IC – Europe Fundamental Forecast | 29 September 2026

IC – Europe Fundamental Forecast | 29 September 2026

What happened in the Asia session?

Asia traded defensively as renewed uncertainty over the Strait of Hormuz and conflicting U.S.–Iran headlines kept crude oil prices elevated, while U.S. Treasury yields near multi-year highs strengthened the dollar and pressured equities, bonds, and precious metals. The clearest regional macro release was Australia’s flat August household spending, which missed expectations and initially weighed on the AUD. However, the Australian dollar remained supported after the Reserve Bank of Australia delivered a 25-basis-point rate hike, lifting the cash rate to 4.60%, its highest level in 15 years.

What does it mean for the European & US sessions?

Energy-driven inflation risks, elevated bond yields, and a firm U.S. dollar remain the dominant cross-asset themes. Traders should focus on the RBA decision already released, European confidence and inflation signals, and upcoming U.S. housing, labor-demand, and consumer-confidence data. Geopolitical developments surrounding U.S.–Iran talks and activity in the Strait of Hormuz remain important for oil, gold, equities, and inflation expectations. Overall, the market remains highly volatile, with stronger oil prices potentially supporting the dollar and bond yields while weighing on gold and risk-sensitive assets.

The Dollar Index (DXY)

Key news events today

CB Consumer Confidence (2:00 pm GMT)

JOLTS Job Openings (2:00 pm GMT)

What can we expect from the DXY today?

The U.S. dollar is firm near a two-month high on Tuesday. The Dollar Index is around 101.2, up roughly 1.8% in September, supported by a sharp rise in U.S. Treasury yields and growing expectations of further Federal Reserve tightening. The 10-year Treasury yield has moved above 5.2%, its highest level since 2007, while the 30-year yield has reached its highest level since 2004. Markets are now pricing in more than a 70% probability of an October Fed rate hike, up from around 57% a week earlier, strengthening demand for the dollar.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) raised the federal funds target range by 25 basis points to 3.75%–4.00% at its September 15–16, 2026, meeting. The decision was approved unanimously by a 12–0 vote, marking a shift from the July meeting, when rates were held at 3.50%–3.75%. The Fed said the move was intended to support its dual mandate and promote a more timely return of inflation toward its 2% objective.
• The labor market remains relatively resilient. The September FOMC statement said job gains have kept pace with workforce growth and that the unemployment rate has changed little. The Fed continues to monitor employment conditions closely alongside inflation when determining the appropriate path for monetary policy.
• Inflation remains above the Federal Reserve’s 2% target and continues to be a key policy concern. The September decision explicitly noted that inflation remains elevated. The latest projections put median headline PCE inflation at 3.7% for 2026, before falling to 2.3% in 2027, 2.1% in 2028, and 2.0% in 2029. Core PCE inflation is projected at 3.4% in 2026, declining to 2.5% in 2027 and 2.2% in 2028.
• Economic activity continues to expand at a solid pace. The Fed highlighted resilient domestic spending, strong productivity growth, and robust capital investment, although uncertainty remains elevated partly because of geopolitical developments. The September projections raised the median 2026 GDP-growth forecast to 2.3%, compared with 2.2% in the June projections.
• The September projections show a higher expected policy-rate path than in June. The median projection for the federal funds rate is now 4.1% at the end of 2026, compared with 3.8% in the June projections. The median is projected at 4.1% in 2027, 3.9% in 2028, and 3.6% in 2029. This indicates that policymakers’ projected rate path remains relatively restrictive while inflation is expected to move gradually toward the target.
• Chair Kevin Warsh continues to emphasize the importance of returning inflation to 2%. Ahead of the September meeting, Warsh indicated that the Fed would have further work to do if policymakers could not gain sufficient confidence that inflation was moving toward the 2% objective. The September decision was subsequently delivered a 25-basis-point hike, while the Committee continued to emphasize its assessment of incoming economic data and risks.
• The September economic projections show a more balanced growth outlook but continued inflation risks. The median unemployment forecast is 4.1% for 2026 and 2027, while the Fed projects GDP growth of 2.3% in 2026 and 2.4% in 2027. At the same time, PCE inflation is expected to remain substantially above target through 2026 before moving closer to 2% over subsequent years.
• The next meeting is scheduled for 27-28 October 2026.

