IC Markets Global – Europe Fundamental Forecast | 05 May 2026
What happened in the Asia session?
Heightening geopolitical tensions following reports of a US-Iran military confrontation, which significantly impacted market sentiment and key financial instruments. Investors reacted to the instability with a flight to safety, putting pressure on risk assets while bolstering safe-haven commodities and the US dollar. Major equity markets showed sensitivity to these developments as traders assessed the potential for further energy shocks and inflationary pressures emanating from the Middle East.
What does it mean for the Europe & US sessions?
traders should be alert to Middle‑East‑driven oil‑price volatility above 110 USD on Brent, which is reinforcing a risk‑off tilt into European and US open, while the main trading catalysts will be the final US ISM services and composite PMIs plus JOLTS figures; these data points will shape odds on the Fed’s path and, in turn, volatility in equities, the dollar, and inflation‑sensitive sectors across both sessions.
The Dollar Index (DXY)
Key news events today
ISM Services PMI (2:00 pm GMT)
JOLTS Job Openings (2:00 pm GMT)
New Home Sales (2:00 pm GMT)
New Home Sales (Feb Data)
What can we expect from DXY today?
The US dollar is consolidating with a slight uptick today, trading around 98.3–98.4 on the Dollar Index as safe‑haven demand and elevated oil prices support its value, even as month‑on‑month and year‑on‑year momentum remains mildly negative amid a cautious Fed and elevated geopolitical risk in the Strait of Hormuz.
Central Bank Notes:
- The Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate target range steady at 3.50%–3.75% at its April 28–29, 2026, meeting, as oil prices remain elevated around $108 per barrel for Brent crude amid ongoing US-Israel tensions with Iran, alongside surging inflation from energy shocks, further delaying any 2026 rate cuts potentially beyond September.
- The Committee continues to pursue maximum employment and 2% inflation goals, with the labor market showing mixed signals as nonfarm payrolls rose by 178,000 in March 2026—beating lowered expectations but driven partly by strike reversals—and the unemployment rate edged down to 4.3% from 4.4% in February.
- Officials face heightened risks from geopolitical tensions, soaring oil prices, and accelerating inflation, with CPI jumping to 3.3% year-over-year in March 2026 from 2.4% in February due to a 10.9% monthly energy surge, headline PCE pressured higher, and core PCE estimates around 3.1% or more.
- Economic activity continues to cool after robust Q4 2025 growth near 5%, with the Atlanta Fed GDPNow estimating Q1 2026 growth at 1.3% amid softer consumer spending, strike impacts, and labor data despite some resilience.
- March 2026’s Summary of Economic Projections forecasts 2026 unemployment at a median around 4.4%, GDP growth revised higher, and core PCE up to 2.7%, with the dot plot still signaling one cut in 2026 to a median 3.25%–3.50% funds rate amid softer labor but inflation upticks.
- The Committee maintains its data-dependent stance amid a mixed labor market, inflation well above target from oil shocks, and geopolitical risks, likely holding rates at 3.50%-3.75% with persistent divisions and hawkish tones on cuts.
- The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to manage reserves amid post-2025 balance sheet adjustments.
- The FOMC continues its adjusted quantitative tightening, with Treasury rolloff caps at $5 billion per month and agency MBS at $35 billion per month to ensure ample reserves post-2025 program adjustments.
- The next meeting is scheduled for 16 to 17 June 2026.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
ISM Services PMI (2:00 pm GMT)
JOLTS Job Openings (2:00 pm GMT)
New Home Sales (2:00 pm GMT)
New Home Sales (Feb Data)
What can we expect from Gold today?
Gold traded lower, hovering around the mid‑$4,500s per ounce after a roughly 2% drop from Monday’s close, as markets price in continued “higher‑for‑longer” U.S. rates and elevated energy‑driven inflation. Despite this near‑term pullback, prices remain sharply higher year‑on‑year and are still supported by strong central‑bank demand and geopolitical risk, with several major banks maintaining multi‑thousand‑dollar price targets into late 2026.
Next 24 Hours Bias
Medium earish
The Euro (EUR)
Key news events today
ECB President Lagarde Speaks (12:30 pm GMT)
What can we expect from EUR today?
The Euro maintains mild gains near 1.1730 against the dollar, buoyed by the ECB’s recent decision to hold rates steady while signaling possible June hikes amid surging 3% inflation and oil-driven pressures from Middle East conflicts. Key data releases today on trade, retail sales, and PPI are poised to influence sentiment, as analysts forecast EUR/USD climbing to 1.18 quarterly on hawkish ECB expectations despite US trade tensions.
