IC Markets Europe Fundamental Forecast | 26 May 2025

What happened in the Asia session?

Most Asian markets were a mixed bag on Monday after U.S. President Donald Trump threatened and then backtracked on increased European trade tariffs over the weekend. On Friday, President Trump stated a proposal to impose a 50% tariff on European goods before backtracking late on Sunday, saying that the U.S. will delay implementation of this goods tariff from 1st of June till 9th of July to buy time for negotiations with the bloc. With no major news events or data releases for the remainder of the day, it could be a fairly quiet session, especially with U.S. banks and financial markets being closed in observance of Memorial Day.

What does it mean for the Europe & US sessions?

The London Stock Exchange and U.K. banks will be closed in observance of the Spring Bank Holiday, resulting in the pound facing lower liquidity and periods of irregular volatility on Monday – Cable surged just over 2% last week as it smashed through the threshold of 1.3500 with ease.

ECB President Christine Lagarde will be speaking about Europe’s role in a fragmented world at the Hertie School in Berlin where she could be faced with questions on the latest tariff developments between the U.S. and the European Union. On Friday, U.S. President Donald Trump had threatened to impose a 50% tariff on goods before backtracking late on Sunday, saying that the U.S. will delay implementation of this goods tariff from 1st of June till 9th of July to buy time for negotiations with the bloc.

The Dollar Index (DXY)

Key news events today

Memorial Day (Bank Holiday)

What can we expect from DXY today?

As U.S. banks and financial markets will be closed in observance of Memorial Day, we can expect trading activity and volume to taper off noticeably once the European trading hours come to an end. Overhead pressures continue to remain firmly in place for the greenback and the DXY will likely break under 99 during the Asian trading hours.

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 7 May 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 further.
• The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.
• Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilised 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 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 17 to 18 June 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

Demand for gold remains robust which saw this precious metal rallied nearly 5% last week. After closing at $3,357.90/oz last Friday, spot prices dipped under $3,350 but should remain supported. The agreement to delay implementation of a 50% goods tariff on the European Union from 1st of June till 9th of July could result in demand for safe-haven assets to wane on Monday.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie rallied 1.6% last week, primarily driven by broad weakness in the greenback due to concerns over rising U.S. debt levels and credit downgrades. This currency pair broke above the threshold of 0.6500 as markets re-opened on Monday and it should remain lifted as the day progresses.

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?

Broad weakness in the greenback saw the Kiwi jump 1.9% and close firmly above 0.5950 last week. This currency pair will likely continue to experience strong tailwinds, driving towards the threshold of 0.6000.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 25 basis points bringing it down to 3.50% on 9 April, marking the fifth consecutive rate cut.
• The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band while firms’ inflation expectations and core inflation are consistent with inflation remaining at target over the medium term.
• Economic activity has evolved largely as expected since the February Monetary Policy Statement; higher-than-expected export prices and a lower exchange rate have supported primary sector incomes and overall economic growth.
• Although monetary restraint had been removed at pace, household spending and residential investment have remained weak.
• The recently announced increases in global trade barriers weaken the outlook for global economic activity. On balance, these developments create downside risks to the outlook for economic activity and inflation.
• The Committee noted that the increase in tariffs will take time to work through the global economy, but the direct price increases for economies imposing tariffs and the dampening impact of increased economic uncertainty on global demand will occur relatively quickly.
• With CPI inflation close to the mid-point of the target range, significant spare capacity in the economy, and a weaker activity outlook stemming from global trade policy, the Committee agreed that a further reduction in the OCR was appropriate.
• Meanwhile, future policy decisions will be determined by the outlook for inflationary pressure over the medium term.
• The next meeting is on 28 May 2025.

Next 24 Hours Bias

Medium Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The yen surged last week as rising U.S. debt levels and credit downgrades spurred demand for safe-haven assets, with USD/JPY tumbling over 1.8% by Friday. However, demand for such assets appeared to ease on Monday following the agreement to delay implementation of a 50% goods tariff on the European Union by the U.S. from 1st of June till 9th of July. This currency pair was floating around 142.80 as Asian markets came online.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 1 May, 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, aiming to reach about 3 trillion yen by January-March 2026.
• Japan’s economic growth is likely to moderate, as trade and other policies in each jurisdiction lead to a slowdown in overseas economies and to a decline in domestic corporate profits and other factors, although factors such as accommodative financial conditions are expected to provide support. Thereafter, Japan’s economic growth rate is likely to rise, with overseas economies returning to a moderate growth path.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be in the range of 2.0-2.5% for fiscal 2025, in the range of 1.5-2.0% for fiscal 2026, and at around 2% for fiscal 2027. The effects of the past rise in import prices and of the recent rise in food prices such as rice prices – these factors have pushed up the inflation rate so far – are expected to wane.
• Meanwhile, underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy. Thereafter, however, underlying CPI inflation is expected to increase gradually.
• Regarding the employment and income situation, despite the deceleration in the economy, labour market conditions are likely to remain tight, as it will become more difficult for labour supply of women and seniors to increase.
• Comparing the projections through fiscal 2026 with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rate for fiscal 2024 is somewhat higher, but the projected growth rates for fiscal 2025 and 2026 are lower due to the effects of trade and other policies in each jurisdiction.
• There are various risks to the outlook. In particular, it is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them. It is therefore necessary to pay due attention to the impact of these developments on financial and foreign exchange markets and on Japan’s economic activity and prices.
• With regard to the risk balance, risks to economic activity are skewed to the downside for fiscal 2025 and 2026. Risks to prices are also skewed to the downside for fiscal 2025 and 2026.
• The next meeting is scheduled for 17 June 2025.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

