IC Trading Europe Fundamental Forecast | 1 April 2025 | IC Trading

IC Trading Europe Fundamental Forecast | 1 April 2025

What happened in the Asia session?

The Caixin China General Manufacturing PMI rose to 51.2 in March, up from February’s 50.8, surpassing expectations of 51.1. This marked the highest reading since last November, with output growth accelerating due to a sustained rise in new orders amid improved demand conditions. Additionally, foreign sales grew the most in 11 months while firms boosted their buying levels in response to a renewed rise in stock purchases. This stronger-than-anticipated PMI report could provide a further lift to oil prices – WTI oil edged towards $72 per barrel by midday in Asia.

The Reserve Bank of Australia (RBA) maintained its cash rate at 4.1% this morning, in line with market expectations, retaining borrowing costs unchanged after a 25-basis point reduction in the February meeting. This central bank expressed growing confidence that inflation is moving sustainably toward the midpoint of its 2 to 3% target range, as higher interest rates have helped bring aggregate demand and supply closer to balance. However, the RBA also highlighted an uncertain economic outlook for both domestic activity and inflation. There is a risk that any pick-up in consumption may be softer than expected, resulting in continued subdued growth and a sharper deterioration in the labour market than currently anticipated. Globally, risks remain significant, driven by geopolitical and policy uncertainties, such as the US tariffs. The Aussie rose strongly following the announcement and looks set to hit the 0.6300-mark as the day progresses.

What does it mean for the Europe & US sessions?

The final Manufacturing PMI report is all but certain to show this sector contracting since mid-2022 while consumer inflation remains persistently sticky, leading to a mixed set of results. The euro could be whipsawed during the European trading hours but a hot CPI print could lift this currency pair higher.

Manufacturing activity in the U.K. dropped to 44.6 in March from 46.9 in the previous month, below forecasts of 46.4. This flash reading pointed to the sixth straight month of worsening conditions in the manufacturing sector, pushing the index to its lowest since late 2023. Manufacturing production fell the most since October 2023 and there was also a steep export-led downturn in overall sales. The final PMI report is anticipated to show an unchanged reading of 44.6 and deteriorating conditions could weigh on the pound before the start of the European trading hours.

After expanding strongly from September of 2024 to January 2025, manufacturing activity in Canada unexpectedly contracted in February as it fell to 47.8, missing market forecasts of 51.9. This preliminary result pointed to the first decline in factory activity since August of last year and the sharpest since December 2023, pressured by contractions in both output and new orders. Firms noted that clients adopted a cautious approach due to uncertainty around trade policies between Canada and the U.S., driving new export orders to drop the most since September. The final PMI report is all but certain to cement contraction for this sector and potentially create headwinds for the Loonie during the U.S. session later today.

The Dollar Index (DXY)

Key news events today

ISM Manufacturing PMI (2:00 pm GMT)

JOLTS Job Opening (2:00 pm GMT)

What can we expect from DXY today?

Key U.S. macroeconomic data released today will provide deep insights into the state of the manufacturing sector and the labour market. The Institute for Supply Management (ISM) has reported a return to expansion for the manufacturing sector in January and February but the ongoing backdrop of trade policy uncertainties could weigh on economic growth. The forecasts for March point to a slowdown in output, falling back into contraction with an estimate of 49.5. Meanwhile, the JOLTS job openings could also slide lower as growth concerns linger.

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 19 March 2025
The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run but uncertainty around the economic outlook has increased; the Committee is attentive to the risks to both sides of its dual mandate.
Recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
GDP growth forecasts were revised downward for 2025 (1.7% vs. 2.1% in the December projection) while PCE inflation projections have been adjusted slightly higher for 2025, with core inflation expected to reach 2.5%, 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 is 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 6 to 7 May 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Key news events today

ISM Manufacturing PMI (2:00 pm GMT)

JOLTS Job Opening (2:00 pm GMT)

What can we expect from Gold today?

Next 24 Hours Bias

Strong Bullish

The Australian Dollar (AUD)

Key news events today

RBA Rate Statement (3:30 am GMT)

RBA Press Conference (4:30 am GMT)

What can we expect from AUD today?

