation pressure from tariffs and cost shocks against the gradual downward pull from economic weakness. While additional rate cuts remain possible, timing and scale will depend on trade policy developments and inflation’s path..
• The next meeting is on 17 September 2025.

Next 24 Hours Bias

Medium Bearish

Oil

Key news events today

No major news event

What can we expect from Oil today?

Oil markets today are stabilizing after recent losses, but eyes remain on Washington-Moscow talks and the next round of demand and supply data to drive the next move. Trump signaled less urgency on penalizing Russian oil buyers and hinted that tougher actions are not imminent. The market previously feared new sanctions after tense negotiations, so the more conciliatory tone is seen as bearish for oil prices, reducing risk premia.

Ongoing worries over economic fallout from US tariff policy and signs of rising OPEC+ supply are pressuring prices. Technical analysis: Oil is approaching key support near $62; if this breaks, next targets are cited as low as $60.90. Intraday trading is expected to be soft and reactive.

Next 24 Hours Bias

Medium Bearish