IC Markets Europe Fundamental Forecast | 22 July 2025
What happened in the Asia session?
The RBA’s unexpectedly steady rates and cautious tone fueled a bounce in the AUD. The Japanese yen strengthened as markets reacted to uncertainty stemming from elections and trade headlines. New Zealand’s softer CPI data heightened expectations of a rate cut, weighing on the NZD. AUD/USD was the primary mover in Asia following the RBA’s decision to hold rates, which boosted the currency and influenced positioning.
Equity indices in Australia remained buoyant, reflecting confidence due to the absence of additional monetary easing. The JPY held firm amid low regional liquidity, supported by a persistent safe-haven tone. Upcoming speeches and U.S. data releases are expected to drive the next major market moves as Asia hands off to Europe and the U.S.
What does it mean for the Europe & US sessions?
Traders should monitor US-EU trade headlines, speeches by Fed Chair Powell and ECB President Lagarde, and upcoming corporate earnings. Additionally, macroeconomic data releases—such as the UK’s public borrowing figures and US regional business surveys—will provide tactical trading cues across FX, rates, and equities.
The Dollar Index (DXY)
Key news events today
Fed Chair Powell Speaks (12:30 pm GMT)
What can we expect from DXY today?
The dollar remains under pressure due to trade policy uncertainty, concerns about the Federal Reserve’s independence, and dovish monetary policy signals. Today’s key focus is Fed Chair Powell’s speech, which could provide crucial guidance on the central bank’s policy path amid ongoing tariff negotiations and political pressures. In the short term, the dollar appears temporarily oversold and may experience a modest bounce, particularly if Fed comments are more hawkish or if U.S. data surprises to the upside. However, broad policy and trade uncertainty, along with risks surrounding Fed leadership, keep the outlook cautious. Over the longer term, analysts continue to forecast a gradual, multi-year decline in the dollar, driven by a diminishing U.S. growth premium and shifting global capital flows. The dollar’s direction today will be shaped primarily by central bank commentary and ongoing tariff developments, with technical support levels and overall risk sentiment providing additional context for near-term currency movements.
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% on 18 June 2025.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run; uncertainty around the economic outlook has diminished but remains elevated.
- The Committee is attentive to the risks to both sides of its dual mandate and judges that the unemployment rate remains low, labour market conditions remain solid, but inflation is somewhat elevated.
- Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace.
- GDP growth forecasts were revised downward for 2025 (1.4% vs. 1.7% in the March projection) while PCE inflation projections have been adjusted higher for 2025, with core inflation expected to reach 3.1% (vs. 2.8% in the March projection), partly due to tariff-related pressures.
- In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
- Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25B to $5B while maintaining the monthly redemption cap on agency debt and agency mortgage-backed securities at $35B.
- The next meeting is scheduled for 29 to 30 July 2025.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
Fed Chair Powell Speaks (12:30 pm GMT)
What can we expect from Gold today?
Gold prices rose to multi-week highs on July 22, 2025, supported by a weaker dollar, safe-haven flows, and expectations of dovish central bank actions. The metal remains highly sensitive to U.S. trade policy developments, central bank commentary, and global political events, all of which could drive volatility in the days ahead.
Gold is expected to remain well-supported at current levels as market attention shifts to upcoming tariff deadlines, Federal Reserve statements, and ongoing global economic and political uncertainty. Many analysts anticipate a potential test of the $3,450–$3,500 range if risk aversion intensifies or if central banks signal further policy easing in the coming months.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
Monetary Policy Meeting (1:30 am GMT)
What can we expect from AUD today?
The Australian dollar depreciated past $0.65 on Monday, extending losses from the previous week as market sentiment remained subdued ahead of the release of the RBA meeting minutes and a speech by Governor Michele Bullock. This followed the RBA’s unexpected decision to leave its benchmark interest rate unchanged at 3.85%, defying widespread expectations of a 25-basis-point cut.
Nevertheless, economists anticipate a gradual shift toward monetary easing later this year, with current forecasts suggesting the cash rate could decline to around 3.1% by early 2026, supported by a stable labor market and cautiously improving economic growth prospects. Meanwhile, investors continued to grapple with concerns over evolving U.S. trade policies, as Australia assessed the potential impact of proposed U.S. tariffs of up to 200% on pharmaceutical goods. While affirming its commitment to fair trade, the Australian government reiterated that it will not renegotiate its existing drug subsidy policies.
