IC Markets Europe Fundamental Forecast | 19 June 2025
What happened in the Asia session?
After contracting in the second and third quarters of 2024 to suffer a technical recession, New Zealand’s economy rebounded in the final quarter to expand 0.7% quarter-on-quarter (QoQ), surpassing the market’s expected 0.4% growth. This expansion, the largest since late 2021, was primarily driven by higher output in sectors such as agriculture, forestry, and fishing, rental, hiring, and real estate services, and manufacturing. This rebound in higher economic activity continued in the first quarter of this year, with an expansion of 0.8% QoQ, exceeding market estimates of a 0.7% increase. Economic activity increased across all three major industry groups, with the strongest gains seen in manufacturing, followed by professional, scientific, technical, administrative, and support services, and agriculture, forestry, and fishing.
After surging by 89,000 in April to set a new record of 14.6 million workers in Australia, employment growth unexpectedly declined in May as 2,500 jobs were lost. Not only did the recent figures mark the second month of decline in 2025, but they also missed the forecast of a 20,600 gain by a wide margin. Meanwhile, the unemployment rate remained unchanged at 4.1% for the fifth consecutive month.
What does it mean for the Europe & US sessions?
The Swiss National Bank (SNB) is widely anticipated to reduce its key policy rate by 25 basis points, from 0.25% to neutral, at today’s monetary policy announcement. This would mark the sixth consecutive board meeting where this central bank has cut rates to stimulate economic growth. SNB Chairman Martin Schlegel’s press conference will commence half an hour after the release of the monetary policy statement – an event which could inject even higher volatility for the Swiss franc.
After reducing the Official Bank Rate by 25 basis points at May’s monetary policy meeting, the Bank of England (BoE) is now expected to keep rates unchanged at 4.25%. This would mark the second pause this year as this central bank adopts a “wait-and-see” approach. Increased global uncertainty due to U.S. tariffs and weakening global growth has murkied the economic outlook and set a challenging environment for central banks to navigate through.
The Dollar Index (DXY)
Key news events today
Juneteenth Independence Day (Bank Holiday)
What can we expect from DXY today?
All major U.S. financial markets, including the NYSE, Nasdaq, and bond markets, along with U.S. banks, are fully closed on Thursday in observance of the Juneteenth National Independence Day holiday. In addition, energy and metal futures markets will have an early close – oil and gold futures will close at 5:30 pm GMT and 6:30 pm GMT, respectively.
Central Bank Notes:
- The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 18 June 2025.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run; uncertainty around the economic outlook has diminished but remains elevated.
- The Committee is attentive to the risks to both sides of its dual mandate and judges that the unemployment rate remains low, labour market conditions remain solid, but inflation is somewhat elevated.
- Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace.
- GDP growth forecasts were revised downward for 2025 (1.4% vs. 1.7% in the March projection) while PCE inflation projections have been adjusted higher for 2025, with core inflation expected to reach 3.1% (vs. 2.8% in the March projection), partly due to tariff-related pressures.
- In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
- Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25B to $5B while maintaining the monthly redemption cap on agency debt and agency mortgage-backed securities at $35B.
- The next meeting is scheduled for 29 to 30 July 2025.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
Juneteenth Independence Day (Bank Holiday)
What can we expect from Gold today?
All major U.S. financial markets, including the NYSE, Nasdaq, and bond markets, along with U.S. banks, are fully closed on Thursday in observance of the Juneteenth National Independence Day holiday. In addition, energy and metal futures markets will have an early close – oil and gold futures will close at 5:30 pm GMT and 6:30 pm GMT, respectively.
Next 24 Hours Bias
Weak Bullish
The Australian Dollar (AUD)
Key news events today
Labour Force Report (1:30 am GMT)
What can we expect from AUD today?
After surging by 89,000 in April to set a new record of 14.6 million workers in Australia, employment growth unexpectedly declined in May as 2,500 jobs were lost. Not only did the recent figures mark the second month of decline in 2025, but they also missed the forecast of a 20,600 gain by a wide margin. Meanwhile, the unemployment rate remained unchanged at 4.1% for the fifth consecutive month.
Central Bank Notes:
- The RBA reduced its cash rate by 25 basis points (bps), bringing it down to 3.85% on 20 May, following a pause on 1 April.
- Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
- Data on inflation for the March quarter provided further evidence that inflation continues to ease. At 2.9%, annual trimmed mean inflation was below 3% for the first time since 2021 and headline inflation, at 2.4%, remained within the target band of 2 to 3%.
- While recent tariff announcements have resulted in a rebound in financial market prices, there is still considerable uncertainty about the final scope of the tariffs and policy responses in other countries, contributing to a weaker outlook for growth, employment and inflation in Australia.
- Private domestic demand appears to have been recovering, real household incomes have picked up and there has been an easing in some measures of financial stress. However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices.
- At the same time, a range of indicators suggests that labour market conditions remain tight. Employment is continuing to grow, measures of labour underutilisation are at relatively low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers.
- Looking through quarterly volatility, wage growth has softened over the past year or so but productivity growth has not picked up and growth in unit labour costs remains high.
- There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments. While the central projection is for growth in household consumption to continue to increase as real incomes rise, recent data suggest that the pick-up will be a little slower than was expected three months ago.
- There is a risk that any pick-up in consumption is even slower than this, resulting in continued subdued growth in aggregate demand and a sharper deterioration in the labour market than currently expected.
- With inflation expected to remain around target, the Board therefore judged that an easing in monetary policy at this meeting was appropriate, assessing that this move would make monetary policy somewhat less restrictive.
- The Board will be attentive to the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
- The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
- The next meeting is on 8 July 2025.
Next 24 Hours Bias
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
GDP (10:45 pm GMT 18th June)
What can we expect from NZD today?
After contracting in the second and third quarters of 2024 to suffer a technical recession, New Zealand’s economy rebounded in the final quarter to expand 0.7% quarter-on-quarter (QoQ), surpassing the market’s expected 0.4% growth. This expansion, the largest since late 2021, was primarily driven by higher output in sectors such as agriculture, forestry, and fishing, rental, hiring, and real estate services, and manufacturing. This rebound in higher economic activity continued in the first quarter of this year, with an expansion of 0.8% QoQ, exceeding market estimates of a 0.7% increase. Economic activity increased across all three major industry groups, with the strongest gains seen in manufacturing, followed by professional, scientific, technical, administrative, and support services, and agriculture, forestry, and fishing.
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 25 basis points bringing it down to 3.25% on 28 May, marking the sixth consecutive rate cut.
- The Committee stated that annual consumer price index inflation increased to 2.5% in the first quarter of 2025 while inflation expectations across firms and households have also risen.
- However, core inflation is declining and there is spare productive capacity in the economy; these conditions are consistent with inflation returning to the mid-point of the 1 to 3% target band over the medium term.
- The New Zealand economy is recovering after a period of contraction as high commodity prices and lower interest rates are supporting overall economic activity but recent developments in the international economy are expected to reduce global economic growth.
- Both tariffs and increased policy uncertainty overseas are expected to moderate New Zealand’s economic recovery and reduce medium-term inflation pressures. However, there remains considerable uncertainty around these judgements.
- Labour market conditions remain weak while the unemployment rate is expected to peak this quarter at 5.2%.
- Inflation is within the target band, and the Committee is well placed to respond to domestic and international developments to maintain price stability over the medium term.
- The next meeting is on 9 July 2025.
Next 24 Hours Bias
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Following the hawkish tilt by the Federal Reserve at its latest FOMC meeting, demand for the yen could weaken to provide a lift for USD/JPY. This currency pair was floating around 145 as Asian markets came online on Thursday, and it could edge higher as the day progresses.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 17 June, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:
- The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
- The Bank will continue its plan to reduce the amount of its monthly outright purchases of JGBs. The scheduled amount of monthly long-term government bond purchases will, in principle, be reduced by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, aiming for a level of around ¥2 trillion in January to March 2027.
- Japan’s economy, while showing some weak movements in certain areas, is recovering moderately. Overseas economies, though partly exhibiting weakness due to the effects of various countries’ trade policies, are generally growing at a moderate pace. Exports and industrial production, while showing some last-minute demand due to the U.S. tariff increases, are basically moving sideways.
- On the price front, looking at the year-on-year rate of change in consumer prices (excluding fresh food), the rate is currently in the mid-3% range, reflecting continued pass-through of wage increases to sales prices, as well as the effects of past rises in import prices and recent increases in food prices such as rice. Expected inflation rates are rising moderately.
