Daily Analysis 01/08/2025

• GBP/USD Price: The GBP/USD pair extended its decline toward 1.3195 on Friday, reflecting continued market pessimism around the British pound amid renewed strength in the US dollar and weaker sentiment in the UK.
• BoE Expectations: Following a 25 bps cut in May, markets are pricing in an 89% chance of another cut at the BoE’s August 7 meeting, as policymakers respond to slowing growth and stickier-than-expected inflation.
• US Jobless Claims: Initial jobless claims rose to 218K for the week ending July 26, coming in just below the forecast of 224K and slightly above the prior week's 217K. The data indicates labor market resilience, though signs of gradual softening persist.
• Fed Rate: The Federal Reserve’s latest policy statement noted that while economic growth has moderated, unemployment remains low and inflation is still elevated, signaling a cautious but steady stance on future rate decisions.
• US Data: Markets are eyeing July’s Nonfarm Payrolls, along with the ISM Manufacturing PMI and UoM Consumer Sentiment Index, all due Friday. These releases could sharpen expectations around the Fed’s next move and significantly sway dollar performance.

Closing statement: GBP/USD is under pressure as expectations for another BoE rate cut intensify, while solid US macro data and steady Fed guidance lend support to the dollar. Near-term direction will hinge on upcoming US labor and sentiment reports.

• XAU/USD Price: Gold prices are struggling to hold onto recent gains, trading just below $3300, as the Federal Reserve’s hawkish tone has dampened appetite for non-yielding assets like bullion.
• Fed’s Stance: Despite criticism from President Trump calling Powell “too late,” the Fed made it clear that a rate cut in September is unlikely, shifting the narrative away from monetary easing and undermining gold’s short-term appeal.
• US-China Trade: Treasury Secretary Bessent expressed confidence in a US-China trade deal, which reduces geopolitical uncertainty and weakens safe-haven demand for gold in the short run.
• US Inflation: The PCE Price Index rose to 2.6% in June, up from a revised 2.3% in May, reinforcing sticky inflation concerns and supporting the Fed’s case for maintaining a restrictive policy stance.
• Wage Growth: The Q2 Employment Cost Index climbed 0.9% vs. 0.8% expected, pointing to robust wage pressure. As this is a key inflationary input watched by the Fed, it further supports the hawkish outlook, limiting gold’s upside.

Closing statement: Gold remains under pressure as hawkish Fed rhetoric, rising inflation, and optimism on US-China trade collectively weigh on safe-haven demand. Near-term direction hinges on incoming US labor and inflation data, with key resistance at $3300.

• Crude Oil Price: West Texas Intermediate (WTI) Oil is hovering around $68.80 per barrel on Friday, attempting to recover from earlier losses as traders weigh geopolitical risks against soft demand data.
• Weekly Gain: Crude prices are up over 6% this week, driven by heightened supply concerns after President Trump threatened 100% secondary tariffs on Russian oil buyers, with China specifically warned of possible penalties, raising fears of global supply disruptions.
• China PMI: China’s Caixin Manufacturing PMI fell to 49.5, below expectations (50.3) and prior readings (50.4), signaling a return to contraction in the world’s second-largest oil consumer and casting doubt on near-term demand recovery.
• EIA Data: US crude inventories rose by 7.7 million barrels last week, with exports plunging by 1.16 million b/d, marking the second lowest level since August 2023. These figures suggest excess supply remains a headwind.
• US Jobs Report: The upcoming US employment report is critical for Oil sentiment. Forecasts suggest slower job creation (110K) and a possible uptick in unemployment to 4.2%, which could impact expectations for economic growth and oil demand.

Closing statement: Despite short-term supply fears fueling a strong weekly rally, WTI remains vulnerable to weakening demand signals from China and the US. The next directional cue will likely come from the US jobs data, which could influence both Fed expectations and crude demand outlook.

• DAX Price: The DAX fell 0.81% on July 31, reversing Wednesday’s mild gains and closing at 24,066, as a wave of sector-specific losses and global trade tensions dragged investor sentiment lower.
• German Inflation: Germany’s preliminary July CPI rose 2.0% y/y, slightly above expectations (1.9%), while core inflation held at 2.7%, reinforcing concerns that price pressures remain sticky and could complicate ECB policy.
• Unemployment Data: German unemployment increased by 2,000 in July, below the forecasted 15,000 rise. The jobless rate held steady at 6.3%, though analysts note gradual labor market softening beneath the surface.
• Index Stocks: Siemens Healthineers dropped 4.43%, with Fresenius Medical Care and Sanofi also weakening on disappointing earnings. German automakers like Mercedes-Benz (-2.51%), Volkswagen (-1.58%), and Ferrari faced pressure from tariff-related concerns and earnings adjustments.
• New Tariffs: A fresh executive order from President Trump imposed 10–41% tariffs on US imports from countries that missed trade deal deadlines, including Canada, India, and Taiwan, rattling global equity markets and exacerbating trade war fears.

Closing statement: The DAX faces broad-based pressures from sector-specific earnings misses and geopolitical trade escalations. While macroeconomic data remains relatively contained, elevated inflation and mounting trade risks could cap upside momentum in the near term.