Central Bank Notes:
- The RBA reduced its cash rate by 25 basis points (bps), bringing it down to 3.85% on 20 May, following a pause on 1 April.
- Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
- Data on inflation for the March quarter provided further evidence that inflation continues to ease. At 2.9%, annual trimmed mean inflation was below 3% for the first time since 2021 and headline inflation, at 2.4%, remained within the target band of 2 to 3%.
- While recent tariff announcements have resulted in a rebound in financial market prices, there is still considerable uncertainty about the final scope of the tariffs and policy responses in other countries, contributing to a weaker outlook for growth, employment and inflation in Australia.
- Private domestic demand appears to have been recovering, real household incomes have picked up and there has been an easing in some measures of financial stress. However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices.
- At the same time, a range of indicators suggests that labour market conditions remain tight. Employment is continuing to grow, measures of labour underutilisation are at relatively low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers.
- Looking through quarterly volatility, wage growth has softened over the past year or so but productivity growth has not picked up and growth in unit labour costs remains high.
- There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments. While the central projection is for growth in household consumption to continue to increase as real incomes rise, recent data suggest that the pick-up will be a little slower than was expected three months ago.
- There is a risk that any pick-up in consumption is even slower than this, resulting in continued subdued growth in aggregate demand and a sharper deterioration in the labour market than currently expected.
- With inflation expected to remain around target, the Board therefore judged that an easing in monetary policy at this meeting was appropriate, assessing that this move would make monetary policy somewhat less restrictive.
- The Board will be attentive to the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
- The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
- The next meeting is on 8 July 2025.
Next 24 Hours Bias
Medium Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news event
What can we expect from NZD today?
While softer inflation data has increased expectations of an RBNZ easing, the currency is finding support from trade tensions that are undermining the U.S. dollar and from strong export fundamentals. The upcoming August RBNZ meeting looms large, with markets fully pricing in a 25-basis-point cut. Near-term price action will likely depend on global risk sentiment and further developments in trade policy, with the NZD remaining sensitive to both domestic policy signals and international risk flows.
The New Zealand dollar is holding steady near recent lows amid softer inflation data, which has heightened the odds of an RBNZ rate cut at the next policy meeting. Strong export performance is cushioning the downside, but global risk sentiment and trade developments remain key wildcards for the NZD in the near term.
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to hold the Official Cash Rate (OCR) at 3.25% on 9 July, marking the first pause following six consecutive rate cuts.
- The MPC cited heightened uncertainty and near-term inflation risks as reasons to wait until August for further action.
- Although the annual consumer price index inflation increased to 2.5% in the first quarter of 2025, it remained within the MPC’s target range of 1 to 3%, noting that the outlook for medium-term inflation pressures has evolved broadly in line with the May MPS projections.
- While it is expected to be near the upper end of the band in the second and third quarters of this year, easing core inflation and spare capacity in the economy should help return it toward the 2% midpoint over time.
- The MPC noted that, despite global factors, domestic financial conditions are evolving broadly as expected, as mortgage and deposit interest rates have continued to decline, reflecting a lower OCR, strong bank liquidity, and soft credit growth.
- In aggregate, GDP growth over the December and March quarters was stronger than expected, reflecting a pick-up in household consumption and business investment, but higher frequency indicators suggest weaker than expected growth in April and May.
- Large economic policy shifts overseas and concerns about sovereign risk could result in additional financial market volatility and increased bond yields, while prolonged economic uncertainty might induce further precautionary behaviour by households and firms, slowing the domestic economic recovery.
- Subject to medium-term inflation pressures continuing to ease in line with the Committee’s central projections, the Committee expects to lower the OCR further, broadly consistent with the projection outlined in May.
- The next meeting is on 20 August 2025.
Next 24 Hours Bias
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news event
What can we expect from JPY today?
The yen remains under pressure due to political uncertainty, the potential for looser fiscal policy, and the wide interest rate differential between the U.S. and Japan. However, persistent domestic inflation, the risk of central bank intervention, and rising trade and tariff uncertainty ahead of August are keeping volatility elevated for USD/JPY. Traders are likely to remain cautious and react swiftly to new developments as Tuesday’s session unfolds.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 17 June, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:
- The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
- The Bank will continue its plan to reduce the amount of its monthly outright purchases of JGBs. The scheduled amount of monthly long-term government bond purchases will, in principle, be reduced by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, aiming for a level of around ¥2 trillion in January to March 2027.
