Daily Analysis 22/04/2025

• GBP/USD Price: The pair reclaimed the 1.3400 level during European trading on Tuesday, boosted by broad-based US Dollar weakness. This reflects market skepticism toward the USD amid growing political and economic noise from the US side.
• BoE Rate Cut: Traders are increasingly betting on a Bank of England rate cut, driven by worries over the economic spillovers of Trump’s trade tariffs. While this weighs on GBP fundamentals, current upward movement is driven more by USD decline.
• Powell's Warning: Fed Chair Jerome Powell emphasized the economic risks tied to US tariffs, reinforcing a cautious policy stance. His remarks added to concerns that the US growth trajectory may weaken, pulling the dollar down.
• Trump's Criticicism: President Trump publicly criticized Powell for his hesitation to act amid policy uncertainty, further injecting volatility into Fed expectations. The political interference narrative continues to pressure the USD, indirectly benefitting GBP/USD.
• CB Speakers: Multiple Fed speakers and BoE Deputy Governor Sarah Breeden are slated to speak Tuesday, with markets keen to extract any policy cues. These events hold potential for short-term volatility depending on tone and inflation outlook.

Closing statement: GBP/USD is currently buoyed by USD weakness, rather than domestic strength, as traders brace for possible BoE rate cuts and heavy central bank commentary. Continued volatility is likely, with the pair’s direction hinging on incoming rhetoric and any shifts in macroeconomic expectations.

• XAU/USD Price: Gold is retreating slightly in early European trading after testing record highs, as bulls pause amid overbought technical conditions. This signals a potential short-term correction despite underlying bullish trends.
• Political Pressure: White House advisor Kevin Hassett’s comments about potentially firing Fed Chair Powell amplify concerns over political interference in monetary policy, boosting gold's appeal as a safe-haven hedge.
• Trump Shifts Blame: According to the WSJ's Fed analyst, Trump appears to be preemptively blaming the Fed for any economic slowdown from his own tariff policies. This dynamic adds uncertainty to Fed policy direction, further supporting demand for gold.
• Geopolitical Risk: Russia's large-scale drone and missile attacks post a fragile Easter ceasefire underscore ongoing geopolitical instability, enhancing gold’s safe-haven status in the eyes of investors.
• US Earnings Reports: With key earnings reports from Tesla, Alphabet, and Boeing expected this week, traders may lock in profits, prompting short-term downward pressure on gold prices. This is typical ahead of market-moving corporate events.

Closing statement: Gold remains structurally bullish amid geopolitical tension, US policy uncertainty, and central bank drama, though near-term profit-taking and technical pullback are likely. A sustained break above $3,500 would require renewed catalysts, likely tied to macro risks or earnings-related volatility.

• Crude Oil Price: Progress in US-Iran nuclear talks has raised the potential for Iranian oil returning to global markets, easing supply concerns. This development was a primary driver of the recent decline in crude oil prices.
• China's Withdrawal: The Financial Times reports that Chinese state-backed funds are pulling away from US private capital, reflecting heightened tensions in the US-China trade war. Broader geopolitical and trade risk casts a shadow over global oil demand.
• Fed Easing: There is growing market consensus that the US economy is slowing, with expectations now factoring in up to four Fed rate cuts this year. While easing can support demand, it also reflects a pessimistic macro outlook, which weighs on oil.
• South Korea Oil: South Korea will implement smaller tax cuts on oil products starting in May, although the current tax relief will extend until June. The measure reflects a localized effort to manage inflation and fuel prices, with limited global price impact.
• Day Ahead: Traders are watching the Richmond Manufacturing Index and FOMC speeches for clues on the USD and Fed policy path. Movements in the dollar could indirectly affect oil prices through currency-linked demand channels.

Closing statement: Crude oil faces downward pressure from easing supply risks and global macro uncertainty, especially amid softening US growth and geopolitical trade frictions. While the outlook remains fragile, upcoming US data and Fed commentary could steer short-term price action.

• DAX Price: The ongoing unpredictability of the US administration is expected to weigh on European markets, including the DAX. This adds a layer of uncertainty amid already fragile investor confidence post-Easter.
• ECB Easing: The European Central Bank’s renewed monetary easing provides a cushion for equities, particularly in the tariff-affected environment. However, much of this move may already be priced in, limiting additional upside in the near term.
• Trade Agenda: Trump Administration trade agenda with Italy, and potentially the EU, may be pushed up with the passing of Pope Francis, with Trump posting that he and Melania will be going to the funeral in Rome.
• SAP Earnings: All eyes are on SAP's earnings report, due after the US market closes, as the company is a major DAX component. A positive or negative surprise could cause notable index-level volatility.
• Ifo Business Climate: Thursday’s Ifo index release will be a key indicator of German business sentiment, which is expected to have deteriorated. A weak reading may reinforce concerns about economic slowdown in the Eurozone’s largest economy.

Closing statement: The DAX faces a cautious and event-driven week, influenced by US political developments, SAP earnings, and softening German business sentiment. While ECB support underpins the index, headwinds from macro and geopolitical noise could cap gains.