Daily Analysis 22/09/2025

• GBP/USD Price: GBP/USD extended its four-day losing streak, slipping to 1.3460 in Asian trading on Monday, pressured by ongoing dollar strength and weak domestic fundamentals.
• Policy Decision: The BoE held rates at 4.0%, citing an uncertain growth outlook and softer labor market. This follows the 25 bps cut in August, reinforcing a cautious stance.
• Rate Expectations: Bank of America no longer expects BoE cuts in 2025, joining other forecasters revising their outlooks after last week’s decision, signaling a more prolonged high-rate environment.
• Fiscal Pressures: UK public sector net borrowing surged to £18 billion in August, far above expectations of £12.8 billion, raising concerns over rising debt burdens and fiscal risks, which may weigh further on the pound.
• Day Ahead: Markets will monitor BoE Chief Economist Huw Pill’s speech later today for policy cues and any signals on the economic outlook.

Closing statement: GBP/USD remains under pressure as fiscal strains and cautious BoE policy reinforce downside risks. The pair’s near-term path hinges on central bank rhetoric and dollar momentum.

• XAU/USD Price: Gold surged to a new all-time high at $3,719, before easing slightly to trade around $3,710 on Monday, reflecting strong demand amid cautious market sentiment.
• Fed's Kashkari: Minneapolis Fed President Neel Kashkari backed the recent rate cut, citing rising unemployment risks. He noted tariffs are unlikely to push inflation much above 3% and argued rates should be held steady if the labor market stabilizes.
• Fed's Miran: Fed Governor Stephen Miran emphasized the need for rates near neutral levels, adding he will soon release a formal review of his outlook, keeping markets attentive to potential shifts in Fed policy bias.
• Legal Challenge: The US Supreme Court will hear arguments on November 5 regarding the legality of Trump’s broad tariffs, following a lower court ruling against his emergency authority. The case introduces policy uncertainty with global trade implications.
• Day Ahead: While Monday lacks major US data, upcoming speeches from FOMC members, including Chair Powell, could drive USD moves and indirectly influence gold prices.

Closing statement: XAU/USD remains underpinned by record highs, Fed policy uncertainty, and trade-related risks. The short-term trajectory hinges on FOMC guidance and USD flows, with momentum favoring further gains unless Powell signals a firmer policy stance.

• Crude Oil Price: West Texas Intermediate (WTI) crude advanced in early European trading Monday, climbing to $62.70 per barrel from Friday’s close of $62.33, supported by risk sentiment and steady demand.
• Fed Policy: San Francisco Fed President Mary Daly explained the latest rate cut as a move to counter labor market weakness, highlighting a broader slowdown in the US economy. Softer growth expectations could indirectly weigh on oil demand outlook.
• NATO–Russia: Geopolitical risks rose after NATO jets intercepted three Russian MiG-31 fighters violating Estonian airspace. Trump vowed US support for EU defense if hostilities escalate, injecting uncertainty that may lend oil prices some risk premium.
• US–China: A reported constructive call between Trump and Xi hinted at progress on issues such as TikTok, with trade and tariff talks to resume. Market hopes for de-escalation may temper downside pressures on crude.
• PBoC Decision: The People’s Bank of China held rates at record lows for the fourth straight month, aiming to soften tariff impacts and stabilize domestic growth, which may indirectly support demand for oil in the medium term.

Closing statement: WTI crude is supported by geopolitical tensions and policy accommodation, though Fed concerns over slowing growth cap optimism. Near-term direction will hinge on US–China negotiations and further developments in Eastern Europe.

• DAX Price: The DAX struggled for clear direction at the start of the week, with buying interest insufficient to push towards new record highs. The index trades around 23,500 points, reflecting cautious investor sentiment.
• Fiscal Policy: Metzler chief economist Edgar Walk criticized the German government’s billion-euro infrastructure spending plans as an "accounting smokescreen," raising concerns over the credibility and effectiveness of fiscal measures.
• Index Rebalancing: The DAX composition changed this week, with Scout24 and Gea joining the index, replacing Porsche and Sartorius. The reshuffle highlights ongoing sector rotation and index adjustments in Germany’s blue-chip benchmark.
• Corporate Earnings: Volkswagen Group shares fell in pre-market trading after profit warnings, dragging sector peers lower. Porsche AG shares slipped 6% on Tradegate, VW dropped 2.6%, and Porsche SE declined 3.8%, weighing on the broader index.
• Key Data: Investors will closely monitor eurozone and US PMIs on Tuesday and Germany’s Ifo Business Climate Index midweek, both of which could set the near-term tone for DAX performance.

Closing statement: The DAX faces headwinds from weak buying momentum, profit warnings in the auto sector, and skepticism over fiscal policy, with near-term direction hinging on upcoming PMI and Ifo survey data.