ECB President Lagarde’s Speech (2:30 pm GMT)

What can we expect from EUR today?

ECB President Christine Lagarde will be speaking about Europe’s role in a fragmented world at the Hertie School in Berlin where she could be faced with questions on the latest tariff developments between the U.S. and the European Union. On Friday, U.S. President Donald Trump had threatened to impose a 50% tariff on goods before backtracking late on Sunday, saying that the U.S. will delay implementation of this goods tariff from 1st of June till 9th of July to buy time for negotiations with the bloc.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 17 April to mark the sixth 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 2.40%, 2.65% and 2.25% respectively.
• The disinflation process is well on track with both headline and core inflation declining in March while services inflation has also eased markedly over recent months. Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Wage growth is moderating, and profits are partially buffering the impact of still elevated wage growth on inflation. The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions.
• Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area.
• 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 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.
• In particular, 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.
• The next meeting is on 5 June 2025.

Next 24 Hours Bias

Medium Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Rising U.S. debt levels and credit downgrades spurred demand for safe-haven assets such as the franc last week with USD/CHF diving 1.7% by Friday. However, demand for such assets eased on Monday following the agreement to delay implementation of a 50% goods tariff on the European Union by the U.S. from 1st of June till 9th of July. This currency pair hovered around 0.8220 at the beginning of the Asia session and could remain supported as the day progresses.

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

Spring Bank Holiday (Bank Holiday)

What can we expect from GBP today?

The London Stock Exchange and U.K. banks will be closed in observance of the Spring Bank Holiday, resulting in the pound facing lower liquidity and periods of irregular volatility on Monday. Cable surged just over 2% last week as it smashed through the threshold of 1.3500 with ease. This currency pair continued its upward ascent as markets re-opened on Monday, rising steadily toward 1.3550.

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 Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

Following a decline of 0.5% in February, consumer spending in Canada rebounded to rise at a monthly rate of 0.8%, increasing to C$69.8 billion in March, based on Friday’s report. Sales were up in six of nine sub-sectors and were led by increases at motor vehicle and parts dealers, while retail turnover was also higher for clothing and clothing accessories, furniture, electronics, and home goods, and building materials. Demand for the Loonie surged last Friday, causing USD/CAD to tumble over 1.7%. This currency pair was floating around 1.3720 as Asian markets came online but the downfall could resume, especially if crude oil prices climb higher.

Central Bank Notes:

• The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% – marking the first pause after seven consecutive meetings where rates were reduced.
• The major shift in direction of U.S. trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations.
• Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally – the April Monetary Policy Report (MPR) presents two scenarios that explore different paths for US trade policy.
• In the first scenario, uncertainty is high but tariffs are limited in scope – Canadian growth weakens temporarily and inflation remains around the 2% target. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession this year and inflation rises temporarily above 3% next year.
• Global economic growth was solid in late 2024 and inflation has been easing towards central bank targets. However, tariffs and uncertainty have weakened the outlook. In the U.S., the economy is showing signs of slowing amid rising policy uncertainty and rapidly deteriorating sentiment, while inflation expectations have risen. In the Euro Area, growth has been modest in early 2025, with continued weakness in the manufacturing sector. China’s economy was strong at the end of 2024 but more recent data shows it slowing modestly.
• In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter. Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation.
• 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.
• Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war and 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 4 June 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Oil prices gained on Friday as U.S. buyers covered positions ahead of the three-day Memorial Day weekend, driven by concerns over the latest round of nuclear talks between American and Iranian negotiators. The meeting in Rome aimed at curtailing the Islamic Republic’s nuclear program but traders remain jittery that if discussions fail to reach a deal, crude supplies could be interrupted. WTI oil rose over 1% last Friday as it climbed above $61 – this benchmark gapped higher at Monday’s open to hover around $62 per barrel.

