Daily Analysis 16/10/2025

• GBP/USD Price: The GBP/USD pair maintained its rebound, trading comfortably above the 1.3400 level during Thursday’s European session. The move signals renewed market confidence in the pound amid improving domestic economic indicators.
• UK GDP: The British economy expanded by 0.1% in August after a 0.1% contraction in July, offering a mild sign of resilience. Although growth remains tepid, the data helps stabilize sentiment and supports sterling’s short-term recovery.
• Industrial Numbers: Both industrial production (+0.4%) and manufacturing output (+0.7%) exceeded forecasts, pointing to underlying sectoral strength. These results reinforce the view that the UK economy retains momentum despite broader uncertainty.
• Political Divisions: Domestic political instability, marked by internal rifts within the ruling party over fiscal and tax policy, continues to weigh on the pound. Markets remain cautious as governance uncertainty limits sterling’s upside potential.
• US Shutdown: The prolonged U.S. government shutdown, now entering its third week, fuels concerns over U.S. fiscal management. This weighs on the dollar, providing indirect support to GBP/USD in the short term.

Closing statement: GBP/USD remains steady above 1.34, underpinned by positive UK economic data and temporary dollar weakness. However, domestic political tensions could cap gains, with near-term resistance seen around 1.3450 unless market sentiment improves further.

• XAU/USD Price: XAU/USD pulled back slightly from a fresh all-time high reached in Asian trading on Thursday but remains on track for a fifth consecutive daily gain. The overall bias stays positive amid a highly supportive macro backdrop.
• US Shutdown: Comments from House Speaker Mike Johnson that the government shutdown could become the longest in history deepened investor anxiety. The ongoing impasse continues to boost safe-haven demand for gold.
• Economic Cost: A Treasury official estimated that the U.S. shutdown could cost $15 billion per week in lost output, highlighting its potential drag on growth. This reinforced the appeal of gold as a hedge against policy and fiscal risk.
• U.S.-China Tensions: Renewed trade frictions, including tit-for-tat port fees and possible U.S. restrictions on cooking oil imports, added to geopolitical uncertainty. Such developments typically strengthen gold’s safe-haven positioning.
• Fed's Shift: Fed Chair Jerome Powell’s dovish remarks on labor market weakness supported expectations for back-to-back 25 bps rate cuts in October and December. Lower rate prospects continue to underpin gold prices.

Closing statement: Gold remains firmly supported despite mild profit-taking, trading near historic highs. The combination of U.S. political gridlock, trade tensions, and dovish Fed expectations sustains a bullish outlook.

• Crude Oil Price: West Texas Intermediate (WTI) crude slipped modestly on Thursday, trading near $58.30 per barrel during the European session. The decline comes amid cautious sentiment as geopolitical and demand concerns persist.
• Russian Oil: President Trump announced that India’s Prime Minister Modi agreed to halt Russian oil purchases, with Washington now aiming to secure similar commitments from China. The move underscores renewed U.S. efforts to isolate Moscow financially.
• Geopolitical Tensions: U.S. Defense Secretary Pete Hegseth warned Russia of mounting consequences should the war in Ukraine continue, while Trump said he is considering supplying Kyiv with Tomahawk cruise missiles. These developments keep geopolitical risks elevated.
• Bessent's Statements: Treasury Secretary Scott Bessent said the U.S. expects Japan to phase out Russian energy imports, reinforcing the administration’s strategy to limit global demand for Russian crude and gas flows.
• Chinese Credit: China’s September credit data showed stronger-than-expected aggregate financing, but the credit impulse slowed, signaling fading stimulus impact and weak private sector demand. This dampened the outlook for oil demand in the world’s second-largest economy.

Closing statement: Crude oil prices remain under pressure as U.S.-led geopolitical actions tighten against Russian energy while Chinese demand signals soften. The balance between rising supply security concerns and slowing global demand keeps WTI trading within a narrow $57.50–$59.50 range for now.

• DAX Price: The German benchmark index DAX trades around 24,100 points, down 0.2% as investors weigh corporate earnings against broader macroeconomic uncertainties. Market sentiment remains cautious amid global risk factors.
• Rare Earth Export: Beijing’s move to restrict rare earth exports has alarmed Washington, raising fears of a deeper U.S.-China trade conflict. Given these materials’ strategic role in technology and defense, the decision has weighed on sentiment across European tech and industrial shares.
• Government Shutdown: The U.S. shutdown has stretched into its 16th day, with Treasury officials estimating a $15 billion weekly hit to the economy. Concerns over spillover effects on global growth are contributing to investor unease.
• Corporate Earnings: Attention in Frankfurt has turned to Q3 earnings reports, with laboratory supplier Sartorius among companies releasing results on Thursday. Investors are closely watching for signals about demand resilience amid tightening financial conditions.
• Fed Speeches: In the absence of major U.S. economic data, market participants await comments from several Federal Reserve officials later in the day. Their tone could influence global risk appetite and near-term equity momentum.

Closing statement: The DAX remains under mild selling pressure as renewed U.S.-China trade frictions and uncertainty over the U.S. fiscal situation overshadow earnings optimism. Near-term direction hinges on corporate results and signals from Fed policymakers regarding the rate outlook.