Central Bank Notes:
- The Governing Council of the ECB is expected to keep the three key interest rates unchanged at its 28–29 May 2026 meeting, with the main refinancing rate near 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%.
- Headline HICP inflation is likely to remain in the 2.0–2.3% range in the early months of 2026, with the March 2026 ECB staff baseline projecting an average of 2.6% for 2026, 2.0% for 2027, and 2.1% for 2028.
- The updated Eurosystem staff projections for 2026 paint a picture of persistent inflation overshoot, with headline inflation averages of around 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028, compared with about 1.9–2.1% earlier outlooks.
- Real GDP growth is projected at about 0.9% in 2026, 1.3% in 2027, and 1.4% in 2028, implying around 0.2–0.3% quarter‑on‑quarter expansion in Q2 2026, consistent with the resilience observed at the end of 2025.
- The euro area unemployment rate is expected to stay near 6.4%, with strong labour‑force participation and modest wage pressures underpinning consumption resilience.
- The Governing Council continues to stress a meeting‑by‑meeting, data‑dependent approach, focusing on the path of inflation, the functioning of monetary‑policy transmission, and the impact of external shocks (geopolitical, energy, and trade‑policy related).
- Balance‑sheet normalization proceeds smoothly, with the APP and PEPP wind‑downs completed and the remaining stock of longer‑dated assets being allowed to run off without significant liquidity shortages.
The next meeting is on 10 to 11 June 2026
Next 24 Hours Bias
Weak Bullish
The Swiss Franc (CHF)
Key news events today
CPI m/m (6:30 am GMT)
What can we expect from CHF today?
The Swiss Franc shows modest strength against the USD today, with the USD/CHF pair trading around 0.7840, up slightly by 0.21% amid ongoing safe-haven flows driven by US-Iran tensions in the Strait of Hormuz. No major Swiss economic data releases are scheduled for May 5, 2026, though the April Unemployment Rate (expected around the previous 3.0%) is due early at 03:00 AM US Eastern Time, potentially influencing sentiment if it deviates.
Central Bank Notes:
- At its monetary policy assessment on 19 March 2026, the Swiss National Bank (SNB) is widely expected to leave the policy rate unchanged at 0%, continuing the extended pause since September 2025, as the Governing Board considers current settings adequate to keep inflation near the target without resorting to negative rates.
- Inflation data since December indicate persistent weakness, with headline CPI hovering around 0% year-on-year through early 2026 and core measures subdued at roughly 0.4%, underscoring limited price pressures and lingering, though contained, deflation risks.
- The SNB’s updated conditional inflation forecast shows minimal change from December, with averages of about 0.2% in 2025 (now complete), 0.3% in 2026, and 0.6% in 2027 under a steady 0% policy rate. However, recent flat CPI readings may slightly lower near-term expectations, preserving scope for further easing if needed.
- Global conditions remain challenging, marked by U.S. tariff escalations under President Trump, subdued external demand, and uncertainties in major export markets such as Europe and the U.S., prompting the SNB to exercise caution despite resilient Swiss domestic activity.
- Sentiment in manufacturing and export sectors stays soft amid franc appreciation and weaker foreign orders, squeezing margins. Yet, overall GDP growth is expected to be around 1.5% in 2026, with unemployment edging up modestly from historic lows.
- The SNB reaffirms its readiness to intervene via rate cuts or FX operations should deflationary pressures intensify, while emphasizing clear communication through detailed meeting minutes and coordination with global partners on currency matters.
The next meeting is on 18 June 2026.
Next 24 Hours Bias
Strong Bullish
The Pound (GBP)
Key news events today
No major news event
What can we expect from GBP today?
The British Pound is trading around $1.3527 against the U.S. Dollar and approximately 1.1574 against the Euro. Following recent Bank of England (BoE) policy announcements, the currency has maintained a firm position, having successfully cleared the 1.35 resistance level on the back of favorable central bank differentials. Market sentiment currently reflects optimism regarding the Pound’s relative strength.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) met on 29 April 2026, maintaining the Bank Rate at 3.75 per cent, with the decision details published on 30 April 2026 alongside the quarterly Monetary Policy Report. This hold follows the unanimous 9-0 vote at the prior 18 March 2026 meeting, amid persistent energy shocks from the Middle East conflict overriding earlier cut expectations. No specific vote split for April is detailed yet, but consensus previews anticipated a hold.
