IC Trading Europe Fundamental Forecast | 22 August 2025
What happened in the Asia session?
Asian stocks traded cautiously, most tracking US tech weakness, while local macro data (e.g., Japan/India PMIs, Australia inflation) failed to spark significant breakouts. Bonds rallied and currency moves were contained, as Jackson Hole and anticipated Fed signals dominated trader attention. Treasuries climbed across the curve on Wednesday into Asia, dropping yields slightly as investors positioned ahead of central bank policy hints. Both Asia- and US-listed tech stocks have seen notable corrections, with continued underperformance of large-cap growth, prompting some risk rotation into value and possibly other geographies.
What does it mean for the Europe & US sessions?
Today features a full slate of high-impact PMIs for both Europe and the U.S., U.S. jobless claims, and key regional indices, all of which will be closely monitored for signs of economic resilience or weakness. The start of the Jackson Hole Symposium means added volatility potential, especially if any unscheduled central bank commentary emerges. Traders should be vigilant for market reactions around these release times. U.S. initial jobless claims are due for the week ending Aug 16 at 12:30 UTC. The prior reading was 224K for the week ending Aug 9, and calendars flag today’s print as another update watched for labor-market momentum.
The Dollar Index (DXY)
Key news events today
Unemployment claims (12:30 pm GMT)
Philly Fed manufacturing index (12:30 pm GMT)
Flash manufacturing PMI (1:45 pm GMT)
Flash services PMI (1:45 pm GMT)
Existing home sales (2:00 pm GMT)
What can we expect from DXY today?
The dollar is steady but leaning softer as traders await direction from the Jackson Hole Symposium and look for further clarity on the Fed’s future rate path. Market volatility is likely around macro data out of the US and any surprise remarks from Powell or other central bankers. The DXY trades flat to slightly lower around 98.2 after a recent pullback from its weekly high, as traders digest the FOMC Minutes and await Fed Chair Powell’s speech at the Jackson Hole Symposium. Over the last month, the dollar has been up 0.4%, but down nearly 3% year-on-year. Forecasts expect the DXY to be near 98.46 by quarter-end
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 its meeting on July 29–30, 2025, 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 Bullish
Gold (XAU)
Key news events today
Unemployment claims (12:30 pm GMT)
Philly Fed manufacturing index (12:30 pm GMT)
Flash manufacturing PMI (1:45 pm GMT)
Flash services PMI (1:45 pm GMT)
Existing home sales (2:00 pm GMT)
What can we expect from Gold today?
Gold prices edged higher mid‑week as traders looked ahead to the Fed’s meeting minutes and the Jackson Hole symposium, rebounding after recent losses. Into Thursday’s U.S. session and Jackson Hole Day 1, gold is stabilizing after a mid‑week bounce, with direction likely set by Fed tone and rate‑path expectations; watch the 3,300–3,375 band for breakouts on policy headlines. In broader market coverage this week, spot gold held near the mid‑$3,300/oz area as investors assessed U.S. policy signals and geopolitics into Jackson Hole.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
French Flash Manufacturing PMI (7:15 am GMT)
French Flash Services PMI (7:15 am GMT)
German Flash Manufacturing PMI (7:30 am GMT)
German Flash Services PMI (7:30 am GMT)
Flash Manufacturing PMI (8:00 am GMT)
Flash Services PMI (8:00 am GMT)
What can we expect from EUR today?
The euro remains mostly stable but faces persistent economic and geopolitical headwinds. The digital euro project continues to receive coverage as part of broader monetary policy modernization. Eurozone growth is moderate and supported by resilient labor markets and fiscal stimulus, but export and investment activity is tempered by global uncertainties.
The European Central Bank (ECB) aims for digital currency to preserve cash’s role in the digital era and ensure secure, inclusive payments while protecting eurozone monetary sovereignty. The digital euro is not expected to rival the dollar globally, but is positioned as a modernization step for European payments.
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
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
On August 21, 2025, the Swiss franc is facing significant headwinds, with traders betting on further declines amid elevated US tariffs, zero rates, and weak inflation. The SNB’s next move is closely watched, but expectations for aggressive intervention while rising are still cautious. The CHF remains vulnerable in the near term, especially against the euro, as global trade and monetary policy dynamics continue to evolve. Pressure on the franc intensified after the US imposed a 39% tariff on Swiss imports, the highest among developed nations, targeting luxury goods, watches, cosmetics, and precision instruments (gold, silver, and pharmaceuticals remain exempt).
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
Medium Bearish
The Pound (GBP)
Key news events today
Flash Manufacturing PMI (8:30 am GMT)
Flash Services PMI (8:30 am GMT)
What can we expect from CHF today?
The pound remains in a holding pattern, trading softly against the dollar but still benefiting from stronger-than-expected UK growth and inflation metrics. The risk of another BoE rate cut this year has receded following the inflation surprise, supporting sterling in the near term. However, the outlook is highly contingent on upcoming data and central bank commentary, especially from the Jackson Hole symposium. Any break from the current trading range could set the tone for sterling for the rest of the summer.
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 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 mild pressure due to a combination of domestic economic weakness, persistent trade uncertainty, and global macro dynamics. The risk of further U.S. tariffs, mixed Canadian economic data, and ongoing expectations for Fed easing suggest the loonie is likely to remain volatile in the near term, with exchange rate movements closely tied to cross-border policy announcements and commodity flows. Bank forecasts continue to expect only marginal CAD appreciation against the USD into Q4 2025.
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 prices are holding gains after a large U.S. inventory draw, but the longer-term outlook is clouded by weak demand, rising OPEC+ supply, and geopolitical uncertainty. Crude oil prices rebounded on Wednesday, August 20, after a steep weekly decline in the U.S.
The U.S. Energy Information Administration (EIA) reported a 6 million-barrel drawdown in the week ending August 15, significantly exceeding analyst expectations and marking the largest drop since mid-June. This tighter supply picture briefly supported crude prices, with West Texas Intermediate (WTI) settling near $63.30 per barrel and Brent crude approaching $67 per barrel.
Next 24 Hours Bias
Weak Bullish