Next 24 Hours Bias

Medium Bullish

The post IC Markets Europe Fundamental Forecast | 26 May 2025 first appeared on IC Markets | Official Blog.

• German DAX futures +1.4%

The early moves are pointing to a solid bounce back from the Friday drop, which was also triggered by Trump. At the time, he said he was going to press the EU with 50% tariffs on 1 June. And earlier today, he said that he is now going to delay that to 9 July in favour of negotiations in the meantime. US markets might be closed but S&P 500 futures are seen up 1.0% currently.

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

• Trump recommends a 50% tariff on EU starting on June 1 (Friday)
• Trump agrees to extend EU tariff deadline to July 9 (Monday)

So, what’d I miss? Well, definitely just in time for more Trump shenanigans it seems. His flip flopping isn’t new and is the same tactic he deployed when announcing the reciprocal tariffs in early April. So, this falls within that. Tariff-ception?

Anyway, risk appetite is picking up to start the new week as markets sense that Trump will try and at least look for the deal. It’s sort of the same approach with China in a sense. But we’ll see.

9 July is not far away and expect there to be much drama in the coming weeks.

But for today, things should be much quieter unless we get more headlines from the man himself. It’s a UK and US holiday, so that will subdue trading appetite for much of the day.

European markets will be open alongside Canada later on but the economic calendar is pretty much empty.

The dollar is left to fend for itself after a torrid period last week and is falling further today. EUR/USD is breaching 1.1400 with S&P 500 futures now marked up by 1% going into the session ahead. Of the more interesting charts, AUD/USD is one to watch as it eyes a technical breakout above the 0.6500 level.

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

• FX option expiries for 26 May 10am New York cut
• China mulling new economic policy tools says Chinese Premier Li Qiang
• Goldman Sachs: Chinese stocks are likely to gain further support from a strengthening yuan
• Citi 0 – 3 month price target for gold back to $3,500/oz
• Fed’s Kashkari – Uncertainty top of mind for Fed, US businesses
• US Senator says there are enough NO votes to block Trump’s “One Big, Beautiful Bill”
• China criticises Australia’s effort to return Darwin port to local ownership
• USD appears friendless in Asia trade (except for the PBoC propping it up!)
• Offshore yuan is hitting its highest since early November last year
• China property: Country Garden seeks extension for US$14.1 billion debt overhaul
• PBOC sets USD/ CNY reference rate for today at 7.1833 (vs. estimate at 7.1737)
• Trump’s tariff threat then backdown cycle – market sees “boy who cried wolf”
• Reminder – UK and US holidays today, Monday, May 26, 2025 – markets closed
• Weekend – Japan PM aims for a trade deal with US by mid-June
• Weekend: Bank of Canada Governor Macklem said Trump’s tariffs the “biggest headwind”
• Reserve Bank of New Zealand Shadow Board recommends 25bp interest rate cut this week
• Rally for US stocks on Trump extending start date on 50% EU tariff
• Trump agreed to extend EU tariff deadline to July 9, usd/yen pops, EUR a little pop too
• Trump says had some good talks with Iran, says had some real progress
• Stand by for Globex opening at the top of the hour
• Update – Iran and US wrapped up a fifth round of nuclear talks – “constructive”
• US may no longer offer reliable investment, capital may pivot to more stable jurisdictions
• Economic calendar in Asia Monday, May 26, 2025 – a very quiet one
• Trade ideas thread – Monday, 26 May, insightful charts, technical analysis, ideas
• EU’s Von der Leyen spoke with Trump, said EU needs time until July 9 to reach a good deal
• Federal Reserve Chair Powell spoke Sunday, didn’t comment on his economic, policy outlook
• Monday open levels, indicative FX prices, 26 May 2025
• FMAS 2025: Who wants to meet up in Cape Town next week?
• Newsquawk Week Ahead: Nvidia earnings, FOMC Minutes, US PCE, RBNZ, Aussie CPI, OPEC JMMC
• Forexlive Americas FX news wrap 23 May: Pres. Trump is not partial to who he tariffs

The
USD lost ground
during the session here against
EUR, AUD (highest since December 2, 2024), GBP (highest since
February of 2022), NZD and CAD. USD/JPY and USD/CHF are not a lot net
changed. Yen and CHF crosses are thus higher.

There
were a couple of impactful early items of news:

• the
  readouts from both Iran and the US were positive on nuclear talks,
  and indeed Trump confirmed this in later remarks saying the US had
  very good talks with Iran. “We had some real progress”.
• European
  Commission President Ursula von der Leyen spoke in a call with Trump
  on Sunday. Trump agreed to delay tariffs on the EU until July 9, a
  reprieve from the threatened 50% levies set to go into effect on June
  1

That
second point was the more impactful, it weighed on the dollar and
underpinned risk (see above FX comments) for the session. While US
markets will be closed on Monday for the Memorial Day holiday US
equity index futures traded on Sunday evening on the CME’s Globex,
rising on this news.

