Daily Analysis 26/08/2025

• GBP/USD Price: GBP/USD slips back to the 1.3500 region on Tuesday, weighed down by renewed US Dollar demand, repeating Monday’s move lower.
• UK Macro Data: Stronger UK PMI data and elevated July inflation reduce the likelihood of BoE rate cuts this year, offering some underlying GBP support.
• Inflation Pressures: UK shop prices rose 0.9% MoM in August, the sharpest gain in 17 months, driven by a 4.2% jump in food costs, adding to inflation risks for the BoE.
• Fed Outlook: Fed’s Musalem stressed more data is needed before a September decision, which tempers rate-cut bets and provides marginal USD support.
• BoE Speech: Markets now await BoE’s Catherine Mann’s speech on Tuesday, which could provide fresh guidance on policy outlook.

Closing statement: GBP/USD remains pressured near 1.3500 as firm UK data limits BoE dovish bets but a cautious Fed stance keeps the Dollar in demand. Upcoming BoE commentary may drive volatility.

• XAU/USD Price: Gold finds demand near $3,375 per ounce during Tuesday’s Asian session, recovering from prior weakness as buyers step in.
• Political Shock: US President Trump’s move to fire Fed Governor Cook jolted markets, initially sending the Dollar lower. Legal hurdles could delay or block the action, but for now uncertainty weighs on USD sentiment.
• Fed Chair: At Jackson Hole, Fed Chair Powell noted risks have shifted, with restrictive policy possibly requiring adjustments. This keeps markets leaning toward rate cut expectations.
• Fed’s Logan: Dallas Fed’s Lorie Logan signaled scope to reduce reserves, expecting banks to use the repo facility in September to manage liquidity, a move seen as neutral to slightly dovish.
• Geopolitical Angle: Russian FM Lavrov dismissed summit prospects, saying no agenda exists for a Putin-Zelenskyy meeting, limiting optimism on peace talks.

Closing statement: Gold stabilizes near $3,375 as Fed policy uncertainty and Trump’s shock Fed move underpin demand, while geopolitical setbacks cap broader risk appetite.

• Crude Oil Price: WTI trades near $64.20 per barrel in early European hours, extending gains as supply-side risks dominate sentiment.
• Geopolitical Risk: Ukraine’s drone strikes on Russian energy facilities intensified supply disruption fears, with major fires and reduced reactor capacity raising concerns over global oil flows.
• Tariff Concerns: The US looks set to proceed with secondary tariffs on India’s Russian oil purchases by August 27, as talks show little progress. This risks dampening demand flows and complicating India’s energy imports.
• Trade Policy: Trump threatened new tariffs and export restrictions, particularly targeting nations with digital taxes and US tech curbs. Such measures could escalate trade tensions and weigh on global growth outlooks.
• Inventory Watch: Markets now turn to the API crude stock report, which could either reinforce the bullish supply shock narrative or cap gains if inventories show unexpected builds.

Closing statement: Crude oil prices hold firm around $64.20 as geopolitical tensions and tariff risks underpin the market. Near-term direction hinges on inventory data and confirmation of US trade/tariff moves.

• DAX Price: The DAX trades near 24,200, staying in a broad upward-trending range. Resistance is firm at 24,650, while ascending support from mid-June continues to hold.
• Economic Data: Germany’s Q2 GDP contracted 0.3%, worse than the initial -0.1% estimate. The sharper downturn reinforces concerns about lingering weakness in Europe’s largest economy.
• Business Sentiment: The IFO Business Climate Index surprised positively, rising to 89 in August vs. 88.6 in July, suggesting a slight pickup in business confidence despite macro headwinds.
• Fiscal Policy: Germany’s draft 2026 budget allocates a record €126.7 billion in investment, focusing on infrastructure and defense upgrades, signaling an attempt to bolster growth and long-term resilience.
• External Risks: Global trade tensions remain in focus, as Trump threatens tariffs up to 200% on China’s rare earth magnets, a move that could further strain supply chains and weigh on European exporters.

Closing statement: The DAX holds firm within its upward range despite weak GDP data, supported by improved sentiment and fiscal stimulus. Near-term movement hinges on external trade risks and whether the index can test resistance at 24,650.