Daily Analysis 27/08/2025

• GBP/USD Price: GBP/USD trades near 1.3450 on Wednesday, giving back gains from the previous session. The pair is pressured by mixed UK fundamentals and political noise out of the US.
• BoE Policy: MPC member Catherine Mann stressed the need to hold rates persistently to counter inflation risks. She also left the door open for forceful rate cuts if downside risks to demand materialize, reflecting the Bank’s policy dilemma.
• UK Labor Market: UK unemployment is projected to climb to 5% by August, the highest since early 2021 lockdowns. Signs of labor market weakness highlight structural challenges for growth and complicate BoE policy decisions.
• Consumer Sentiment: The US Conference Board’s consumer sentiment index slipped to 97.4, signaling rising pessimism over job availability. This underscores a softening US labor outlook, feeding speculation about Fed policy adjustments.
• Political Tension: Fed Governor Cook is pursuing legal action over Trump’s attempt to dismiss her, with her status unresolved ahead of the September Fed meeting. This fuels uncertainty over US monetary governance and adds volatility to the dollar.

Closing statement: GBP/USD faces pressure near 1.3450 as UK labor weakness offsets any BoE hawkish tilt, while US political and economic uncertainty shapes dollar flows. The pair may stay range-bound until clearer signals from central banks.

• XAU/USD Price: Gold trades lower during Wednesday’s European session after a brief rebound yesterday. The metal struggles to hold momentum as investors balance safe-haven flows against shifting Fed expectations.
• US-China Trade: President Trump threatened 200% tariffs on Chinese goods if Beijing fails to supply rare earth magnets. He also signaled possible tech export restrictions in response to digital services taxes, raising global trade tensions and supporting gold’s risk-hedge appeal.
• Geopolitical Developments: US Secretary of State Marco Rubio advanced diplomatic talks with Europe on Ukraine, earning praise from Kyiv for Trump’s “peacemaking leadership.” Hopes of a framework for peace reduce safe-haven demand, weighing on gold.
• Rate Cut Bets: Markets now price an 87% chance of a Fed rate cut in September, up from 84% the prior day. Strong expectations of policy easing underpin gold by lowering the opportunity cost of holding non-yielding assets.
• Key Data: Attention shifts to Friday’s US PCE Price Index, a crucial inflation gauge for the Fed. The release could reshape expectations for policy easing and drive near-term gold volatility.

Closing statement: XAU/USD softens as trade tensions support safe-haven demand but Ukraine peace talks and firm Fed cut bets create mixed drivers. Gold may consolidate ahead of the PCE report, with short-term direction hinging on US inflation data.

• Crude Oil Price: WTI crude slips to $63.00 per barrel in early Wednesday European trade, slightly below Tuesday’s close of $63.16. The decline reflects cautious sentiment as geopolitical and trade developments weigh on the outlook.
• US Tariffs: Washington will impose additional 25% tariffs on Indian exports, taking the total to 50%, in retaliation for India’s continued Russian oil purchases. This escalates trade frictions and adds uncertainty to global demand flows.
• Russia-Ukraine Conflict: Energy infrastructure remains under heavy attack, with Russia increasing August crude exports from western ports by 200,000 bpd versus its initial schedule. The supply boost partially offsets fears of disruption from the war.
• Inventory Data: API data showed a draw of nearly 1 million barrels, below expectations of 1.7 million and down from the previous 2.4 million. The smaller-than-expected decline dampens bullish momentum for oil prices.
• Kazakhstan Risks: Fears persist that Kazakh crude exports could be disrupted since they rely on Russian infrastructure. For now, flows remain unaffected, according to Kazakhstan’s Energy Ministry, but the geopolitical risk premium lingers.

Closing statement: Crude oil faces conflicting pressures: tariff-driven trade tensions and geopolitical risks support upside, while a smaller US inventory draw and increased Russian exports cap gains. WTI may stay rangebound near $63 until clearer demand signals emerge.

• DAX Price: The DAX fell 0.5% to 24,152 on Tuesday, extending its sideways trend over the past week. Investors remain cautious, with little momentum to break out of the current range.
• Consumer Sentiment: Germany’s consumer climate indicator dropped to -23.6 for September, down from -21.7. Weaker income and economic expectations highlight growing pessimism and point to soft domestic demand.
• US Policy Signals: US Commerce Secretary Lutnick said it was fair for President Trump to expect returns if the government adds value to businesses, particularly in defense. While he rejected the idea of a sovereign wealth fund, the rhetoric adds policy uncertainty.
• Nvidia Earnings: Global markets are watching Nvidia’s Q2 results, given its dominance in AI processors. A strong report could lift global tech sentiment, supporting risk appetite and influencing the DAX’s heavyweight tech-related stocks.
• Trade Tensions: Trump reiterated plans for a substantial tariff on furniture imports, signaling more trade frictions. Such moves could weigh on European exporters, keeping investors wary.

Closing statement: The DAX remains rangebound, pressured by weak consumer confidence in Germany and ongoing trade tensions. Upcoming Nvidia earnings may provide the next catalyst, with upside potential if results beat expectations.