- Quantitative tightening (QT) continues unchanged at the 2025 pace for gilt holdings reductions, supporting balance-sheet normalization while monitoring liquidity and maintaining restrictiveness against ongoing shocks.
- Headline CPI inflation rose to 3.3% in March 2026 from energy and motor fuel surges due to Middle East tensions, expected to stay between 3% and 3.5% through the summer, well above the 2% target. The April Monetary Policy Report outlines scenarios with inflation peaking over 3.5% by the end of 2026 in the baseline before easing below 2% in three years, or higher at 6%+ in adverse cases requiring tighter policy.
- UK growth outlook weakens further into Q2-Q3 2026 amid energy-driven cost pressures, rising unemployment risks, and softening confidence, with prior pay growth cooling now vulnerable to business pass-throughs.
- Global risks from Middle East conflict persist, fueling energy/commodity volatility and sterling/gilt fluctuations; MPC views direct impacts as containable if demand slackens to curb secondary inflation effects.
- Inflation risks remain upward-biased due to energy persistence, potential wage embedding, and shock duration uncertainty, balanced against downside from economic slack and labor market softening.
- The MPC maintains a data-dependent stance, with policy still restrictive; the April Report provides fuller shock analysis, but no easing is signaled, yet members monitor for 2% sustainability, with Governor Bailey emphasizing vigilance.
- The next meeting is on 18 June 2026.
Next 24 Hours Bias
Medium Bullish
The Canadian Dollar (CAD)
Key news events today
No major news event
What can we expect from CAD today?
The Canadian dollar is edging slightly lower on Tuesday, as the US dollar regains some ground on geopolitical concerns and safe‑haven flows, even though strong oil prices continue to support the loonie. The currency is trading in a narrow band around mid‑1.35 on USD/CAD after four consecutive weekly gains, with markets awaiting Canadian labour data and Bank of Canada guidance to clarify whether the CAD can extend its recovery or remain range‑bound amid elevated Middle East risks and stable‑to‑hawkish US rate expectations.
Central Bank Notes:
- The Governing Council held the overnight rate target steady at 2.25% at its 28-29 April 2026 meeting, matching consensus expectations and prolonging the policy pause as inflation trends firmer toward target. The Bank highlighted lingering global headwinds from Middle East tensions and U.S. tariff escalations under Trump, but confirmed the stance continues fostering disinflation amid moderating energy volatility.
- U.S. trade frictions and geopolitical strains persist in dampening sentiment, yet Canadian manufacturing PMI strengthened further in expansion, driven by robust export orders tied to sustained energy demand. Goods exports, anchored by crude oil, maintained strength through March, countering subdued capex as businesses emphasize operational buffers over expansion.
- Economic growth extended into Q2 2026 at roughly 2.1% annualized, sustaining Q1’s momentum via resource shipments, public spending, and industrial recovery. March preliminary figures suggest resilient expansion, tempered slightly by seasonal factors and lingering supply disruptions.
- Services PMI rose deeper into expansion territory, with gains across tech, leisure, and professional services; consumer segments showed firmer footing from wage gains, despite elevated prices curbing non-essentials. The Bank views this breadth as signaling a balanced, sustainable upturn.
- National housing resales climbed modestly in March alongside stable prices, supported by steady rates and regional affordability pockets, as inventory accumulation in key markets avoids sharp imbalances. Policymakers expect gradual softening, underpinned by sound lending standards and consistent household dynamics.
- Headline CPI held near 2.0% year-over-year in March 2026 prints, within the target band, with core metrics like CPI-trim and median easing to around 2.5% on easing food, goods, and partial shelter relief. This bolsters confidence in inflation’s durable path to 2%.
- Officials affirmed 2.25% appropriately positions the economy for 2% inflation stability and orderly rebalancing, with cuts off the table absent growth or price setbacks. Focus shifts to Q2 momentum, core trends, and trade/geopolitical developments ahead of June.
- The next meeting is on 10 June 2026.
Next 24 Hours Bias
Weak Bullish
Oil
Key news events today
API Crude Oil Stock ( 8:30 pm GMT)
What can we expect from Oil today?
Global oil markets are experiencing significant upward pressure today as regional security threats in the Middle East escalate, specifically concerning the safety of energy infrastructure and shipping routes. While production quotas have been increased by OPEC+, the market remains reactive to news of military strikes and trade disputes between major world powers. Investors are closely monitoring the potential for supply disruptions as the Strait of Hormuz continues to be a focal point of global energy security concerns.
Next 24 Hours Bias
Strong Bullish
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