Also
rising today was the yuan. Offshore yuan, CNH, hit its strongest
since early November of 2024. In its reference rate setting today the
People’s Bank of China flipped its damping around to slow the
yuan’s rise (or support the USD if you’d prefer that
perspective!). A rising yuan is supportive for AUD (at the margin it
decreases the cost of Australian products in China).

This article was written by Eamonn Sheridan at www.forexlive.com.

DXY (US Dollar Index):

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance. 

Pivot: 97.78

Supporting reasons: Identified as a pullback support that aligns close to the 61.8% Fibonacci projection, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 95.22

Supporting reasons: Identified as an overlap support that aligns close to the 100% Fibonacci projection, indicating a potential area where the price could stabilize once again.

1st resistance: 101.81
Supporting reasons: Identified as an overlap resistance, indicating a potential level that could cap further upward movement.

EUR/USD:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could rise toward the pivot and potentially make a bearish reversal off this level to fall toward the 1st support.

Pivot: 1.1690

Supporting reasons: Identified as a pullback resistance that aligns close to the 127.2% Fibonacci extension and the 78.6% Fibonacci projection, indicating a potential area where selling pressures could intensify. 

 1st support: 1.1194
Supporting reasons: Identified as a pullback support, indicating a potential area where the price could stabilize once more.

1st resistance: 1.1910

Supporting reasons: Identified as a pullback resistance that aligns close to the 100% Fibonacci projection, indicating a potential area that could halt any further upward movement.

EUR/JPY:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance. 

Pivot: 160.68

Supporting reasons: Identified as a pullback support that aligns close to the 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 158.41
Supporting reasons: Identified as a swing low support, indicating a potential area where the price could stabilize once again.

1st resistance: 164.89
Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement.

EUR/GBP: 

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance. 

Pivot: 0.8359

Supporting reasons: Identified as a pullback support that aligns close to the 161.8% Fibonacci extension, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 0.8300
Supporting reasons: Identified as a pullback support, indicating a potential area where the price could stabilize once more.

1st resistance: 0.8450
Supporting reasons: Identified as an overlap resistance, indicating a potential level that could cap further upward movement.

GBP/USD:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could rise toward the pivot and potentially make a bearish reversal off this level to pull back toward the 1st support.

Pivot: 1.3640

Supporting reasons: Identified as a multi-swing-high resistance that aligns with a 161.8% Fibonacci extension and the 61.8% Fibonacci projection, indicating a potential area where selling pressures could intensify.

1st support: 1.345
Supporting reasons: Identified as a pullback support, indicating a potential area where the price could stabilize once more.

1st resistance: 1.3747
Supporting reasons: Identified as a resistance that aligns with the 78.6% Fibonacci projection, indicating a potential level that could cap further upward movement.

GBP/JPY:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could make a bearish reversal off the pivot and fall toward the 1st support

Pivot: 193.35

Supporting reasons: Identified as a pullback resistance, indicating a potential area where selling pressures could intensify

1st support: 189.48

Supporting reasons: Identified as a pullback support that aligns close to the 61.8% Fibonacci retracement, indicating a potential level where the price could stabilize once more.

1st resistance: 196.27
Supporting reasons: Identified as a swing high resistance, indicating a potential level that could cap further upward movement.

USD/CHF:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance. 

Pivot: 0.8079

Supporting reasons: Identified as a swing low support, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 0.7803
Supporting reasons: Identified as a multi-swing-low support that aligns close to the 61.8% Fibonacci projection and the 161.8% Fibonacci extension, indicating a potential level where the price could stabilize once again.

1st resistance: 0.8462
Supporting reasons: Identified as an overlap resistance, indicating a potential level that could cap further upward movement.

USD/JPY:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance. 

Pivot: 140.70

Supporting reasons: Identified as an overlap support that aligns close to the 78.6% Fibonacci projection, indicating a potential area where buying interests could pick up to stage a rebound. 

1st support: 137.16
Supporting reasons: Identified as a swing-low support that aligns close to the 100% Fibonacci projection, suggesting a potential area where the price could stabilize once more.

1st resistance: 145.54
Supporting reasons: Identified as a pullback resistance, indicating a potential level that could cap further upward movement.

USD/CAD:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price is falling toward the pivot and could potentially make a bullish bounce off this level to rise toward the 1st resistance.

Pivot: 1.3600

Supporting reasons: Identified as an overlap support that aligns with a 161.8% Fibonacci extension, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 1.3441
Supporting reasons: Identified as a multi-swing-low support that aligns close to a 78.6% Fibonacci projection, indicating a key level where the price could stabilize once more.

