Daily Analysis 05/06/2025

• GBP/USD Price: The GBP/USD pair is reversing lower, trading near 1.3550 during early Thursday in Europe. A resurgence in US Dollar strength is weighing on the pair after recent gains, eroding some of the bullish momentum seen earlier this week.
• Trump's Social: US President Donald Trump criticized the Federal Reserve for sticking to its restrictive stance despite soft data. His remarks followed a disappointing ADP private employment report, adding to pressure on the Fed to consider earlier rate cuts.
• US Services PMI: The ISM Services PMI slipped to 49.9 in May, down from 51.6 in April and below the 52.0 forecast. This marks a shift into contraction territory, raising concerns about the broader US economic outlook and possibly limiting future USD gains.
• Fed's Kashkari: Minneapolis Fed President Neel Kashkari acknowledged signs of labor market softening but emphasized ongoing economic uncertainty. His cautious tone suggests the Fed remains data-dependent, keeping market participants wary.
• US-UK Tariffs: In a partial trade policy rollback, President Trump signed an executive order to temporarily suspend the steep 50% tariffs on UK steel and aluminum. The return to a 25% tariff rate offers a marginal relief to British exporters, but its FX impact is limited.

Closing statement: The GBP/USD pair is under modest pressure, dragged by renewed USD strength and Fed policy ambiguity despite weak data. While tariff relief for UK exports is a positive signal, the focus will likely stay on US economic indicators and evolving Fed expectations, which continue to steer near-term direction.

• XAU/USD Price: XAU/USD trades range-bound on Thursday, failing to extend the prior session’s modest gains. A slight uptick in the US Dollar is capping bullish attempts, while underlying geopolitical and fiscal risks are offering support, keeping the metal above key support levels.
• Fed Outlook: Despite a slight recovery in the USD, dovish expectations from the Federal Reserve continue to restrain aggressive buying. Markets remain focused on rate cut prospects, particularly as concerns grow over the expanding US budget deficit tied to Trump’s major tax and spending initiatives.
• Geopolitical Risks: President Trump’s confirmation of a tense conversation with Russian President Putin—who vowed retaliation over Ukrainian attacks—has heightened geopolitical tension, lending safe-haven appeal to gold. Investors remain sensitive to any military escalation.
• US Veto: The US vetoed a UN Security Council resolution for a ceasefire in Gaza for the fifth time. With Israeli airstrikes intensifying and nearly 100 Palestinian casualties reported in 24 hours, humanitarian concerns and conflict escalation support gold as a risk hedge.
• US Jobless Claims: Traders now await the release of the US Weekly Initial Jobless Claims, which may provide near-term direction for both the US Dollar and gold prices, especially in the context of Fed policy expectations.

Closing statement: Gold remains trapped in a narrow range, caught between USD strength and supportive geopolitical and monetary policy dynamics. With risk sentiment fragile and key US labor data due shortly, XAU/USD may stay volatile, but dips are likely to be well-bid near support levels unless the Fed narrative shifts sharply.

• Crude Oil Price: West Texas Intermediate (WTI) crude oil trades around $62.00 on Thursday during European hours. Despite recent price gains, market sentiment remains cautious as supply-side news dominates, particularly with OPEC+ signaling more output.
• OPEC+ Output: OPEC+ agreed to a 411,000 barrels per day (bpd) production hike for July, following increases in May and June. The group's gradual easing strategy aims to meet summer demand but could cap upside for oil prices if demand fails to match expectations.
• Saudi Arabia Signals: According to Bloomberg, Saudi Arabia is open to additional production increases to boost its market share. This is interpreted as a deliberate move to pressure non-compliant OPEC+ members like Kazakhstan and Iraq, and could lead to a short-term oversupply.
• Geopolitical Tensions: Iran’s Supreme Leader Khamenei expressed skepticism over US-Iran talks, while President Trump issued strong warnings regarding Tehran’s refusal of a nuclear proposal. The rhetoric raises geopolitical risk, which typically offers support to crude prices.
• US Inventory: The EIA reported a sharp rise in US gasoline inventories (+5.2 million barrels vs. +600k expected), reflecting potential demand weakness. However, crude oil stockpiles fell more than expected, providing a partial bullish offset.

Closing statement: Oil markets remain caught between rising OPEC+ output, Saudi market maneuvers, and renewed geopolitical tensions. While strong US gasoline builds raise demand concerns, geopolitical friction and drawdowns in crude stocks could limit downside. Near-term direction will hinge on supply discipline within OPEC+ and US demand signals.

• DAX Price: The DAX rose 0.02% to 24,281 in early trading on Thursday, June 5, as investors positioned cautiously ahead of the European Central Bank’s (ECB) rate decision and President Lagarde’s press conference, expected to set the tone for H2 monetary policy.
• German Factory Orders: Germany’s Factory Orders unexpectedly increased by 0.6% in April, defying forecasts of a 1% decline. The data, following March’s upwardly revised 3.4% rebound, signals continued momentum in the manufacturing sector, potentially softening recession fears in the Eurozone’s largest economy.
• Bayer Shares: Bayer stock rallied 3.75% after Goldman Sachs upgraded the stock to Buy and the US FDA approved expanded use of its prostate cancer drug, Nubeqa. The twin catalysts drove early outperformance in healthcare, bolstering sectoral sentiment.
• Auto Stocks: Progress in US-EU trade talks lifted auto sector sentiment, with Mercedes-Benz (+0.65%), BMW, Porsche, and Volkswagen all posting early gains. Any resolution in tariff disputes could further boost this export-heavy sector.
• ECB Rate Cut: The ECB is widely expected to cut interest rates by 25 basis points to 2.15%, marking a continued easing cycle amid slowing inflation. However, market focus is on the press conference, with forward guidance on further cuts expected to steer equity and bond market direction.

Closing statement: The DAX remains supported by positive domestic data and improving trade sentiment, while the ECB decision looms large for near-term momentum. A measured rate cut with dovish signals could support further upside, especially for rate-sensitive and export-oriented sectors.