IC – Europe Fundamental Forecast | 24 July 2026

IC – Europe Fundamental Forecast | 24 July 2026

What happened in the Asia session?

The Asia session was dominated by risk-off sentiment rather than economic data releases. Escalating Middle East tensions pushed crude oil above $100 per barrel, renewing inflation concerns and lifting global bond yields. This strengthened the U.S. dollar, weakened the yen and other major currencies, and weighed heavily on Asian stock markets. With no major Asian macroeconomic releases, traders focused on geopolitical risks, BOJ policy expectations, and positioning ahead of the European PMI surveys and the UK Retail Sales data scheduled later today.

What does it mean for the Europe & US sessions?

Today’s focus shifts from yesterday’s labor market data to business activity across Europe and the United States. Early in the session, traders will closely watch the UK’s Retail Sales report, followed by Flash PMI releases from France, Germany, and the UK to assess the health of the European economy. Attention then turns to the U.S., where Flash Manufacturing and Services PMIs, together with New Home Sales, will provide fresh evidence on the strength of the American economy ahead of next week’s Federal Reserve meeting. Stronger-than-expected data would likely support the U.S. dollar while pressuring gold, whereas weaker figures could boost safe-haven assets and increase expectations for a more accommodative Fed later this year.
​
The Dollar Index (DXY)

Key news events today

No major news event

What can we expect from DXY today?

The U.S. dollar begins Friday with strong bullish momentum as investors seek safety amid geopolitical uncertainty, surging oil prices, and rising U.S. Treasury yields. Markets are increasingly pricing in the possibility of a more hawkish Federal Reserve, helping the greenback outperform most major currencies. The key themes for today remain inflation expectations, Fed policy outlook, geopolitical developments, and any fresh U.S. macroeconomic data that could influence interest-rate expectations.

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

No major news event

What can we expect from Gold today?

Gold enters Friday on a bearish footing as a firmer U.S. dollar, higher Treasury yields, and expectations of prolonged restrictive Fed policy continue to pressure prices. Although geopolitical risks and elevated oil prices would normally support gold, markets are currently interpreting those developments as inflationary, reinforcing expectations for higher interest rates rather than boosting safe-haven buying. Traders should closely monitor today’s UK and Eurozone PMI releases, as any significant surprises could influence risk sentiment, currency markets, and gold’s short-term direction.

Next 24 Hours Bias   
Weak Bearish

The Euro (EUR)

Key news events today

French Flash Manufacturing PMI (7:15 am GMT)

French Flash Services PMI (7:15 am GMT)

German Flash Manufacturing PMI (7:30 am GMT)

German Flash Services PMI (7:30 am GMT)

What can we expect from EUR today?

The euro’s main focus today is the release of the French, German, and Eurozone Flash Manufacturing and Services PMI reports, which will provide the first snapshot of business activity for July. Strong PMI readings would suggest improving economic momentum and could strengthen the euro by increasing expectations that the ECB may resume tightening later this year. However, weaker-than-forecast data would reinforce concerns about slowing growth and likely weigh on the currency. With the ECB having left interest rates unchanged yesterday while maintaining a cautious but potentially hawkish outlook, today’s PMI figures are expected to be the key catalyst for EUR pairs during the European session.

Central Bank Notes:

• The Governing Council kept all three key interest rates unchanged at its 22–23 July meeting, maintaining the deposit facility at 2.25%, the main refinancing operations rate at 2.40%, and the marginal lending facility at 2.65%. The ECB reiterated that monetary policy will remain meeting-by-meeting and data-dependent, with no pre-commitment to a future rate path.
• The euro area economy continues to expand at a modest pace, with growth expected to remain below trend but resilient. While domestic demand and the labor market continue to provide support, elevated uncertainty, higher energy prices, and weaker external demand are expected to limit the pace of expansion through the second half of 2026.
• Balance-sheet normalization continues as planned. The APP and PEPP portfolios continue to decline predictably as the Eurosystem no longer reinvests maturing securities. The ECB has indicated that liquidity conditions remain orderly and that it stands ready to preserve the smooth transmission of monetary policy if necessary.
• Inflation risks remain tilted to the upside. Renewed volatility in oil and natural gas prices following geopolitical tensions in the Middle East could keep headline inflation above the ECB’s 2% target for longer. Policymakers are closely monitoring the persistence of energy-driven inflation, wage developments, and any potential second-round effects.
• The ECB is expected to maintain a cautious policy stance into August. Future policy decisions will continue to depend on incoming inflation data, wage growth, underlying inflation measures, credit conditions, and the effectiveness of monetary policy transmission. While markets see the possibility of further tightening later in the year if inflation remains persistent, the ECB has not committed to additional rate increases.
• For the euro (EUR), the outlook remains balanced. Stable ECB policy provides support, but renewed energy-price shocks and global risk sentiment may generate two-way volatility. The euro could strengthen if euro-area inflation remains sticky or economic data outperform expectations, while weaker growth or a more hawkish Federal Reserve could weigh on the currency.
• Euro-area bond markets are expected to remain sensitive to inflation expectations and geopolitical developments. Front-end yields should remain relatively anchored while the ECB stays on hold, whereas longer-dated yields will continue to respond to energy-price developments, inflation expectations, and global risk sentiment.

​The next meeting is on 9 to 10 September 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 is trading under pressure today as global currency markets continue to favor the U.S. dollar amid stronger safe-haven demand for USD, elevated geopolitical uncertainty, and differences in central bank expectations. The CHF has recently weakened against the dollar, with USD/CHF trading around the 0.8170 area, reflecting continued dollar strength and reduced demand for traditional safe-haven currencies such as the franc.

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

Retail Sales m/m (6:00 am GMT)

Flash Manufacturing PMI (6:00 am GMT)

Flash Services PMI (6:00 am GMT)

What can we expect from GBP today?

The British pound is trading with a cautious tone today as markets focus on the latest UK economic data, particularly the Flash PMI releases shown on the calendar. The key event for sterling is the UK Flash Manufacturing PMI (forecast: 52.0 vs previous 52.5) and Flash Services PMI (forecast: 49.4 vs previous 48.8). A services PMI reading below 50 would indicate contraction, which could weigh on GBP by raising concerns about economic momentum, while a stronger-than-expected result could support the pound by reducing expectations of further monetary easing.

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 Bearish

The Canadian Dollar (CAD)

Key news events today

No major news event

What can we expect from CAD today?

The Canadian dollar (CAD) is trading with a slightly positive bias today, supported by stronger domestic data, firm crude oil prices, and improved sentiment toward Canada’s export sector. The latest retail sales figures showed continued consumer resilience, with Canadian retail sales rising 1.0% in May and preliminary June data pointing to another increase, helping ease concerns about a sharp economic slowdown. The stronger consumer data has provided some support for the loonie, with USD/CAD trading around the 1.4070–1.4080 area, indicating modest CAD strength..
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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?

Crude oil remains strongly supported by geopolitical supply risks, with prices trading near multi-month highs as concerns grow over disruptions to global energy routes. The main driver today is renewed tension in the Middle East, particularly risks around key shipping lanes after attacks on oil tankers in the Red Sea and escalating regional conflict. Brent crude recently pushed above the $100 per barrel level, while WTI also gained sharply as traders priced in the possibility of tighter global supply.

Next 24 Hours Bias
Strong Bullish

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