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USD/JPY is now dipping towards the 143.00 mark for the first time in a little over two weeks. The pair is now down 0.7% on the day at 143.03 as sellers keep the run going after the moves yesterday. Meanwhile, we are seeing USD/CHF fall closer towards 0.7900 as well as it continues to lack a floor below the 0.8000 mark. From earlier: Dollar beaten down at month-end but now the real test begins

GBP/USD is also seen up 0.2% to 1.3760 but the commodity currencies are not too much changed against the dollar at least. USD/CAD is down 0.1% to 1.3598 with AUD/USD marginally higher at 0.6584 on the day. That said, the latter is well off its earlier low of 0.6553 so that puts things into context for the session.

The only non-mover of sorts is EUR/USD which is flattish at 1.1780 currently. The pair is sandwiched between two large option expiries today but I reckon ECB policymaker de Guindos’ remarks on the euro here is also holding some weight. It’s a case of the police is watching so you probably don’t want to be stepping on the gas pedal and going too far, too fast.

This article was written by Justin Low at www.forexlive.com.

• Prior 49.4

The reading is just a marginal improvement to May but it reaffirms some added stabilisation to the manufacturing sector in the euro area this year at least. The pick up in sentiment in Germany is the most notable but we’ll have to see if this can carry over to the second half of the year. HCOB notes that:

“There are signs of some stabilization in the manufacturing sector. Companies have now expanded production slightly for
the fourth month in a row, order intake has ceased to fall, and slightly longer delivery times also indicate that demand is
picking up a bit. Against the backdrop of numerous uncertainties – US tariffs, the crisis in the Middle East, and Russia’s
ongoing war against Ukraine – this can certainly be seen as a sign of resilience. However, it also has to do with the fact that,
after years of recession, the economic cycle usually turns at some point because old machines need to be replaced, cars
can no longer be repaired, and the necessary modernization of factory buildings can’t be postponed any further.

“Encouragingly, four of the eight eurozone countries where the PMI survey is conducted are now in expansion territory.
Germany is not one of them, but the situation here has nevertheless improved somewhat. However, France, Italy, and
Austria are putting the brakes on the eurozone’s growth, as their downturn has recently deepened. If Germany enters the
growth zone, which we believe is likely given the new government’s growth package, among other things, these countries
could receive a positive boost, as Germany is their most important export destination.

“A relatively high degree of optimism can be observed among manufacturers. In June, this indicator rose to its highest level
since February 2022. This improved sentiment is partly due to Germany, where expectations of producing more in one year
than today have risen to a 40-month high. The mood has also improved in Spain, while confidence has declined somewhat
in France and Italy. This is in line with the general environment, as there is growth in Spain, while the manufacturing sector
is shrinking in France and Italy.”

This article was written by Justin Low at www.forexlive.com.

• Prior 34k
• Unemployment rate 6.3% vs 6.4% expected
• Prior 6.3%

German unemployment rose by less than expected in June as the jobless rate held steady at 6.3%. The number of unemployed persons is seen increasing to 2.97 million in adjusted terms. That figure is slowly approaching the 3 million mark, which will be for the first time in roughly a decade.

This article was written by Justin Low at www.forexlive.com.

• Prior was 48.3

Key findings:

• Business expectations highest since February 2022

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Signs of a recovery, albeit a somewhat sluggish one, are increasing. Production rose for the fourth month in a row,
especially in the capital goods sector in June, and order intakes have also picked up recently. The strength of the recovery is
somewhat called into question by the accelerated pace of job cuts and the steeper reduction in inventories of raw materials
and intermediate goods. The latter, however, may be the result of companies underestimating demand and therefore having
to draw more than usual on existing stocks of inputs for production. Overall, the headline PMI is pointing upward and is on
the verge of crossing into expansion territory.

“It is encouraging that new orders have risen three times in the past four months. In June, impulses came from both abroad
and domestically. It is therefore not only the pull-forward effects of US importers seeking to pre-empt higher tariffs that are
providing some tailwinds for German industry, but also domestic demand, which is gradually showing signs of life again.

“Purchasing prices have been falling month after month for around two-and-a-half years. However, competition has ensured
that customers of German manufacturers have also been benefiting from lower prices for most of the past two years. The
discounting appears to be somewhat less pronounced in sales prices, however, which suggests that profit margins in
industry have risen.

