Daily Analysis 29/08/2025

• GBP/USD Price: GBP/USD retreats in early European trading, testing the 1.3500 support and currently sitting near 1.3480. The pair is under pressure as the dollar steadies ahead of key US inflation data.
• BoE Outlook: The Bank of England is unlikely to cut rates in 2025, which underpins the pound’s medium-term outlook. The lack of easing prospects contrasts with expectations for other central banks, offering relative support for GBP.
• UK Fiscal Policy: Reports suggest UK Chancellor Rachel Reeves may impose a windfall tax on commercial lenders, aiming to claw back excess profits from BoE deposit holdings. While politically significant, the measure could weigh on sentiment toward the banking sector.
• Fed Uncertainty: Dollar sentiment is clouded by Fed Governor Lisa Cook’s legal battle against President Trump’s dismissal attempt. The controversy raises institutional risks for the Fed, though immediate market impact remains limited.
• Data Watch: Traders focus on the US PCE Price Index for July, due later in the session. As the Fed’s preferred inflation gauge, the release is critical for shaping expectations ahead of the September policy meeting.

Closing statement: GBP/USD hovers near 1.3480 support, with near-term direction hinging on the US PCE data. While BoE’s stance offers pound support, political noise in both the UK and US leaves the pair vulnerable to volatility.

• XAU/USD Price: Gold trades slightly lower in Asian hours on Friday, hovering around $3,415/oz. The metal is consolidating after recent gains, with traders cautious ahead of key US inflation data.
• Fed Autonomy: US Vice President JD Vance confirmed the end of Fed independence, stating that monetary policy decisions should involve elected officials rather than unelected bureaucrats. Such remarks raise concerns over political interference, which could weaken confidence in the dollar long term.
• Labor Market Data: US Initial Jobless Claims fell to 229K, below consensus of 230K and the prior revised 234K. The stronger-than-expected labor data suggests some resilience in the jobs market, which may reduce immediate pressure for aggressive Fed easing.
• Fed Commentary: NY Fed’s John Williams said interest rates could fall, but decisions will depend on incoming data. His cautious tone reflects the Fed’s preference to remain data-dependent amid mixed economic signals.
• Inflation Data: The Core PCE Price Index, the Fed’s preferred inflation gauge, is due today and expected to tick up to 2.9% from 2.8%. A stronger reading could dampen rate-cut bets and weigh on gold, while a soft print may spark upside momentum.

Closing statement: Gold at $3,415 trades cautiously ahead of the Core PCE release, balancing between political pressure on the Fed, labor market strength, and inflation trends. A hot PCE print risks further downside, while a softer reading could reignite safe-haven demand.

• Crude Oil Price: WTI crude slipped modestly in early European trade on Friday, trading near $64.00/bbl, down from Thursday’s $64.10 close. The move reflects profit-taking and shifting demand expectations.
• Seasonal Demand: With the US summer driving season ending after Labor Day, gasoline demand is set to cool. At the same time, producers are gradually lifting supply as voluntary output cuts expire, raising the risk of oversupply.
• Geopolitical Risks: Tensions remain elevated as Russia escalated missile and drone strikes on Ukraine, while Kyiv struck Russian oil refineries in retaliation. Supply security fears linger, keeping markets volatile despite rising output elsewhere.
• Inventory Data: The EIA reported a crude draw of 2.392 million barrels last week, smaller than the prior 6.014 million decline but still supportive for prices. The data hints at a tightening US supply backdrop, partially offsetting demand concerns.
• Market Outlook: The IEA projects supply will outpace demand in the coming quarters, while OPEC+ restores capacity. This adds to bearish sentiment and may cap any rallies unless geopolitical disruptions intensify.

Closing statement: Crude oil around $64/bbl faces a tug-of-war between seasonal demand weakness and rising supply versus geopolitical risks and US inventory draws. Momentum leans bearish in the near term, but supply shocks from Russia-Ukraine conflict could provide upside spikes.

• DAX Price: Germany’s DAX closed flat at 24,039.92 on Thursday, and slipped 0.5% lower this morning. The sideways performance reflects investor caution ahead of fresh economic and geopolitical inputs.
• Retail Sales: German Retail Sales rose 1.9% YoY in July, weaker than the expected 2.6% and well below June’s 4.9% surge. On a monthly basis, sales dropped 1.5%, highlighting faltering consumer demand despite resilient employment conditions.
• Import Prices: Import prices fell 1.4% YoY in July, exceeding expectations for a smaller drop, and slipped 0.4% MoM. Persistent import price deflation underscores weak external demand and ongoing disinflationary pressures in the German economy.
• Labor Market: Germany’s jobless rate held steady at 6.3% in August, the highest since September 2020. However, the number of unemployed fell by 9,000, the sharpest monthly drop in over three years, offering a small silver lining amid structural weakness.
• Geopolitical News: EU foreign and defense ministers are meeting in Copenhagen to discuss the Russia-Ukraine war and Middle East tensions. Heightened geopolitical risks could weigh on sentiment and increase volatility in European equities.

Closing statement: The DAX remains under pressure as weak retail sales and disinflation signals overshadow a modest labor market improvement. With geopolitical tensions intensifying, investor caution may persist, keeping the index in a sideways-to-bearish bias near-term.