1st resistance: 1.3881
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement. The presence of the red Ichimoku Cloud adds further significance to the strength of this resistance zone.

AUD/USD:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price is rising toward the pivot and could potentially make a bearish reversal off this level to pullback toward the 1st support.

Pivot: 0.6560
Supporting reasons: Identified as an overlap resistance that aligns with a 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 0.6352

Supporting reasons: Identified as a multi-swing-low support, suggesting a potential area where the price could stabilize once again.

1st resistance: 0.6680
Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement.

NZD/USD

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price is rising toward the pivot and could potentially make a bearish reversal off this level to pullback toward the 1st support.

Pivot: 0.6025
Supporting reasons: Identified as a multi-swing-high resistance that aligns with a 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 0.5846

Supporting reasons: Identified as a swing-low support, suggesting a potential area where the price could stabilize once more.

1st resistance: 0.6130

Supporting reasons: Identified as a pullback resistance, indicating a potential area that could halt any further upward movement.

US30 (DJIA):

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance.

Pivot: 41,374.60

Supporting reasons: Identified as an overlap support that aligns with a 23.6% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 39,617.40

Supporting reasons: Identified as a pullback support that aligns with a 50% Fibonacci retracement, suggesting a potential area where the price could stabilize once again. 

1st resistance: 43,330.76

Supporting reasons: Identified as an overlap resistance that aligns close to a 78.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

DE40 (DAX):

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance.

Pivot: 23,392.47
Supporting reasons: Identified as an overlap support, indicating a potential area where buying interests could pick up to resume the uptrend. The presence of the green Ichimoku Cloud adds further significance to the strength of the bullish momentum.

1st support: 22,533.30

Supporting reasons: Identified as a pullback support, indicating a key level where the price could stabilize once more.

1st resistance: 24,749.87
Supporting reasons: Identified as a resistance that aligns with a 127.2% Fibonacci extension, indicating a potential area that could halt any further upward movement.

US500 (S&P 500): 

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance.

Pivot: 5,782.17

Supporting reasons: Identified as an overlap support that aligns with a 23.6% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend. The presence of the green Ichimoku Cloud adds further significance to the strength of the bullish momentum.

1st support: 5,521.45

Supporting reasons: Identified as a pullback support that aligns with a 50% Fibonacci retracement, indicating a potential level where the price could stabilize once again.

1st resistance: 6,136.80

Supporting reasons: Identified as a swing-high resistance that aligns close to the all-time high, indicating a potential area that could halt any further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could fall toward the pivot and potentially make a bullish bounce off this level to rise toward the 1st resistance.

Pivot: 106,444.58
Supporting reasons: Identified as an overlap support, indicating a potential area where buying interests could pick up to resume the uptrend. The presence of the green Ichimoku Cloud adds further significance to the strength of the bullish momentum.

1st support: 101,963.41
Supporting reasons: Identified as an overlap support that aligns close to a 23.6% Fibonacci retracement, indicating a potential level where the price could stabilize once more.

1st resistance: 113,594.81
Supporting reasons: Identified as a resistance that aligns with a 61.8% Fibonacci projection, indicating a potential area that could halt any further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price is rising toward the pivot and could potentially make a bearish reversal off this level to fall toward the 1st support.

Pivot: 2,796.31
Supporting reasons: Identified as a multi-swing-high resistance that aligns close to a 50% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 2,094.10
Supporting reasons: Identified as an overlap support that aligns close to a 50% Fibonacci retracement, indicating a potential level where the price could stabilize once again.

1st resistance: 3,033.34
Supporting reasons: Identified as an overlap resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

WTI/USD (Oil):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price could rise toward the pivot and potentially make a bearish reversal off this level to fall toward the 1st support.

Pivot: 65.68

Supporting reasons: Identified as a pullback resistance that aligns with a 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify. The presence of the red Ichimoku Cloud adds further significance to the strength of the bearish momentum.

1st support: 55.90
Supporting reasons: Identified as a multi-swing-low support, indicating a key level where the price could stabilize once more.

1st resistance: 71.18
Supporting reasons: Identified as a -swing-high resistance that aligns with a 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

XAU/USD (GOLD):

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could rise toward the pivot and potentially make a bearish reversal off this level to fall toward the 1st support.

Pivot: 34378.37

Supporting reasons: Identified as a swing high resistance, indicating a potential area where selling pressures could intensify. 

1st support: 3166.90
Supporting reasons: Identified as an overlap support, acting as a potential level where price could stabilize once again.

1st resistance: 3522.49
Supporting reasons: Identified as a resistance that aligns with the 127.2% Fibonacci extension, indicating a potential area that could halt any further upward movement.

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The post Monday 26th May 2025: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 26 May 2025

What happened in the U.S. session?

