IC – Europe Fundamental Forecast | 23 July 2026
What happened in the Asia session?
During today’s Asian session, the primary market-moving event was the Australian June Labour Market Report, which came in significantly stronger than expectations. Australia added 76.3K jobs, far exceeding the market forecast of 16.4K, while the unemployment rate remained unchanged at 4.4%, matching expectations. The robust employment growth reinforced expectations that the Reserve Bank of Australia (RBA) may maintain a hawkish stance or consider further policy tightening if inflation remains persistent. The stronger Australian employment figures triggered broad buying of the Australian Dollar (AUD).
What does it mean for the Europe & US sessions?
Today’s market focus will be on the European Central Bank’s interest rate decision, policy statement, and President Lagarde’s press conference, followed by the U.S. Initial Jobless Claims report. While the ECB is expected to leave rates unchanged, traders will closely analyze any forward guidance regarding future tightening amid rising energy prices and persistent inflation risks. During the U.S. session, jobless claims will provide another snapshot of labor market strength ahead of the next Federal Reserve meeting.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (12:30 pm GMT)
What can we expect from DXY today?
The U.S. dollar remains supported primarily by safe-haven demand stemming from heightened geopolitical tensions between the United States and Iran, alongside a sharp rise in oil prices above $95 per barrel. However, market participants are largely focused on today’s U.S. Initial Jobless Claims report, forecast at 211K versus the previous 208K. Stronger-than-expected employment data would likely strengthen the dollar by reinforcing confidence in the U.S. economy and reducing expectations of near-term Federal Reserve policy easing. Conversely, weaker labor market data could weigh on the greenback, particularly if it signals that economic momentum is beginning to soften.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) left the federal funds rate unchanged at 3.50%–3.75% at its June 16–17, 2026, meeting, marking another pause in the policy cycle. Under new Fed Chair Kevin Warsh, policymakers signaled a more cautious and hawkish stance as inflation remains above target despite moderating energy prices.
- The Committee remains committed to achieving maximum employment and returning inflation to its 2% objective. Labor market conditions have remained relatively stable, with job gains continuing at a moderate pace and the unemployment rate projected to remain near 4.4% through 2026.
- Inflation continues to be the primary concern for policymakers. Headline inflation remains elevated, supported by earlier energy-related price pressures and persistent services inflation. The June projections showed higher inflation forecasts than previously expected, leading several officials to favor keeping policy restrictive for longer.
- Economic activity continues to expand at a moderate pace. Productivity growth, capital investment, and AI-related spending remain supportive of growth, while consumer spending and housing activity show signs of slowing compared with late 2025 and early 2026.
- The June 2026 Summary of Economic Projections (SEP) revealed a more divided Committee. Nine officials projected at least one rate hike during 2026, while others expected rates to remain unchanged or eventually decline. The median outlook shifted toward a higher-for-longer policy path compared with earlier projections.
- The Committee emphasized a data-dependent approach and noted that future decisions will depend on incoming data on inflation, employment, and economic growth. Officials acknowledged that geopolitical developments and energy markets remain important upside risks to inflation.
- The FOMC continues its balance sheet normalization program, maintaining Treasury runoff caps at $5 billion per month and agency mortgage-backed securities (MBS) runoff caps at $35 billion per month, while ensuring ample reserves remain in the banking system.
- The next meeting is scheduled for 28 to 29 July 2026.
Next 24 Hours Bias
Weak Bullish
Gold (XAU)
Key news events today
Unemployment Claims (12:30 pm GMT)
What can we expect from Gold today?
Gold begins Thursday on a firm footing after reaching its highest level in about two weeks, supported by a softer U.S. dollar and persistent geopolitical uncertainty. Nevertheless, traders remain cautious ahead of today’s ECB policy decision, ECB press conference, and U.S. jobless claims data, all of which could reshape expectations for global interest rates. If U.S. economic data weakens or the ECB adopts a dovish tone, gold could extend its recent rally. On the other hand, stronger U.S. data or renewed hawkish central bank rhetoric may trigger profit-taking and pressure prices lower.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
Main Refinancing Rate (12:15 pm GMT)
Monetary Policy Statement (12:15 pm GMT)
ECB Press Conference (12:45 pm GMT)
What can we expect from EUR today?
The euro is in focus today as the European Central Bank (ECB) announces its latest monetary policy decision. The market overwhelmingly expects the ECB to leave the Main Refinancing Rate unchanged at 2.40%, following June’s 25-basis-point increase. However, traders will be paying much closer attention to the Monetary Policy Statement and ECB President Christine Lagarde’s press conference for guidance on whether another rate hike could come later this year. Policymakers continue to balance easing inflation against renewed upside risks from higher energy prices and geopolitical tensions in the Middle East.
