Daily Analysis 28/08/2025

• GBP/USD Price: GBP/USD holds steady around 1.3500 on Thursday’s European session, consolidating after two days of gains. The pair shows resilience as traders weigh UK inflation concerns against broader USD dynamics.
• BoE Policy: BoE’s Catherine Mann, known as the most hawkish committee member, argued for keeping rates on hold for an extended period. Her remarks underscore the Bank’s struggle to balance persistent inflation pressures with economic fragility.
• UK Services: UK services confidence weakened again in August. The CBI warned of high costs and weak demand, urging the government to avoid additional tax hikes and reconsider labor reforms that could burden firms further.
• Environmental Risks: Analysts cautioned that unchecked environmental degradation could slash nearly 5% off UK GDP. Calls for greater private sector involvement highlight long-term structural risks beyond near-term policy debates.
• Food Inflation: Food prices rose 4.2% YoY in August, the sharpest pace in 18 months, driven by costlier essentials like chocolate, butter, and eggs. The British Retail Consortium flagged this as the fastest increase since February 2024, reinforcing household spending pressures.

Closing statement: GBP/USD remains steady but faces headwinds from stubborn inflation and weak business sentiment. The pound’s outlook hinges on how the BoE balances rate policy against slowing growth and on incoming US economic data.

• XAU/USD Price: Gold trades lower near $3,400 per ounce in early European hours on Thursday, extending its downside momentum. The move reflects profit-taking and renewed USD strength.
• Fed Independence: NY Fed President John Williams defended central bank independence amid Trump’s attempts to exert influence over monetary policy. This reinforces uncertainty about the Fed’s policy credibility and long-term direction.
• Fed Rate Cut: Markets are pricing in an 87% chance of a 25 bps Fed rate cut at the September meeting. Rate cut bets generally support gold, as lower yields reduce the opportunity cost of holding non-yielding assets.
• AI Investment: NVIDIA’s Jensen Huang stressed that the AI investment boom is far from peaking, with hyperscalers expected to double annual capex to around $600 billion. While not directly tied to gold, AI-driven equity enthusiasm could draw flows away from safe-haven assets.
• Global Trade; Mexico announced plans to raise tariffs on Chinese goods under its 2026 budget, covering sectors like autos, textiles, and plastics. This development highlights ongoing global trade frictions, potentially adding to market volatility and safe-haven demand.

Closing statement: Gold remains under pressure in the near term, though rate cut expectations and geopolitical trade tensions provide a floor. XAU/USD may see choppy trading, with support holding if Fed easing signals grow stronger.

• Crude Oil Price: West Texas Intermediate (WTI) crude trades lower at $63.40 per barrel, down from Wednesday’s close of $63.67. The pullback reflects profit-taking after recent gains, with supply data providing mixed signals.
• EIA Inventory: EIA reported a 2.39 million-barrel crude draw for the week ending August 22, slightly above expectations of a 2.0 million decline but smaller than last week’s hefty 6.01 million draw. The data highlights ongoing supply tightness, though momentum appears to be easing.
• Seasonal Demand: Refiners are ramping up ahead of the US summer driving peak, with crude demand climbing to 9.24 mbpd from 8.84 mbpd the previous week. Elevated gasoline consumption into Labor Day typically supports oil prices in the near term.
• US-India Tariff: Washington’s decision to double tariffs on Indian imports to 50% took effect Wednesday, with a 25% penalty tied to India’s Russian oil purchases. The move strains bilateral relations, while India plans support measures for exporters and trade diversification.
• Trade Tensions; Beyond energy markets, broader US trade frictions are in focus, with Indian tariffs amplifying risks of retaliatory measures. Escalating disputes could weigh on global growth expectations, indirectly pressuring oil demand outlook.

Closing statement: WTI remains under mild downside pressure despite firm US demand and ongoing inventory draws. Near-term direction hinges on tariff fallout and seasonal consumption strength, with geopolitical trade risks adding volatility to oil markets.

• DAX Price: The DAX slipped 0.4% to 24,046.21 on Wednesday but rebounded this morning, trading 0.5% higher. The index remains range-bound as investors weigh mixed economic signals against upcoming central bank updates.
• Consumer Confidence: Germany’s GfK Consumer Confidence Index fell to -23.6 for September, below consensus of -21.5 and weaker than the revised -21.7 prior reading. The deterioration highlights fragile household sentiment, reinforcing concerns about domestic demand.
• ECB Minutes: Markets await the ECB’s July meeting minutes on Thursday, which may offer clues on whether policymakers are inclined to extend the current pause after halting rate cuts. Any signs of renewed easing bias could impact both the euro and German equities.
• US Data: Later today, US GDP and jobless claims will be closely watched. Economists expect claims to dip to 230K from 235K, which could influence global risk sentiment and spill over into DAX trading.
• Fed Commentary: FOMC members’ speeches remain pivotal for market tone. Guidance on the Fed’s Q4 rate outlook could either bolster risk appetite or prompt caution, adding to volatility across European indices.

Closing statement: The DAX shows short-term resilience despite weak German sentiment data. Investors remain focused on ECB minutes and US macro signals, with Fed commentary likely to shape risk appetite into the week’s close.