Daily Analysis 04/06/2025

• GBP/USD Price: The GBP/USD pair trades around 1.3510 in Wednesday's European session, rebounding slightly after a previous session decline. Market participants remain cautious amid mixed signals from Bank of England officials and lingering global trade concerns.
• BoE Governor: BoE Governor Andrew Bailey reiterated his view that interest rates are likely to fall, but warned of increasing uncertainty due to rising global trade tensions, which could weigh on investment and overall economic growth.
• Lack of Consensus: Parliamentary hearings revealed a lack of consensus within the Bank of England regarding the pace of future rate cuts. While inflation is moderating, some MPC members remain concerned about sticky price pressures.
• Deputy Governor: Deputy Governor Sarah Breeden, seen as a centrist voice on the MPC, stated her support for May's rate cut even without external trade shocks, reinforcing the central bank’s dovish tilt in the current policy stance.
• China News: In a statement, China’s Ministry of Commerce said it has suspended or canceled trade barriers in line with its agreement with the US. This adds to easing trade tensions, a factor influencing global risk sentiment and GBP flow.

Closing statement: GBP/USD is modestly higher as BoE’s dovish tone is offset by policy uncertainty and ongoing trade developments. With the central bank signaling a bias toward easing but lacking internal consensus, and with China–US trade compliance easing global tensions, markets will closely watch upcoming UK macro data and external geopolitical shifts.

• XAU/USD Price: Gold prices are attempting a mild recovery, trading near $3,350 during Wednesday’s European session. The rebound follows a tepid performance earlier in the week, with investors remaining cautious ahead of key US economic data.
• Fed’s Bostic: Atlanta Fed President Raphael Bostic said on Tuesday that he remains “very cautious” about cutting interest rates too soon. He emphasized that current policy should prioritize patience, which tempers expectations for imminent monetary easing—limiting gold’s upside.
• Fed's Goolsbee: Chicago Fed President Austan Goolsbee acknowledged that while employment remains strong, the inflationary effects of tariffs may surface gradually. His remarks introduced uncertainty about inflation trends, which can drive demand for gold as an inflation hedge.
• Fed’s Cook: Fed Governor Lisa Cook highlighted that current trade policy is already affecting the economy, suggesting rising inflation with lower output could lead to a stagflationary environment. This dovish tone supports safe-haven flows into gold.
• US Data: Markets now turn to the ADP Employment Change and ISM Services PMI data due later today. These reports will offer further insight into labor market resilience and service-sector health, both of which could influence Fed policy expectations and gold direction.

Closing statement: Gold’s modest rebound reflects a delicate balance between dovish Fed commentary and policy uncertainty. Caution from key Fed officials and growing concerns over trade-induced stagflation support gold’s floor, but sustained upside will depend on incoming macroeconomic signals from the US.

• Crude Oil Price: West Texas Intermediate (WTI) crude remains steady around $62.50 in Tuesday’s European trading, following a strong 3.5% gain in the previous session. Market momentum is being sustained by supply-side risks and optimistic refining margins.
• OECD Outlook: The OECD downgraded its global GDP growth forecast for this year to 2.9% from 3.1%, citing tighter monetary conditions and geopolitical risks. The muted growth expectations raise concerns over long-term oil demand, limiting upside momentum.
• Geopolitical Tensions: Oil markets are supported by renewed geopolitical concerns. Iran has indicated a likely rejection of a US nuclear deal, dampening hopes for increased Iranian exports. This fuels fears of a persistent supply shortfall amid already volatile conditions.
• Russia-Ukraine Talks: The second round of peace negotiations between Russia and Ukraine failed to make meaningful progress. As hostilities escalate, the unresolved conflict adds further risk premium to oil prices, particularly in European energy markets.
• Reuters News: According to Reuters, refiners across major regions are posting unexpected profits due to strong demand and constrained supply. Plant closures and peak summer fuel needs are driving refining margins higher, adding tailwind to crude prices.

Closing statement: Crude oil remains supported by geopolitical instability and strong refining dynamics, even as global growth concerns pose a demand-side risk. With summer driving season underway and limited supply relief in sight, the bias for oil remains upward, though sensitive to shifts in macroeconomic sentiment.

• DAX Price: The DAX rebounded sharply, gaining 0.67% on June 3, reversing the previous session’s losses. The move was driven by investor optimism around a more dovish ECB rate path, with falling inflation bolstering expectations for monetary easing.
• Technical Outlook: The index continues to trade above both its 50-day and 200-day EMAs, reinforcing the underlying bullish trend. Technical strength supports the outlook for further gains, assuming macro risks remain contained.
• Eurozone Inflation: Euro area inflation dropped to 1.9% in May, falling below the ECB’s 2% target for the first time since September 2024. The reading increases pressure on the ECB to begin cutting rates, providing a tailwind for equities—particularly rate-sensitive sectors.
• US-EU Trade Talks: Markets are closely watching the June 4 trade negotiations between US and EU officials, as tensions rise following Trump’s threat to double steel and aluminum tariffs. Any signs of escalation could pose downside risks for export-heavy German stocks.
• US Data: Investors also await key US macro releases, including the ADP Employment Report and ISM Services PMI. A stronger-than-expected print may reinforce Fed patience on rate cuts, with potential implications for global risk sentiment.

Closing statement: The DAX is currently supported by expectations of ECB easing and solid technical momentum, though US-EU trade friction and upcoming US data could influence short-term direction. The broader bullish bias remains intact, but headline sensitivity remains high.