Central Bank Notes:

The RBA maintained the cash rate at 4.10% on 1 April, following a 25-basis point reduction on 18 February.
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.
Recent information suggests that underlying inflation continues to ease in line with the most recent forecasts published in the February Statement on Monetary Policy.
Private domestic demand appears to be 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 suggest that labour market conditions remain tight. Despite a decline in employment in February, 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. Wage pressures have eased a little more than expected but productivity growth has not picked up and growth in unit labour costs remains high.
There are notable uncertainties about the outlook for domestic economic activity and inflation. The central projection is for growth in household consumption to continue to increase as income growth rises. But there is a risk that any pick-up in consumption is slower than expected, resulting in continued subdued output growth and a sharper deterioration in the labour market than currently expected.
Uncertainty about the outlook abroad also remains significant. On the macroeconomic policy front, recent announcements from the U.S. on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures. Geopolitical uncertainties are also pronounced.
The Board’s assessment is that monetary policy remains restrictive and the continued decline in underlying inflation is welcome, but there are nevertheless risks on both sides and the Board is cautious about the outlook.
The Board will rely upon the data and the evolving assessment of risks to guide its decisions and is resolute in its determination to sustainably return inflation to target and will do what is necessary to achieve that outcome.
The next meeting is on 20 May 2025.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The Kiwi will likely be influenced by the direction of the Aussie today as the Reserve Bank of Australia (RBA) announces its interest rate decision at its board meeting. Higher volatility should be expected for this currency pair during the Asian trading hours.

Central Bank Notes:

The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 3.75% on 19 February, marking the fourth consecutive rate cut.
The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band; inflation expectations are at target and core inflation continues to fall towards the target mid-point.
Economic activity in New Zealand remains subdued and with spare productive capacity, domestic inflation pressures continue to ease. Price and wage-setting behaviours are adapting to a low-inflation environment while the price of imports has fallen, also contributing to lower headline inflation.
Economic growth is expected to recover during 2025 as lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions. Higher prices for some key commodities and a lower exchange rate will increase export revenues and employment growth is expected to pick up in the second half of the year as the domestic economy recovers.
Global economic growth is expected to remain subdued in the near term as geopolitics, including uncertainty about trade barriers, is likely to weaken global growth. Global economic activity is also likely to remain fragile over the medium term given increasing geoeconomic fragmentation.
Consumer price inflation is expected to be volatile in the near term, due to a lower exchange rate and higher petrol prices. Nevertheless, the Committee is well placed to maintain price stability over the medium term.
The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the Committee confidence to continue lowering the OCR. If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.
The next meeting is on 9 April 2025.

Next 24 Hours Bias

Medium Bullish

The Japanese Yen (JPY)

Key news events today

Manufacturing PMI (12:30 am GMT)

What can we expect from JPY today?

The manufacturing downturn in Japan deepened in March as output and new orders both fell solidly while a modest rise in staff numbers supported further decline in backlogs. Not only did this sector record its ninth consecutive month of contraction, but manufacturing conditions deteriorated at the strongest pace for a year. Despite another month of deteriorating PMI activity, the yen strengthened on Tuesday with USD/JPY falling towards 149.50. Global trade policy uncertainties could be a driver for safe-haven flows, triggering demand for the yen.

Central Bank Notes:

The Policy Board of the Bank of Japan decided on 19 March, by a unanimous vote, to maintain the following guidelines for money market operations for the inter-meeting period:
1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
2. The Bank will continue its plan to reduce the amount of its monthly outright purchases of JGBs, aiming to reach about 3 trillion yen by January-March 2026.
Japan’s economy has continued to recover moderately, with some sectors showing improvement. Exports and industrial production have remained relatively stable, while corporate profits continue on an improving trend and business sentiment maintains a favourable level.
The employment and income situation has shown moderate improvement, with private consumption on a moderately increasing trend despite ongoing impacts from price rises.
On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been in the range of 3.0-3.5% recently. Services prices continue to rise moderately, reflecting factors such as wage increases, while the effects of cost pass-through from past import price rises have diminished.
Inflation expectations have continued to rise moderately, with underlying CPI inflation gradually increasing toward the price stability target of 2%. The virtuous cycle between wages and prices continues to strengthen, with businesses increasingly reflecting higher costs in selling prices.
Japan’s economy is expected to maintain growth above its potential rate, supported by moderately growing overseas economies and the intensifying virtuous cycle from income to spending, underpinned by accommodative financial conditions.
The next meeting is scheduled for 19 June 2025.

Next 24 Hours Bias

Medium Bearish

The Euro (EUR)

Key news events today

Manufacturing PMI (8:00 am GMT)

CPI (9:00 am GMT)

What can we expect from EUR today?

Central Bank Notes:

The Governing Council reduced the three key ECB interest rates by 25 basis points on 6 March to mark the fifth 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 2.65%, 2.90% and 2.50% respectively.
The Council acknowledged that monetary policy was becoming meaningfully less restrictive, easing borrowing costs for businesses and households with inflation projected to average 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027, while core inflation also neared the 2% target.
Although domestic inflation remains elevated due to delayed wage and price adjustments, wage growth is moderating.
Economic growth forecasts were revised downward to 0.9% for 2025 and 1.2% for 2026, reflecting weak exports and investment.
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 ECB remains data-dependent and will adjust its policy as needed to ensure inflation stabilizes around its 2% medium-term target without committing to a specific rate path.
The next meeting is on 17 April 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

Retail Sales (6:30 am GMT)

What can we expect from CHF today?