- Japan’s economy, while showing some weak movements in certain areas, is recovering moderately. Overseas economies, though partly exhibiting weakness due to the effects of various countries’ trade policies, are generally growing at a moderate pace. Exports and industrial production, while showing some last-minute demand due to the U.S. tariff increases, are basically moving sideways.
- On the price front, looking at the year-on-year rate of change in consumer prices (excluding fresh food), the rate is currently in the mid-3% range, reflecting continued pass-through of wage increases to sales prices, as well as the effects of past rises in import prices and recent increases in food prices such as rice. Expected inflation rates are rising moderately.
- As for consumer prices (excluding fresh food), the effects of past import price increases and recent rises in food prices such as rice, which have pushed up inflation so far, are expected to wane. During this period, the underlying rate of increase in consumer prices may stagnate somewhat due to the slowdown in growth pace.
- Looking ahead, the Japanese economy is expected to slow its growth pace, as overseas economies decelerate due to the effects of various countries’ trade policies, putting downward pressure on Japanese corporate profits, etc., although accommodative financial conditions will provide some support. Thereafter, as overseas economies return to a moderate growth path, Japan’s growth rate is expected to increase.
- As the growth rate rises, labour shortages intensify, and medium- to long-term expected inflation rates rise, inflation is expected to gradually increase. In the latter half of the projection period in the “Outlook Report,” inflation is expected to move at a level generally consistent with the “price stability target”.
- There are various risk factors, but in particular, the outlook for the development of trade policies in various countries and the resulting uncertainty regarding overseas economic and price trends is extremely high. It is necessary to closely monitor the impact on financial and foreign exchange markets, as well as on Japan’s economy and prices.
- The next meeting is scheduled for 31 July 2025.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
ECB President Lagarde’s Speech (5:00 pm GMT)
What can we expect from EUR today?
The euro is holding steady ahead of Thursday’s ECB meeting and potential U.S. tariff actions. Policymakers and markets remain on alert for developments that could disrupt the region’s fragile economic recovery, with attention focused on central bank guidance and updates on transatlantic trade relations. This is a pivotal week for the euro, as markets brace for a likely ECB policy pause and rising trade risks from impending U.S. tariffs. The currency remains in a tight range, weighed down by export uncertainty, weak domestic data, and cautious messaging from the central bank. Volatility may spike following Thursday’s ECB decision and any new developments in U.S.-Europe trade relations.
Central Bank Notes:
- The Governing Council reduced the three key ECB interest rates by 25 basis points on 5 June to mark the seventh successive rate cut.
- Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.15%, 2.40% and 2.00% respectively.
- Inflation is currently at around the Governing Council’s 2% medium-term target. In the baseline of the new Eurosystem staff projections, headline inflation is set to average 2.0% in 2025, 1.6% in 2026 and 2.0% in 2027. The downward revisions compared with the March projections, by 0.3 percentage points for both 2025 and 2026, mainly reflect lower assumptions for energy prices and a stronger euro. Staff expect inflation excluding energy and food to average 2.4% in 2025 and 1.9% in 2026 and 2027, broadly unchanged since March.
- Staff see real GDP growth averaging 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027. The unrevised growth projection for 2025 reflects a stronger-than-expected first quarter combined with weaker prospects for the remainder of the year. While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term.
- Higher real incomes and a robust labour market will allow households to spend more. Together with more favourable financing conditions, this should make the economy more resilient to global shocks. Wage growth is still elevated but continues to moderate visibly, and profits are partially buffering its impact on inflation.
- The Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target. Especially in current conditions of exceptional uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.
- The Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission, and it is not pre-committing to a particular rate path.
- The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
- The next meeting is on 24 July 2025.
Next 24 Hours Bias
Medium Bearish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
Today, the Swiss franc remains one of the world’s strongest major currencies, supported by continued safe-haven demand, a cautious SNB policy, and subdued inflation. While Switzerland’s economy showed resilience in Q1, risks stemming from the strong currency and global trade headwinds remain key concerns for both policymakers and markets this week. The franc continues to hold firm against both the dollar and the euro, underpinned by its safe-haven appeal and a dovish monetary policy stance following the SNB’s recent rate cut to zero. Domestic data remains muted, with no major new releases today, and the SNB maintains a vigilant stance amid ongoing global volatility and risks to Switzerland’s export competitiveness.
