{"id":89476,"date":"2026-08-31T18:07:47","date_gmt":"2026-08-31T08:07:47","guid":{"rendered":"https:\/\/ic.com\/blog\/?p=89476"},"modified":"2026-08-31T18:09:15","modified_gmt":"2026-08-31T08:09:15","slug":"ic-europe-fundamental-forecast-31-august-2026","status":"publish","type":"post","link":"https:\/\/ic.com\/blog\/ic-europe-fundamental-forecast-31-august-2026\/","title":{"rendered":"IC &#8211; Europe Fundamental Forecast | 31 August 2026"},"content":{"rendered":"\n<p><strong>IC &#8211; Europe Fundamental Forecast | 31 August 2026<\/strong><strong><br \/><\/strong><\/p>\n\n\n\n<p><strong>What happened in the Asia session?<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>The Asia session was dominated by a risk-off environment, with oil bullish, Asian equities bearish, and the yen volatile. For traders, the key themes to monitor into the European and U.S. sessions are whether the Hormuz conflict escalates further, whether Brent can sustain levels around $90+, and how markets continue to price the Fed and BoJ given the combination of higher energy prices, inflation risks and currency intervention concerns.<br \/><br \/><strong>What does it mean for the Europe &amp; US sessions?<\/strong><strong><br \/><\/strong><br \/>European and U.S. markets are entering the week with a strong risk-off bias as escalating U.S.\u2013Iran tensions push oil higher and reignite inflation concerns. Brent around $90.60, combined with Kevin Warsh&#8217;s hawkish Fed stance, is supporting the U.S. dollar and Treasury yields while putting pressure on equities and gold. Traders should pay particular attention to oil&#8217;s reaction to developments around the Strait of Hormuz, EUR\/USD ahead of Eurozone inflation data, and USD\/JPY around the 160 level.<br \/><br \/><strong>The Dollar Index (DXY)<\/strong><\/p>\n\n\n\n<p><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>No major news event<br \/><br \/><strong>What can we expect from DXY today?<\/strong><\/p>\n\n\n\n<p>The US dollar is starting the week on firmer footing, with the Dollar Index (DXY) holding near a two-week high after Federal Reserve Chair Kevin Warsh adopted a more hawkish tone on inflation. Markets are now pricing roughly a 57% probability of a September Fed rate hike, compared with expectations earlier in August that rates would remain unchanged through year-end. The shift has pushed the 2-year Treasury yield to around 4.33%, supporting the dollar.<br \/><br \/><em>Central Bank Notes:<\/em><\/p>\n\n\n\n<ul>\n<li>The Federal Open Market Committee (FOMC) kept the federal funds rate unchanged at 3.50%\u20133.75% at its July 28\u201329, 2026, meeting, marking the fifth consecutive meeting without a policy change. The Committee voted 9\u20133 to maintain rates, with three members dissenting in favor of a 25-basis-point rate hike, highlighting growing concern among some policymakers that inflation remains too high.<\/li>\n\n\n\n<li>The Committee reaffirmed its dual mandate of maximum employment and price stability. Officials noted that the labor market remains resilient, with job gains broadly keeping pace with labor force growth and the unemployment rate remaining relatively stable. The FOMC continues to view employment conditions as consistent with a healthy economy while remaining vigilant for signs of labor market weakening.<\/li>\n\n\n\n<li>Inflation remains the Committee&#8217;s primary concern. While some recent inflation data have shown moderation, overall price pressures remain above the Fed&#8217;s 2% target. Policymakers emphasized that elevated inflation continues to be driven in part by higher energy prices and persistent supply-side pressures, leading the Committee to maintain a restrictive monetary policy stance.<\/li>\n\n\n\n<li>Economic activity continues to expand at a solid pace despite elevated uncertainty. Strong productivity growth, business investment, and continued spending related to artificial intelligence remain supportive of economic growth. However, the FOMC acknowledged that geopolitical tensions, particularly developments affecting global energy markets, continue to pose risks to both inflation and the broader economic outlook.<\/li>\n\n\n\n<li>The July meeting highlighted increasing divisions within the Committee. Three policymakers\u2014Beth Hammack, Neel Kashkari, and Lorie Logan\u2014voted against the majority, preferring an immediate rate increase. This unusually large number of dissents reflects growing concern among some officials that inflation could remain persistent and may require additional policy tightening if progress stalls.<\/li>\n\n\n\n<li>Chair Kevin Warsh reiterated that future policy decisions will remain strictly data-dependent. He avoided providing explicit forward guidance, emphasizing that upcoming decisions will depend on incoming inflation, employment, and growth data. Warsh also stressed that the Committee remains fully committed to returning inflation to its 2% objective and is prepared to act if inflationary pressures intensify.