Next 24 Hours Bias
Strongly Bullish

Gold (XAU)

Key news events today

CB Consumer Confidence (2:00 pm GMT)

JOLTS Job Openings (2:00 pm GMT)

What can we expect from the Gold today?

Gold is trading near a seven-week low around $4,125 per ounce, pressured by a stronger U.S. dollar, rising Treasury yields, higher oil prices, and expectations that the Federal Reserve may keep interest rates elevated or tighten policy further. Traders are watching upcoming U.S. economic data for clues about the Fed’s next moves. Weaker-than-expected data could support a rebound in gold, while stronger data may increase downward pressure. The short-term bias remains bearish below $4,200.

Next 24 Hours Bias   
Strongly Bearish

The Euro (EUR)

Key news events today

ECB President Lagarde Speaks (11:00 am GMT)

What can we expect from the EUR today?

The euro starts Tuesday near a two-month low, pressured by expectations that the ECB may remain cautious on further rate hikes while U.S. interest rates continue to offer a yield advantage. Euro-area confidence data were mixed, with consumer confidence improving while economic, industrial, and services sentiment weakened. EUR/USD remains vulnerable below 1.1400, with 1.1350 acting as the key downside level. However, oversold technical conditions and the upcoming eurozone inflation data could trigger a corrective rebound if ECB officials adopt a less dovish tone or inflation comes in higher than expected.

Central Bank Notes:

• The ECB enters October with its policy outlook dependent on the outcome of its 10 September meeting. The latest confirmed decision, from 23 July, kept the deposit facility at 2.25%, the main refinancing operations rate at 2.40%, and the marginal lending facility at 2.65%. The ECB continued to emphasize a meeting-by-meeting and data-dependent approach, with no commitment to a predetermined rate path.
• The euro-area economy remains resilient, but growth is still relatively modest. The latest ECB data show euro-area GDP at €4.1185 trillion in Q2 2026, up 1.2% quarter-on-quarter and 3.6% year-on-year in the latest reported data. However, the economic outlook remains vulnerable to elevated energy costs, geopolitical uncertainty, and weaker external demand.
• Inflation remains the key issue for ECB policy. The ECB’s July assessment highlighted that energy prices remained highly volatile and significantly above pre-conflict levels, with the full inflationary impact of the energy shock still uncertain. The ECB is therefore closely monitoring direct energy effects as well as possible second-round effects through wages and broader price-setting behavior.
• Professional forecasters continue to expect inflation to remain above target in 2026. The ECB’s Q3 Survey of Professional Forecasters projected headline HICP inflation at 2.7% for 2026, falling to 2.2% in 2027 and 2.0% in 2028. Core inflation, excluding energy, food, alcohol, and tobacco, was projected at 2.4% in 2026 and 2.2% in 2027.
• Growth expectations have softened. The same ECB survey projects real GDP growth of only 0.6% in 2026, followed by 1.2% in 2027 and 1.3% in 2028. This combination of relatively weak growth and above-target inflation leaves the ECB facing a difficult policy trade-off heading into October.
• The ECB’s balance-sheet normalization is expected to continue. The APP and PEPP portfolios continue to decline in a measured and predictable manner because the Eurosystem is no longer reinvesting principal payments from maturing securities. This gradual quantitative tightening is expected to continue unless financial-market conditions require the ECB to adjust its approach.
• The main risk for October is the combination of persistent inflation and weak growth. Higher oil and natural-gas prices could keep inflation above the ECB’s 2% target while simultaneously reducing household purchasing power and business activity. This could make the ECB more cautious about easing policy even if economic growth remains weak.

​The next meeting is on 29 October 2026.

Next 24 Hours Bias
Medium Bearish

The Swiss Franc (CHF)

Key news events today

No major news event

What can we expect from the CHF today?