“The manufacturing sector is looking to the future with a great deal of confidence. While the mood in autumn last year was
very subdued, a large number of companies now consider it likely that production will increase over the next twelve months.
There is clearly some hope here that the new government will soon deliver on its promises to stimulate the economy.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 49.8

A marginal revision higher but it still points to a renewed downturn in the French manufacturing sector to wrap up Q2. Falling new orders amid muted demand conditions remain the main concern as it has been since last year. HCOB notes that:

“Over the course of 2025, the headline HCOB PMI for France’s manufacturing sector had shown a marked improvement,
edging closer to the expansion threshold by May. However, this positive momentum came to a halt in June, with the
headline manufacturing index declining for the first time this year. The deterioration can largely be attributed to two key
subcomponents. First, output contracted again after two consecutive months of modest growth, with several panellists citing
persistent weakness in the automotive sector as a contributing factor. Second, domestic demand—which had exhibited a
clear recovery trend since the beginning of the year—saw a notable loss of momentum in June. As a result, the fragile
recovery path of French manufacturing has suffered a significant setback. The key question now is whether this represents a
temporary correction or the premature end of a hard-won rebound.

“Looking ahead, there are still reasons for cautious optimism. Despite the decline in the headline index, future output
expectations continued to improve in June, extending their upward trajectory. This optimism likely reflects a combination of
factors: the European Central Bank’s recent monetary easing, planned increases in defence-related investment, and EUlevel initiatives aimed at reducing regulatory burdens. Labour market dynamics, however, remain subdued. The employment
subindex has hovered around the neutral 50 mark for the fourth consecutive month, suggesting stagnation in industrial hiring
activity.

“Price developments present a mixed picture. Output prices declined marginally for the fourth month in a row, likely reflecting
ongoing competitive pressures. At the same time, input prices remained above the growth threshold, indicating continued
cost increases. This divergence is placing further pressure on firms’ profit margins.”

This article was written by Justin Low at www.forexlive.com.

• Prior 42.1

The improvement comes amid a notable jump in both the output and new orders. That said, the outlook remains tentative with 60% of firms expecting an increase in protectionist measures over the next 12 months. Here’s the detailed breakdown of the report:

This article was written by Justin Low at www.forexlive.com.

• Prior 50.5

That’s the best reading for the year so far as the Spanish manufacturing sector posts modest growth towards the end of Q2. There was an improvement in output with orders also increasing for the first time since January. HCOB notes that:

“June brought slight improvements in Spain’s manufacturing sector, as indicated by the HCOB headline PMI. Throughout the
year, the sector has hovered around the 50-point threshold, suggesting a lack of clear direction following a strong
performance in 2024. The recent uptick may mark the early stages of a potential recovery, though sustained momentum in
the coming months will be crucial to confirm a more durable trend.

“Looking ahead, several factors could support the sector: interest rate cuts by the ECB, planned EU-level efforts to reduce
regulatory burdens – particularly benefiting the automotive industry – and new NATO spending targets calling for defence
budgets to rise to 5% of GDP by 2035. Spain, however, has secured an exemption: as long as it can meet the required
military capabilities with fewer resources, it will not be held to the full spending target. Nonetheless, external risks remain.
U.S. trade policy and its indirect effects could weigh on Spain’s export outlook. Nevertheless, sentiment among industrial
firms has improved. The subindex for future output rose again in June and now exceeds its historical average.

“The nascent recovery in Spain’s manufacturing sector is currently being driven by a stronger order book and increased
production activity. To meet rising production needs, firms have increasingly drawn on existing inventories. However, caution
persists in the procurement of inputs, suggesting that the recovery has yet to gain sufficient breadth and depth to trigger a
broader investment cycle.

“On the pricing side, the downward trend continues. Input prices have declined, largely due to the stronger euro, which has
made imports more affordable and eased cost pressures. Should the Middle East conflict escalate further, rising oil prices
could reverse this trend and exert upward pressure on input costs. For now, falling input prices are feeding through to output
prices. Firms report declining sales prices, citing competitive pressures as a key driver.”

This article was written by Justin Low at www.forexlive.com.

• Symmetric 2% goal should remain ECB’s primary guide.
• New times call for vigorous policies at key moments.
• New times call for patience in temporary events.

These are just token remarks but it highlights the commitment to the 2% target and patience as they gather more information throughout the summer.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• We have to watch very carefully for consequences of inflation.
• Labour market is softening.
• Path of interest rates will continue to be gradually downwards.
• A major change is needed for upturn in productivity.
• Next big tech change should help productivity.
• We’ve seen a steepening of the long term bond yield curve.
• I don’t think there’s anything unusual about the UK in terms of the yield curve.
• There will be no sustained growth without stable low inflation.