Following a social media post on Friday where U.S. President Donald Trump had threatened to impose a 50% tariff on goods from the European Union, he stated late on Sunday that the U.S. will delay implementation of this goods tariff from 1st of June till 9th of July to buy time for negotiations with the bloc. The agreement came after a call with Ursula von der Leyen on Sunday, the president of the European Commission, who had told Trump that she “wants to get down to serious negotiations,” according to President Trump.

What does it mean for the Asia Session?

This latest development resulted in a relatively ‘calm’ start to the week with U.S., European and Japan stock futures rising steadily while overhead pressures for the greenback build even further with the dollar index (DXY) sliding toward 99. Meanwhile, demand for gold remains robust which saw this precious metal rallied nearly 5% last week. After closing at $3,357.90/oz last Friday, spot prices dipped under $3,350 but should remain supported.

The Dollar Index (DXY)

Key news events today

Memorial Day (Bank Holiday)

What can we expect from DXY today?

As U.S. banks and financial markets will be closed in observance of Memorial Day, we can expect trading activity and volume to taper off noticeably once the European trading hours come to an end. Overhead pressures continue to remain firmly in place for the greenback and the DXY will likely break under 99 during the Asian trading hours.

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 7 May 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 further.
• The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.
• Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilised 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 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 17 to 18 June 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

Demand for gold remains robust which saw this precious metal rallied nearly 5% last week. After closing at $3,357.90/oz last Friday, spot prices dipped under $3,350 but should remain supported. The agreement to delay implementation of a 50% goods tariff on the European Union from 1st of June till 9th of July could result in demand for safe-haven assets to wane on Monday.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie rallied 1.6% last week, primarily driven by broad weakness in the greenback due to concerns over rising U.S. debt levels and credit downgrades. This currency pair broke above the threshold of 0.6500 as markets re-opened on Monday and it should remain lifted as the day progresses.

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?

Broad weakness in the greenback saw the Kiwi jump 1.9% and close firmly above 0.5950 last week. This currency pair will likely continue to experience strong tailwinds, driving towards the threshold of 0.6000.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 25 basis points bringing it down to 3.50% on 9 April, marking the fifth consecutive rate cut.
• The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band while firms’ inflation expectations and core inflation are consistent with inflation remaining at target over the medium term.
• Economic activity has evolved largely as expected since the February Monetary Policy Statement; higher-than-expected export prices and a lower exchange rate have supported primary sector incomes and overall economic growth.
• Although monetary restraint had been removed at pace, household spending and residential investment have remained weak.
• The recently announced increases in global trade barriers weaken the outlook for global economic activity. On balance, these developments create downside risks to the outlook for economic activity and inflation.
• The Committee noted that the increase in tariffs will take time to work through the global economy, but the direct price increases for economies imposing tariffs and the dampening impact of increased economic uncertainty on global demand will occur relatively quickly.
• With CPI inflation close to the mid-point of the target range, significant spare capacity in the economy, and a weaker activity outlook stemming from global trade policy, the Committee agreed that a further reduction in the OCR was appropriate.
• Meanwhile, future policy decisions will be determined by the outlook for inflationary pressure over the medium term.
• The next meeting is on 28 May 2025.

Next 24 Hours Bias

Medium Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The yen surged last week as rising U.S. debt levels and credit downgrades spurred demand for safe-haven assets, with USD/JPY tumbling over 1.8% by Friday. However, demand for such assets appeared to ease on Monday following the agreement to delay implementation of a 50% goods tariff on the European Union by the U.S. from 1st of June till 9th of July. This currency pair was floating around 142.80 as Asian markets came online.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 1 May, 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, aiming to reach about 3 trillion yen by January-March 2026.
• Japan’s economic growth is likely to moderate, as trade and other policies in each jurisdiction lead to a slowdown in overseas economies and to a decline in domestic corporate profits and other factors, although factors such as accommodative financial conditions are expected to provide support. Thereafter, Japan’s economic growth rate is likely to rise, with overseas economies returning to a moderate growth path.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be in the range of 2.0-2.5% for fiscal 2025, in the range of 1.5-2.0% for fiscal 2026, and at around 2% for fiscal 2027. The effects of the past rise in import prices and of the recent rise in food prices such as rice prices – these factors have pushed up the inflation rate so far – are expected to wane.
• Meanwhile, underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy. Thereafter, however, underlying CPI inflation is expected to increase gradually.
• Regarding the employment and income situation, despite the deceleration in the economy, labour market conditions are likely to remain tight, as it will become more difficult for labour supply of women and seniors to increase.
• Comparing the projections through fiscal 2026 with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rate for fiscal 2024 is somewhat higher, but the projected growth rates for fiscal 2025 and 2026 are lower due to the effects of trade and other policies in each jurisdiction.
• There are various risks to the outlook. In particular, it is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them. It is therefore necessary to pay due attention to the impact of these developments on financial and foreign exchange markets and on Japan’s economic activity and prices.
• With regard to the risk balance, risks to economic activity are skewed to the downside for fiscal 2025 and 2026. Risks to prices are also skewed to the downside for fiscal 2025 and 2026.
• The next meeting is scheduled for 17 June 2025.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

ECB President Lagarde’s Speech (2:30 pm GMT)

What can we expect from EUR today?