<\/li>\n\n\n\n<li>The FOMC continues its balance sheet normalization program without changes. The Federal Reserve will maintain Treasury runoff caps at $5 billion per month and agency mortgage-backed securities (MBS) runoff caps at $35 billion per month, while continuing to ensure ample reserves remain available within the banking system.<\/li>\n\n\n\n<li>The next meeting is scheduled for 15 to 16&nbsp; September 2026.<\/li>\n<\/ul>\n\n\n\n<p><strong>Next 24 Hours Bias<\/strong><br \/>Medium Bullish<\/p>\n\n\n\n<p><strong>Gold (XAU)<\/strong><strong><br \/><\/strong><strong><br \/><\/strong><strong>Key news events today<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from Gold today?<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>Gold&#8217;s short-term bias is bearish\/corrective, with profit-taking and higher U.S. yields weighing on prices, but the broader fundamental picture remains supportive because of geopolitical uncertainty and longer-term demand for safe-haven assets. Traders should watch the $4,400 area closely; holding above it could allow gold to stabilize and attempt another recovery, while a sustained break below it could open the door to a deeper correction. Gold remains up more than 9% over the past month, highlighting how strong the preceding rally has been.<\/p>\n\n\n\n<p><strong>Next 24 Hours Bias&nbsp; &nbsp; <\/strong><strong><br \/><\/strong>Strong Bearish<\/p>\n\n\n\n<p><strong>The Euro (EUR)<\/strong><\/p>\n\n\n\n<p><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>German Prelim CPI m\/m ( All Day)<\/p>\n\n\n\n<p><strong>What can we expect from EUR toda<\/strong>y?<br \/><br \/>Rising eurozone inflation and growing expectations of an ECB rate hike are supportive for the currency, while renewed geopolitical tensions and higher oil prices could keep inflation elevated. However, the euro faces strong competition from the dollar after the Fed adopted a more hawkish tone. For <a href=\"http:\/\/U.S. Stock Futures Slip as Iran Tensions Send Oil Prices Higher\" title=\"\">EUR\/USD <\/a>traders, the 1.16 area remains important, with European inflation and Friday&#8217;s U.S. jobs report likely to determine whether the euro can resume its upward trend or undergo a deeper pullback.<\/p>\n\n\n\n<p><br \/><em>Central Bank Notes:<\/em><\/p>\n\n\n\n<ul>\n<li>The Governing Council kept all three key interest rates unchanged at its 22\u201323 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.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>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&#8217;s 2% target for longer. Policymakers are closely monitoring the persistence of energy-driven inflation, wage developments, and any potential second-round effects.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>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.<\/li>\n<\/ul>\n\n\n\n<p>\u200bThe next meeting is on 9 to 10 September 2026<\/p>\n\n\n\n<p><strong>Next 24 Hours Bias<\/strong><br \/>Weak Bullish<\/p>\n\n\n\n<p><strong>The Swiss Franc (CHF)<\/strong><strong><br \/><\/strong><\/p>\n\n\n\n<p><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from CHF today?<\/strong><strong><br \/><\/strong><br \/>The franc enters Monday with a supportive backdrop from geopolitical uncertainty and renewed demand for defensive currencies. However, the SNB&#8217;s 0% policy rate and its willingness to counter excessive CHF appreciation could limit the currency&#8217;s upside. For traders, USD\/CHF around 0.8090 and EUR\/CHF around 0.9364 are important levels to monitor. Continued geopolitical escalation would favour CHF strength, while easing tensions or stronger U.S. economic data could trigger a rebound in USD\/CHF.<br \/><br \/><em>Central Bank Notes:<\/em><\/p>\n\n\n\n<ul>\n<li>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.<\/li>\n\n\n\n<li>Inflation remains exceptionally subdued in Switzerland. Recent data show consumer price growth staying comfortably within the SNB&#8217;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.<\/li>\n\n\n\n<li>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&#8217;s decision to maintain rates at current levels.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>Swiss economic activity remains resilient but modest. GDP growth is expected to remain around 1\u20131.5% in 2026, supported by domestic demand, although manufacturing and export-oriented sectors continue to face challenges from a strong franc and softer foreign demand.<\/li>\n\n\n\n<li>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.<\/li>\n<\/ul>\n\n\n\n<p><br \/>The next meeting is on 24 September 2026.