The Swiss franc is trading softer today as markets continue to digest the SNB’s decision to keep interest rates at 0% while reducing the urgency of its intervention language. USD/CHF near 0.8311 and EUR/CHF near 0.9456 point to continued CHF weakness, supported by wider interest-rate differentials and the SNB’s tolerance for some franc depreciation to support growth. However, rising energy prices and slightly higher SNB inflation forecasts could limit further CHF downside. The SNB’s continued willingness to intervene, along with the franc’s safe-haven status, could also trigger sharp CHF rebounds if global or geopolitical tensions intensify.

Central Bank Notes:

• At its 24 September meeting, the SNB kept the policy rate unchanged at 0.00%, citing appropriate monetary conditions.
• Swiss inflation increased from 0.6% in May to 0.8% in August, mainly due to higher energy prices. The SNB expects inflation to rise somewhat in Q4 before easing during 2027.
• The SNB now projects average inflation of 0.7% in 2026, 0.8% in 2027, and 0.8% in 2028, assuming the policy rate remains at 0%.
• The SNB remains willing to intervene in the foreign-exchange market if necessary to maintain appropriate monetary conditions, particularly if exchange-rate movements become problematic.
• The SNB expects Swiss growth to remain moderate, forecasting 1.5–2% growth in 2026 and around 1.5% in 2027.
• The main risks remain Middle East tensions, elevated energy prices, global growth, and trade-policy uncertainty. Higher energy prices could increase inflation while weakening economic growth.

The next meeting is on 10 December 2026.

Next 24 Hours Bias
Medium Bearish

The Pound (GBP)

Key news events today

No major news event

What can we expect from the GBP today?

The pound is trading with a slightly bearish bias on Tuesday, 29 September 2026. GBP/USD is around 1.3250, while EUR/GBP is near 0.8583. Sterling remains under pressure from a firmer U.S. dollar and elevated U.S. Treasury yields, with the 10-year yield recently reaching multi-year highs. However, hawkish comments from Bank of England Deputy Governor Dave Ramsden are providing some support, as he said the BoE could consider raising Bank Rate if upside inflation pressures continue to build, particularly from elevated energy prices.

Central Bank Notes:

• Interest-rate decision: The BoE held the Bank Rate at 3.75% at its 17 September 2026 meeting. The MPC voted 6–3, with three members supporting a 25-basis-point increase to 4.00%. The decision reflects a cautious approach as policymakers balance inflation risks against subdued economic activity.
• UK CPI inflation rose to 3.1% in August, up from 2.9% in July, remaining above the BoE’s 2% target. Core CPI remained at 2.6%, while services inflation was 3.4%, indicating that underlying price pressures are still present.
• The ongoing Middle East conflict has contributed to higher and more volatile energy prices. The BoE expects inflation to rise further over the coming quarters, although the eventual impact will depend on how long energy prices remain elevated.
• The UK economy remains subdued, while weaker demand and a cooling labor market create challenges for the MPC. Policymakers must balance the risk of persistent inflation against the possibility of further weakening economic activity.
• Wage growth and services inflation remain important areas of focus. Although core inflation has been relatively stable, the rise in headline inflation means the MPC is likely to remain cautious about easing policy.
• The BoE is reviewing the pace and structure of its balance-sheet reduction. Its latest plans include slowing the pace of gilt sales, reflecting concerns around market conditions and the impact of quantitative tightening.
• The BoE’s next decisions will remain data-dependent, with inflation, energy prices, wage growth, and economic activity determining whether rates remain unchanged or increase.
• The next meeting is on 5 November 2026.
  
  Next 24 Hours Bias
  Medium Bearish

The Canadian Dollar (CAD)

Key news events today

GDP m/m (12:30 pm GMT)

What can we expect from the CAD today?

