Daily Analysis 18/06/2025

• GBP/USD Price: The British Pound dropped sharply, with GBP/USD falling well below 1.3500 during the latter half of Tuesday. The risk-off market tone, driven by geopolitical tensions and disappointing US data, boosted demand for the safe-haven US Dollar, pressuring the pair lower.
• UK Inflation: According to the ONS, the UK's annual CPI came in at 3.4% in May, slightly down from April’s 3.5%. While the decline is marginal, inflation remains well above the Bank of England’s 2% target, complicating the rate-cut expectations and underpinning volatility in GBP.
• US Manufacturing Data: US data released on Monday revealed a sharp deterioration of the NY Fed Manufacturing Index, which fell to a reading of -16 in June, against expectations of a moderate improvement to -5.5 from -9.2 in May.
• US Retail Data: The US docket indicated that Retail Sales contracted in May due to a decline in major vehicle purchases. Sales dropped 0.9% month-over-month, which was below the forecast of 0.7%. In the twelve months leading up to May, sales rose sharply by 3.3%, down from a 5% jump in April.
• Geopolitical Tensions: Heightened military activity between Israel and Iran—including threats of the largest missile strike yet—has stoked geopolitical fears, contributing to the overall risk-off mood and reinforcing USD strength via safe-haven demand.

Closing statement: GBP/USD is under heavy pressure, driven by a combination of weaker UK fundamentals, safe-haven flows into the USD, and rising geopolitical tensions. While inflation remains high in the UK, the lack of risk appetite and disappointing global data weigh more heavily, pointing toward a bearish bias in the near term.

• XAU/USD Price: XAU/USD traded within a tight range around $3,390 on Tuesday, supported by safe-haven demand as investors stayed cautious amid escalating conflict in the Middle East. Gold’s resilience reflects market anxiety and preference for defensive assets.
• Israel-Iran Conflict: Ongoing military exchanges between Israel and Iran entered the fifth consecutive day. US President Trump’s call for Tehran evacuations and his early exit from the G7 summit to meet with the National Security Council further intensified geopolitical concerns, sustaining demand for gold.
• Central Banks: The World Gold Council's latest central bank survey showed that 95% of 73 respondents expect increased gold reserves in the next 12 months. This underscores strong institutional confidence in gold as a strategic reserve asset.
• US Industrial Production: US Industrial Production fell by 0.2% MoM, missing expectations of a modest gain. This marks the second contraction in three months, suggesting sluggish economic momentum, which could reinforce dovish monetary expectations and support non-yielding assets like gold.
• Fed Policy Decision: All eyes are on the Federal Reserve's decision on Wednesday, where rates are expected to be held at 4.25%-4.5%. Investors will look for forward guidance, especially regarding inflation and potential rate cuts, which could shape the near-term path for gold.

Closing statement: XAU/USD remains well-supported by geopolitical turmoil, central bank demand, and weakening US economic data. With the Fed's decision looming and global uncertainty high, gold may retain its safe-haven appeal, with a potential upside bias if dovish signals emerge.

• Crude Oil Price: WTI crude oil prices remain elevated, consolidating just below $73.00, the highest level in months. The consolidation follows a sharp bullish breakout, driven by tightening supply expectations and geopolitical risk premium.
• Russia Reaction: Russian Deputy PM Aleksander Novak called on OPEC+ to reconsider its planned production increase, arguing that current oil prices are not sustainable for many producers. His remarks suggest a potential shift in the group’s supply strategy, which could support prices further.
• Geopolitical Risk: Middle East tensions worsened as Trump dismissed prospects of a ceasefire, and Israel continued aggressive military operations. His threats against Iran’s Supreme Leader and open challenges to US intelligence assessments amplify regional instability, reinforcing crude’s risk premium.
• Iran Nuclear Concerns: US Director of National Intelligence Tulsi Gabbard stated that Iran is not close to a nuclear weapon, but Trump contradicted her publicly, creating further policy uncertainty. This discord fuels market unease over the future of Iranian oil exports and supply dynamics.
• API Report: Traders await the API’s weekly inventory data, which could reveal shifts in US supply and influence short-term momentum. A significant drawdown could validate the recent rally, while a surprise build may trigger modest profit-taking.

Closing statement: WTI crude remains well-supported above $72 amid OPEC+ policy uncertainty, Middle East tensions, and a bullish technical backdrop. All eyes turn to upcoming inventory data and any policy adjustments, with risks still skewed to the upside in the short term.

• DAX Price: The DAX dropped 1.12% to close at 23,435 on Tuesday, reversing Monday’s rebound. This marks the first close below 23,500 since May 9, signaling renewed market caution and technical vulnerability as investors respond to geopolitical and macroeconomic uncertainties.
• Index Stocks: Concerns over US tariffs on pharmaceuticals pressured health stocks, with Fresenius Medical Care down 4.47%. Auto stocks also underperformed on US-EU trade deal uncertainty, as Mercedes-Benz, Volkswagen, Porsche, and BMW posted losses. Tech names like Infineon and SAP also slid, reflecting broader sectoral weakness.
• Trump Thoughts: Geopolitical tensions escalated as Politico reported that Trump is weighing US military involvement alongside Israel in Iran’s bombardment. This fueled market risk aversion, with investors seeking shelter from the rising Middle East volatility and its potential economic consequences.
• Economic Sentiment: The German ZEW Economic Sentiment Index surged to 47.5 in June, nearly double May’s reading and well above forecasts. Similarly, Eurozone sentiment rose to 35.3, beating expectations. This reflects growing optimism about regional growth, partially cushioning the DAX’s downside.
• US Economic Projections: Investors are awaiting the Federal Reserve’s updated Summary of Economic Projections (SEP), which will include revised forecasts for inflation, GDP, and employment. These updates could shape global risk appetite and affect DAX performance via shifts in bond yields and currency strength.

Closing statement: The DAX faces near-term pressure amid rising geopolitical risks, trade tension fears, and sectoral weakness, despite improving regional sentiment. Price action suggests technical fragility, and the upcoming Fed projections may determine whether the index stabilizes or faces deeper correction.