<\/p>\n\n\n\n<p><strong>Next 24 Hours Bias<\/strong><br \/>Weak Bearish<\/p>\n\n\n\n<p><strong>The Pound (GBP)<\/strong><strong><br \/><\/strong><strong><br \/><\/strong><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from GBP today?<br \/><br \/><\/strong>The<a href=\"https:\/\/www.tradingview.com\/symbols\/GBPUSD\/?exchange=ICMARKETS\" title=\"\"> pound&#8217;s<\/a> earlier strength was supported by solid UK economic data and expectations that persistent inflation could eventually force the BoE to keep rates higher. However, markets have recently reduced expectations for a 2026 rate hike, while a more hawkish Federal Reserve is strengthening the U.S. dollar. At the same time, higher oil prices caused by the Iran conflict could keep UK inflation elevated.<\/p>\n\n\n\n<p><em>Central Bank Notes:<\/em><\/p>\n\n\n\n<ul>\n<li>The Bank of England\u2019s Monetary Policy Committee (MPC) met on 29\u201330 July 2026, with the decision and updated Monetary Policy Report scheduled for publication on 30 July. The previous meeting in June resulted in a 7\u20132 vote to maintain the Bank Rate at 3.75%, with Megan Greene and Huw Pill voting for a 25-basis-point increase to 4.00%. The July meeting is particularly important because it includes a new Monetary Policy Report and updated economic projections.<\/li>\n\n\n\n<li>UK inflation has continued to move closer to the Bank\u2019s 2% target. CPI inflation fell to 2.6% in June 2026, from 2.8% in May, while core CPI remained at 2.6%. Services inflation also eased from 3.7% to 3.6%, suggesting that underlying domestic price pressures are gradually moderating. Nevertheless, services inflation remains above the 2% target and continues to be an important consideration for the MPC.<\/li>\n\n\n\n<li>The inflation outlook remains complicated by energy-market developments. The earlier Middle East energy shock pushed inflation higher and created uncertainty around the speed at which inflation would return sustainably to target. Although energy prices have fallen from their earlier peaks, they remain elevated relative to pre-conflict levels. The MPC therefore continues to monitor the potential for energy costs to feed into wages, services prices and inflation expectations.<\/li>\n\n\n\n<li>The UK economy remains relatively subdued, with weak demand and signs of cooling in the labour market weighing against the upside inflation risks. The combination of slower economic activity and easing inflation creates a difficult policy balance for the MPC: keeping rates restrictive for too long could weaken growth further, while easing policy prematurely could allow persistent domestic inflation pressures to return.<\/li>\n\n\n\n<li>Wage growth and services inflation remain key risks for monetary policy. Although headline CPI has fallen substantially from earlier 2026 levels, the MPC is likely to remain cautious until there is greater evidence that domestic inflation pressures are sustainably declining. The moderation in services inflation to 3.6% is encouraging, but it remains above levels consistent with the Bank\u2019s 2% inflation target.<\/li>\n\n\n\n<li>Quantitative tightening (QT) remains part of the Bank\u2019s broader monetary-policy framework. The MPC continues reducing the stock of UK government bonds held for monetary-policy purposes through its balance-sheet reduction programme. At the June meeting, the stock of government bonds held for monetary-policy purposes stood at approximately \u00a3522 billion.<\/li>\n\n\n\n<li>The policy outlook remains highly data-dependent. With inflation moving lower but services inflation and wage pressures still elevated, the MPC faces a delicate balance between maintaining sufficiently restrictive policy and avoiding unnecessary damage to economic growth. Market participants had previously placed substantial probability on the Bank Rate remaining at 3.75% through the July meeting, although expectations for later meetings showed greater uncertainty, including the possibility of rate increases if inflation proves persistent.<\/li>\n\n\n\n<li>The next meeting is on 17 September 2026.<br \/><br \/><strong>Next 24 Hours Bias<\/strong><strong><br \/><\/strong>Weak Bearish<\/li>\n<\/ul>\n\n\n\n<p><strong><br \/><\/strong><strong><br \/><\/strong><strong>The Canadian Dollar (CAD)<\/strong><strong><br \/><\/strong><strong><br \/><\/strong><strong>Key news events today<\/strong><strong><br \/><\/strong><strong><br \/><\/strong>No major news event<\/p>\n\n\n\n<p><strong>What can we expect from CAD today?<\/strong><\/p>\n\n\n\n<p>The Canadian dollar enters Monday caught between higher oil prices, which favor CAD, and a stronger U.S. dollar\/Fed-hawkishness, which favor USD. For forex traders, USD\/CAD and crude oil will be the key markets to monitor, with upcoming Canadian and U.S. economic data potentially determining whether the recent USD\/CAD recovery continues or reverses.