Daily Analysis 02/10/2025

• GBP/USD Price: GBP/USD extends gains for the fifth straight session, trading near 1.3480 in European hours on Thursday. The pair remains supported despite conflicting domestic policy signals.
• BoE Commentary: BoE Deputy Governor Sarah Breeden argued for rate cuts, warning that prolonged high rates could damage growth and suppress inflation below the 2% target. This stance adds downside risk to GBP sentiment.
• BoE's Mann: In contrast, policymaker Catherine Mann warned of persistent “higher-for-longer” inflation, noting that price pressures remain material. She supported holding rates steady for now, reflecting a cautious hawkish tilt.
• BoE's Lombardelli: Deputy Governor Clare Lombardelli highlighted the dangers of treating inflation shocks as temporary, suggesting that their effects may last longer than expected. Her remarks reinforce inflation vigilance within the BoE.
• Labor Data: The US ADP report showed a 32,000 decline in private payrolls for September, with annual pay growth at 4.5%. Weak employment data limits USD strength, offering near-term support to GBP/USD.

Closing statement: GBP/USD trades higher as BoE policymakers remain divided on inflation and rate paths, while weak US labor data undermines the dollar. The pair’s direction will hinge on upcoming UK inflation data and US jobs releases.

• XAU/USD Price: Gold (XAU/USD) extends its rally to fresh record highs in early European trade, edging closer to the $3,900 level. The move reflects strong safe-haven demand amid a favorable backdrop.
• Yearly Gains: Gold has surged 45% year-to-date in 2025, with September alone bringing gains of over 11%. Persistent uncertainty across global markets has reinforced investor appetite for bullion.
• Trump’s “Liberation Day” policies, alongside widening fiscal deficits and political pressure on the Fed to cut rates, have undermined the USD’s safe-haven appeal, shifting flows toward gold.
• Fed Commentary: Dallas Fed President Lorie Logan stressed that inflation expectations remain fragile and signaled caution in further rate cuts. However, her hawkish stance has not dampened bullish momentum in gold.
• Geopolitical Risks: Tensions remain elevated after Russia warned of escalation if the US supplies Tomahawk missiles to Ukraine. The heightened risk climate adds another layer of support for gold prices.

Closing statement: Gold sustains strong momentum near $3,900, powered by dollar weakness, safe-haven demand, and ongoing geopolitical risks. Unless Fed hawkishness regains traction, XAU/USD could test new highs in the near term.

• Crude Oil Price: WTI crude trades at $61.70 per barrel in early European hours on Thursday, slightly higher than Wednesday’s close at $61.62, showing modest price recovery.
• Geopolitical Developments: Reports suggest the US will provide Ukraine with intelligence to enable long-range strikes on Russian energy infrastructure. This decision, approved by Trump, could heighten geopolitical risks in oil markets.
• G7 Pressure: G7 Finance Ministers pledged to tighten restrictions on Russian oil exports by targeting buyers and intermediaries that help Moscow circumvent sanctions. This adds to the supply-side uncertainty.
• Inventory Data: The EIA reported a 1.792M barrel increase in US crude stockpiles for the week ending September 26, contrasting with the previous week’s drawdown. Rising inventories exert mild downside pressure on prices.
• OPEC+ Supply: Expectations of a significant OPEC+ production hike in November—potentially three times October’s increase—pose a cap on crude’s upside as Saudi Arabia seeks to regain lost market share.

Closing statement: Crude oil is stabilizing near $61.70, balancing geopolitical tensions that support prices with bearish inventory data and looming OPEC+ supply increases. Short-term momentum remains cautious, with risks tilted to the downside if supply ramps up as expected.

• DAX Price: The DAX trades 0.3% higher at 24,300 points on Thursday, extending gains after breaking through key levels earlier in the week.
• Corporate Updates: Continental expects its Q3 performance to match forecasts, signaling stability despite ongoing restructuring in its business operations.
• Policy Developments: German Chancellor Friedrich Merz pledged to restore competitiveness, with cabinet-approved reforms focusing on bureaucracy reduction, AI adoption, and digitization to support growth.
• Investment Initiative: The “Made in Germany” program is expected to inject €735B into the economy by 2028. With 44 new participants, the initiative now includes 105 firms, ranging from SMEs to giants like Deutsche Bank and Siemens.
• Market Sentiment: Despite a US government shutdown, Wall Street indices like the S&P 500 and Nasdaq 100 hit new records, reflecting resilient investor sentiment that could provide a supportive backdrop for European equities.

Closing statement: The DAX continues its upward momentum, supported by strong domestic policy reforms and investment initiatives. External optimism from US markets offsets political risks, leaving the outlook constructive in the near term.