There’s nothing new here from Bailey as he just reaffirms the gradual easing with a keen eye on inflation persistence.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Eurostoxx +0.1%
• Germany DAX +0.2%
• France CAC 40 +0.1%
• UK FTSE +0.3%
• Spain IBEX +0.2%
• Italy FTSE MIB -0.2%

There’s not much in it after we move on from wrapping up month-end and quarter-end trade yesterday. US futures are also looking more tepid, with S&P 500 futures down 0.1%. Just around the corner, we’ll be getting the US jobs report on Thursday and that will be one that investors will watch out for to start the new month.

This article was written by Justin Low at www.forexlive.com.

Global Markets:

•  Asian Stock Markets : Nikkei down 1.34%, Shanghai Composite up 0.39%, Hang Seng down 0.87% ASX down 0.01%
• Commodities : Gold at $3341.35 (1.49%), Silver at $36.08 (0.19%), Brent Oil at $66.8 (0.19%), WTI Oil at $65.18 (0.13%)
• Rates : US 10-year yield at 4.211, UK 10-year yield at 4.483, Germany 10-year yield at 2.576

News & Data:

• (USD) Chicago PMI 40.4  to 42.7 expected

Markets Update:

Asia-Pacific markets traded mixed on Tuesday as investors weighed Wall Street’s record gains against global concerns over U.S. President Donald Trump’s tariff policies. His 90-day tariff reprieve is set to expire next week, adding to uncertainty. U.S. Treasury Secretary Scott Bessent noted that while some countries are “negotiating in good faith,” tariffs could still “spring back” to the levels announced on April 2 if talks fail.

Mainland China’s CSI 300 rose 0.18% in its final hour of trade. China’s Caixin/S&P Global manufacturing PMI for June came in at 50.4, better than the 49 forecast by Reuters. In Japan, the Nikkei 225 fell 1.24% after hitting an 11-month high in the previous session, while the Topix declined 0.74%. South Korea’s Kospi gained 0.58%, and the Kosdaq rose 0.28%. Australia’s S&P/ASX 200 ended flat at 8,451.10. India’s Nifty 50 and BSE Sensex were also little changed. Hong Kong markets remained closed for a public holiday.

U.S. stock futures slipped in Asian hours after two of Wall Street’s key indexes posted record closes on Monday. The S&P 500 rose 0.52% to 6,204.95, the Nasdaq gained 0.47% to 20,369.73, and the Dow advanced 0.63% to 44,094.77. Canada dropped its digital services tax to ease tensions after Trump ended trade talks with Ottawa.

Upcoming Events: 

• 02:00 PM GMT – USD ISM Manufacturing PMI
• 02:00 PM GMT – USD JOLTS Job Openings

The post Tuesday 1st July 2025: Asia-Pacific Markets Mixed as Wall Street Hits Records and Tariff Uncertainty Looms first appeared on IC Markets | Official Blog.

IC Markets Europe Fundamental Forecast | 1 July 2025

What happened in the Asia session?

Manufacturing activity in Japan returned to expansion for the first time since May 2024 with a reading of 50.1. June’s figure edged higher from 49.4 in the previous month, but it fell short of the market forecasts of 50.4. Despite production output rising for the first time in ten months, demand conditions remained subdued as sales declined further. However, employment continued its upward trend as confidence grew around the outlook for the year ahead. Demand for the yen resumed on Monday as USD/JPY fell over 0.5% as Asian markets came online on Tuesday – this currency pair fell under 143.50 during this session.

What does it mean for the Europe & US sessions?

Key Swiss macroeconomic data will be released before the start of the European trading hours on Tuesday. Economic growth was anticipated to slow in the second quarter of this year, and that impact could be reflected in the latest reports for consumer spending and the manufacturing sector. A weak set of results will certainly pave the way for a seventh successive rate cut at the upcoming central bank meeting in September.

Manufacturing activity in the U.K. is expected to contract for the ninth consecutive month with a reading of 47.7 for June, a slight improvement from May’s figure of 46.4. Despite the improvement, this sector continued to face headwinds, with manufacturers reporting another decline in export orders, largely driven by the impact of U.S. tariffs, heightened geopolitical uncertainty, and strong global price competition. Output also fell solidly during June, while total new work from abroad dropped for the eighth straight month. However, the rate of decline in export sales eased to the slowest in five months, suggesting some stabilisation. Despite another month of deterioration for the manufacturing sector, the Pound will likely remain bid due to the ongoing sell-off in the greenback.

