Daily Analysis 10/07/2025

• GBP/USD Price: The British Pound (GBP) trades flat against the US Dollar (USD) on Wednesday, halting its three-day losing streak even as the Greenback remains steady. Market participants appear cautious ahead of key domestic data releases.
• Financial Stability Report: In its latest Financial Stability Report, the Bank of England (BoE) flagged a more challenging global financial environment, citing persistent geopolitical tensions, fragmented trade flows, and rising sovereign debt. Nevertheless, the BoE emphasized that the UK financial system remains resilient, and banks are well-capitalized to support economic activity.
• FPC Analysis: Despite external risks, the Financial Policy Committee (FPC) noted that UK mortgage lending has picked up, signaling steady household demand and contributing to an overall supportive backdrop for domestic growth.
• UK Data: Attention turns to Friday’s trade and industrial production figures, which are expected to influence BoE deliberations ahead of its August policy meeting and updated forecasts.
• UK GDP: Thursday’s UK GDP report for May, forecast to grow by 0.1% MoM after a prior 0.3% contraction, will be closely watched tomorrow.

Closing statement: GBP/USD stabilizes for now as markets await key UK economic data and further guidance from the BoE. A positive GDP print could provide a modest lift, while external financial risks continue to cap major gains.

• XAU/USD Price: The gold price (XAU/USD) remains under pressure for the second consecutive day, hovering near the $3,325 level, its lowest in over a week, during early European trading on Wednesday.
• FOMC minutes: The FOMC minutes released Tuesday revealed that while uncertainty around monetary policy remains elevated due to trade and geopolitical tensions, it has diminished somewhat since the last meeting. This has tempered expectations for imminent rate cuts, weighing on gold as a non-yielding asset.
• Tariff Announcements: US President Donald Trump announced new tariff letters on Wednesday, including a 50% rate on Brazil and hefty tariffs on Algeria, Libya, Iraq, Sri Lanka, and the Philippines, all effective in August. The escalation increases global trade tensions but has so far failed to spark safe-haven buying in gold.
• Chinese Inflation: China’s June CPI rose 1% year-over-year, recovering from a 0.1% decline in May, while the PPI fell more sharply than expected at -3.6%, highlighting fragile demand conditions. The mixed data provided limited immediate support to gold prices.
• Fed Rate Cut: Market expectations for a September Fed rate cut dropped to 61%, down from 73% last week, according to CME FedWatch data. This shift strengthens the US Dollar and further undermines gold’s appeal.

Closing statement: Gold continues to face headwinds from reduced Fed rate cut bets and a stronger Dollar backdrop, despite intensifying trade risks. Prices could remain under pressure unless safe-haven demand reemerges or US economic data disappoints sharply.

• Crude Oil Price: West Texas Intermediate (WTI) crude oil holds around $67.40 early Wednesday in Europe, following sharp moves driven by unexpected supply developments.
• OPEC+ Indications: OPEC+ blindsided oil market participants with a larger-than-expected oil production hike for August. OPEC+ motivated its decision for the supersized hike with “a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories.”
• Lutnick's Statement: US Commerce Secretary Howard Lutnick indicated that another 15–20 tariff letters will be issued in coming days, adding to global trade uncertainty. While not directly targeting oil, broader trade tensions can weigh on risk sentiment and energy demand outlook.
• Chinese Economic Data: China’s latest May data showed improvements in industrial output, retail sales, and services activity, while PMI readings flirted with the expansion threshold. Overall, these support expectations for around 5% GDP growth in 2025, offering a demand-side cushion for oil.
• EU Sanctions: The EU’s 18th sanctions package against Russia remains stalled, partly due to disagreements over adjusting the Russian oil price cap and resistance from Slovakia. Any resolution could impact global oil flows and market balances in coming months.

Closing statement: Crude oil faces downward pressure from OPEC+'s supply surprise but finds some support in improving Chinese data. Geopolitical and trade tensions add further complexity, leaving prices vulnerable to sharp swings as headlines evolve.

• DAX Price: The DAX index soared to a record high of 24,609.15 points, closing Wednesday up 1.4% at 24,549.56, driven by optimism over a potential resolution to the US-EU trade dispute. Hopes of avoiding new tariffs and improving global trade relations boosted investor sentiment.
• German Inflation: Germany’s June final CPI came in at +2.0% year-over-year, matching preliminary figures and expectations. While in line with the ECB’s inflation target, the data is not expected to influence near-term policy decisions, as officials await more comprehensive summer data.
• Trump Comments: US President Donald Trump reiterated that trade talks with the EU and China are progressing, though he warned he is only "days away" from sending a tariff letter to the EU. This keeps markets cautious despite current optimism.
• Structural Risks: Goldman Sachs' Luke Barrs noted that markets may be underestimating the deeper, structural implications of new tariffs on corporate supply chains and earnings. While currently seen as manageable, such moves could introduce volatility if fully realized.
• US Labor Data: Investors await US weekly initial jobless claims, following last week’s strong employment report. The data could provide further clues on the Fed’s monetary policy path and broader economic momentum, indirectly influencing European equity sentiment.

Closing statement: The DAX’s record rally reflects trade deal optimism, but looming tariff risks and US labor data could quickly reshape sentiment. Caution remains warranted even as the technical picture points to strong near-term momentum.