ECB President Christine Lagarde will be speaking about Europe’s role in a fragmented world at the Hertie School in Berlin where she could be faced with questions on the latest tariff developments between the U.S. and the European Union. On Friday, U.S. President Donald Trump had threatened to impose a 50% tariff on goods before backtracking late on Sunday, saying that the U.S. will delay implementation of this goods tariff from 1st of June till 9th of July to buy time for negotiations with the bloc.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 17 April to mark the sixth 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 2.40%, 2.65% and 2.25% respectively.
• The disinflation process is well on track with both headline and core inflation declining in March while services inflation has also eased markedly over recent months. Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Wage growth is moderating, and profits are partially buffering the impact of still elevated wage growth on inflation. The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions.
• Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area.
• 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 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.
• In particular, 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.
• The next meeting is on 5 June 2025.

Next 24 Hours Bias

Medium Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Rising U.S. debt levels and credit downgrades spurred demand for safe-haven assets such as the franc last week with USD/CHF diving 1.7% by Friday. However, demand for such assets eased on Monday following the agreement to delay implementation of a 50% goods tariff on the European Union by the U.S. from 1st of June till 9th of July. This currency pair hovered around 0.8220 at the beginning of the Asia session and could remain supported as the day progresses.

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

Spring Bank Holiday (Bank Holiday)

What can we expect from GBP today?

The London Stock Exchange and U.K. banks will be closed in observance of the Spring Bank Holiday, resulting in the pound facing lower liquidity and periods of irregular volatility on Monday. Cable surged just over 2% last week as it smashed through the threshold of 1.3500 with ease. This currency pair continued its upward ascent as markets re-opened on Monday, rising steadily toward 1.3550.

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 Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

Following a decline of 0.5% in February, consumer spending in Canada rebounded to rise at a monthly rate of 0.8%, increasing to C$69.8 billion in March, based on Friday’s report. Sales were up in six of nine sub-sectors and were led by increases at motor vehicle and parts dealers, while retail turnover was also higher for clothing and clothing accessories, furniture, electronics, and home goods, and building materials. Demand for the Loonie surged last Friday, causing USD/CAD to tumble over 1.7%. This currency pair was floating around 1.3720 as Asian markets came online but the downfall could resume, especially if crude oil prices climb higher.

Central Bank Notes:

• The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% – marking the first pause after seven consecutive meetings where rates were reduced.
• The major shift in direction of U.S. trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations.
• Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally – the April Monetary Policy Report (MPR) presents two scenarios that explore different paths for US trade policy.
• In the first scenario, uncertainty is high but tariffs are limited in scope – Canadian growth weakens temporarily and inflation remains around the 2% target. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession this year and inflation rises temporarily above 3% next year.
• Global economic growth was solid in late 2024 and inflation has been easing towards central bank targets. However, tariffs and uncertainty have weakened the outlook. In the U.S., the economy is showing signs of slowing amid rising policy uncertainty and rapidly deteriorating sentiment, while inflation expectations have risen. In the Euro Area, growth has been modest in early 2025, with continued weakness in the manufacturing sector. China’s economy was strong at the end of 2024 but more recent data shows it slowing modestly.
• In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter. Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation.
• 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.
• Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war and 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 4 June 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Oil prices gained on Friday as U.S. buyers covered positions ahead of the three-day Memorial Day weekend, driven by concerns over the latest round of nuclear talks between American and Iranian negotiators. The meeting in Rome aimed at curtailing the Islamic Republic’s nuclear program but traders remain jittery that if discussions fail to reach a deal, crude supplies could be interrupted. WTI oil rose over 1% last Friday as it climbed above $61 – this benchmark gapped higher at Monday’s open to hover around $62 per barrel.

Next 24 Hours Bias

Medium Bullish

The post IC Markets Asia Fundamental Forecast | 26 May 2025 first appeared on IC Markets | Official Blog.

Chinese Premier Li Qiang spoke in a symposium with Chinese firms in Jakarta over the weekend. Info from state news agency Xinhua, via Reuters:.

• China is weighing new policy tools in the face of an international economic and trade order that is “under severe impact”
• “The fragmentation of industrial and supply chains has deepened, and trade barriers have increased, which has had a great impact on the economic development of all countries”
• China is studying new policy tools, including some “unconventional measures”, which will be launched as the situation changes
• China will continue strengthening economic cooperation with more countries

Li is on a three-day visit to Indonesia until Monday and will then travel to Malaysia for the ASEAN-GCC-China Summit.

