IC – Europe Fundamental Forecast | 29 October 2026

IC – Europe Fundamental Forecast | 29 October 2026

What happened in the Asia session?

Asian markets are navigating a combination of elevated oil prices, uncertainty over global interest rates, and mixed technology-sector sentiment. The Fed’s decision to hold rates has left markets sensitive to U.S. bond yields and today’s GDP and Core PCE releases. The New Zealand dollar remains under pressure following the RBNZ’s unexpected rate hold, while the Australian dollar has recently shown relative strength. The yen remains vulnerable to elevated U.S. yields, and gold faces competing influences from interest rates and safe-haven demand.

What does it mean for the European & US sessions?

Thursday’s biggest market catalysts are the ECB decision, U.S. GDP, Core PCE inflation, and unemployment claims. The Fed’s latest decision to hold rates has not removed concerns about persistent inflation or the possibility of another increase in December.

The dollar could strengthen, and gold could weaken if U.S. growth and inflation come in above expectations. A hawkish ECB message could support the euro, while a cautious message could weigh on it. Oil remains an important secondary driver because energy-price changes can influence inflation expectations and central-bank policy.

The Dollar Index (DXY)

Key news events today

Advance GDP q/q (12:30 pm GMT)

Core PCE Price Index m/m (12:30 pm GMT)

Advance GDP Price Index q/q (12:30 pm GMT)

Unemployment Claims (12:30 pm GMT)

What can we expect from the DXY today?

The US dollar is relatively steady on Thursday after the Fed held interest rates at 3.75%–4.00%, but uncertainty over the next rate decision is limiting its direction. Today’s main catalysts are US GDP, core PCE inflation, and unemployment claims. Strong growth and higher inflation could support the dollar, while weaker figures could trigger further selling.

Central Bank Notes:

• The Federal Open Market Committee (FOMC) kept interest rates unchanged at 3.75%–4.00% at its October 27–28 meeting. The decision was approved by a 10–2 vote, following September’s 25-basis-point rate hike. Two members preferred another 25-basis-point increase.
• The labor market remains relatively stable. The Fed noted that job gains have kept pace with workforce growth and that the unemployment rate has changed little. Employment conditions remain an important factor in future policy decisions.
• Inflation remains above the Fed’s 2% target. Policymakers want more economic data to assess whether inflation is moving sustainably towards the target. Persistent inflation could increase the possibility of further rate hikes.
• The Fed upgraded its assessment of the U.S. economy from a solid pace of growth to a strong pace. Domestic spending remains resilient, productivity growth is strong, and business investment remains robust. However, geopolitical developments continue to create uncertainty.
• The Fed has kept the door open to further rate hikes if inflation remains elevated. The latest decision suggests policymakers want more evidence before making their next move. Markets are watching closely for signals about a possible rate increase in December.
• Chair Kevin Warsh continues to emphasize the importance of bringing inflation back to the 2% target. The October decision reflects a cautious approach, with the Fed waiting for more information before adjusting interest rates again.
• The Fed’s decision could influence the U.S. dollar, Treasury yields, gold, and other financial markets. Expectations of higher interest rates may support the dollar and pressure gold, while signs of easing inflation could weaken the dollar and support gold prices. Market reactions will depend on incoming economic data and expectations for future policy.
• The next meeting is scheduled for 8 to 9 December 2026.

Next 24 Hours Bias
Medium Bullish

Gold (XAU)

Key news events today

Advance GDP q/q (12:30 pm GMT)

Core PCE Price Index m/m (12:30 pm GMT)

Advance GDP Price Index q/q (12:30 pm GMT)

Unemployment Claims (12:30 pm GMT)

What can we expect from the Gold today?

Gold is trading around $4,051 per ounce on Thursday, following a modest recovery. The Federal Reserve’s decision to leave interest rates unchanged has not removed concerns about further tightening, while elevated U.S. Treasury yields and rising oil prices continue to complicate the outlook.