The final manufacturing report for the Euro Area is expected to show an unchanged reading of 49.4, the same as the flash report as well as the prior month’s reading. This sector has remained in contraction since the second half of 2022, but that has not weighed on the Euro in 2025. This currency pair continues to remain buoyed due to the U.S. dollar falling heavily out of favour with investors and traders alike. Meanwhile, consumer inflation is expected to remain somewhat unchanged in July, based on preliminary data. With the universal 10% tariffs effective since April, the path forward for inflation could be more ‘bumpy’ than originally anticipated.

The Dollar Index (DXY)

Key news events today

Fed Chair Powell’s Speech (1:30 pm GMT)

ISM Manufacturing PMI (2:00 pm GMT)

JOLTS Job Openings (2:00 pm GMT)

What can we expect from DXY today?

Federal Reserve Chairman Jerome Powell will be participating in a panel discussion titled “Policy Panel” at the ECB Forum on Central Banking in Sintra alongside his fellow counterparts from the E.U., the U.K. and Japan, followed by the release of the ISM Manufacturing PMI and JOLTS Job Openings reports. The combination of central bank chiefs speaking and key U.S. macroeconomic data are likely to inject higher volatility not only for the greenback but also for the broader financial markets.

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 Bearish

Gold (XAU)

Key news events today

Fed Chair Powell’s Speech (1:30 pm GMT)

ISM Manufacturing PMI (2:00 pm GMT)

JOLTS Job Openings (2:00 pm GMT)

What can we expect from Gold today?

Federal Reserve Chairman Jerome Powell will be participating in a panel discussion titled “Policy Panel” at the ECB Forum on Central Banking in Sintra alongside his fellow counterparts from the E.U., the U.K. and Japan, followed by the release of the ISM Manufacturing PMI and JOLTS Job Openings reports. The combination of central bank chiefs speaking and key U.S. macroeconomic data are likely to inject higher volatility not only for gold but also for the broader financial markets. After falling as low as $3,247.54/oz, spot prices rebounded nearly 2.3% by the onset of Tuesday’s Asia session and look set to climb higher.

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

With the greenback continuing to face intense overhead pressures, the Aussie jumped 0.8% on Monday as it hit an overnight high of 0.6583 – this currency pair pulled back slightly as Asian markets came online on Tuesday. With no major domestic catalysts scheduled for today, the Aussie is likely to be impacted by key U.S. macroeconomic data on manufacturing and labour.

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

Medium Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The Kiwi rallied 1% as it came within a whisker of the 0.6100 threshold. With no major domestic catalysts lined up for Tuesday, this currency pair will take its cue from key U.S. macroeconomic data on manufacturing and labour that are scheduled for release later today.

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

Medium Bullish

The Japanese Yen (JPY)

Key news events today

S&P Global Manufacturing PMI (12:30 am GMT)

What can we expect from JPY today?

Manufacturing activity in Japan returned to expansion for the first time since May 2024 with a reading of 50.1. June’s figure edged higher from 49.4 in the previous month, but it fell short of the market forecasts of 50.4. Despite production output rising for the first time in ten months, demand conditions remained subdued as sales declined further. However, employment continued its upward trend as confidence grew around the outlook for the year ahead. Demand for the yen resumed on Monday as USD/JPY fell over 0.5% as Asian markets came online on Tuesday – this currency pair fell under 143.50 during Tuesday’s Asia session.

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:
  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. 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

Medium Bearish

The Euro (EUR)

Key news events today

S&P Global Manufacturing PMI (8:00 am GMT)

CPI (9:00 am GMT)

What can we expect from EUR today?

The final manufacturing report for the Euro Area is expected to show an unchanged reading of 49.4, the same as the flash report as well as the prior month’s reading. This sector has remained in contraction since the second half of 2022, but that has not weighed on the Euro in 2025. This currency pair continues to remain buoyed due to the U.S. dollar falling heavily out of favour with investors and traders alike. Meanwhile, consumer inflation is expected to remain somewhat unchanged in July, based on preliminary data. With the universal 10% tariffs effective since April, the path forward for inflation could be more ‘bumpy’ than originally anticipated.

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 Bullish

The Swiss Franc (CHF)

Key news events today

Retail Sales (6:30 am GMT)

Procure Manufacturing PMI (7:30 am GMT)

What can we expect from CHF today?