Central Bank Notes:
- The Governing Council is expected to maintain the three key rates unchanged at their June levels into July, with the main refinancing rate around 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%. Policy remains on a meeting‑by‑meeting, data‑dependent footing.
- Real GDP growth is expected to be modest: around 0.9% in 2026, 1.3% in 2027, and 1.4% in 2028. Quarterly momentum implies roughly 0.2–0.3% q/q growth in Q2 2026, consistent with resilience seen late‑2025.
- Balance‑sheet normalization continues smoothly. APP and PEPP wind‑downs are effectively completed; the Eurosystem is allowing remaining longer‑dated holdings to run off. No material liquidity shortages are expected; the Governing Council will monitor transmission and market functioning closely.
- Upside risks: stronger‑than‑expected services inflation persistence, renewed energy or commodity price shocks, and tighter global financial conditions that transmit unevenly.
- The ECB is likely to keep policy rates on hold while emphasizing data dependence: future moves will be guided by incoming HICP prints, wage dynamics, and indicators of monetary transmission (credit, deposit flows, and market functioning).
- With rates expected to be on hold and inflation slightly above target for 2026, the EUR may trade with two‑way volatility; upside for the EUR if euro‑area data surprise to the upside or if US data weaken relative to the euro‑area, but limited unilateral appreciation given symmetric policy risks.
- Curve pricing should reflect a prolonged period of unchanged rates with modest probability of hikes if upside inflation surprises continue; front-end stays anchored, while longer‑dated yields respond to inflation‑expectation movements and global risk sentiment.
The next meeting is on 22 to 23 July 2026
Next 24 Hours Bias
Weak Bullish
The Swiss Franc (CHF)
Key news events today
No major news event
What can we expect from CHF today?
The Swiss franc remains influenced by Swiss National Bank (SNB) policy expectations, global risk sentiment, and its traditional safe-haven demand. The SNB has kept its policy rate at 0%, maintaining an accommodative stance while monitoring inflation and currency strength. The central bank has also maintained the option of foreign-exchange intervention if excessive franc appreciation threatens price stability. Recent SNB commentary indicates that the franc has depreciated somewhat since earlier policy assessments, making financial conditions slightly easier and supporting economic activity.
Central Bank Notes:
- At its monetary policy assessment on 18 June 2026, the Swiss National Bank left the SNB policy rate unchanged at 0.00%, in line with market expectations. Policymakers maintained that the current policy setting remains appropriate given low inflation and ongoing global economic uncertainty.
- Inflation remains exceptionally subdued in Switzerland. Recent data show consumer price growth staying comfortably within the SNB’s price stability range, with headline inflation around 0.6% year-on-year in May 2026, while underlying inflation pressures remain limited despite higher global energy prices.
- The SNB continues to view medium-term inflation pressures as largely unchanged. While energy prices linked to Middle East tensions have temporarily lifted near-term inflation expectations, the stronger Swiss franc has helped offset imported inflation, supporting the central bank’s decision to maintain rates at current levels.
- External risks remain elevated. Policymakers highlighted ongoing geopolitical tensions, trade uncertainties, and slower global growth prospects, particularly in key export markets such as the Eurozone and the United States. These factors continue to warrant a cautious policy approach.
- Swiss economic activity remains resilient but modest. GDP growth is expected to remain around 1–1.5% in 2026, supported by domestic demand, although manufacturing and export-oriented sectors continue to face challenges from a strong franc and softer foreign demand.
- The SNB reiterated its readiness to act if necessary. The Governing Board emphasized that it remains willing to intervene in foreign exchange markets to counter excessive Swiss franc appreciation and stands prepared to adjust policy should inflation or economic conditions deviate materially from expectations.
The next meeting is on 24 September 2026.
Next 24 Hours Bias
Weak Bearish
The Pound (GBP)
Key news events today
No major news event
What can we expect from GBP today?
The British pound remains supported by expectations that the Bank of England may keep monetary policy restrictive for longer, despite recent signs of cooling inflation. UK inflation slowed to 2.6% in June, helped by lower fuel and food prices, giving some relief to households and the new government’s cost-of-living measures. However, underlying inflation pressures remain a concern, particularly from services inflation and energy market uncertainty, keeping investors focused on whether the Bank of England will maintain or even raise interest rates later in 2026.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 17–18 June 2026 and voted 7–2 to maintain the Bank Rate at 3.75%. Two members, Megan Greene and Chief Economist Huw Pill, voted for a 25-basis-point increase to 4.00%, citing concerns about inflation expectations and the risk of persistent price pressures. The majority favored keeping policy unchanged while assessing the evolving impact of recent energy-market developments.
- Quantitative tightening (QT) continues as planned, with the Bank maintaining its balance-sheet reduction strategy through gilt runoff and sales. The MPC considers QT an important part of policy normalization while preserving sufficient liquidity in financial markets.