Consumer spending in Switzerland increased at an annual rate of 1.3% in January, softer than market expectations of a 1.6% gain. This marked the weakest growth in retail trade activity since last June when the retail sales fell 3%, as sales moderated for categories such as food, beverages & tobacco; non-food products; and service stations. The forecasts for February point to a slight improvement with sales anticipated to rise 1.5% YoY. Demand for the franc could pick up should consumer spending jump in the latest report.

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

Weak Bullish

The Pound (GBP)

Key news events today

Manufacturing PMI (8:30 am GMT)

What can we expect from GBP today?

Central Bank Notes:

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to maintain the Bank Rate at 4.50% on 19 March 2025, while one member preferred to reduce it by 25 basis points (bps).
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.
Twelve-month CPI inflation increased to 3.0% in January from 2.5% in December, slightly higher than expected in the February Report; domestic price and wage pressures are moderating, but remain somewhat elevated.
Although global energy prices have fallen back recently, they remain higher than last year and CPI inflation is still projected to rise to around 3.75% in 2025 Q3. While CPI inflation is expected to fall back thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures.
While UK GDP growth estimates have been slightly stronger than expected at the time of the February Monetary Policy Report, business survey indicators generally continue to suggest weakness in growth and particularly in employment intentions. In recent quarters, subdued activity has been judged to reflect both demand and supply factors.
The labour market had continued to ease, although it was still judged to be broadly in balance – some indicators of employment intentions had deteriorated markedly, to levels consistent with shrinking employment while other indicators, such as the number of vacancies, had not weakened to the same extent.
Domestic price and wage pressures were moderating, but remained somewhat elevated. A range of indicators suggested that underlying pay growth had eased further in recent months, although annual growth in private sector regular average weekly earnings had picked up to 6.1% in the three months to January.
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 8 May 2025.

Next 24 Hours Bias

Medium Bullish

The Canadian Dollar (CAD)

Key news events today

Manufacturing PMI (1:30 pm GMT)

What can we expect from CAD today?

Central Bank Notes:

The Bank of Canada reduced its target for the overnight rate by 25 basis points bringing it down to 2.75% on 12 March; this marked the seventh consecutive meeting where rates were reduced.
The bank announced its plan to complete the normalization of its balance sheet, ending quantitative tightening, and will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.
The Governing Council noted that the economy grew more than expected in the fourth quarter of last year, spurred by past rate cuts but growth is now expected to slow at the turn of the year due to increasing trade conflict with the United States.
Employment growth strengthened in November through January and the unemployment rate declined to 6.6%. In February, job growth stalled. While past interest rate cuts have boosted demand for labour in recent months, there are warning signs that heightened trade tensions could disrupt the recovery in the jobs market. Meanwhile, wage growth has shown signs of moderation.
Inflation remains close to the 2% target. The temporary suspension of the GST/HST lowered some consumer prices, but January’s CPI was slightly firmer than expected at 1.9%. Inflation is expected to increase to about 2½% in March with the end of the tax break. The Bank’s preferred measures of core inflation remain above 2%, mainly because of the persistence of shelter price inflation. Short-term inflation expectations have risen in light of fears about the impact of tariffs on prices.
While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing U.S. tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest.
While monetary policy cannot offset the impacts of a trade war, the Governing Council will carefully 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.
The Council will also be closely monitoring inflation expectations and is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
The next meeting is on 16 April 2025.

Next 24 Hours Bias

Weak Bullish

Oil

Key news events today

Caixin Manufacturing PMI (1:45 am GMT)

What can we expect from Oil today?

Oil prices surged nearly 3% on Monday as supply concerns rose following U.S. President Donald Trump’s threats to impose further tariffs on Russia as well as planning a possible attack on Iran. Heightened geopolitical risks propelled WTI oil to hit an overnight high of $71.83 per barrel, climbing to a 5-week high. Meanwhile, The Caixin China General Manufacturing PMI rose to 51.2 in March, up from February’s 50.8, surpassing expectations of 51.1. This marked the highest reading since last November, with output growth accelerating due to a sustained rise in new orders amid improved demand conditions. Additionally, foreign sales grew the most in 11 months while firms boosted their buying levels in response to a renewed rise in stock purchases. This stronger-than-anticipated PMI report could provide a further lift to oil prices – WTI oil edged towards $72 per barrel by midday in Asia.

Next 24 Hours Bias

Medium Bullish

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