Next 24 Hours Bias   
Medium Bearish

The Euro (EUR)

Key news events today

Main Refinancing Rate (1:15 pm GMT)

Monetary Policy Statement (1:15 pm GMT)

ECB Press Conference (1:45 pm GMT)

What can we expect from the EUR today?

The euro faces a cautious to bearish outlook heading into Thursday’s major events. EUR/USD is under pressure near 1.1150, as concerns about French government debt and the dollar’s relative strength are limiting euro gains.

The main event is the ECB decision, followed by Lagarde’s press conference. If the ECB signals further rate increases, the euro could rebound. However, weaker European sentiment or stronger-than-expected U.S. GDP and inflation data could push EUR/USD lower.

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?

Switzerland’s economic sentiment has weakened sharply, which is a negative domestic signal, while the SNB’s 0% policy rate limits its yield advantage over higher-rate currencies. Meanwhile, the Federal Reserve held its rate at 3.75%–4% on Wednesday, with two policymakers favoring a hike and inflation still elevated. This leaves the dollar sensitive to today’s US GDP and Core PCE data.

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 begins Thursday with a cautious to bearish outlook, particularly against the U.S. dollar. Sterling remains sensitive to UK borrowing concerns, while expectations of a possible Bank of England rate hike provide some support.

The main event risk today is the U.S. GDP and Core PCE data, followed by the ECB decision and press conference. Strong U.S. figures could put additional pressure on GBP/USD, whereas softer data could give sterling room to recover.

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

No major news event

What can we expect from the CAD today?

The Canadian dollar starts Thursday on a firmer footing after yesterday’s Bank of Canada rate hike to 2.50%. The bank’s warning that further increases may be needed and continued energy-market tensions are supportive for CAD. However, stronger U.S. GDP or inflation data could strengthen the dollar and reverse some of the Canadian currency’s gains. Traders should focus on today’s U.S. GDP and Core PCE releases, Canadian wage data, and BoC commentary before looking for a clearer direction in USD/CAD.

Central Bank Notes:

• On 28 October 2026, the Bank of Canada raised its overnight interest rate by 25 basis points to 2.50%, ending its extended period of holding rates steady. The bank cited persistent inflation risks and stronger economic activity. Further rate increases remain possible.
• Canada’s economy grew by an annualized 3.3% in Q2 2026, with growth estimated at around 2% in Q3. However, new US tariffs and trade uncertainty are expected to slow economic activity in Q4.
• Unemployment has remained around 6.5%, indicating continued spare capacity in the labor market. Although employment conditions have stabilized, uncertainty over trade and economic growth remains a concern.
• Canada’s annual inflation rate rose to 3.1% in September, up from 3.0% in August. Higher gasoline prices were the main driver, while inflation excluding gasoline remained at 2.2% and core inflation measures stayed close to 2%.
• Persistently high global oil prices and Middle East tensions continue to increase fuel and transportation costs. The bank warned that these pressures could spread to other goods and services, keeping inflation elevated for longer.
• Renewed US tariffs and uncertainty over trade relations remain significant risks to Canada’s economic outlook. These pressures could weaken exports, delay business investment, and slow growth, while also increasing business costs.
• The BoC has raised its policy rate to 2.50% to limit the risk of persistent inflation. The bank may raise rates further if price pressures continue, but future decisions will depend on economic data, energy prices, and trade developments.
• The next meeting is on 9 December 2026.

Next 24 Hours Bias
Medium Bullish

Oil

Key news events today

No major news event

What can we expect from the Oil today?

Oil is trading under pressure early as hopes for renewed U.S.–Iran peace talks offset concerns about escalating Middle East tensions. However, prices remain elevated because of supply-disruption risks and a fourth consecutive weekly decline in U.S. crude inventories. The rise in gasoline stocks provides a counterargument, suggesting that fuel demand may not be equally strong across the market.

Next 24 Hours Bias
Medium Bullish

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