The Canadian dollar is starting Tuesday on the defensive, with USD/CAD rising toward 1.4175 and trading near its highest levels of the year. The immediate catalyst is Canada’s July GDP report, with a flat monthly reading expected. A weaker-than-expected result could put further pressure on the CAD, particularly as U.S. dollar strength, a wider interest-rate differential, and softer oil prices weigh on sentiment. Bank of Canada Deputy Governor Toni Gravelle’s comments later today could add short-term volatility, but unless the data or his remarks are notably hawkish, the near-term technical and macro bias remains mildly bearish for the Canadian dollar.
​
Central Bank Notes:

• At its 2 September 2026 meeting, the Bank of Canada maintained the overnight rate target at 2.25%, keeping the Bank Rate at 2.50% and the deposit rate at 2.20%. This marks the seventh consecutive decision at 2.25%. While the decision was expected, the bank’s communication became somewhat more cautious as inflation risks increased. Governor Tiff Macklem emphasized that the Bank remains prepared to adjust monetary policy if necessary to preserve price stability.
• The Canadian economy has strengthened significantly in the second quarter. GDP expanded at an annualized rate of 3.3% in Q2 2026, following very weak growth in Q1. The recovery was relatively broad-based, with consumer spending remaining resilient while housing activity, exports, and business investment also improved. However, the Bank noted that some of the Q2 strength reflected temporary factors and that the sustainability of the recovery remains uncertain because of renewed trade tensions with the United States.
• The labor market has continued to improve, providing additional support for domestic demand. Employment increased by 75,000 in July, while the unemployment rate declined to 6.4%, its lowest level since July 2024. Wage growth, however, continued to moderate, with average hourly wages rising 2.8% year over year in July compared with 3.3% in June. The combination of stronger employment and moderating wages suggests that labor-market conditions are improving without generating an immediate resurgence in underlying inflation pressures.
• Inflation remains the key concern for the Bank. Headline CPI increased to 3.0% year over year in July, up from 2.8% in June. Much of the acceleration was driven by gasoline, with gasoline prices rising 25.7% year over year. Encouragingly, CPI excluding gasoline remained at 2.2%, while core inflation measures have stayed close to 2%. The Bank therefore continues to distinguish between temporary energy-driven inflation and more persistent underlying price pressures.
• Higher global oil prices have increased the upside risks to Canadian inflation. The continuing conflict in the Middle East, restrictions affecting shipments through the Strait of Hormuz, and elevated refinery margins have kept gasoline and other energy prices high. The Bank is currently looking through some of the direct effects of higher oil prices, but Governor Macklem warned that the longer energy prices remain elevated, the greater the risk that inflation becomes more persistent and spreads into other goods and services.
• US-Canada trade tensions have become a more significant downside risk to growth. New US tariffs on Canadian exports and Canada’s retaliatory measures are creating additional uncertainty for businesses. The Bank estimates that the products directly affected by the new tariffs account for around 5% of Canada’s exports to the United States, limiting the immediate economy-wide impact. Nevertheless, broader uncertainty could cause businesses to delay investment and hiring decisions, potentially slowing the recovery.
• The bank’s policy stance remains data-dependent going into October. The BoC is balancing two opposing forces: stronger-than-expected economic activity and renewed inflation risks on one side, versus excess economic capacity and trade-related downside risks on the other. With inflation around 3% but underlying inflation closer to 2%, the Bank has so far chosen to remain on hold rather than immediately tighten policy.
• The next meeting is on 28 October 2026.

Next 24 Hours Bias
Medium Bearish

Oil

Key news events today

API Crude Oil Stock (8:30 pm GMT)

What can we expect from the Oil today?

Oil prices remain elevated as concerns over Middle East supply disruptions continue to outweigh improving exports. Brent is around $106–107 and WTI near $94, with the market closely watching U.S.–Iran talks and activity around the Strait of Hormuz. Middle East crude exports have recovered to about 12.8 million barrels per day, but flows remain well below pre-conflict levels and rely partly on costly shipping workarounds. OPEC+ is maintaining its October production policy, while the October 4 OPEC+ meeting, Hormuz shipping, Saudi exports, and U.S.–Iran developments remain key catalysts for oil today.

Next 24 Hours Bias
Strongly Bullish

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