IC – Europe Fundamental Forecast | 02 November 2026
What happened in the Asia session?
Asian markets started Monday with mixed sentiment as investors reacted to weaker Chinese economic data and the previous session’s significant sell-off in U.S. technology stocks.
China’s manufacturing PMI falling to 49.3 increased concerns about the strength of the Chinese economy, putting pressure on regional currencies, particularly the Australian and New Zealand dollars.
What does it mean for the European & US sessions?
Markets begin November with cautious sentiment as investors assess geopolitical risks, elevated oil prices, technology-sector uncertainty and the outlook for interest rates.
The U.S. dollar remains sensitive to Federal Reserve expectations, with today’s ISM Manufacturing PMI providing an important indication of economic strength. A stronger reading could lift Treasury yields and support the dollar, while weaker figures could benefit gold.
The Dollar Index (DXY)
Key news events today
ISM Manufacturing PMI (3:00 pm GMT)
What can we expect from the DXY today?
The US dollar starts Monday relatively stable, with a slight bullish bias supported by expectations of another Federal Reserve interest rate increase in December. Elevated Treasury yields, weakness in the euro, and uncertainty surrounding the upcoming US midterm elections are also important market drivers.
However, traders should pay close attention to today’s US ISM Manufacturing PMI and Friday’s Non-Farm Payrolls report. Strong economic data could strengthen the dollar by increasing expectations of further Fed tightening, while disappointing data could weaken it.
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
ISM Manufacturing PMI (3:00 pm GMT)
What can we expect from the Gold today?
Gold is attempting to recover towards $3,900 after suffering a significant sell-off at the end of October. However, the recovery remains uncertain as investors continue to assess the possibility of another Federal Reserve interest-rate increase in December.
Persistent inflation concerns, elevated oil prices, and expectations of tighter monetary policy are creating headwinds for gold. Meanwhile, upcoming U.S. midterm elections and employment data could generate additional volatility.
Next 24 Hours Bias
Medium Bullish
The Euro (EUR)
Key news events today
No major news event
What can we expect from the EUR today?
The euro remains under pressure on Monday, trading near a 17-month low against the US dollar. Fitch’s negative outlook for France, concerns about rising energy prices, and uncertainty surrounding the European economy are weighing on investor sentiment.
However, stronger-than-expected eurozone GDP growth and expectations of a possible ECB rate hike in December are providing some support.
Central Bank Notes:
- At its 29 October meeting, the ECB kept all three key interest rates unchanged. The deposit facility rate remains at 2.50%, the main refinancing operations rate at 2.65%, and the marginal lending facility rate at 2.90%. The ECB maintained its data-dependent, meeting-by-meeting approach, with no commitment to future rate changes.
- Inflation remains a major concern. Euro-area annual inflation rose to 3.8% in September, up from 3.2% in August. Higher energy prices were the main contributor, with energy inflation reaching 18.8%. This keeps inflation well above the ECB’s 2% target.
- Economic growth remains relatively modest. The ECB’s September projections expect GDP growth of 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028. Although the economy has shown resilience, higher energy costs and geopolitical uncertainty continue to threaten the outlook.
- Economic confidence weakened in October. The Euro-area Economic Sentiment Indicator declined by 0.6 points to 96.9, marking its second consecutive monthly decline. Consumer confidence also weakened, suggesting continued pressure on household spending and business activity.
- Energy prices remain a major risk to the inflation outlook. The ECB warned that prolonged increases in oil and natural gas prices could push inflation higher while weakening economic growth. The bank is also monitoring whether higher energy costs begin spreading into wages and broader consumer prices.
- The ECB’s balance-sheet reduction continues. The APP and PEPP portfolios are gradually declining as the central bank no longer reinvests principal payments from maturing bonds. This process represents continued quantitative tightening and a gradual withdrawal of monetary support.
- The main focus heading into November is whether persistent inflation will require further interest rate increases. The ECB remains cautious as rising energy costs create inflation risks, while weaker economic confidence and tighter financing conditions could weigh on growth. Upcoming inflation and economic activity data will be important in determining the bank’s next policy decision.
The next meeting is on 16-17 December 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 SNB’s decision to maintain interest rates at 0%, together with reduced concerns about safe-haven inflows, limits the potential for significant franc appreciation. However, the franc could still attract buying interest if geopolitical uncertainty increases or global financial markets become more volatile.
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
Weak Bearish
The Pound (GBP)
Key news events today
No major news event
What can we expect from the GBP today?
The British pound enters the week with a relatively positive outlook, supported by expectations that the Bank of England will raise interest rates from 3.75% to 4.00% this Thursday. Persistent UK inflation, which reached 3.5% in September, is strengthening the case for tighter monetary policy. Sterling also finished October strongly, with GBP/USD reaching approximately 1.3429.
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 Bullish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from the CAD today?
The Canadian dollar starts Monday with support from the Bank of Canada’s recent interest-rate increase and elevated oil prices. However, weaker-than-expected economic growth and uncertainty surrounding U.S.–Canada trade negotiations remain important downside risks.
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 prices are facing downward pressure on Monday as improving diplomatic prospects between the United States and Iran reduce some of the geopolitical risk premium in the market. OPEC+ has also decided to maintain its December production targets, limiting the prospect of additional supply entering the market.
However, oil remains vulnerable to sudden price increases because Middle Eastern supply disruptions, attacks on energy infrastructure, and uncertainty surrounding the Strait of Hormuz have not disappeared.
Next 24 Hours Bias
Medium Bullish
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