- As for consumer prices (excluding fresh food), the effects of past import price increases and recent rises in food prices such as rice, which have pushed up inflation so far, are expected to wane. During this period, the underlying rate of increase in consumer prices may stagnate somewhat due to the slowdown in growth pace.
- Looking ahead, the Japanese economy is expected to slow its growth pace, as overseas economies decelerate due to the effects of various countries’ trade policies, putting downward pressure on Japanese corporate profits, etc., although accommodative financial conditions will provide some support. Thereafter, as overseas economies return to a moderate growth path, Japan’s growth rate is expected to increase.
- As the growth rate rises, labour shortages intensify, and medium- to long-term expected inflation rates rise, inflation is expected to gradually increase. In the latter half of the projection period in the “Outlook Report,” inflation is expected to move at a level generally consistent with the “price stability target”.
- There are various risk factors, but in particular, the outlook for the development of trade policies in various countries and the resulting uncertainty regarding overseas economic and price trends is extremely high. It is necessary to closely monitor the impact on financial and foreign exchange markets, as well as on Japan’s economy and prices.
- The next meeting is scheduled for 31 July 2025.
Next 24 Hours Bias
Weak Bullish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
Wednesday’s final report for consumer inflation in the Euro Area showed no change from its flash estimates, with headline CPI moderating from an annual rate of 2.2% in the prior month to 1.9% in May, while the core reading eased quite significantly from 2.7% to 2.3%. With inflationary pressures continuing to dissipate further, the Euro faced near-term headwinds post-CPI release and continued to slide lower following a ‘hawkish’ FOMC outcome.
Central Bank Notes:
- The Governing Council reduced the three key ECB interest rates by 25 basis points on 5 June to mark the seventh successive rate cut.
- Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.15%, 2.40% and 2.00% respectively.
- Inflation is currently at around the Governing Council’s 2% medium-term target. In the baseline of the new Eurosystem staff projections, headline inflation is set to average 2.0% in 2025, 1.6% in 2026 and 2.0% in 2027. The downward revisions compared with the March projections, by 0.3 percentage points for both 2025 and 2026, mainly reflect lower assumptions for energy prices and a stronger euro. Staff expect inflation excluding energy and food to average 2.4% in 2025 and 1.9% in 2026 and 2027, broadly unchanged since March.
- Staff see real GDP growth averaging 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027. The unrevised growth projection for 2025 reflects a stronger-than-expected first quarter combined with weaker prospects for the remainder of the year. While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term.
- Higher real incomes and a robust labour market will allow households to spend more. Together with more favourable financing conditions, this should make the economy more resilient to global shocks. Wage growth is still elevated but continues to moderate visibly, and profits are partially buffering its impact on inflation.
- The Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target. Especially in current conditions of exceptional uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.
- The Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission, and it is not pre-committing to a particular rate path.
- The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
- The next meeting is on 24 July 2025.
Next 24 Hours Bias
Medium Bearish
The Swiss Franc (CHF)
Key news events today
SNB Interest Rate Decision (7:30 am GMT)
SNB Press Conference (8:00 am GMT)
What can we expect from CHF today?
The Swiss National Bank (SNB) is widely anticipated to reduce its key policy rate by 25 basis points, from 0.25% to neutral, at today’s monetary policy announcement. This would mark the sixth consecutive board meeting where this central bank has cut rates to stimulate economic growth. SNB Chairman Martin Schlegel’s press conference will commence half an hour after the release of the monetary policy statement – an event which could inject even higher volatility for the Swiss franc.
Central Bank Notes:
- The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.50% to 0.25% on 20 March 2025, marking the fifth consecutive reduction.
- Underlying inflationary pressure has decreased further this quarter.
- Inflation in the period since the last monetary policy assessment has again been lower than expected, decreasing from 0.7% in November to 0.3% in February, primarily due to lower electricity prices.
- In the shorter term, the new conditional inflation forecast is slightly higher than December: 0.3% for Q2 2025, 0.4% for 2025 overall, and 0.8% for 2026 and 2027, based on the assumption that the SNB policy rate remains at 0.25% over the entire forecast horizon.