- Inflation remains above target despite some easing in energy prices. The Bank expects CPI inflation to remain around or above 3% during the second half of 2026, compared with the 2% target. While recent declines in oil and gas prices have reduced the near-term inflation outlook, policymakers remain concerned about potential second-round effects through wages and services inflation.
- UK economic growth remains subdued. The MPC noted signs of weakening demand, falling vacancies, and a softer labor market, although recent wage growth data came in slightly stronger than expected. The Committee expects economic activity to remain modest as higher borrowing costs and uncertainty continue to weigh on business investment and consumer spending.
- Global risks remain elevated, particularly due to developments in the Middle East and their potential effects on energy markets, trade flows, and financial conditions. Although tensions have eased somewhat following diplomatic progress, policymakers continue to monitor commodity-price volatility and its implications for UK inflation.
- Inflation risks remain tilted to the upside. The MPC highlighted concerns that higher inflation expectations, resilient wage growth, and renewed energy-price shocks could require a more restrictive policy stance. However, downside risks from weaker growth and increasing economic slack offset this influence.
- The MPC continues to emphasize a data-dependent and restrictive policy stance, with no commitment to either rate cuts or hikes in the near term. Governor Andrew Bailey stated that policymakers will remain vigilant and stand ready to respond if inflation proves more persistent than expected. The presence of two votes for a rate increase demonstrates that the Committee remains alert to upside inflation risks.
- The next meeting is on 30 July 2026.
Next 24 Hours Bias
Weak Bullish
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 slightly positive tone, supported mainly by strength in crude oil prices and improved risk sentiment. Canada’s economy remains heavily influenced by energy markets, and the recent recovery in oil prices has provided support for the loonie. The CAD recently recovered from a one-week low as oil prices climbed, with USD/CAD moving lower as investors increased demand for commodity-linked currencies.
Central Bank Notes:
- At its 15 July 2026 meeting, the Governing Council maintained the overnight rate target at 2.25%, marking a sixth consecutive decision at this level and extending the policy pause that began in late 2025. The decision was in line with market expectations. It reflects the Council’s view that the current stance remains appropriately restrictive to return inflation sustainably to the 2% target over the projection horizon while balancing two‑sided risks.
- External conditions remain challenging, with persistent geopolitical tensions in the Middle East and ongoing U.S. trade frictions continuing to weigh on global sentiment and supply chains. Council minutes and external commentary highlight that these risks are asymmetric, with the potential either to slow foreign demand or to heighten volatility in global energy and other commodity prices, warranting a nimble policy stance.
- Real GDP appears to have resumed growth in Q2 2026 after stalling earlier in the year, with the Bank and private forecasters now expecting output to expand at roughly a 2.3–2.5% annualized pace, slightly above the April baseline. Growth remains supported by resource shipments and exports amid robust global energy demand, while domestic activity is gradually broadening as consumption and housing stabilize and business investment shows tentative improvement from earlier weakness.
- The labour market remains tight but continues a gradual rebalancing: employment rose by about 18,000 positions in June, and the unemployment rate edged down to 6.5%, tying its lowest level since mid‑2024. Wage growth has cooled from prior peaks, and regional participation increases are consistent with easing wage pressures over time, although pockets of labour scarcity persist in energy‑related and some service sectors.
- Headline CPI has drifted above 2% and was around 3.2% year‑over‑year in May, with inflation expected to remain elevated in June before gradually easing as energy effects fade. Core measures have moved closer to 2% on average, and the share of CPI components running above 3% has fallen back toward historical norms, suggesting underlying inflation is moderating even as near‑term headline readings remain somewhat higher. The Bank continues to project inflation returning to the 2% target in early 2027, conditional on oil prices stabilizing near their assumed range.
- High‑frequency indicators point to continued expansion in manufacturing and exports into early summer, with Purchasing Managers’ Index readings still in positive territory, supported by solid energy‑sector activity and demand for intermediate goods. However, surveys indicate that firms’ capex intentions remain cautious in light of trade uncertainty and past weakness in domestic demand, suggesting investment may recover only gradually.
- Credit growth remains moderate, and bank lending spreads and deposit pricing show limited additional pass‑through from recent global rate moves, keeping domestic financial conditions relatively stable. Mortgage rates remain somewhat elevated compared with pre‑tightening levels but have been broadly unchanged in recent months, contributing to a measured moderation in housing activity rather than an abrupt adjustment.
- The next meeting is on 2 September 2026.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news event
What can we expect from Oil today?
Oil prices are trading with a bullish bias today as geopolitical risks dominate market sentiment. The main focus remains on potential disruptions to Middle East oil flows, especially around key shipping routes, which has increased demand for crude as a hedge against supply uncertainty. However, traders are also watching broader economic signals, OPEC+ production decisions, and inventory trends because any improvement in supply conditions or weaker demand expectations could limit further upside.
Next 24 Hours Bias
Strong Bullish
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