Daily Analysis 03/11/2025

• GBP/USD Price: The GBP/USD pair trades subdued around the mid-1.3100s, hovering near its lowest level since mid-April. The lack of recovery momentum signals continued bearish sentiment, with traders cautious ahead of key UK fiscal announcements.
• Fiscal Risks: Growing concerns over fiscal sustainability ahead of Chancellor Rachel Reeves’s Autumn Budget weigh heavily on the GBP. Expectations of higher taxes and slower economic growth are driving investors to trim exposure to UK assets, amplifying downside pressure.
• BoE Expectations: Markets widely expect the Bank of England to maintain its policy rate at the upcoming meeting on Thursday. Persistent inflation and the uncertainty surrounding the budget are prompting the central bank to stay on hold, though some analysts now see the first rate cut coming sooner than expected, possibly to 3.75%.
• Fed’s Stance: The US Dollar remains supported after Fed Chair Jerome Powell’s hawkish remarks last week, which reinforced expectations of a prolonged higher-for-longer rate environment. This divergence between the BoE’s cautious tone and the Fed’s firmness continues to cap GBP/USD recovery attempts.
• Rate Cut Expectations: Traders are pricing a 33% probability of a BoE rate cut in November, and about a 68% likelihood by year-end, citing softer inflation and mounting fiscal headwinds as justification for policy easing.

Closing statement: The GBP/USD pair remains under sustained pressure, with fiscal uncertainty and central bank divergence dragging sentiment lower. Unless the upcoming Autumn Budget or BoE meeting delivers a positive surprise, the pair may continue to drift toward new multi-month lows in the near term.

• XAU/USD Price: The XAU/USD pair attracts fresh buying interest, bouncing strongly from the $3,963–3,692 support zone to trade above $4010 in early European trading. The renewed upside momentum indicates safe-haven flows returning to the market.
• Geopolitical Tensions: The latest comments from US President Donald Trump, hinting at possible restrictions on AI hardware exports to China, have revived risk aversion across markets. This geopolitical unease is prompting investors to diversify into Gold, reinforcing its defensive appeal.
• Government Shutdown: The ongoing government shutdown, now in its 33rd day, underscores deep political divisions in Washington. Trump’s call to abolish the Senate filibuster rule has added to the turmoil, heightening concerns over potential economic disruptions and supporting Gold’s stability.
• Fed Officials: Several Federal Open Market Committee (FOMC) members made statements downplaying the likelihood of further rate cuts in 2025. The shift in tone has limited Gold’s upside to some extent, as higher real yields tend to dampen non-yielding asset demand.
• Manufacturing Data: Traders now await the ISM Manufacturing PMI release later in the North American session for clues about the US economic outlook. A weaker-than-expected print could rekindle dovish Fed bets, potentially fueling further Gold gains.

Closing statement: Gold’s rebound above $4010 reflects a resurgence in safe-haven demand amid geopolitical and fiscal uncertainty. While Fed caution may temporarily cap gains, the broader risk-off environment continues to favor a bullish bias in the near term.

• Crude Oil Price: West Texas Intermediate (WTI) crude oil prices advance during early European trading, continuing their positive momentum from last week. The benchmark is supported by renewed supply-side dynamics and geopolitical risk, bolstering short-term sentiment.
• OPEC+ Output: The OPEC+ alliance announced on Sunday its plan to pause production hikes in Q1 2026 following another 137,000 barrels per day (bpd) increase in December. The move signals a measured approach to supply management amid fragile demand recovery expectations.
• Geopolitical Risks: Over the weekend, a Ukrainian drone strike targeted Russia’s Black Sea oil port, sparking a fire and damaging a vessel, according to Reuters. The attack underscores heightened geopolitical instability, raising concerns about potential disruptions to regional oil flows.
• Earning Reports: The energy sector closed last week higher after Exxon and Chevron posted better-than-expected earnings, citing robust production growth and operational efficiency despite softening prices. This resilience reinforced market confidence in the fundamentals of major oil producers.
• China Decision: Following the latest US sanctions on Russia’s oil industry, Chinese refiners have canceled Russian cargoes, with Sinopec and PetroChina halting orders. The pause reflects a “wait-and-see” approach as refiners assess potential exposure to secondary sanctions.

Closing statement: WTI crude remains supported by geopolitical tensions and disciplined OPEC+ policy, even as demand-side uncertainty from China lingers. The combination of restricted Russian supply and steady OPEC+ output could provide a mildly bullish bias in the near term.

• DAX Price: The DAX opened the week on a steadier note, trading around 24,100 points on Monday. Market sentiment improved slightly after a period of softness, with investors cautiously optimistic amid renewed focus on year-end positioning.
• Trade Tensions: Market strategist Christoph Geyer described the current setup as the “best statistical situation of the year”, suggesting the DAX could see a rally into year-end, provided no new tariff disputes or geopolitical escalations disrupt investor confidence.
• Germany Measures: Ahead of Thursday’s Chancellery meeting, Finance Minister Lars Klingbeil called for a complete ban on Russian steel imports. The proposal underscores Germany’s growing determination to shield domestic industry and support its struggling steel sector.
• Economic Outlook: A new survey by the Cologne Institute for Economic Research (IW) showed that 36% of German firms plan job cuts in 2026, while only 18% intend to hire, pointing to continued labor market softness and broader economic stagnation.
• ECB Stance: ECB policymaker Martins Kazaks noted that risks to inflation and growth are now more balanced, emphasizing that the central bank will act “when needed but shouldn’t be jumpy.” His comments hint at a steady policy path and reduced odds of near-term rate changes.

Closing statement: The DAX begins the week on a steady footing, buoyed by optimism for a year-end rally, though domestic economic challenges and geopolitical risks remain headwinds. Stable ECB policy and easing trade tensions could support gradual upside momentum into November.