Daily Analysis 27/06/2025

• GBP/USD Price: GBP/USD trades above 1.3700 on Thursday, extending its winning streak to a fourth consecutive session. The move is primarily driven by broad-based US Dollar softness and renewed confidence in UK monetary policy stability.
• BoE's Bailey: Andrew Bailey reaffirmed that a gradual and careful path for rate cuts is the correct approach, especially given the short-term uptick in inflation, which introduces policy uncertainty. This measured tone underpins investor confidence in the Pound.
• BoE’s Breeden: BoE policymaker Breeden highlighted the resilience and competitiveness of the UK financial system, emphasizing the importance of sustainable private markets. While not directly market-moving, such remarks support a constructive GBP narrative.
• US Inventory Data: US advance wholesale inventories fell 0.3% in May, missing expectations of a 0.1% gain. However, given the volatile nature of this data, it had minimal immediate impact on GBP/USD price action.
• Fed’s Barkin: Fed's Thomas Barkin stated that policy is well positioned, but acknowledged the cloudy outlook and upward pressure on inflation from tariffs. His comments support the growing narrative for eventual Fed easing, which continues to weigh on the US Dollar.

Closing statement: GBP/USD remains well-supported, driven by cautious optimism from the Bank of England, firm UK data, and weakening USD fundamentals. While inflation uncertainty and trade risks linger, near-term momentum favors continued upside unless challenged by hawkish surprises.

• XAU/USD Price: Gold (XAU/USD) trades with a modest positive tone for the second day, hovering just below the $3,350 mark. The lack of follow-through indicates caution among bulls, despite supportive macro data for precious metals.
• US Trade Balance: May 2025 trade deficit widened to -$96.59B, worse than the -$88.50B forecast. The rebound from March lows—driven by front-loading imports ahead of tariffs—suggests temporary improvement, with lingering concerns about trade imbalances underpinning gold’s safe-haven appeal.
• Q1 GDP: US Q1 GDP came in at -0.5% vs -0.2% expected, with weakness driven by poor consumption data. This reinforces the fragile nature of the US recovery, adding to investor demand for non-yielding assets like gold in uncertain growth environments.
• Fed's Powell: Fed Chair Jerome Powell highlighted that tariff effects may distort June–August data, complicating policy visibility. With only June data available by the July FOMC, expectations are growing for a dovish bias, potentially benefitting gold.
• Fed's Goolsbee: Fed’s Austan Goolsbee emphasized that more data is needed to assess tariff fallout, stating, “we got to get a few months of clarity”. His cautious stance further adds to the uncertainty surrounding the Fed’s next steps, subtly supporting gold prices.

Closing statement: Gold remains underpinned by macroeconomic fragility and policy uncertainty, though upside is capped below technical resistance. Until clarity emerges on tariffs and growth trends, gold may stay range-bound with a bullish tilt as investors seek hedges against volatility.

• Crude Oil Price: West Texas Intermediate (WTI) crude oil price rose to $65.12 per barrel early Friday in Europe, modestly up from $64.75 on Thursday. The move reflects cautious optimism, though prices remain significantly below last week's highs amid geopolitical and policy headwinds.
• EU Climate Policy: In ongoing US-EU trade talks, President Trump has intervened to push back on EU climate regulations, reportedly at the request of major US oil executives, including Exxon’s Darren Woods. This marks a strategic alignment with Big Oil interests, potentially easing regulatory pressures on fossil fuels.
• US-India Trade: Reuters reports deadlock in US-India negotiations over import duties on auto components, steel, and agriculture products. This development may dampen broader trade optimism and indirectly affect energy markets through potential impacts on global industrial activity.
• Fed’s Collins: Boston Fed’s Susan Collins noted that July may be too soon to cut rates, citing insufficient data clarity. Her remarks dampen hopes for imminent monetary easing, which could limit oil’s upside by reinforcing recessionary concerns.
• US Economic Data: Markets await the May PCE report, the Fed’s preferred inflation gauge, along with revised University of Michigan sentiment data. Given prior CPI and retail sales softness, the data could be pivotal for Fed rate expectations and, in turn, for oil demand forecasts.

Closing statement: Crude oil remains in a fragile recovery mode, supported by political backing for energy producers but capped by macroeconomic and trade tensions. Short-term gains may persist, but broad upside depends on clearer economic signals and policy paths.

• DAX Price: The DAX rose 0.64% on Thursday, June 26, closing at 23,649, recovering from Wednesday’s 0.61% loss. The bounce was led by defense-linked equities, buoyed by NATO’s commitment to increased military spending.
• Index Stocks: Rheinmetall surged 7.28%, with Airbus (+2.56%) and MTU Aero (+0.16%) also benefiting after NATO leaders supported greater defense budgets. This marks a strong rotation into aerospace and military sectors amid rising geopolitical tensions.
• Tariff Uncertainty: Markets remain cautious as Trump’s July 9 tariff deadline on EU goods approaches. While Chancellor Merz advocates for a quick deal, President Macron's resistance to perceived imbalances introduces significant friction into US-EU negotiations.
• Euro Area Inflation: Markets now eye preliminary June inflation data from Spain and France, seen as precursors to the euro area’s broader reading. Analysts expect Eurozone HICP inflation to tick up to 2.0%, driven by a rebound in energy prices.
• Powell Highlights: Fed Chair Jerome Powell, in his Capitol Hill testimony, acknowledged that rate cuts could have come sooner if Trump’s tariffs hadn’t clouded inflation dynamics. His comments further entrench market sensitivity to trade-linked data and rhetoric.

Closing statement: The DAX benefited from a defense-driven rebound, but upside remains capped by trade policy risks and upcoming inflation data. Near-term performance will depend on tariff developments and Eurozone CPI surprises.