This article was written by Eamonn Sheridan at www.forexlive.com.

US Stocks Fall into the Weekend on Tariff Threats – Nasdaq down 1%

US stocks closed lower on Friday after President Trump threatened to push through 50% tariffs on the EU and on Apple if they did not make iPhones in the US. The EU deadline has since been extended to July 1, but investors fear that there could be more tariff updates to come. The Nasdaq led the way lower on Friday, closing down 1%, followed by the S&P and Dow, which lost 0.67% and 0.61% respectively. The dollar took a hit on the news, the DXY losing 0.77% to move down to 99.11, and Treasury yields eased in choppy markets, the 2-year flat at 3.991% and the 10-year ultimately losing 1.8 basis points to close at 4.511%. Oil prices pushed higher on news that talks between Iran and the US were not going well, Brent up 0.53% to $64.78 and WTI up 0.54% to $61.51, whilst the uncertainty across markets helped propel gold back to recent highs, up 1.83% on the day to close at $3,356.99 an ounce.

Gold Rallies to Long-Term Resistance on Tariff Comments

Gold prices leapt again on Friday after President Trump threatened more tariffs on the EU, as investors once again placed trades into haven products. Market participants had started to feel that tariff volatility was pulling back as the US engaged in negotiations with various trading partners, and investors were hoping for more good news on the horizon. But comments from the President knocked that, and gold raced higher again. It peaked near the long-term resistance on the daily chart, which came in around the $3,350 region, and traders will now be poised for more moves in the coming days. Any further escalation of trade concerns is likely to lead to a break higher, which could once again target the all-time high; or better news is likely to see it drop back into the range. Either way, it is unlikely that gold will remain trading at these levels for too long.

Quiet Calendar Day to Start the Trading Week

It looks like being a relatively quiet start to the trading week, with little on the event calendar to move markets and holidays in major centers that should see reduced volumes. There is little in the way of data releases across all three trading sessions today, although we are set to hear from some key central bankers. We have already heard from Fed Chair Jerome Powell today shortly before the Asian open, although he avoided any market-moving comments in a speech at Princeton University. We are due to hear from the German Buba President Joachim Nagel and ECB President Christine Lagarde during the European session today, which could see some moves in the euro. Traders will also be aware that both US and UK markets are closed today, which will affect liquidity in the latter sessions of the day, and moves could be exacerbated—especially if more tariff updates hit the newswires.

The post General Market Analysis – 26/05/25 first appeared on IC Markets | Official Blog.

Chinese equities are likely to gain further support from a strengthening yuan, which has remained resilient despite ongoing trade tensions with the US, according to Goldman Sachs strategists.

They noted that for every 1% rise in the yuan against the US dollar, Chinese stocks could climb about 3%, driven by improved earnings prospects and increased foreign investment. Goldman recently revised its 12-month yuan forecast to 7 per dollar, up from 7.35.

• “Chinese stocks usually perform well when the yuan appreciates,”
• GS maintain an overweight view on the market.
• Sectors such as consumer discretionary, property, and brokerages are seen as key beneficiaries of a stronger currency.

This article was written by Eamonn Sheridan at www.forexlive.com.

Citi 0 – 3 month price target for gold back to $3,500/oz

• expect price to consolidate between $3,100/oz and $3,500/oz

Citi cite the latest tariff escalation

This article was written by Eamonn Sheridan at www.forexlive.com.

Sen. Ron Johnson, R-Wis spoke with CNN on Sunday:

• “My primary focus now is spending. This is completely unacceptable. Current projections are $2.2 trillion per year deficit,” he said. “There should be a goal of this Republican Senate to reduce the deficit, not increase it. We’re increasing it.”
• “I think we have enough to stop the process until the president gets serious about spending reduction and reducing the deficit,” Johnson said.

We heard similar from Republicans objecting in the House and they all caved in.

More here (very detailed!)

Senate leaders are aiming for a July 4 vote

This article was written by Eamonn Sheridan at www.forexlive.com.

China’s ambassador to Australia has criticised Canberra’s plan to return Darwin Port to local ownership, arguing the Chinese firm running it, Landbridge, should not be penalised.

Prime Minister Albanese said in April the government would force a sale on national interest grounds.

The port was leased to Chinese company Landbridge in 2015 for 99 years. The Chinese embassy said it was unfair to reclaim the port now that it has become profitable, calling the move ethically questionable. Landbridge says the port is not for sale.

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This will be something to keep an eye on for Aus/China relations.

This article was written by Eamonn Sheridan at www.forexlive.com.