Daily Analysis 01/07/2025

• GBP/USD Price: The GBP/USD pair holds gains for the fourth consecutive session, trading above 1.3700 during Thursday’s European session. The move is supported by continued US Dollar softness and solid UK economic fundamentals.
• UK Q1 GDP: The UK’s final Q1 GDP showed +0.7% quarter-on-quarter, matching the preliminary estimate. Growth was primarily driven by the services sector, reaffirming resilience in the broader UK economy despite global headwinds.
• UK House Prices: UK house price growth slowed to 2.1% in June from 3.5% in May, with a 0.8% monthly decline after seasonal adjustments. The slowdown is attributed to weaker demand following the April stamp duty increase, suggesting a potential moderation in the housing market.
• US Senate: The US Senate narrowly approved a procedural vote to begin debate on Trump’s comprehensive “One Big Beautiful Bill,” projected to add $3.3 trillion to the federal deficit over ten years. This large fiscal push adds uncertainty to the US fiscal outlook and pressures the USD.
• PMI Data: Markets will focus on final manufacturing PMI data releases on Tuesday from major economies including Japan, Switzerland, the Eurozone, the UK, and the US. These figures will provide insight into global demand trends and shape near-term currency moves.

Closing statement: GBP/USD strength is underpinned by solid UK growth data and ongoing USD weakness, while domestic indicators like housing show potential softening. Attention now shifts to global PMI readings, which could influence the pair's trajectory in the coming sessions.

• XAU/USD Price: Gold prices regain stability on Monday, rising slightly above $3,320 per troy ounce. This rebound comes amid a mixed US Dollar performance and cautious market sentiment ahead of key policy comments.
• US-Japan Trade: Japanese negotiator Ryosei Akazawa will stay in the US to continue talks, with Treasury Secretary Scott Bessent hinting that discussions could last until September 1 (US Labor Day). This prolongs trade uncertainty, which often supports gold as a safe haven.
• Trade Deals: Reports suggest US officials are pushing for leaner trade agreements ahead of the critical July 9 tariff deadline. These developments raise market caution and may indirectly support gold demand in the near term.
• Fed Rate Cut: Traders now assign only a small probability to a rate cut in July, with about a 74% chance seen for a cut by September. This shift reduces immediate downside pressure on yields, offering near-term stability to gold.
• Fed Speeches: Investors await remarks from Atlanta Fed President Bostic and Chicago Fed President Goolsbee later Monday. Their views on inflation, growth, and policy direction could influence rate expectations and gold’s trajectory.

Closing statement: Gold’s modest recovery reflects lingering trade uncertainty and tempered Fed cut expectations, while upcoming central bank commentary could shape near-term market moves. The metal remains supported as a hedge amid geopolitical and policy risks.

• Crude Oil Price: West Texas Intermediate (WTI) crude declined in early European trading on Tuesday, dropping to $64.29 per barrel from Monday’s close of $64.43. The price action reflects a cautious tone as traders weigh upcoming supply changes.
• OPEC+ Meeting: OPEC+ producers will meet virtually on July 6, where they are expected to approve a further 411,000 barrels per day (bpd) increase in output for August. If confirmed, this would lift total production additions in 2025 to roughly 1.8 million bpd, reinforcing a well-supplied market narrative.
• UK Refinery: In a surprise development, the UK’s Prax Group filed for insolvency. Prax operates the Lindsey Oil Refinery, a major source of regional fuel supply. This could cause localized supply disruptions but is unlikely to shift global pricing significantly.
• South Korea Trade: A senior South Korean trade official announced plans to extend trade negotiations with the US, adding to broader trade-related uncertainties. While not directly oil-focused, these talks can affect overall energy trade dynamics in Asia.
• Morgan Stanley Outlook: Morgan Stanley forecasts Brent crude to decline toward $60 per barrel by early 2026, citing easing Middle East tensions and robust supply outlooks. While this long-term view reinforces a bearish bias, short-term volatility remains driven by geopolitical events and OPEC+ actions.

Closing statement: WTI is pressured by supply growth expectations and longer-term bearish forecasts, despite isolated supply-side disruptions like Prax’s insolvency. The focus now turns to the July 6 OPEC+ meeting and evolving geopolitical signals to guide near-term price direction.

• DAX Price: After a modest decline on Monday, the DAX edged up by 0.13% on Tuesday, trading near 23,950 points. The rebound reflects cautious optimism amid ongoing macro and trade developments.
• German Inflation: Germany’s June preliminary CPI rose 2.0% year-on-year, slightly below the 2.2% forecast. Meanwhile, core inflation moderated only slightly to 2.7% from 2.8% in May, suggesting persistent underlying price pressures and limited progress in cooling inflation so far this year.
• ECB's Lagarde: ECB President Christine Lagarde highlighted that global uncertainty and frequent supply shocks are causing firms to adjust prices more often, fueling more volatile inflation patterns. Her comments signal a cautious policy stance and heightened inflation vigilance.
• EU-US Tariff Deal: While earlier reports suggested a potential deal before the July 9 deadline, French Finance Minister Éric Lombard advocated for delaying the agreement, preferring quality over speed. This position introduces renewed uncertainty around trade relations and investor sentiment.
• Key Data: Investors await the Euro Area’s June flash inflation data, which could reveal signs of renewed price pressures. Also in focus are Swiss Manufacturing PMI and German unemployment data, both due on Tuesday, to further inform the region’s economic outlook.

Closing statement: The DAX’s tentative recovery reflects mixed inflation signals and lingering trade deal uncertainties, with macro data likely to shape short-term direction. Investors should watch inflation and labor market prints closely, as they will influence ECB policy expectations and risk appetite.