IC Trading Europe Fundamental Forecast | 25 August 2025

IC Trading Europe Fundamental Forecast | 25 August 2025

What happened in the Asia session?

Asian equities, especially technology shares, were most impacted by Powell’s dovish surprise, followed by moves in currencies (USD, JPY), US Treasury yields, and commodities like gold. The positive sentiment hinges on anticipated US monetary easing, but markets remain vigilant for macro data releases and US earnings as the week progresses. The dollar index is slightly up after several weeks of losses, and two-year Treasury yields are up 1bp to 3.71%

What does it mean for the Europe & US sessions?

Markets are set to open with a cautiously risk-on tone as Asian equities firmed overnight on growing expectations of imminent Fed rate cuts, while European futures are mixed ahead of Germany’s key ifo survey; in the U.S., focus will be on housing and regional activity data later today and durable goods, GDP, and PCE this week. Traders should watch European sentiment prints (Germany ifo) and U.S. housing/PMI proxies today, and remain positioned for a week culminating in U.S. GDP (2nd estimate) and July Core PCE on Friday.

The Dollar Index (DXY)

Key news events today

New Home Sales (2:00 pm GMT)

What can we expect from DXY today?

The U.S. dollar is struggling to recover from its lowest level in four weeks versus the euro, following a sharp selloff triggered last Friday by Fed Chair Powell’s dovish comments at Jackson Hole, which raised expectations for imminent interest rate cuts. Into Monday’s European session, the dollar edged up very slightly but remains well below key levels against major peers, with traders now pricing an 80% probability of a quarter-point rate cut at the September 17 FOMC meeting and a total of nearly 50 basis points by year-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

New Home Sales (2:00 pm GMT)

What can we expect from Gold today?

Gold is trading lower today amid a rebound in the dollar, but sustained expectations of US rate cuts and geopolitical uncertainty continue to underpin the precious metal’s strong performance for 2025. Gold prices on Monday, August 25, 2025, have slipped slightly from recent highs due to a modest strengthening of the US dollar. However, ongoing expectations of US interest rate cuts following Federal Reserve Chair Jerome Powell’s dovish remarks have provided support for the metal. Gold dipped to $3,366.10 USD/t.oz, down 0.21% from the previous day, but remains up 1.55% for the month and 33.82% year-on-year, having hit historic highs above $3,500 earlier in 2025.

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

German ifo business climate (8:00 am GMT)

What can we expect from EUR today?

The Euro is holding much of its 2025 rally despite a recent dip, supported by internal economic strength, while US dollar weakness is boosting short-term sentiment. Watch for further volatility due to ECB policy, US political developments, and ongoing trade disputes. The EUR/USD exchange rate fell to 1.1704, a drop of 0.09% from the previous session.

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 rate moves 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?

The Swiss Franc is stable to slightly stronger today, underpinned by falling domestic inflation and continued appeal for defensive FX exposure among investors. Exchange rates, policy commentary, and technical markers are generally positive, but caution remains regarding export competitiveness and longer-term monetary decisions. The Swiss Franc is up 0.04% over the past month and 5.22% over the past year versus the US Dollar, demonstrating modest appreciation over the ongoing 12-month period. The CHF/USD rate for the day has fluctuated in the range of 1.23396 to 1.2493 during the past week, suggesting sustained stability with minor volatility.

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

No major news event

What can we expect from CHF today?

The Pound remains robust on August 25, 2025, supported by improved domestic growth and business confidence, but faces inflation and policy headwinds. The broader forecast points to mild volatility but relative resilience versus major peers. The pound’s performance was recently boosted by positive UK GDP numbers and business confidence, but tempered by higher inflation, especially airfares and food prices, with inflation running above expectations. The GBP/USD rate fell by 0.08% from the previous session, now at 1.3510.

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 is trading with a mild bearish bias today, responding to shifting central bank signals and slow domestic economic recovery, while the market awaits concrete monetary easing and trade outcomes.US dollar weakness following Powell’s dovish pivot at Jackson Hole provides tailwinds for the CAD, but domestic Canadian data remains lackluster, especially with retail sales projected to have fallen by 0.8% in July and a surprise July job loss. Core inflation (Trimmed-Mean) remains elevated at 3.0%, keeping central bank policy in focus as both the Bank of Canada and the Fed are expected to lean dovish for the remainder of the year.

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 that 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?

Today’s oil market is influenced by direct supply threats from Ukraine-Russia hostilities, monetary policy optimism, and technical price trends, with potential for volatility depending on both geopolitical and economic developments. Despite a slight recent decline after resistance near $63.75, crude oil remains technically strong overall, with the potential for renewed bullish momentum if current levels hold.OPEC maintains global oil demand growth forecasts for 2025 at 1.3 million barrels per day and has slightly raised its outlook for 2026, indicating stable fundamentals ahead.

Next 24 Hours Bias

Weak Bullish