Daily Analysis 08/07/2025

• GBP/USD Price: GBP/USD continues its winning streak for the fourth session, trading above 1.3600 during European hours on Thursday.
• Technical Outlook: Technicals show a slightly bullish bias as the 14-day RSI remains above 50, though the drop below the nine-day EMA hints at softer short-term momentum.
• UK Fiscal Policy: UK Chancellor Rachel Reeves hinted at potential tax hikes in the autumn budget to cover a widening public finance gap, exacerbated by increased welfare spending and recent policy concessions to avoid intra-party conflicts.
• Deutsche Bank: Deutsche Bank analysts expect the BoE to cut rates by 25 bps to 4% in August, followed by two additional cuts in November and December, reflecting ongoing concerns over economic momentum and inflation dynamics.
• Fed Expectations: In contrast, the US Federal Reserve is seen maintaining higher rates, citing the risk of higher inflation stemming from new import taxes and a still-resilient US labor market.

Closing statement: GBP/USD remains supported by broad dollar weakness and policy divergence. However, fiscal uncertainty and upcoming BoE decisions may limit aggressive upside, with traders closely monitoring UK budget developments and Fed policy signals.

• XAU/USD Price: Gold price drops closer to $3,300 on Tuesday, pressured by emergency US Dollar buying and renewed risk sentiment shifts, keeping the metal on the back foot.
• US Tariff: President Trump confirmed 25% tariffs on Japanese and South Korean imports starting August 1, with additional letters sent to 12 more countries warning of 25% to 40% duties next month. This escalation boosts short-term USD demand, weighing on gold.
• Trade Negotiations: Despite firm tariff rhetoric, Trump suggested some flexibility in the August 1 deadline, potentially leaving room for last-minute deals or adjustments.
• Japan Negotiatior: Japan’s top negotiator, Ryosei Akazawa, reported constructive talks with US Commerce Secretary Howard Lutnick.
• GS Outlook: Goldman Sachs now expects a Fed rate cut in September (previously December), citing rising uncertainty, including speculation around Powell’s term. Lower rate expectations could support gold in the medium term.

Closing statement: Gold remains under pressure amid USD strength driven by tariff shocks and safe-haven flows into the dollar. However, softer Fed policy expectations and potential trade negotiation twists could provide eventual support for XAU/USD.

• Crude Oil Price: The price of crude oil is settling up $0.93 or 1.39% at $67.93. That comes despite a large and expected production boost announced by OPEC+ over the weekend.
• Total Production: OPEC is now on track to add back the full 2.17 million barrel voluntary cut and oil is down only $6 on the year. None of that was priced in at the start of the year and it's a decent performance, although it's somewhat helped by a falling US dollar.
• US Rigs: Weekly US rig counts and producer surveys show shale operators continue to reduce production plans, reinforcing views that US shale output has peaked. At current price levels, maintaining even flat production is becoming challenging, providing a bullish backdrop for oil in the medium term.
• Geopolitical Tensions: Israel’s military struck Houthi positions in Yemen, targeting ports and a power plant, citing repeated drone and missile attacks. This escalation underscores ongoing Middle East risks that could tighten supply further despite the OPEC+ boost.
• US Tariff Policy: US Treasury Secretary Bessent reaffirmed that tariffs imposed in April will take effect on August 1 for countries lacking a deal with the US. While aimed at trade partners, the broader economic impact could influence global oil demand.

Closing statement: Crude oil’s rebound despite higher OPEC+ supply highlights tight structural fundamentals and supportive macro factors like a weaker dollar. However, geopolitical tensions and evolving US trade policy keep the outlook fluid, suggesting traders remain cautious but constructive in the near term.

• DAX Price: The German DAX index opened with a 0.52% gain, reaching the symbolic 24,000 level on Tuesday, as investor sentiment improves despite mixed trade and corporate headlines.
• US Tariff: Media reports indicate the Trump administration offered the EU a proposal to maintain a 10% baseline tariff, with possible exemptions for aircraft and spirits. This reduces near-term trade uncertainty and supports European equities, including German exporters.
• Index Stocks: Daimler Truck shares face pressure after Bernstein reiterated its Sell rating with a target price of €32, highlighting ongoing challenges in the auto sector. Additionally, a fresh strike at Zalando’s Erfurt logistics center adds to domestic labor tensions amid wage disputes.
• Trade Balance: Germany's May trade surplus widened to €18.4 billion, above the expected €15.5 billion. Although exports fell by 1.4%, a sharper 3.8% drop in imports drove the surplus, supporting the underlying economic outlook.
• Ukraine News: Trump’s comment on sending more weapons to Ukraine, despite previously advocating cuts, raises geopolitical tension. While not yet a market-moving factor, it could influence sentiment if tensions escalate further.

Closing statement: The DAX’s rise to 24,000 reflects resilient investor confidence driven by trade policy clarity and stronger fundamentals, but sector-specific challenges and geopolitical risks suggest cautious optimism in the near term.