Daily Analysis 07/07/2025

• GBP/USD Price: The GBP/USD pair continues to slide, trading around 1.3620 during Monday’s European session, pressured by broad US dollar strength and shifting policy expectations.
• Political Stability: Last week, the British Pound found some support after Prime Minister Keir Starmer confirmed that Chancellor Rachel Reeves would stay on, reinforcing government stability. However, this was not enough to sustain upward momentum.
• BoE Policy: Bank of England (BoE) Governor Andrew Bailey emphasized that interest rates are on a downward path, while MPC member Alan Taylor urged faster rate cuts to avoid a potential hard landing. These dovish signals add to bearish sentiment toward the pound.
• Tariff Plans: US Commerce Secretary Howard Lutnick confirmed that new tariffs will take effect on August 1, with details being finalized. The anticipated letters to trading partners signal escalating trade tensions, further supporting the US dollar as a safe-haven.
• Fiscal Concerns: Markets are also grappling with worries over President Trump’s tax-cut and spending plans, which could exacerbate the US fiscal deficit and long-term debt challenges. However, these concerns have yet to meaningfully dent near-term USD strength.

Closing statement: GBP/USD remains under pressure from dovish BoE signals and a firmer US dollar, despite political stability in the UK. Traders will watch upcoming tariff announcements and BoE commentary for further direction this week.

• XAU/USD Price: Gold (XAU/USD) fell to around $3,300 on Monday, extending its recent decline as the metal attracted fresh sellers at the start of the week during European trading.
• New Bill: President Trump's "One Big Beautiful Bill" became law, adding an estimated $3.4 trillion to US debt over the next decade, deepening long-term fiscal concerns. While potentially supportive for gold longer term, it did not halt immediate selling pressure.
• Tariff Letters: Trump announced that US tariff letters and/or deals will be delivered starting July 7, raising global trade uncertainty. In the short term, however, the US dollar remains firm, weighing on gold.
• Rate Cut Bets: Markets currently price in over a 70% chance of a September Fed rate cut, with expectations for at least two cuts by year-end. While this underpins the medium-term outlook for gold, immediate price action remains weak.
• Fed Minutes: Investors are looking ahead to the Fed’s June meeting minutes on Wednesday, seeking more details on policymakers’ views regarding future rate cuts, which could influence gold’s trajectory.

Closing statement: Gold prices remain under pressure despite supportive macro factors like US debt growth and expected Fed easing. Near-term focus will be on Fed minutes and tariff developments for potential shifts in sentiment.

• Crude Oil Price: West Texas Intermediate (WTI) crude oil trades around $65.30 during early European hours, stabilizing after recent volatility driven by supply and geopolitical factors.
• OPEC+ Production: OPEC+ surprised markets by increasing output by 548,000 barrels per day (bpd), above the 411,000 bpd expected. This faster unwinding of voluntary supply cuts adds downward pressure on prices as global supply expands.
• GS Outlook: Goldman Sachs reaffirmed its Brent forecast at $59 for Q4 2025 and $56 for 2026, highlighting a view of modest price weakness ahead, as ample supply and tempered demand expectations weigh on sentiment.
• Middle East Tensions: The Israeli military launched intense strikes on Houthi targets in Yemen, responding to attacks on Israel. While adding some geopolitical risk premium, the impact on physical oil supply routes appears limited so far.
• China-EU Trade: China announced restrictions on government purchases of EU medical devices in retaliation for EU procurement bans. Upcoming EU-China leaders' summit may influence broader risk sentiment, indirectly impacting commodity markets.

Closing statement: WTI prices remain capped by OPEC+ supply increases and cautious demand outlooks despite Middle East tensions. Traders will watch for further geopolitical developments and updates from the upcoming China-EU summit to gauge near-term market direction.

• DAX Price: The DAX fell 0.61% on Friday, closing at 23,788, reversing Thursday’s equivalent gain as investors turned cautious ahead of upcoming tariff decisions and macro data.
• Index Stocks: Concerns over potential EU tariff hikes dragged auto stocks lower, with Porsche dropping 1.67%, Volkswagen down 1.19%, and Mercedes-Benz losing 1.01%. Bank stocks also struggled on economic uncertainty, with Deutsche Bank slipping 1.55%.
• Industrial Production: Germany’s May industrial production rose 1.2% month-over-month, well above the expected flat reading. This reflects stronger output, although energy-intensive sectors still lag.
• US Jobs Data: Goldman Sachs noted that the latest US jobs report strengthens the case for a cautious Fed stance, as labor market resilience reduces urgency for immediate rate cuts.
• Fed Commentary: Investors will closely watch Fed officials’ remarks later on July 7, seeking clues on policy direction following the solid NFP data and how this might shape global risk sentiment.

Closing statement: The DAX faces near-term headwinds from trade policy uncertainty and cautious global sentiment despite strong domestic industrial data. Attention now shifts to US monetary policy signals to gauge future risk appetite.