<br \/>\u200b<br \/>Central Bank Notes:<\/p>\n\n\n\n<ul>\n<li>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\u2019s view that the current stance remains appropriately restrictive to return inflation sustainably to the 2% target over the projection horizon while balancing two\u2011sided risks.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>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\u20132.5% 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.<\/li>\n\n\n\n<li>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\u20112024. 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\u2011related and some service sectors.<\/li>\n\n\n\n<li>Headline CPI has drifted above 2% and was around 3.2% year\u2011over\u2011year 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\u2011term 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.<\/li>\n\n\n\n<li>High\u2011frequency indicators point to continued expansion in manufacturing and exports into early summer, with Purchasing Managers\u2019 Index readings still in positive territory, supported by solid energy\u2011sector activity and demand for intermediate goods. However, surveys indicate that firms\u2019 capex intentions remain cautious in light of trade uncertainty and past weakness in domestic demand, suggesting investment may recover only gradually.<\/li>\n\n\n\n<li>Credit growth remains moderate, and bank lending spreads and deposit pricing show limited additional pass\u2011through from recent global rate moves, keeping domestic financial conditions relatively stable. Mortgage rates remain somewhat elevated compared with pre\u2011tightening levels but have been broadly unchanged in recent months, contributing to a measured moderation in housing activity rather than an abrupt adjustment.<\/li>\n\n\n\n<li>The next meeting is on 2 September 2026.<\/li>\n<\/ul>\n\n\n\n<p><strong>Next 24 Hours Bias<\/strong><br \/>Weak Bullish<\/p>\n\n\n\n<p><strong>Oil<\/strong><strong><br \/><\/strong><strong><em><br \/><\/em><\/strong><strong>Key news events today<\/strong><\/p>\n\n\n\n<p>No major news event<br \/><strong><br \/><\/strong><strong>What can we expect from Oil today?<\/strong><\/p>\n\n\n\n<p>The renewed U.S.-Iran confrontation around the Strait of Hormuz has pushed Brent back toward $90, with WTI above $85, as traders price a greater risk of prolonged supply disruption. The key level to watch is $90 on Brent: sustained trading above it could open the way toward $95 and potentially $100 if tensions worsen or shipping through Hormuz deteriorates further. Conversely, a credible de-escalation between the U.S. and Iran or a meaningful recovery in tanker traffic could trigger profit-taking and pull crude back below $90. For today&#8217;s session, geopolitical headlines and developments around Hormuz should remain the dominant drivers of oil volatility.<br \/><br \/><strong>Next 24 Hours Bias<\/strong><strong><br \/><\/strong>Medium Bullish<\/p>\n\n\n\n<p><strong>Risk Warning:<\/strong>&nbsp;Trading in securities involves significant risk. Prices may fluctuate and securities can become entirely valueless. You may incur losses that exceed your potential profits, and in some cases, losses may exceed the amount you have deposited. Securities, futures, options, and contracts for differences are complex financial instruments and are not suitable for all investors. Engaging in such transactions requires a sound understanding of the associated risks. Please read and ensure you fully understand our&nbsp;<a href=\"https:\/\/cdn.ic.com\/uploads\/FSA\/Risk_Disclosure_Notice_FSA.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Risk Disclosure<\/a>.<\/p>\n\n\n\n<p>Our leverage is dynamic and may change at any time. Such changes may affect your positions and margin requirements. You are responsible for monitoring your positions and maintaining sufficient margin at all times<\/p>\n","protected":false},"excerpt":{"rendered":"<p>IC &#8211; Europe Fundamental Forecast | 31 August 2026 What happened [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":84955,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[196,215,339],"tags":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/posts\/89476"}],"collection":[{"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/comments?post=89476"}],"version-history":[{"count":3,"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/posts\/89476\/revisions"}],"predecessor-version":[{"id":89504,"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/posts\/89476\/revisions\/89504"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/media\/84955"}],"wp:attachment":[{"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/media?parent=89476"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/categories?post=89476"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ic.com\/blog\/wp-json\/wp\/v2\/tags?post=89476"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}