Key Swiss macroeconomic data will be released before the start of the European trading hours on Tuesday. Economic growth was anticipated to slow in the second quarter of this year, and that impact could be reflected in the latest reports for consumer spending and the manufacturing sector. A weak set of results will certainly pave the way for a seventh successive rate cut at the upcoming central bank meeting in September.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.25% to 0% on 19 June 2025, marking the sixth consecutive reduction.
• Inflationary pressure has decreased further as compared to the previous quarter, decreasing from 0.3% in February to -0.1% in May, mainly attributable to lower prices in tourism and oil products.
• Compared to March, the new conditional inflation forecast is lower in the short term. In the medium term, there is hardly any change from March, putting the average annual inflation at 0.2% for 2025, 0.5% for 2026 and 0.7% for 2027.
• The global economy continued to grow at a moderate pace in the first quarter of 2025 but the global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions.
• Swiss GDP growth was strong in the first quarter of 2025, but this development was largely because, as in other countries, exports to the U.S. were brought forward.
• Following the strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year; the SNB expects GDP growth of 1% to 1.5% for 2025 as a whole, while also anticipating GDP growth of 1% to 1.5% for 2026.
• 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 25 September 2025.

Next 24 Hours Bias

Medium Bearish

The Pound (GBP)

Key news events today

S&P Global Manufacturing PMI (8:30 am GMT)

What can we expect from GBP today?

Manufacturing activity in the U.K. is expected to contract for the ninth consecutive month with a reading of 47.7 for June, a slight improvement from May’s figure of 46.4. Despite the improvement, this sector continued to face headwinds, with manufacturers reporting another decline in export orders, largely driven by the impact of U.S. tariffs, heightened geopolitical uncertainty, and strong global price competition. Output also fell solidly during June, while total new work from abroad dropped for the eighth straight month. However, the rate of decline in export sales eased to the slowest in five months, suggesting some stabilisation. Despite another month of deterioration for the manufacturing sector, the Pound will likely remain bid due to the ongoing sell-off in the greenback.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to maintain the Bank Rate at 4.25% on 19 June 2025, with three members preferring to reduce the Bank Rate by 25 basis points.
• 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 £100 billion over the next 12 months to a total of £558 billion, starting in October 2024. On 19 June 2025, the stock of UK government bonds held for monetary policy purposes was £590 billion.
• There has been substantial disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations.
• Twelve-month CPI inflation increased to 3.4% in May from 2.6% in March, in line with expectations in the May Monetary Policy Report. The rise was largely due to a range of regulated prices and previous increases in energy prices.
• Underlying UK GDP growth appears to have remained weak, and the labour market has continued to loosen, leading to clearer signs that a margin of slack has opened up over time.
• Measures of pay growth have continued to moderate and, as in May, the Committee expects a significant slowing over the rest of the year.
• Global uncertainty remains elevated while energy prices have risen owing to an escalation of the conflict in the Middle East, prompting the Committee to remain sensitive to heightened unpredictability in the economic and geopolitical environment.
• There remain two-sided risks to inflation. Given the outlook and continued disinflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate and the Committee will continue to monitor closely the risks of inflation persistence and what the 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 7 August 2025.

Next 24 Hours Bias

Medium Bullish

The Canadian Dollar (CAD)

Key news events today

Canada Day (Bank Holiday)

What can we expect from CAD today?

Canada’s Toronto Stock Exchange and banks will be closed in observance of Canada Day, where the Loonie could face lower liquidity during the U.S. session. Meanwhile,  Canada’s decision to retract its Digital Services Tax plan led to U.S. President Donald Trump’s announcement of resuming trade talks on Monday, bolstering demand for the Loonie – USD/CAD tumbled 0.6% overnight.

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 Bearish

Oil

Key news events today

API Crude Oil Stock (8:30 pm GMT)

What can we expect from Oil today?

Oil prices slipped on Monday as investors assessed reduced tensions in the Middle East and the potential for an OPEC+ production hike in August, with WTI oil futures falling as low as $64.50 per barrel. The quickly arranged ceasefire between Israel and Iran seems to be holding for now, leading to a rapid reduction in the previously applied supply risk premium. Moving over to U.S. inventories, the API stockpiles have drawn down stronger than originally anticipated over the past five weeks, coinciding with the beginning of the peak summer driving season in the Northern Hemisphere. This has resulted in a weekly average draw of 4.5 million barrels of crude over this period, signalling higher fuel demand. However, another week of higher drawdowns may not be enough to support oil prices in the near term.

Next 24 Hours Bias

Medium Bearish

The post IC Markets Europe Fundamental Forecast | 1 July 2025 first appeared on IC Markets | Official Blog.