Daily Analysis 04/08/2025

• GBP/USD Price: The GBP/USD pair is consolidating around 1.3270 during Monday’s European session, after gaining over 0.5% on Friday, with traders awaiting key UK monetary policy decisions later this week.
• UK Manufacturing PMI: The July final manufacturing PMI came in at 48.0, slightly below the 48.2 preliminary figure, pointing to a continued contraction in the sector. The report highlighted faster job shedding, while input and output price inflation remained steady.
• House Prices: Nationwide reported a 0.6% m/m rise in house prices, doubling expectations and lifting the average home value to £272,664. The report suggests housing market resilience, helped by the stabilization after prior volatility.
• BoE Rate Cut: Markets widely anticipate a 25 bps rate cut to 4.00% by the Bank of England this Thursday, as soft labor market trends and weak manufacturing data reinforce the need for policy easing.
• Fed Comments: Fed’s Hammock acknowledged the recent NFP report as underwhelming, but emphasized that the Fed's bigger concern lies with persistent inflation, not employment. This highlights the monetary policy divergence that could influence GBP/USD volatility.

Closing statement: GBP/USD is maintaining a cautious tone around 1.3270 ahead of Thursday’s BoE decision. While housing market strength offers some domestic support, weak manufacturing data and dovish rate expectations keep the pound vulnerable. Focus now shifts to the BoE meeting and US data for near-term direction.

• XAU/USD Price: XAU/USD continues to decline, falling toward $3,350 on Monday, marking a fourth consecutive day in the red as safe-haven demand remains muted despite increased macroeconomic uncertainty.
• US Jobs Data: US Nonfarm Payrolls rose by just 73,000 in July, significantly below expectations of 110,000. This follows a sharp downward revision for June, signaling a cooling labor market and reinforcing the case for Fed easing.
• Fed Rate Cut: After the weak NFP print, rate cut expectations surged, with odds for a September cut rising to 80% from 50%, according to CME’s FedWatch Tool. This dovish shift supports the longer-term outlook for gold, though prices are yet to reflect it in the short term.
• Fed Officials: Fed Governors Waller and Bowman expressed concerns over delaying action, noting that tariff-driven inflation should be discounted, and a rate cut may be needed to prevent further labor market deterioration and growth slowdown.
• Political Pressure: President Trump escalated criticism of Fed Chair Powell, urging the board to intervene and cut rates. These unusual political attacks on central bank independence add to market volatility, with potential to boost gold’s appeal if confidence in Fed credibility wavers.

Closing statement: Gold remains under pressure near $3,350, but weak US employment data and rising expectations for Fed easing may soon restore bullish momentum. Investors will be closely watching upcoming Fed communications and inflation figures for confirmation of a policy shift.

• Crude Oil Price: West Texas Intermediate (WTI) crude rose modestly to $66.80 per barrel in early Monday European trading, up from Friday’s close at $66.64, as market participants digest new geopolitical and OPEC+ developments.
• Pressure on India: India's four state-owned refineries reportedly stopped buying Russian oil in response to US political pressure, pivoting instead to spot markets in the Middle East and West Africa. With Russia previously supplying 35% of India’s imports, this shift has significant implications for global crude flows.
• OPEC+ Cut: OPEC+ surprised markets by announcing a 547,000 b/d production increase, effectively ending its 2023 output cut policy a year early. The move suggests a focus on regaining market share, while potentially supporting lower fuel prices—a timely backdrop for Trump heading into US elections.
• Trump Threats: US President Trump escalated pressure on Moscow, threatening secondary sanctions on buyers of Russian crude unless a ceasefire is reached. The development underscores a return to “crude diplomacy”, adding a layer of geopolitical risk to oil markets.
• Saudi-Russia Alliance: A rare meeting between Russian Deputy PM Novak and Saudi Energy Minister Prince Abdulaziz in Riyadh reaffirmed ongoing cooperation between Moscow and Riyadh, suggesting that while OPEC+ is boosting supply, strategic coordination remains intact.

Closing statement: Crude oil markets face a complex mix of geopolitical maneuvering and shifting alliances. While prices remain stable near $66.80, the end of OPEC+ cuts, India's shift from Russian crude, and Trump’s assertive foreign policy could introduce significant volatility in the near term.

• DAX Price: The DAX plunged 2.66% on Friday, August 1, following a 0.81% drop on Thursday, closing at 23,426. This marked one of the index’s steepest two-day selloffs in recent months, reflecting a mix of weak macro data and global risk aversion.
• Manufacturing PMI: Germany’s July final Manufacturing PMI was revised slightly down to 49.1, just below the neutral 50 mark. While production improved, ongoing job losses—though slowing—highlight persistent structural weaknesses in the sector.
• ECB Outlook: Eurozone inflation remained sticky in July, with headline CPI at 2.0% and core at 2.3%, reinforcing the ECB’s cautious stance on rate cuts. The prospect of elevated borrowing costs poses a drag on valuations and corporate earnings outlooks, particularly for rate-sensitive sectors.
• Data and Tariffs: Disappointing Chinese PMI data (49.5) and renewed US tariffs hurt global risk sentiment, leading to a negative open for the DAX on Friday. Germany’s export-heavy economy is particularly vulnerable to external demand shocks, amplifying the downside.
• Today's Calendar: Looking ahead to Monday (August 4), markets await US factory orders, expected to fall -5.2% MoM for June, and further Fed commentary. These events may set the tone for global equities, with potential spillovers into European markets including the DAX.

Closing statement: The DAX is under pressure near 23,426, facing headwinds from weak external data, hawkish ECB expectations, and global trade tensions. Short-term sentiment will hinge on US macro indicators and central bank signals, though the broader trend may remain fragile without stronger economic momentum.