- GDP growth in Switzerland remains moderate, with the services sector continuing to show slightly stronger growth, while manufacturing faces challenges.
- The SNB anticipates GDP growth of around 1.0% to 1.5% for 2025.
- The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
- The next meeting is on 19 June 2025.
Next 24 Hours Bias
Medium Bullish
The Pound (GBP)
Key news events today
BoE Interest Rate Decision (11:00 am GMT)
What can we expect from GBP today?
After reducing the Official Bank Rate by 25 basis points at May’s monetary policy meeting, the Bank of England (BoE) is now expected to keep rates unchanged at 4.25%. This would mark the second pause this year as this central bank adopts a “wait-and-see” approach. Increased global uncertainty due to U.S. tariffs and weakening global growth has murkied the economic outlook and set a challenging environment for central banks to navigate through.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5 to 4 to reduce the Bank Rate by 25 basis points (bps), bringing it down to 4.25% on 8 May 2025.
- Two members preferred a larger cut of 50 bps, while two opted to hold rates steady at 4.5%.
- The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
- Progress on disinflation in domestic price and wage pressures is generally continuing. Twelve-month CPI inflation fell to 2.6% in March from 2.8% in February, close to expectations in the February Report.
- Although indicators of pay growth remain elevated, a significant slowing is still expected over the rest of the year.
- Wholesale energy prices have fallen back since the February Report. Previous increases in energy prices are still likely to drive up CPI inflation from April onwards, to 3.5% for 2025 Q3, but is expected to fall back thereafter.
- Underlying UK GDP growth is judged to have slowed since the middle of 2024 and has been much less volatile than growth in headline GDP – growth was expected to have been around zero in 2025 Q1, well below Bank staff’s projection for headline growth of 0.6%.
- Underlying employment growth has also softened recently and the labour market has continued to loosen. The ratio of vacancies to unemployment has fallen further and is now judged to be below its equilibrium level – the impact of higher Employers’ National Insurance Contributions (NICs) on employment appears to have been fairly small to date.
- Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate and it will continue to monitor closely the risks of inflation persistence and what the evolving evidence may reveal about the balance between aggregate supply and demand in the economy.
- Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
- The next meeting is on 19 June 2025.
Next 24 Hours Bias
Medium Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
A pick-up in demand for the greenback lifted USD/CAD overnight following the hawkish tilt by the Federal Reserve at its latest FOMC meeting. This currency pair rose above the 1.3700 handle at the beginning of Thursday’s Asia session, and it should remain elevated. However, rising oil prices could provide some headwinds for USD/CAD.
Central Bank Notes:
- The Bank of Canada maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% on 4th June – marking the second consecutive meeting where rates were kept on hold.
- The Governing Council noted that the ongoing increase and decrease of various U.S. tariffs, coupled with highly uncertain outcomes of bilateral trade negotiations and tariff rates remaining well above their levels at the beginning of 2025, placed downside risks on growth and lifted inflation expectations, warranting caution regarding the continuation of monetary easing.
- The higher uncertainty stemmed from the absence of a clear tariff path by the U.S. and persistent threats of new trade actions, which prompted the BoC Governing Council to highlight risks such as the extent to which higher US tariffs reduce demand for Canadian exports.
- Canada’s economic growth in the first quarter came in at 2.2%, slightly stronger than the original forecast, while the composition of GDP growth was largely as expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence.
- Housing activity was down, driven by a sharp contraction in resales, while government spending also declined. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued.
- The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9% while CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6%.
- The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up, while recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs.
- The Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs while proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy.
- The Governing Council will focus on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval by supporting economic growth while ensuring that inflation remains well-controlled.
- The next meeting is on 30 July 2025.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
No major news events
What can we expect from Oil today?
Just like the API stockpiles, the EIA crude oil inventories also registered their fourth week of higher drawdowns, which is typically a sign of stronger U.S. demand for crude. A whopping 11.5 million barrels of crude were taken from storage, exceeding the expected draw of 2.3 million by a wide margin. WTI oil futures reached an overnight high of $74.27 per barrel before easing slightly. Prices pulled back as traders weighed the probabilities of a U.S. intervention in peace talks between Israel and Iran. WTI futures hovered around $73.30 during Asia trading hours on Thursday.
Next 24 Hours Bias
Weak Bullish