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
BoE Governor Bailey Speaks (9:15 am GMT)
What can we expect from GBP today?
Traders and analysts remain cautious, trimming earlier dovish bets on the Bank of England and viewing the pound’s strength as a reflection of both the UK’s economic resilience and a temporary pullback in the US dollar. The outlook for GBP will hinge on this week’s UK PMI and retail sales data, as well as further clarity on global trade policy. The pound enters Tuesday with cautious optimism amid broad dollar weakness but faces key tests from BoE Governor Bailey’s upcoming speech, ongoing concerns about UK economic growth, changes in immigration policy, and persistent inflationary pressures. While a rate cut in August is still widely anticipated, recent inflation data has introduced some uncertainty into market expectations.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to maintain the Bank Rate at 4.25% on 19 June 2025, with three members preferring to reduce the Bank Rate by 25 basis points.
- The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100 billion over the next 12 months to a total of £558 billion, starting in October 2024. On 19 June 2025, the stock of UK government bonds held for monetary policy purposes was £590 billion.
- There has been substantial disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations.
- Twelve-month CPI inflation increased to 3.4% in May from 2.6% in March, in line with expectations in the May Monetary Policy Report. The rise was largely due to a range of regulated prices and previous increases in energy prices.
- Underlying UK GDP growth appears to have remained weak, and the labour market has continued to loosen, leading to clearer signs that a margin of slack has opened up over time.
- Measures of pay growth have continued to moderate and, as in May, the Committee expects a significant slowing over the rest of the year.
- Global uncertainty remains elevated while energy prices have risen owing to an escalation of the conflict in the Middle East, prompting the Committee to remain sensitive to heightened unpredictability in the economic and geopolitical environment.
- There remain two-sided risks to inflation. Given the outlook and continued disinflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate and the Committee will continue to monitor closely the risks of inflation persistence and what the evidence may reveal about the balance between aggregate supply and demand in the economy.
- Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
- The next meeting is on 7 August 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 stable but under gentle pressure, with global tariff risks, U.S. policy developments, and steady yet subdued domestic growth acting as the main drivers. With no major Canadian data expected today, the loonie’s direction is likely to be shaped by broader global and U.S. trends, policy headlines, and overall risk sentiment.
The Canadian dollar also faces headwinds from escalating U.S. trade tensions, persistent core inflation, and ongoing economic uncertainty. While the loonie has shown resilience in 2025, the upcoming Bank of Canada (BoC) meeting on July 30 and ongoing tariff negotiations will be crucial in determining the currency’s trajectory. Technical indicators suggest potential further weakness toward 1.3800—unless trade tensions ease or economic data deliver positive surprises.
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% on 4th June – marking the second consecutive meeting where rates were kept on hold.
- The Governing Council noted that the ongoing increase and decrease of various U.S. tariffs, coupled with highly uncertain outcomes of bilateral trade negotiations and tariff rates remaining well above their levels at the beginning of 2025, placed downside risks on growth and lifted inflation expectations, warranting caution regarding the continuation of monetary easing.
- The higher uncertainty stemmed from the absence of a clear tariff path by the U.S. and persistent threats of new trade actions, which prompted the BoC Governing Council to highlight risks such as the extent to which higher US tariffs reduce demand for Canadian exports.
- 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.
- Housing activity was down, driven by a sharp contraction in resales, while government spending also declined. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued.
- The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9% while CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6%.
- The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up, while recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs.
- The Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs while proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy.
- The Governing Council will focus on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval by supporting economic growth while ensuring that inflation remains well-controlled.
- The next meeting is on 30 July 2025.
Next 24 Hours Bias
Weak Bullish
Oil
Key news events today
API weekly crude oil stock (8:30 pm GMT)
What can we expect from Oil today?
Today’s oil price movements are primarily shaped by the interplay of rising OPEC+ and U.S. supply, weak global demand growth, geopolitical risks stemming from sanctions and trade tensions, and seasonal support from summer travel. The market remains cautious and rangebound, awaiting clearer signals from upcoming OPEC+ meetings and macroeconomic developments.
Oil prices continue to face pressure from ample supply and weakening demand, with only modest upward support from seasonal travel and the potential for disruptive headlines in the geopolitical and policy arenas. Traders are closely monitoring developments in OPEC+, sanctions, and macroeconomic data to determine the next significant move in crude prices.
Next 24 Hours Bias
Weak Bullish
