Daily Analysis 01/12/2025

• GBP/USD Price: GBP/USD trades slightly lower near 1.3215 early Monday, giving back some recent gains as markets adopt a cautious stance ahead of key US data.
• Budget Impact: UK Chancellor Rachel Reeves’ Autumn Budget introduced tax increases and adjustments to business rates, benefits, and pensions, shaping expectations for fiscal tightening ahead.
• OBR Outlook: The Office for Budget Responsibility (OBR) revised the 2025 UK growth forecast upward from 1.0% to 1.5%, reflecting improved sentiment following the budget’s release.
• Fed Dovish: Recent dovish comments from Fed officials Waller and Williams strengthened expectations for another US rate cut in December, weighing on the US dollar.
• Data Ahead: Markets now look to the US ISM Manufacturing index due today, with mixed signals from prior PMIs and regional Fed surveys adding uncertainty to the outlook.

Closing statement: GBP/USD could remain slightly pressured in the near term, with direction hinging on upcoming US manufacturing data and evolving rate expectations. The pair maintains a mild bullish bias as long as US yields drift lower.

• XAU/USD Price: Gold climbs to its highest level since October 21 in Monday’s Asian session, extending last week’s strong gains as fundamentals continue to favor upside momentum.
• Fed's Daly: San Francisco Fed President Mary Daly signaled support for a rate cut next month, citing a sudden deterioration in the labor market and emphasizing that recession risks outweigh inflation risks.
• Trump Nominee: President Trump said he has decided on his pick for Fed Chair, with Kevin Hassett widely viewed as the frontrunner, reinforcing expectations of upcoming US rate cuts.
• China Caution: Chinese policymakers are expected to delay major stimulus until 2026, shifting market focus to December’s Central Economic Work Conference for guidance on near-term policy direction.
• Data Delays: Although key US labor and inflation data have been postponed beyond the December 10 FOMC meeting, traders will scrutinize this week’s releases for clues amid lingering uncertainty about the rate path.

Closing statement: XAU/USD retains a constructive bias, supported by dovish Fed expectations and policy uncertainty elsewhere. A sustained break above recent highs could keep bullish momentum intact heading into December.

• Crude Oil Price: WTI rises early Monday in Europe, trading near $59.50 per barrel and slightly above Friday’s close as buyers step in at the start of the week.
• OPEC+ Halt: Prices find strong support after OPEC+ agrees to halt its planned output increase for Q1 2026, tightening expectations for supply conditions.
• US Optimism: US Secretary of State Marco Rubio signaled optimism following weekend talks with Ukrainian officials in Florida, reaffirming US support for Ukraine’s sovereignty and stability.
• New Negotiator: Ukraine’s new negotiator Rustem Umerov described the discussions as productive, praising Washington for maintaining robust backing despite recent political turbulence.
• Drone Strikes: Ukrainian naval drones targeted two Russian “shadow fleet” tankers in the Black Sea, raising geopolitical tensions and providing a modest risk premium for oil markets.

Closing statement: WTI retains a slightly bullish undertone supported by OPEC+ actions and renewed geopolitical risks, though sustained momentum will depend on broader risk appetite and upcoming US data.

• DAX Price: Germany’s DAX 40 trades around 23,725 points on Monday, holding relatively firm despite mixed global sentiment and caution ahead of key data releases.
• China Slowdown: China’s official manufacturing PMI inched up to 49.2 as expected but remained in contraction for an eighth straight month, while the private RatingDog PMI slipped back below 50 to 49.9, signaling renewed softness in external demand, an indirect headwind for German exporters.
• Venezuela Tensions:Geopolitical risk ticked higher after President Trump declared Venezuelan airspace “closed in its entirety,” drawing sharp criticism from Caracas and international partners such as Iran, though immediate market spillovers remain limited.
• Seasonal Tailwind: Wall Street enters a historically strong period, with the S&P 500 averaging over 1% gains in December, a positive seasonal dynamic that may indirectly support European equities through improved global risk appetite.
• Data Focus: This week's market direction may hinge on US releases covering manufacturing, services, and private-sector employment, all of which could influence global sentiment and spill over into DAX trading.

Closing statement: The DAX remains range-bound but stable, supported by strong seasonality and resilient external sentiment. However, lingering Chinese weakness and geopolitical uncertainties may cap upside potential in the near term.